<PAGE> 1
As filed with the Commission on July 16, 1996
Registration Number 33-99686
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
The Tracker Corporation of America
(Exact Name of Registrant as specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
7299
(Primary Standard Industrial Classification Code Number)
86-0767918
(I.R.S. Employer Identification Number)
180 Dundas Street West, Suite 1502, Toronto, Ontario CANADA M5G 1Z8;
(416) 595-6222
(Name, Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
I. Bruce Lewis, 180 Dundas Street West, Suite 1502,
Toronto, Ontario CANADA M5G 1Z8; (416) 595-6222
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
Robert J. Hackett, Esq. & W. T. Eggleston, Jr., Esq.
Fennemore Craig, Two North Central Avenue, Suite 2200, Phoenix, Arizona 85004;
(602) 257-5761
(Copies to)
As soon as practicable after the effective date of this registration statement
Approximate date of commencement of proposed sale to the public
If any of the securities being registered on this Form are to be offered on a
delayed or continued basis pursuant to Rule 415 under the Securities Act of 1933
check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
Securities to be Registered offering price per aggregate offering registration fee
registered share* price*
=======================================================================================================
<S> <C> <C> <C> <C>
Resale of Common Stock 4,709,181 $0.31 per share** $1,459,846 $ 503.40
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 250,000 $0.31 per share** $ 77,500 $ 26.72
Underlying Common Stock
Purchase Warrants
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 960,002 $0.31 per share** $ 297,601 $ 102.62
Underlying First Series
Convertible
Subordinated Debentures
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 728,957 $0.31 per share** $ 225,977 $ 77.92
Underlying Second
Series Convertible
Subordinated Debentures
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 5,225,339 $0.31 per share** $1,619,855 $ 558.57
Underlying Exchangeable
Preference Shares and
Exchangeable Preference
Share Warrants
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 900,000 $0.31 per share** $ 279,000 $ 96.21
Underlying Merchant
Partners Option
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 326,000 $0.31 per share** $ 101,060 $ 34.85
Which May be Issued to
CRG
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 500,000 $0.31 per share** $ 155,000 $ 53.45
Underlying CRG Options
- -------------------------------------------------------------------------------------------------------
Resale of Common Stock 200,000 $0.31 per share** $ 62,000 $ 21.38
Underlying TODA Warrant
- -------------------------------------------------------------------------------------------------------
TOTAL: 13,799,479 $1,475.12***
=======================================================================================================
</TABLE>
* Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457.
** Based on the average of the bid and asked price of a share of the
Common Stock of the registrant on June 25, 1996 as reported by the
National Quotation Bureau.
*** There is no additional fee due in connection with this Amendment No. 1
to the Registration Statement because the fee calculated above is less
than the fee paid in connection with the original filing.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE> 3
CROSS-REFERENCE SHEET
ITEM 1. FOREPART OF REGISTRATION STATEMENT AND OUTSIDE FRONT COVER
PAGE OF PROSPECTUS. (See Forepart of Registration Statement,
Cross-Reference Sheet, and Outside Front Cover Page of
Prospectus.)
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF PROSPECTUS. (See
Inside Front Cover Page and Outside Back Cover Page.)
ITEM 3. SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO
FIXED CHARGES. (See Prospectus Summary and Risk Factors. The
caption "Ratio of Earnings to Fixed Charges" is not applicable
to this Registrant.)
ITEM 4. USE OF PROCEEDS. (See Use of Proceeds.)
ITEM 5. DETERMINATION OF OFFERING PRICE. (See Outside Front Cover Page
of Prospectus and Plan of Distribution.)
ITEM 6. DILUTION. (See Dilution.)
ITEM 7. SELLING SECURITY HOLDERS. (See Selling Securityholders.)
ITEM 8. PLAN OF DISTRIBUTION. (See Plan of Distribution.)
ITEM 9. DESCRIPTION OF SECURITIES TO BE REGISTERED. (See Description
of Securities.)
ITEM 10. INTERESTS OF NAMED EXPERTS AND COUNSEL. (None. See Legal
Matters and Experts.)
ITEM 11. INFORMATION WITH RESPECT TO THE REGISTRANT. (See Outside
Front Cover Page, Prospectus Summary, The Company, Risk
Factors, Dividend Policy, Selected Consolidated Financial Data,
Management's Discussion and Analysis of Financial Condition and
Results of Operations, Business, Management, Certain
Relationships and Related Transactions, Security Ownership of
Certain Beneficial Owners and Management, Selling
Securityholders, Shares Eligible for Future Sale, Description
of Securities, and Financial Statements.)
ITEM 12. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES. (See Description of Securities -
Directors' Liability.)
<PAGE> 4
THE TRACKER CORPORATION OF AMERICA
13,799,479 SHARES OF COMMON STOCK
---------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE ____ OF THIS PROSPECTUS. THESE ARE
SPECULATIVE SECURITIES.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THE DATE OF THIS PROSPECTUS IS _____________, 1996
---------------------------
This Prospectus relates to the public offering from time to time by
certain holders thereof (the "Selling Securityholders") of up to (i) 4,709,181
issued and outstanding shares of the common stock, par value $0.001 (the "Common
Stock"), of The Tracker Corporation of America, a Delaware corporation ("Tracker
U.S."); (ii) 250,000 shares of Common Stock which are issuable to the holder
thereof upon the exercise of Tracker U.S.'s outstanding Common Stock Purchase
Warrants (the "Common Warrants"); (iii) 960,002 shares of Common Stock which are
issuable to the holders of Tracker U.S.'s Convertible Subordinated Debentures in
an aggregate principal amount of $1,000,000 (the "First Series Convertible
Debentures") upon the conversion of such warrants into Common Stock; (iv)
728,957 shares of Common Stock which are issuable to the holders of Tracker
U.S.'s Convertible Subordinated Debentures in an aggregate principal amount of
$1,189,529 (individually the "Second Series Convertible Debentures" and
collectively with the First Series Convertible Debentures, the "Convertible
Debentures") upon the conversion of such debentures into Common Stock; (v)
5,225,339 shares of Common Stock which are issuable to the holders of
Exchangeable Preference Shares (the "Exchangeable Preference Shares") issued by
Tracker U.S.'s subsidiary, The Tracker Corporation, an Ontario, Canada
corporation ("Tracker Canada"), and the holders of Tracker Canada's Exchangeable
Preference Share Warrants (the "Exchangeable Preference Share Warrants") upon
the exchange of Exchangeable Preference Shares for Common Stock; (vi) 900,000
shares of Common Stock which are issuable to the holder thereof upon the
exercise of an outstanding Common Stock Purchase Option (the "Merchant Partners
Option"); (vii) 326,000 shares of Common Stock which may, at the option of the
Company, be issued to the Company's investor relations firm (the "CRG Shares");
(viii) 500,000 shares of Common Stock which are issuable to the holder thereof
upon the exercise of outstanding options (the "CRG Options"); and (ix) 200,000
shares of Common Stock which are issuable to the holder thereof upon the
exercise of an outstanding Common Stock Purchase Warrant (the "TODA Warrant").
The Common Stock offered by the Selling Securityholders hereby may be
offered from time to time for the account of the Selling Securityholders. The
Selling Securityholders may sell the shares of Common Stock being offered by
them from time to time in transactions in the over-the-counter market, in
negotiated transactions, or by a combination of these methods at market prices
prevailing at the time of the sale, at prices related to such market prices or
at negotiated prices. There can be no assurance, however, that the Selling
Securityholders will sell any of the shares of Common Stock offered hereby. See
"PLAN OF DISTRIBUTION" and "SELLING SECURITYHOLDERS." Tracker U.S. will not
receive any of the proceeds from any sale of the shares of Common Stock. See
"USE OF PROCEEDS."
<PAGE> 5
The Common Stock is traded on the over-the-counter market and is quoted
on the OTC Bulletin Board under the symbol "TRKR." On June 25, 1996, the
high bid price of the Common Stock was $0.50. See "PRICE RANGE OF COMMON
STOCK."
AVAILABLE INFORMATION
The Registrant is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports and other information filed by
the Registrant with the Commission pursuant to the informational requirements of
the Exchange Act can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington D.C. 20549
and at the Commission's regional offices located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549 at prescribed rates.
---------------------------
The Company will furnish its stockholders with annual reports
containing audited financial statements.
The Selling Securityholders directly, through agents designated from
time to time, or through dealers or underwriters also to be designated, may sell
shares of Common Stock from time to time on terms to be determined at the time
of sale. To the extent required, the specific shares to be sold, the names of
the Selling Securityholders, purchase price, public offering price, the names of
any such agent, dealer or underwriter, and any applicable commission or discount
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds of the Selling Securityholders
from the shares will be the purchase price of shares sold less the aggregate
agents' commissions. See "SELLING SECURITYHOLDERS" and "PLAN OF DISTRIBUTION."
To the extent required, such Prospectus Supplement will also set forth
information regarding any indemnification by the Company of the Selling
Securityholders or any underwriter, dealer or agent against certain liabilities,
including liabilities under the Securities Act.
The Selling Securityholders and any broker-dealer, agent or underwriter
which participates with the Selling Securityholders in the distribution of the
shares of Common Stock may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the securities purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act. See "PLAN OF DISTRIBUTION."
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary of certain information contained in this
Prospectus is not complete. This summary is qualified in its entirety by the
more detailed information and financial statements appearing elsewhere in this
Prospectus. Prospective investors must read the entire Prospectus. The
securities offered hereby are speculative and involve a high degree of risk. See
"RISK FACTORS." As used in this Prospectus, the term "Company" includes The
Tracker Corporation of America, a Delaware corporation ("Tracker U.S."), and The
Tracker Corporation, an Ontario, Canada corporation ("Tracker Canada"), a
wholly-owned subsidiary of Tracker U.S., unless the context indicates otherwise;
provided, however, that with respect to all information provided herein relating
to Tracker U.S.'s Common Stock, options, warrants and other capital securities,
the term "Company" means Tracker U.S., unless the context otherwise requires.
All dollar amounts contained in this Prospectus are in U.S. dollars unless
otherwise noted. The assets and liabilities of the Company are translated at the
March 31, 1996 exchange rate while revenues, expenses and cashflows are
translated at the average rates in effect for the period.
THE COMPANY
The Tracker Corporation of America, a Delaware corporation ("Tracker
U.S."), is a development stage company which, through its wholly-owned
Canadian subsidiary, The Tracker Corporation, an Ontario, Canada corporation
("Tracker Canada"), has developed and has begun to market, sell and operate a
personal property identification and recovery system which uses advanced bar
code and laser scanning technology to aid in the identification and recovery
of lost and stolen personal possessions. The Company launched its service in a
limited test market in Toronto, Canada in October 1994 and is slowly continuing
to expand its service throughout Canada. The Company recently began test
marketing in the United States and has begun to introduce its service to
various communities in the United States through the use of diverse marketing
channels. The Company's service has been endorsed by the International
Association of Chiefs of Police.
The Company offers its members special encoded labels that are attached
to the members' personal possessions and contain ownership information in
advanced bar code form (PDF 417 symbology). After a member's lost item has been
found and then scanned, the labels are linked electronically to a central
computer base. A Company service representative then notifies the member that
his or her possession has been found and informs the member of the item's
location. The identified item may then be picked up by the member, or delivered
to the member safely and promptly by courier at the member's expense. The
Company also has implemented and offers a supplemental service called the
"Tracker Plus" service, which covers the full cost of returning possessions to
members.
The Company plans to expand its recovery service by having
manufacturers of products such as computer chips, bicycles, power tools,
electronic equipment, cameras and auto parts apply the Company's coding, through
laser etching or other methods, directly onto or into products at the source of
manufacture. The Company believes that this expansion of its service will be
attractive to manufacturers because (i) it will add value to their products by
showing that they care about their customers and their customers' ability to
recover lost or stolen items and (ii) the coding will enhance the ability of
manufacturers and distributors to combat retail and warranty fraud. There can be
no assurance, however, that the Company will be able to successfully expand its
service in this fashion.
In addition to the Company's personal property identification and
recovery system, the Company has implemented and is currently offering a card
registration service. This service permits a member, with a single toll free
phone call, to: (i) cancel all of the member's lost or stolen debit and credit
cards; (ii) request replacement cards; (iii) request a wire of emergency funds
or replacement airline tickets (charged to the member's credit card); (iv)
request a change of address for all cards; and (v) be covered on fraudulent
charges on cards, after notifying the Company, in an amount of up to $6,000.
THE OFFERING
Selling Securityholders may sell up to (i) 4,709,181 already issued
shares of Common Stock, (ii) 250,000 shares of Common Stock which are issuable
to the holder of the Common Warrants upon the exercise thereof; (iii)
3
<PAGE> 7
960,002 shares of Common Stock which are issuable to the holders of the First
Series Convertible Debentures upon the conversion of such debentures into Common
Stock; (iv) 728,957 shares of Common Stock which are issuable to the holders of
the Second Series Convertible Debentures upon the conversion of such debentures
into Common Stock; (v) 5,225,339 shares of Common Stock which are issuable to
the holders of the Exchangeable Preference Shares and Exchangeable Preference
Warrants upon the exchange of Exchangeable Preference Shares for Common Stock;
(vi) 900,000 shares of Common Stock which are issuable to the holder of the
Merchant Partners Option upon the exercise thereof; (vii) 326,000 CRG Shares;
(viii) 500,000 shares of Common Stock which are issuable to the holder of the
CRG Options upon the exercise thereof; and (ix) 200,000 shares of Common Stock
which are issuable to the holder of the TODA Warrant upon the exercise thereof.
The Selling Securityholders may sell such shares from time to time in
transactions in the over-the-counter market, in negotiated transactions, or by a
combination of these methods at market prices prevailing at the time of the
sale, at prices related to such market prices or at negotiated prices. There can
be no assurance, however, that the Selling Securityholders will sell any of the
shares of Common Stock offered hereby.
<TABLE>
<S> <C>
COMMON STOCK CURRENTLY
OUTSTANDING(1)(2) 15,921,647
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING(1)(2)(3) 19,578,482
</TABLE>
USE OF PROCEEDS The Company will not receive any of the proceeds of any
sales. See "USE OF PROCEEDS."
RISK FACTORS Investors should carefully consider the factors listed
under "RISK FACTORS."
- -----------------
(1) Includes 10,711,885 shares of Common Stock and 5,209,762 shares of
Class B Voting Common Stock outstanding as of June 25, 1996.
(2) Excludes 120,000 shares reserved for issuance in the future in
connection with Tracker U.S.'s Stock Incentive Plan, shares that may be
issued in the future if the Company issues any more of the $810,471
aggregate principal amount of Second Series Convertible Debentures
which were authorized but not yet issued as of June 25, 1996 and if
such debentures are converted into Common Stock, 250,000 shares
reserved for issuance in the future upon exercise of the Common
Warrants, 500,000 shares reserved for issuance in the future upon
exercise of the Company's other outstanding warrants, 15,577 shares
reserved for issuance upon the exercise of Tracker Canada Exchangeable
Preference Warrants into Tracker Canada Exchangeable Preference Shares
and the exchange of such shares into shares of Common Stock, shares
reserved for issuance in the future upon the exercise by Saturn
Investments, Inc. of its option to purchase an additional amount of
shares of Common Stock that would provide Saturn (when combined with
common shares held by Saturn at the time of exercise) with ownership of
25% of the Company's issued and outstanding voting equity, and 326,000
shares and options to purchase 500,000 shares that may be issued in the
future pursuant to an agreement with the Company's investor relations
firm. See "EXECUTIVE COMPENSATION - 1994 Stock Incentive Plan,"
"DESCRIPTION OF SECURITIES," and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS - Investment by Saturn Investments, Inc." and "- Corporate
Relations Group."
(3) Adjusted to give effect to the conversion of First Series Convertible
Debentures into 960,002 shares, the conversion of Second Series
Convertible Debentures into 728,957 shares, the conversion of
Convertible Preferred Stock into 867,876 shares (based on the
conversion price in effect as of June 25, 1996), the exercise of the
Merchant Partners Option into 900,000 shares, and the exercise of the
TODA Warrant into 200,000 shares. See "DESCRIPTION OF SECURITIES -
Convertible Debentures," "- Preferred Stock," "- Merchant Partners
Option" and "- TODA Warrant."
4
<PAGE> 8
The following table summarizes certain selected consolidated financial
data of the Company and is qualified in its entirety by the more detailed
financial statements contained elsewhere in this Prospectus. The selected
consolidated financial data at March 31, 1995 and 1996 and for the fiscal years
ended March 31, 1995 and 1996 and the period from inception at May 6, 1993
through March 31, 1994 have been derived from the audited consolidated financial
statements of the Company which have been audited by Price Waterhouse LLP,
independent accountants.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Inception (May 6,
1993) to Fiscal Year Ended Fiscal Year Ended
Consolidated Statement of Operations Data March 31, 1994 March 31, 1995 March 31, 1996
- ----------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue $ -- $10,187 $106,522
Net loss (2,043,425) (5,068,583) (6,090,730)
Net loss per share (0.38) (0.71) (0.57)
Consolidated Balance Sheet Data March 31, 1994 March 31, 1995 March 31, 1996
- ------------------------------- -------------- -------------- --------------
Total assets 2,675,527 1,669,452 1,193,742
Total current liabilities 275,660 1,446,543* 2,393,631*
Long-term debt -- -- --
Total stockholder's equity 2,399,867 222,909 (1,378,772)
Working capital 2,195,349 (445,686) (1,728,529)
</TABLE>
- --------------
* Included in total current liabilities for March 31, 1996 are $1,460,000
of convertible subordinate debentures and $115,241 of current and
deferred revenues (as compared with $0 of convertible subordinated
debentures and $10,998 of deferred revenues for March 31, 1995).
5
<PAGE> 9
RISK FACTORS
The securities offered by this Prospectus are speculative and involve a
high degree of risk. In addition to the other information in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating a purchase of securities offered by this Prospectus.
LACK OF PROFITABILITY; CONTINUING LOSSES EXPECTED; ABILITY TO CONTINUE AS A
GOING CONCERN
Prior to its acquisition of Tracker Canada in July 1994, Tracker U.S.
had been inactive for several years and had conducted no significant operations
or activities. Tracker Canada, which originated the Company's present line of
business, was founded in May 1993. During the fiscal year ended March 31, 1996,
the Company incurred a net loss of $6,090,730 and, at the end of such fiscal
year, had an accumulated deficit of $13,202,738. The Company expects to
continue to incur losses through at least March 31, 1997. From the date of
inception (May 6, 1993) through March 31, 1996, the Company had realized
revenues of only $116,709. The report of independent acocuntants covering the
Company's financial statements for the year ended March 31, 1996 expresses
doubt about its ability to continue as a going concern because it is a
development stage company and has not yet been able to generate significant
revenues or attract outside financing. There can be no assurance that the
Company will be able to attract significant outside financing on terms
acceptable to the Company or that the Company will achieve profitable
operations. If the Company is unable to attract such financing or achieve
profitable operations, it may be forced to cease or significantly limit its
operations. See "RISK FACTORS - Additional Financing Requirements,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS - The Company's Personal Property Identification and
Recovery System," and "BUSINESS - The Company's Marketing Strategy."
EARLY STAGE OF COMPANY; FAILURE OF CERTAIN MARKETING CAMPAIGNS
The Company is a development stage company that has developed and has
begun to market, sell and operate its personal property identification and
recovery system and its card registration service. To date, the Company has
generated only modest sales. Further, two of the Company's television test
marketing efforts, both of which were through L.L. Knickerbocker Company, Inc.
("Knickerbocker"), resulted in substantially less sales of the Company's
personal property identification and recovery service than the Company had
anticipated. First, Knickerbocker in November 1995 launched an unsuccessful
television test marketing campaign that aired via broadcast television in six
markets in the United States and nationally via certain cable television
channels. Second, through Knickerbocker, the Company obtained a purchase order
from The Home Shopping Network for 2,500 personal property protection ("Tracker
Plus") kits. The Company's appearance on The Home Shopping Network in June 1996,
however, resulted in sales by The Home Shopping Network of only nine of the
kits.
The Company's operations and resulting cash flows are subject to all
of the risks inherent in an emerging business enterprise. The commercial
introduction of the Company's services will present marketing and financial
challenges for the Company. To achieve significant revenues and profitable
operations on a continuing basis, the Company must successfully market, sell and
operate its services. There can be no assurance that the Company will be able to
do so. In addition, although the Company has been generating ongoing revenues
since December 31, 1995, there can be no assurance that sales made by the
Company will be at volumes and prices sufficient for the Company to achieve
profitable operations. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "BUSINESS - The Company's Personal
Property Identification and Recovery System," "BUSINESS - The Company's
Marketing Strategy" and "BUSINESS - The Company's Plan of Distribution."
ADDITIONAL FINANCING REQUIREMENTS AND POTENTIAL DILUTION OF STOCKHOLDERS
The Company will require additional funds in order to successfully
market, sell and operate its services. The Company's inability to obtain
financing or to raise additional capital, when needed and in amounts and on
terms favorable to the Company, could prevent or delay the marketing, sale and
operation of the Company's services and could have a material adverse effect on
the Company's business, operating results and financial condition. Although the
Company intends to raise capital through additional debt or equity offerings, no
assurance can be given that the Company will be able to do so. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Liquidity and Capital Resources," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Capital Requirements," and
"BUSINESS - Capital Requirements." Further, if the Company issues additional
equity securities or debt securities convertible into equity securities, the
ownership interest of the Company's stockholders would be diluted.
6
<PAGE> 10
MANAGEMENT OF FUTURE GROWTH
One of the Company's principal objectives is to be the first to market,
sell and operate a personal property identification and recovery system. If the
Company achieves that objective, its growth will place a strain on the Company's
management, operational and financial resources. The Company's ability to be the
first to market, sell and operate a personal property identification and
recovery system, to achieve profitable operations and to manage future growth
will depend upon the Company's ability to continue to implement operational,
financial and accounting systems, to attract and retain highly qualified
personnel to manage the future growth of the Company, and to expand, train and
manage its employee base. There can be no assurance that the Company will be
successful in these respects.
SOURCES OF SUPPLY; LACK OF FORMAL AGREEMENTS WITH SUPPLIERS
The Company's ability to market, sell and operate its personal property
identification and recovery system depends in part on its ability to procure the
necessary scanning equipment, labels, courier services and scanning locations.
Although the Company has preliminary understandings or agreements with suppliers
of such equipment, labels and services, the Company's agreements or
understandings tend to be informal, may be difficult to enforce, and may be
subject to termination. Accordingly, there can be no assurance that such
equipment, labels and services will be available when needed by the Company or
on terms favorable to the Company. Any unavailability of such equipment, labels
or services on terms favorable to the Company could prevent or delay the
development, marketing, sale, operation and effectiveness of the Company's
personal property identification and recovery system and could have a material
adverse effect on the Company's business, operating results and financial
condition. See "BUSINESS - Key Suppliers" and "BUSINESS - The Company's Personal
Property Identification and Recovery Network - The Scanning Network," and
"BUSINESS - The Company's Marketing Strategy."
COMPETITION
The Company is aware of one company that is planning to introduce
services similar to the Company's. The Company believes that this competitor may
offer a service that provides labels for identification purposes and an
800-number through which the finder and the owner of an item may be put in
contact with each other to make their own arrangements for the return of the
item to the owner. The Company believes that this company will not offer an
integrated system, like the Company's, which not only provides a means of
identifying an item, but also provides a complete pick up and delivery system.
The successful introduction of such services by this or any other
competitors, or the introduction by competitors of ineffective systems which
damage the credibility of the Company's industry as a whole, could have a
material adverse effect on the Company's business, operating results and
financial condition. Moreover, the expansion of services or an increase in the
level of competition by this competitor, or the entry of new competitors, could
have a material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully with existing or new competitors in the personal property
identification and recovery business.
With respect to the Company's card registration service, the Company's
market share is small and the market is highly competitive. Competitors include
Signature Group, CUC International, Safecard Services, American Express and
others. These competitors have longer operating histories, benefit from
substantially greater market recognition and have substantially greater
financial and marketing resources than the Company. In addition, certain
competitors have contractual relationships with credit card issuers for sales of
subscriptions to the issuers' cardholders. Competition in this third party
endorsed segment of the credit card industry is intense. Factors affecting the
outcome of competition with respect to the third party endorsed segment include
the quality and reliability of the services to be offered, subscriber
acquisition strategy and expertise (which is highly dependent upon creative
talents), operational capability, reputation, financial stability of the company
supplying the services, the confidence of credit card issuers in the company's
management, the compensation or fee paid to the credit card issuer and the
security maintained by the company with respect to the credit card and credit
data of which it has custody. As of the date of this Prospectus, the Company had
no contractual relationships with any credit card issuers and there can be no
assurance that it will be able to develop any such relationships. This may place
the
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Company at a competitive disadvantage with respect to its card registration
service. In addition, an increase in the level of competition from existing
competitors, or the entry of new competitors, may have a material adverse effect
on the Company's business, operating results and financial condition. There can
be no assurance that the Company will be able to compete successfully with
existing or new competitors in the card registration business. See "BUSINESS -
Competition."
INTELLECTUAL PROPERTY PROTECTION AND INFRINGEMENT
The Company's success will depend, in part, on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. The Company will rely on a combination of
trade secret and trademark laws, nondisclosure and other contractual agreements,
and technical measures to protect the confidential information, know-how and
proprietary rights relating to its personal property identification and recovery
system. The Company has filed for trademark and service mark protection in the
United States and Canada over the following: (i) "All is not lost(TM)"; (ii)
"Use it or lose it(TM)"; (iii) "Tracker: The Ultimate Warranty(TM)"; (iv)
"Tracker(TM)"; and (v) the Tracker logo. The applications in the United States
for all marks except "Tracker(TM)" and the Tracker logo have been restricted to
services only as opposed to goods. In addition, the Company has filed an
international patent application pursuant to the Patent Cooperation Treaty for
its personal property identification and recovery system. There can be no
assurance, however, that these will mature into an issued patent or issued
trademarks or service marks or that any patent, trademark or service mark
obtained or licensed by the Company will be held valid and enforceable if
asserted by the Company against another party. In addition, the above
protections may not preclude competitors from developing a personal property
identification and recovery system that is competitive with the Company's
system. The Company does not believe that its products and trademarks and other
confidential and proprietary rights infringe upon the proprietary rights of
third parties. There can be no assurance, however, that third parties will not
assert infringement claims against the Company in the future. The successful
assertion of such claims would have a material adverse effect on the Company's
business, operating results and financial condition. See "BUSINESS -
Intellectual Property Protection and Infringement."
LIMITED MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Tracker U.S.'s Common Stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board. The market for the Common Stock must be
characterized as extremely limited due to the low trading volume and the small
number of brokerage firms acting as market makers. As a result, an investor may
find it difficult to dispose of, or to obtain accurate quotations as to the
value of, the Common Stock. No assurance can be given that the over-the-counter
market for the Company's securities will continue, that a more active market
will develop or that the prices in any such market will be maintained at their
current levels or increased. Factors such as technological innovations, new
product developments, general trends in the Company's industry, quarterly
variations in the Company's results of operations, and market conditions in
general may cause the market price of the Common Stock to fluctuate
significantly. The stock markets have experienced extreme price and volume
fluctuations. These broad market fluctuations and other factors may adversely
affect the market price of the Common Stock.
PENNY STOCK RULES
The Common Stock is subject to the penny stock rules promulgated under
the Exchange Act (the "Penny Stock Rules"). The Penny Stock Rules regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system.) The Penny Stock Rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document prepared by the Commission that provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information,
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must be given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or with the
customer's confirmation.
In addition, the Penny Stock Rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for the Common Stock.
Thus, investors may find it more difficult to sell the Common Stock.
CONCENTRATION OF OWNERSHIP; EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
By way of background, in March 1994, prior to the Reorganization,
Tracker Canada received an investment of CDN $3,350,000 from Stalia Holdings
B.V. ("Stalia") for units consisting of common shares of Tracker Canada and
warrants to purchase common shares of Tracker Canada. In connection with that
investment by Stalia, Tracker Canada on March 14, 1994 entered into a Stock
Option Agreement with Stalia (the "Stalia Option Agreement") and Tracker
Canada and certain of its stockholders entered into a Right of First Refusal,
Co-Sale and Voting Agreement with Stalia (the "Stalia Agreement"). As of
January 31, 1996, Stalia transferred its Tracker Canada Exchangeable Preference
Shares to Saturn Investments, Inc. ("Saturn"), an affiliate of Stalia. Stalia
also transferred to Saturn all of Stalia's rights under the Stalia Option
Agreement and the Stalia Agreement.
The Company's directors, officers, principal stockholders and their
affiliates will continue to beneficially own approximately 38.8% of the
Company's Common Stock immediately following this offering, assuming that the
Exchangeable Preference Shares and Exchangeable Preference Warrants will be
exchanged into 5,225,339 shares of Common Stock, that currently exercisable
options to purchase 9,999 shares of Common Stock will be exercised in full, that
the Convertible Debentures outstanding as of June 25, 1996 will be converted in
full into approximately 1,688,959 shares of Common Stock, that Saturn
Investments, Inc. ("Saturn") will exercise its option to purchase an additional
amount of shares of Common Stock (3,903,797) that would provide Saturn (when
combined with common shares held by Saturn at the time of exercise) with
ownership of 25% of the Company's issued and outstanding voting equity, that the
Convertible Preferred Stock outstanding as of June 25, 1996 will be converted
into 867,876 shares of Common Stock (based on the conversion price in effect as
of June 25, 1996), that the TODA Warrant will be exercised into 200,000 shares
of Common Stock, and that the Merchant Partners Option will be exercised into
900,000 shares of Common Stock. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT." As a result of such ownership, the Company's directors,
officers, principal stockholders and their affiliates will effectively have the
ability to control the Company and direct its business and affairs. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, the Company's
Certificate of Incorporation and Bylaws contain provisions that have the effect
of retaining the control of current management and that may discourage
acquisition bids for the Company. Such provisions could limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock and impede the ability of stockholders to replace management even
if factors warrant such a change. See "DESCRIPTION OF SECURITIES - Anti-Takeover
Effects of Provisions of the Certificate of Incorporation and Bylaws."
In addition, Saturn has a contractual right, which to date it has not
exercised, to have one representative on the Company's Board of Directors, which
representative may be removed only with the written consent of Saturn. Saturn
also has the right to attend Board meetings and to receive certain information
regarding the Company. See "CERTAIN RELATIONSHIPS AND TRANSACTIONS - Investment
by Saturn Investments, Inc."
RIGHTS TO ACQUIRE ADDITIONAL SHARES
Tracker U.S. has outstanding Common Warrants to purchase 750,000 shares
of its Common Stock at $5.00 per share during the one-year period commencing on
July 12, 1995 and ending on July 12, 1996, subject to extension under certain
circumstances. See "DESCRIPTION OF SECURITIES - Common Warrants." In addition,
Tracker U.S.'s wholly-owned subsidiary, Tracker Canada, has outstanding
Exchangeable Preference Warrants to purchase 15,577 of Tracker Canada's
Exchangeable Preference Shares at Canadian $14.00 per share that expire on
various dates, the last of which is September 23, 1996. If the Exchangeable
Preference Warrants are exercised into Exchangeable Preference Shares, such
Exchangeable Preference Shares may be exchanged on a one-for-one basis for
shares of Common Stock after July 12, 1995 and will automatically be exchanged
for shares of Common Stock on July 12, 2002. See "DESCRIPTION OF SECURITIES -
Exchangeable Preference Warrants." Further, Tracker U.S. has agreed to grant its
investor relations firm options to purchase up to 500,000 shares of Common Stock
at various exercise prices ranging from $2.00 to $3.00 per share over the course
of the next five years and may issue 326,000 shares of Common Stock to that firm
in lieu of cash payments for its services. See "DESCRIPTION OF SECURITIES - CRG
Shares and Options." Based on present market prices of the Common Stock, it is
unlikely that the Common Warrants, Exchangeable Preference Warrants or CRG
options will be exercised prior to their expiration dates.
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The Company has granted its directors options to purchase 43,333 shares
of Common Stock pursuant to its stock incentive plan. An aggregate of 120,000
shares have been reserved for issuance pursuant to that plan. See "EXECUTIVE
COMPENSATION - 1994 Stock Incentive Plan." In addition, Tracker U.S. has issued
First Series Convertible Debentures in an aggregate principal amount of
$1,000,000. The First Series Convertible Debentures may be converted into shares
of Common Stock, in whole or in part, at a conversion rate of $0.4375 per share
of Common Stock from October 1, 1995 through July 31, 1996. The conversion of
all the remaining unconverted First Series Convertible Debentures would result
in the issuance of approximately 906,002 shares of Common Stock. Tracker U.S.
also has issued Second Series Convertible Debentures in an aggregate principal
amount of $1,189,529 as of June 25, 1996. The Second Series Convertible
Debentures may be converted into shares of Common Stock, in whole or in part, at
various conversion rates, the weighted average of which is $1.045972 per share
of Common Stock, from October 31, 1995 through July 31, 1996. The conversion of
all the remaining unconverted Second Series Convertible Debentures outstanding
as of June 25, 1996 would result in the issuance of approximately 728,957 shares
of Common Stock. In addition, the Company's Board of Directors has authorized
the issuance of up to an additional $810,471 aggregate principal amount of
Second Series Convertible Debentures with a conversion price of not less than
$0.9375 per share. If additional Second Series Convertible Subordinated
Debentures are issued, additional shares of Common Stock could be acquired by
the holders of any such additional debentures. See "DESCRIPTION OF SECURITIES -
Convertible Debentures." Further, Tracker U.S. has outstanding the Merchant
Partners Option to purchase 900,000 shares of Common Stock, subject to certain
contingencies in the case of 700,000 of the shares, at various exercise prices
ranging from $0.50 to $1.00. The option is exercisable for various periods
ending on July 10, 2001. See "DESCRIPTION OF SECURITIES - Merchant Partners
Option." Tracker U.S. also has outstanding the TODA Warrant to purchase 200,000
shares of its Common Stock at an exercise price of $0.40 per share through May
30, 2001. See "DESCRIPTION OF SECURITIES - TODA Warrant."
Further, the Company has granted to Saturn the right to purchase an
additional amount of shares of Common Stock that would provide Saturn (when
combined with common shares held by Saturn at the time of exercise) with
ownership of 25% of the Company's issued and outstanding voting equity. The
purchase price of such shares is their fair market value. The Company has also
granted to Saturn a right of first refusal to purchase its pro rata share of
certain new securities which the Company may from time to time propose to issue
and sell. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Investment by
Saturn Investments, Inc."
For the life of these options, warrants and debentures (except for the
Saturn options, which are exercisable at the fair market value of the shares
purchased), the holders thereof will have the opportunity to profit from any
difference between the exercise or conversion price of the options, warrants or
debentures and any higher market price of the Common Stock of the Company
without assuming the risks of ownership of the Common Stock. The presence of
such options, warrants and debentures may have the effect of depressing the
market value of the Company's Common Stock and making it more difficult for the
Company to raise additional equity financing under terms satisfactory to the
Company. In addition, the holders of the options, warrants and debentures can be
expected to exercise or convert them only at times when the Company in all
likelihood would be able to obtain any needed capital by a new offering of its
securities on terms more favorable than those provided by the options and
warrants. To the extent any of the options, warrants or debentures are exercised
or converted, the ownership interest of the Company's stockholders would be
diluted. Moreover, Saturn's right of first refusal could have the effect of
making it more difficult for the Company to raise additional equity financing
under terms satisfactory to the Company.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION OF ADDITIONAL SHARES
Of the 10,711,885 shares of Common Stock that were outstanding as of
June 25, 1996, 1,509,048 are freely tradeable and an additional 4,709,181 shares
which are being registered by the Registration Statement of which this
Prospectus is a part will, upon their sale pursuant to this Prospectus, become
freely tradeable. All of the remaining 4,493,656 shares of Common Stock that
were outstanding as of June 25, 1996 will become eligible for resale in the
public market at subsequent dates after expiration of the applicable holding
periods.
In addition, the Registration Statement of which this Prospectus is
part registers for resale by the holders thereof an aggregate of 9,090,298
shares of Common Stock that may be issued to certain persons by the Company
pursuant to (i) the Common Warrants, (ii) the First Series Convertible
Debentures, (iii) the Second Series
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Convertible Debentures, (iv) Tracker Canada's Exchangeable Preference Shares,
(v) Tracker Canada's Exchangeable Preference Warrants that are exercisable into
Exchangeable Preference Shares, which, in turn, are exchangeable on a
one-for-one basis for shares of Common Stock, (vi) the Merchant Partners Option,
(vii) the CRG Options and an agreement with CRG, and (viii) the TODA Warrant.
See "DESCRIPTION OF SECURITIES." All such Common Shares will, upon their sale
pursuant to this Prospectus, be freely tradeable. See "SHARES ELIGIBLE FOR
FUTURE SALE" and "PLAN OF DISTRIBUTION." Future sales of substantial amounts of
shares in the public market could adversely affect the market price of the
Company's shares.
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and
does not intend to pay any cash dividends in the foreseeable future. Future
earnings, if any, will be retained to fund the development and growth of the
Company's business. In addition, Tracker U.S. has agreed not to declare and pay
cash dividends on its Common Stock unless it also causes Tracker Canada to
declare and pay cash dividends on the Tracker Canada Exchangeable Preference
Shares at the same time and in the same manner as the dividends paid on the
Common Stock of Tracker U.S. Tracker U.S. must provide Tracker Canada with
adequate funds, through a contribution to capital surplus, to pay such
dividends. Further, the Company's agreement with Saturn provides that, without
first obtaining the written consent of Saturn, certain controlling stockholders
must not vote for, and must exercise their best efforts as significant
shareholders to ensure that the Board of Directors does not approve, the
declaration or payment of any dividends or the making of any distribution out of
the ordinary course of the Company's business to the shareholders of the
Company. Prospective investors who seek dividend income from their investments
should not purchase the securities offered by this Prospectus. See "DIVIDEND
POLICY," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Acquisition
Transaction" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Investment by
Saturn Investments, Inc."
DILUTION
Purchasers of shares of Common Stock may experience immediate and
substantial dilution in the net tangible book value of the Common Stock from the
offering price. See "DILUTION."
INTERNATIONAL OPERATIONS
The Company has operations in Canada and recently began test marketing
in the United States. In addition, the Company has signed a letter
agreement with Amerasia International Holdings Limited ("Amerasia") pursuant to
which Amerasia will assist the Company in selling licenses for overseas markets.
There can be no assurance, however, that this letter agreement will result in
any sales of foreign licenses.
International operations are subject to inherent risks, including
unexpected changes in regulatory requirements, currency exchange rates, tariffs
and other barriers, difficulties in staffing and managing foreign operations,
and potentially adverse tax consequences. There can be no assurance that these
factors will not have a material adverse impact on the Company's ability to
market its system on an international basis. See "BUSINESS - International
Operations."
PRIOR BANKRUPTCY OF COMPANY'S PRESIDENT, EXECUTIVE VICE PRESIDENT AND DIRECTORS
I. Bruce Lewis, the Company's Chief Executive Officer, President, and
Chairman of the Board of Directors, and Mark J. Gertzbein, the Company's
Executive Vice President, Chief Financial Officer, Secretary, Treasurer and
Deputy Chairman of the Board of Directors, were previously involved with Albert
Berg Limited, a company which was petitioned into bankruptcy by its creditors in
May 1990. Mr. Lewis was the President and a Director and Mr. Gertzbein was the
Vice President, Finance and Administration, of Albert Berg Limited. See
"MANAGEMENT - Directors and Executive Officers of the Company."
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INDEMNIFICATION OF COMPANY'S OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation and By-laws provide for
indemnification of all Directors and officers. In addition, each Director of the
Company has entered into a separate indemnification agreement with the Company.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Transactions with
Management."
GOVERNMENTAL REGULATIONS
The Company is marketing its services through the use of telemarketing
and may be subject to state regulation of telemarketing if it is deemed to be a
telemarketer within the meaning of such regulations. A telemarketer's failure to
comply with the regulations may result in civil and/or criminal liability.
Although the Company believes it is in substantial compliance with all currently
applicable regulations, additional regulations could be enacted in the future
that could have an adverse effect on the Company's business, operating results
and financial condition.
In addition, the Company, through Tracker Referral Network
International, Inc. ("Tracker Referral") pursuant to a marketing agreement with
Tracker Referral, is marketing its personal property identification and recovery
services through the use of multi-level marketing. Tracker Referral's
multi-level marketing system is or may be subject to or affected by extensive
government regulation, including but not limited to federal and state regulation
(which varies from state to state) of the offer and sale of business franchises,
business opportunities and securities. Although such multi-level marketing is
performed by Tracker Referral rather than by the Company, and although the
Company believes that Tracker Referral's multi-level marketing system is in
substantial compliance with all currently applicable regulations, there can be
no assurance that Tracker Referral will not be found to be in non-compliance
with existing regulations as a result of, among other things, misconduct by
independent contractors over whom Tracker Referral has limited control, the
ambiguous nature of certain of the regulations, and the considerable
interpretive and enforcement discretion given to regulators. Any assertion or
determination that such independent contractor or its independent contractors
are not in compliance with existing regulations, or the enactment of additional
regulations in the future, could have a material adverse effect on the Company's
business, operating results and financial condition. Further, any failure to
comply could cause Tracker Referral or the Company to pay fines as well as to
quit doing business in any state where it is out of compliance. See "BUSINESS -
Governmental Regulations."
ECONOMIC AND GENERAL RISKS
As with any company, the success of the Company will depend in part
upon factors which are beyond the control of the Company and are impossible to
predict. Such factors include general economic conditions, both nationally and
internationally, currency exchange rates, changes in tax laws and other
governmental regulations, and the level of unemployment. There can be no
assurance that an unfavorable change in such factors would not have a material
adverse effect on the demand for the Company's personal property identification
and recovery service, the Company's operating results and financial condition,
or the market price of the Company's Common Stock.
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THE COMPANY
BUSINESS
Based upon information received by the Company's field operations team
in discussions with police organizations, transit/airport lost and founds and
entertainment theme parks, and upon information provided to the Company by
independent research companies, the Company believes that only a portion of the
population has taken steps to label or otherwise identify its belongings in the
past because of skepticism concerning the possibility of recovery and the value
of taking measures to increase the likelihood of recovery. In addition, the
Company believes that various existing methods of labeling or otherwise
identifying valuables have not achieved mass market acceptance, create
concerns for security conscious owners, or have been ineffective in returning
valuables to their owners, because: (a) identification is sometimes impossible
because the labels used did not have good adhesive qualities or were not able
to endure wear and tear; and (b) many owners record only the serial numbers of
their possessions, thus making it almost impossible for the police or a "Good
Samaritan" to trace the owners and return the possessions. See "BUSINESS - Need
for the Company's Personal Property Identification and Recovery System." The
Company is a development stage company, which has developed and has begun to
market, sell and operate a personal property identification and recovery system
which uses advanced bar code and laser scanning technology to aid in the
identification and recovery of lost and stolen personal possessions.
The Company introduced its personal property identification and
recovery service in a limited test market in Toronto, Canada in October 1994 and
is slowly continuing to expand its service throughout Canada. The Company
recently began test marketing in the United States and has begun to introduce
its service to various communities in the United States. The Company has begun
to offer its service through diverse marketing channels, such as
joint-promotional partners, selected retailers, direct response, door-to-door
canvassing, telemarketers, and network referral marketers, supported by a
multi-media marketing campaign. To facilitate its identification and recovery
service, the Company is continuing to add to its network of strategic
partnerships and scanning locations in high traffic public areas, including
courier companies, law enforcement agencies, lost and found departments and
major tourist attractions. The Company's service has been endorsed by the
International Association of Chiefs of Police. See "BUSINESS - The IACP
Endorsement." There can be no assurance, however, that the Company will be able
to establish such a network or successfully market its product through such
channels. In addition, there can be no assurance that competitors will not enter
the market with similar or superior products or services. See "BUSINESS -
Competition" and "RISK FACTORS - Competition." The planned launch and the
development of future markets will depend on certain factors, including demand
for the Company's service and adequate financing and capital, over which the
Company may have little or no control. There can be no assurance that the
Company will be successful in its attempt to secure financing on terms
acceptable to the Company. See "BUSINESS - Capital Requirements."
The Company offers its members special encoded labels that are attached
to the members' personal possessions and contain ownership information in
advanced bar code form (PDF 417 symbology). After a member's lost item has been
found and then scanned, the labels are linked electronically to a central
computer base. A Company service representative then notifies the member that
his or her possession has been found and informs the member of the item's
location. In addition to the coding, a North American 1-800 number, a toll free
worldwide number, and the "call to action" phrase "IF FOUND CALL" are printed on
the labels. The identified item may then be picked up by the member, or
delivered to the member safely and promptly by courier at the member's expense.
The Company also offers a supplemental service called the "Tracker Plus"
service, which covers the full cost of returning possessions to members.
The Company believes that its personal property identification and
recovery service:
* makes it convenient for members to identify their possessions;
* enables members to identify their possessions without placing
personal information on the possessions;
* provides a better method of identification that will remain on
possessions and will remain intact;
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* provides a system that will make the identification process
easy;
* makes the return of the possessions simple and cost effective;
* motivates more people who find valuables to be "Good
Samaritans" by returning the valuables to their rightful
owners; and
* thereby improves the chances that members will get their lost
or stolen possessions back.
The Company's strategy is to provide a personal property identification
and recovery system that does not merely provide another method of identifying
articles, but instead provides a simpler method of identifying articles as well
as a complete identification and return delivery service that will help get the
articles back to members when the articles are located. Another part of the
Company's strategy is to:
* make it easy for consumers to understand the concept and the
benefits of the service;
* make it easy for consumers to enroll in the service;
* create realistic market expectations;
* provide an excellent price to value relationship;
* develop, maintain and operate a reliable service that improves
the likelihood of recovering lost or stolen possessions; and
* communicate the incidence of successful recoveries of
possessions in order to provide the credibility necessary to
stimulate consumer confidence in the service.
The Company plans to expand its recovery service by having
manufacturers of products such as computer chips, bicycles, power tools,
electronic equipment, cameras and auto parts apply the Company's coding, through
laser etching or other methods, directly onto or into products at the source of
manufacture. The Company believes that this expansion of its service will be
attractive to manufacturers because (i) it will add value to their products by
showing that they care about their customers and their customers' ability to
recover lost or stolen items and (ii) the coding will enhance the ability of
manufacturers and distributors to combat retail and warranty fraud. There can be
no assurance, however, that the Company will be able to successfully expand its
service in this fashion.
In addition to the Company's personal property identification and
recovery system, the Company has implemented and is currently offering a card
registration service marketed through telemarketers. This service permits a
member, with a single toll free phone call, to: (i) cancel all of the member's
lost or stolen debit and credit cards; (ii) request replacement cards; (iii)
request a wire of emergency funds or replacement airline tickets (charged to the
member's credit card); (iv) request a change of address for all cards; and (v)
be covered on fraudulent charges on cards, after notifying the Company, in an
amount of up to $6,000. There can be no assurance that the Company will be able
to successfully market its card registration service or that the Company will be
able to compete successfully with companies offering similar services. See
"BUSINESS - Competition" and "RISK FACTORS - Competition."
CORPORATE HISTORY
Tracker U.S. was originally incorporated in Utah in February 1986 under
the name Equitec Capital Corporation to serve as a vehicle to acquire or merge
with an operating company. It changed its name to E-Tech Capital Corporation in
March 1986 and to E-Tech, Incorporated in February 1987. In July 1992, Tracker
U.S. changed its state of incorporation from Utah to Nevada through a change in
domicile merger and, in connection therewith, changed its name to Ultra Capital
Corp. Prior to the Reorganization discussed in the next paragraph, Tracker U.S.
had been inactive for the preceding several years and had conducted no
significant operations or activities.
In July 1994, Tracker U.S. changed its state of incorporation from
Nevada to Delaware through a change in domicile merger and, in connection
therewith, changed its name to The Tracker Corporation of America and changed
its fiscal year end from December 31 to March 31. Also in July 1994, Tracker
U.S. succeeded to its current line of business through a reorganization (the
"Reorganization") in which it acquired all of the issued and outstanding voting
shares of The Tracker Corporation, an Ontario, Canada corporation ("Tracker
Canada"), in exchange for shares of Tracker U.S.'s capital stock representing,
at the time, approximately 90% of the total voting shares of Tracker U.S. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Reorganization."
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Tracker Canada, which originated the Company's present line of
business, was incorporated in May 1993 and is now a wholly-owned subsidiary of
Tracker U.S. Prior to the Reorganization, Tracker Canada engaged in
organizational efforts, including the hiring of technical and management
personnel, focused on the research and development of advanced bar code and
laser scanning technology, entered into agreements or understandings with key
suppliers, prepared the business and marketing plan, programmed the software and
filed for patent and trademark protection in Canada and the United States.
The Company's principal executive offices are located at 180 Dundas
Street West, Suite 1502, Toronto, Ontario, Canada, M5G 1Z8, and its telephone
number is (416) 595-6222.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
shares of Common Stock offered hereby. The Company estimates that it will incur
expenses of approximately $200,000 in connection with this offering.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and
does not intend to pay any cash dividends in the foreseeable future. Future
earnings, if any, will be retained to fund the development and growth of the
Company's business. In addition, Tracker U.S. has agreed not to declare and pay
cash dividends on its Common Stock unless it also causes Tracker Canada to
declare and pay cash dividends on the Tracker Canada Exchangeable Preference
Shares at the same time and in the same manner as the dividends paid on the
Common Stock of Tracker U.S. Tracker U.S. must provide Tracker Canada with
adequate funds, through a contribution to capital surplus, to pay such
dividends. Further, the Company's agreement with Saturn Investments, Inc.
provides that, without first obtaining the written consent of Saturn, certain
controlling stockholders must not vote for, and must exercise their best efforts
as significant shareholders to ensure that the Board of Directors does not
approve, the declaration or payment of any dividends or the making of any
distribution out of the ordinary course of the Company's business to the
shareholders of the Company. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - Investment by Saturn Investments, Inc." Prospective investors who seek
dividend income from their investments should not purchase the securities
offered by this Prospectus.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market, is
quoted on the OTC Bulletin Board and is quoted in the "pink sheets" under the
symbol "TRKR". Quotations for the Company's common stock were first listed on
the OTC Bulletin Board on May 5, 1993. The market for the Company's Common Stock
must be characterized as extremely limited due to the low trading volume and the
small number of brokerage firms acting as market makers. As a result, an
investor may find it difficult to dispose of, or to obtain accurate quotations
as to the value of, the Common Stock. No assurance can be given that the
over-the-counter market for the Company's securities will continue, that a more
active market will develop or that the prices in any such market will be
maintained at their current levels or increased.
15
<PAGE> 19
The following table sets forth, for the periods indicated, the high and
low bid quotations for the Company's Common Stock as reported by the National
Quotation Bureau, Inc. These quotations reflect inter-dealer prices, without
adjustments for retail markups, markdowns or commissions, and do not represent
actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
June 30, 1994 $ 8.5000 $ 1.7500
September 30, 1994 $ 9.5000 $ 4.0000
December 31, 1994 $ 6.7500 $ 5.0000
March 31, 1995 $ 5.3750 $ 0.5000
June 30, 1995 $ 3.0625 $ 0.6250
September 30, 1995 $ 2.8750 $ 0.3750
December 31, 1995 $ 2.6250 $ 0.5000
March 31, 1996 * $ 0.8125 $ 0.0625
June 30, 1996 $ 0.8750 $ 0.3750
</TABLE>
- ----------
* Excludes January 8, 1996, for which the National Quotation Bureau, Inc.
was unable to provide information.
On June 25, 1996, the high and low bid quotations for the
Company's Common Stock on the OTC Bulletin Board were $0.50 and $0.125,
respectively. As of June 25, 1996, there were 10,711,885 shares of Common Stock
outstanding held by approximately 320 holders of record, including
broker-dealers and clearing corporations holding common shares on behalf of
their customers, and 5,209,762 shares of Class B Voting Common Stock outstanding
held by Montreal Trust Company of Canada, as Trustee, on behalf of approximately
100 holders of record.
DILUTION
The net tangible book value of the Company's outstanding Common Stock
as of March 31, 1996 was $(1,378,772) or $(0.1125) per share. Net tangible book
value per common share is equal to the Company's total tangible assets less its
total liabilities and Preferred Stock (none of which Preferred Stock was
outstanding as of March 31, 1996, but 350 shares of which were outstanding as of
June 25, 1996 (see "DESCRIPTION OF SECURITIES - Preferred Stock")), divided by
the total number of outstanding shares of Common Stock and Class B Voting Common
Stock as of such date. The above stated net tangible book value and net tangible
book value per common share does not give effect to (i) the issuance of shares
of Common Stock since March 31, 1996; (ii) the issuance, if any, of shares of
Common Stock in the future upon the conversion of the First Series Convertible
Debentures, the conversion of the Second Series Convertible Debentures, the
exercise of the Exchangeable Preference Share Warrants, or the conversion of the
Preferred Stock outstanding as of June 25, 1996; or (iii) the issuance, if any,
of shares of Common Stock in the future pursuant to the exercise of outstanding
options or options that may be granted in the future under the Company's Stock
Incentive Plan or otherwise.
It is impossible to predict the amount of dilution from the price paid
by purchasers who buy Common Stock that will be absorbed by such purchasers
because the sale price per common share is not known. There will be no increase
in the net tangible book value per share as a result of any payments made by
purchasers who buy Common Stock because such payments, if any, will be made to
the Selling Securityholders rather than to the Company.
16
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the Company presented
below should be read in conjunction with the detailed information and financial
statements appearing elsewhere in this Prospectus. The selected consolidated
financial data at March 31, 1994, 1995 and 1996 and for the fiscal years ended
March 31, 1995 and 1996 and the period from inception at May 6, 1993 through
March 31, 1994 have been derived from the audited consolidated financial
statements of the Company which have been audited by Price Waterhouse LLP,
independent accountants.
For accounting purposes, the Reorganization with Tracker Canada is
being treated as a reverse merger/acquisition with recapitalization of Tracker
Canada as the acquirer because, among other factors, the assets and operations
of Tracker Canada significantly exceeded those of Ultra Capital Corp. (Tracker
U.S.'s predecessor) and the shareholders of Tracker Canada control Tracker U.S.
after the Reorganization. The Reorganization is being treated for accounting and
financial reporting purposes as an issuance of shares by Tracker Canada. Thus,
pro forma information is not presented as the Reorganization is not a business
combination. The historical consolidated financial statements prior to July 12,
1994 are those of Tracker Canada. Tracker Canada was organized on May 6, 1993.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Reorganization" and Note 1
of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Inception (May 6,
1993) to Fiscal Year Ended Fiscal Year Ended
Consolidated Statement of Operations Data March 31, 1994 March 31, 1995 March 31, 1996
- ----------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue $ -- $10,187 $106,522
Net income (loss) (2,043,425) (5,068,583) (6,090,730)
Net income (loss) per share (0.38) (0.71) (0.57)
Consolidated Balance Sheet Data March 31, 1994 March 31, 1995 March 31, 1996
- ------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Total assets $2,675,527 $1,669,452 $1,193,742
Total current liabilities 275,660 1,446,543* 2,393,631*
Long-term debt -- -- --
Total stockholder's equity 2,399,867 222,909 (1,378,772)
Working capital 2,195,349 (445,686) (1,728,529)
</TABLE>
- --------------
* Included in total current liabilities for March 31, 1996 are $1,460,000
of convertible subordinate debentures and $294,124 of current and long
term deferred revenues (as compared with $0 of convertible subordinated
debentures and $10,998 of deferred revenues for March 31, 1995).
17
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The information contained in this Prospectus which does not constitute
historical facts constitutes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbors
created thereby. Such forward-looking statements involve important risks and
uncertainties, including but not limited to: the risk that the Company may not
be able to successfully market, sell and operate its personal property
identification and recovery system and its card registration service; the risk
that the Company may be unable to obtain additional financing or raise
additional capital when needed and in amounts and on terms favorable to the
Company; the risk that the Company will not be able to continue to implement
operational, financial and accounting systems, to attract and retain highly
qualified personnel to manage the future growth of the Company, and to expand,
train and manage its employee base; the risk that the Company may not be able to
procure the necessary scanning equipment, labels, courier services and scanning
locations when needed and on terms favorable to the Company; the risk that the
Company's intellectual property protection may not preclude competitors from
developing a personal property identification and recovery system that is
competitive with the Company's system and the risk that third parties may assert
infringement claims against the Company in the future; the risk that the Company
may not be able to compete with existing or new competitors; the risks inherent
in international operations; and other risks detailed in this Prospectus and in
the Company's other filings with the Securities and Exchange Commission. See
"RISK FACTORS."
There can be no assurance that the forward-looking information
contained in this Prospectus will prove to be accurate. The risks and
uncertainties discussed above increase the uncertainty inherent in such
forward-looking information. Accordingly, there may be differences between the
actual results or plans and the predicted results or plans. Actual results or
plans may be materially different than those indicated in the forward-looking
information contained in this Prospectus.
OVERVIEW
Prior to the Reorganization effective July 12, 1994, Tracker U.S. (then
Ultra Capital Corp.) had been inactive for the preceding several years and had
conducted no significant operations or activities. See "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS - Reorganization." Tracker Canada, which originated the
present line of business, had its inception on May 6, 1993. During the period
from inception to September 30, 1994, the Company was engaged in organizational
efforts, including the hiring of technical and management personnel. During that
time, the Company focused on the research and development of advanced bar code
and laser scanning technology, entered into agreements or understandings with
key suppliers, prepared the business and marketing plan, programmed the software
and filed for patent and trademark protection in Canada and the United States.
The Company is a development stage company that has developed and begun to
market, sell and operate a personal property identification and recovery system
and a card registration service. The Company launched its personal property
identification and recovery service in a limited test market in Toronto, Canada
in October 1994 and is slowly continuing to expand its service throughout
Canada. The Company recently began test marketing in the United States and has
begun to introduce its service to various communities in the United States. The
Company offers its services through diverse marketing channels such as joint
promotional partners (i.e., Samsonite Canada, Inc.), selected retailers (i.e.,
Sony of Canada Ltd.), direct response (i.e., Donnelley Marketing, Inc.
distribution of a 4.5 million piece drop in May 1996), door-to-door canvassing
(i.e., the Company's Child ID representatives), telemarketers (i.e., Datatrack,
Inc., Sitel Canada, Inc. and PR Response, Inc. selling the Company's new card
registration service) and network referral marketers (i.e., Tracker Referral
Network International, Inc. selling home-based business opportunities utilizing
the Company's products and services).
Although the Company has been generating gross cash flows of
approximately $150,000 per month since December 31, 1995, there can be no
assurance that sales made by the Company will be at volumes and prices
sufficient for the Company to achieve profitable operations. Further, two of the
Company's television test
18
<PAGE> 22
marketing efforts, both of which were through L.L. Knickerbocker Company, Inc.
("Knickerbocker"), resulted in substantially less sales of the Company's
personal property identification and recovery service than the Company had
anticipated. First, Knickerbocker in November 1995 launched an unsuccessful
television test marketing campaign that aired via broadcast television in six
markets in the United States and nationally via certain cable television
channels. Second, through Knickerbocker, the Company obtained a purchase order
from The Home Shopping Network for 2,500 personal property protection ("Tracker
Plus") kits. The Company's appearance on The Home Shopping Network in June 1996
resulted in sales by The Home Shopping Network of only nine of the kits. The
Company, however, continues to offer its services through various marketing
channels. Management continues to believe that there is a substantial market
for the Company's services.
The Company has been unprofitable since inception. During the fiscal
year ended March 31, 1996, the Company incurred a net loss of $6,090,730 and, at
the end of such fiscal year, had an accumulated deficit of $13,202,738. The
Company expects to continue to incur losses, through at least March 31, 1997.
From the date of inception (May 6, 1993) through March 31, 1996, the Company had
realized revenues of only $116,709. Although the Company has begun to achieve
ongoing significant cash flows (approximately $150,000 per month since December
31, 1995), the Company will require additional capital in order to implement its
business plan in the manner contemplated. There can be no assurance that the
Company will be able to obtain such financing on terms acceptable to the
Company. See "Capital Requirements" below. The report of independent accountants
covering the Company's financial statements for the fiscal year ended March 31,
1996 expresses substantial doubt about the Company's ability to continue as a
going concern because it is a development stage company and has not been able to
attract significant outside financing or generate significant revenues. There
can be no assurance that the Company will be able to obtain such financing on
terms acceptable to the Company or that the Company will be able to achieve
profitable operations. If the Company is unable to obtain such financing or
achieve profitable operations, it may be forced to cease or significantly limit
it operations. See "RISK FACTORS - Lack of Profitability; Continuing Losses
Expected; Ability to Continue as a Going Concern" and "RISK FACTORS - ADDITIONAL
FINANCING REQUIREMENTS."
Historical financial information prior to the Reorganization effective
July 12, 1994 is that of Tracker Canada. See "SELECTED CONSOLIDATED FINANCIAL
DATA." Revenue for Company services is recognized on a straight-line basis over
the term of service offered (presently 12 to 60 months). Amounts received for
which service has not yet been provided are recorded as deferred revenue. See
Note 3 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH
31, 1995. During the fiscal year ended March 31, 1996, the Company had net
revenues of $106,522 as compared to $10,187 net revenues for the fiscal year
ended March 31, 1995. Cost of goods sold for the fiscal year ended March 31,
1996 was $40,230 as compared to $4,029 for the fiscal year ended March 31, 1995.
This resulted in a gross profit of $66,292 for the fiscal year ended March 31,
1996 as compared to $6,158 gross profit for the fiscal year ended March 31,
1995.
During the fiscal year ended March 31, 1996, the Company incurred a net
loss of $6,090,730 as compared to a net loss of $5,068,583 for the fiscal year
ended March 31, 1995. These losses included expenses in the amount of $6,157,022
for the fiscal year ended March 31, 1996 as compared to $5,074,741 for the
fiscal year ended March 31, 1995. These expenses consisted of operational costs
of $592,880 for the fiscal year ended March 31, 1996 as compared to $687,681 for
the fiscal year ended March 31, 1995, information systems costs of $262,942 for
the fiscal year ended March 31, 1996 as compared to $465,827 for the fiscal year
ended March 31, 1995, sales and marketing costs of $1,031,041 for the fiscal
year ended March 31, 1996 as compared to $1,737,438 for the fiscal year ended
March 31, 1995, and general and administrative costs of $4,270,159 for the
fiscal year ended March 31, 1996 as compared to $2,183,795 for the fiscal year
ended March 31, 1995.
Included in the deficit for the fiscal year ended March 31, 1996 are
non-operating expenditures in the amount of (1) $1,059,447 for investor, media
and public relations services; (2) $138,000 for legal, audit and tax
professional costs associated with the Company entering the process of filing a
required registration statement with the Securities and Exchange Commission; (3)
$181,311 in interest expense incurred as a result of raising capital through
convertible debentures; (4) $1,078,785 of ongoing costs reflecting non-cash
outlays and monthly adjustments for prepaid expenditures being utilized and
expensed, which include (a) $912,273 associated with the development of the
Company's direct selling commercial through its contract with The L.L.
Knickerbocker Company and the costs associated with fees to cover its celebrity
spokesperson, Angie Dickinson, (b) $118,360 relating to the amortization of
rent, and (c) $48,152 associated with the administration services provided under
the Centry contract;
19
<PAGE> 23
(5) $85,646 relating to the amortization of deferred charges on the commission
incurred from the securing of investors for the Company's Convertible
Debentures; (6) $826,875 associated with the non-cash outlay relating to the
issuance of 630,000 share of Common Stock, restricted as to transferability, to
certain officers of the Company; and (7) $429,061 associated with the non-cash
outlay relating to the issuance of 770,000 shares of Common Stock to six key
employees and one director as payment in lieu of prior accrued salaries and fees
and as an advance of their salaries and fees through September 30, 1996. All
other major expense groups for the fiscal year ended March 31, 1996 have been
reduced in comparison to the fiscal year ended March 31, 1995 and the Company is
continuing in its efforts to minimize its operating cash "burn" rate.
FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO FISCAL YEAR ENDED MARCH
31, 1994. During the fiscal year ended March 31, 1995, the Company had net
revenues of $10,187 as compared to no net revenues for the fiscal year ended
March 31, 1994. Cost of goods sold for the year ended March 31, 1995 was
$4,029 as compared to no cost for the fiscal year ended March 31, 1994. This
resulted in a gross profit of $6,158 for the fiscal year ended March 31, 1995 as
compared to no gross profit for the fiscal year ended March 31, 1994.
During the fiscal year ended March 31, 1995, the Company incurred a net
loss of $5,068,583 as compared to a net loss of $2,043,425 for the fiscal year
ended March 31, 1994. These losses included developmental costs in the amount of
$5,074,741 for the fiscal year ended March 31, 1995 as compared to $2,043,425
for the fiscal year ended March 31, 1994. These development costs consisted of
operational costs of $687,681 for the fiscal year ended March 31, 1995 as
compared to $149,260 for the fiscal year ended March 31, 1994, information
systems costs of $465,827 for the fiscal year ended March 31, 1995 as compared
to $157,277 for the fiscal year ended March 31, 1994, sales and marketing costs
of $1,737,438 for the fiscal year ended March 31, 1995 as compared to $606,271
for the fiscal year ended March 31, 1994, and general and administrative costs
of $2,183,795 for the fiscal year ended March 31, 1995 as compared to $1,130,617
for the fiscal year ended March 31, 1994.
The results of operations stated above for the fiscal year ended March
31, 1994 are not for a full year, but instead are for the period from May 6,
1993 (the date of inception of Tracker Canada) through March 31, 1994.
Accordingly, results for the fiscal years ended March 31, 1995 and March 31,
1994 are not necessarily comparable.
LIQUIDITY AND CAPITAL RESOURCES
From inception at May 6, 1993 through March 31, 1996, the Company has
received approximately $9,652,065 in net cash from financing activities, some
of which activities are noted below.
During the year ended March 31, 1996, the Company's net cash used in
operations was $3,501,557 as compared to $3,394,591 for the fiscal year ended
March 31, 1995. The cash used in operations was devoted primarily to funding the
development of identification and recovery systems and software, labels,
packaging, marketing and advertising materials and plans, the development of a
scanning network, and initial sales and promotional commitments leading and
subsequent to the Canadian market launch in October 1994 and the buildup for the
test launch into the United States.
As of March 31, 1996, the Company had total current assets of $665,102
as compared to $1,000,857 at March 31, 1995. Current assets consisted of cash in
the amount of $78,844 as of March 31, 1996 as compared to $107,091 at March 31,
1995, short-term investments in the amount of $221,190 as of March 31, 1996 as
compared to $0 at March 31, 1995, accounts receivable in the amount of $7,361 as
of March 31, 1996 as compared to $4,981 at March 31, 1995, prepaid expenses and
deposits in the amount of $168,345 as of March 31, 1996 as compared to $544,432
at March 31, 1995, inventories in the amount of $115,612 as of March 31, 1996 as
compared to $166,003 at March 31, 1995, a note receivable in the amount of $0 as
of March 31, 1996 as compared to $178,350 at March 31, 1995, and current
deferred charges in the amount of $73,750 as of March 31, 1996 as compared to $0
at March 31, 1995. As of March 31, 1996, the Company had amount due from
stockholders in the amount of $58,226 as of March 31, 1996 as compared to
$191,926 at March 31, 1995, long-term deferred charges totalling $66,234 as
compared to $0 at March 31, 1995, net fixed assets totaling $353,729 as compared
to $437,147 at March 31, 1995, and long-term investments in the amount of
$50,451 as compared to $39,522 at March 31, 1995. As of March 31, 1996, the
Company had liabilities of $2,393,631 as compared to $1,446,543 at March 31,
1995. Such liabilities consisted of accounts payable in the amount of $551,553
as of March 31, 1996 as compared to $1,101,424 at
20
<PAGE> 24
March 31, 1995, accrued liabilities in the amount of $266,837 as of March 31,
1996 as compared to $334,121 at March 31, 1995, deferred revenues in the amount
of $115,241 as of March 31, 1996 as compared to $10,998 at March 31, 1995, and
convertible subordinated debentures in the amount of $1,460,000 as of March 31,
1996 as compared to $0 at March 31, 1995. The Company had long-term deferred
revenues in the amount of $178,883 as of March 31, 1996 as compared to $0 at
March 31, 1995.
As of March 31, 1996 and March 31, 1995, respectively, the Company had
accumulated deficits of $13,202,738 and $7,112,008. To date, the Company has
financed its research and development activities and operations primarily
through the private placement by Tracker U.S. of First Series Convertible
Debentures aggregating $1,000,000 from July to October 1995, the private
placement by Tracker U.S. of Second Series Convertible Debentures aggregating
$1,189,529 through March 1996, the sale by Tracker U.S. of a total of 1,810,000
shares of Common Stock in private placements, and the sale by Tracker U.S.
pursuant to Regulation S under the Securities Act of 850 shares of Preferred
Stock for $850,000 during April and May 1996.
The sales of the 1,810,000 shares of Common Stock are described in the
remainder of this paragraph. On September 16, 1994, Tracker U.S. issued,
pursuant to Regulation S under the Securities Act, 785,000 shares of Common
Stock (200,000 shares of which were returned to the Company) for total gross
proceeds to Tracker U.S. of $2,351,700, $955,000 of which was received by
Tracker U.S. in the form of cash and the remainder of which was in the form of
payments by the buyer of the shares of Common Stock to third parties in
cancellation of indebtedness owed by the Company to such third parties. On
February 9, 1995, Tracker U.S. issued to two separate overseas buyers, pursuant
to Regulation S, 275,000 shares of Common Stock for total proceeds to the
Company of $550,000. On March 15, 1995, Tracker U.S. issued 500,000 units, each
unit consisting of one share of Common Stock and one warrant to purchase Common
Stock, for total gross proceeds to the Company of $350,000. On May 1, 1995,
Tracker U.S. issued 250,000 units, each unit consisting of one share of Common
Stock and one warrant to purchase Common Stock, for total gross proceeds to the
Company of $250,000. Tracker U.S. also issued 200,000 shares of Common Stock to
a buyer for $200,000, of which only $83,000 has been paid to Tracker U.S. by the
buyer. The Company has filed suit against the investor to attempt to collect the
remaining $117,000. There can be no assurance, however, that the Company will be
successful in the lawsuit or will be able to collect such amount.
In addition to the above described private placements, the Company
raised $619,166 during the year ended March 31, 1996 through the issuance of
849,803 of Tracker Canada's Exchangeable Preference Shares pursuant to
outstanding warrants to purchase such Exchangeable Preference Shares. Further,
the Company has issued shares to employees and third parties in lieu of
compensation to such employees or payments to such third parties for products or
services provided to the Company.
Tracker U.S., the parent corporation, is dependent upon the liquidity
of its subsidiary, Tracker Canada. The terms of the Exchangeable Preference
Shares restrict, under certain limited circumstances, Tracker Canada's ability
to fund the liquidity requirements of Tracker U.S. by paying dividends or making
other distributions to Tracker U.S. The Company believes that such terms have no
material impact on Tracker Canada's ability to fund the liquidity requirements
of Tracker U.S., however, because such terms prohibit Tracker Canada from making
a distribution to Tracker U.S. without the consent of the holders of the
Exchangeable Preference Shares only if all dividends accrued on the Exchangeable
Preference Shares have not been declared and paid in full or an amount set aside
for such payment. Because dividends on the Exchangeable Preference Shares do not
accrue unless and until a dividend is declared on the Tracker U.S. Common Stock,
and because Tracker U.S. has never paid any cash dividends on its Common Stock
and does not intend to pay any cash dividends in the foreseeable future (see
"DIVIDEND POLICY"), the Company believes it is extremely unlikely that there
will ever be any prohibition on distributions by Tracker Canada to Tracker U.S.
The Company has a short-term investment, recorded at the Company's
original cost of $221,730 (CDN $1.04 per share), in 288,462 shares of Stratcomm
Media Ltd. ("Stratcomm"). The Company was contractually prohibited from selling
such shares until May 30, 1996, and, therefore, could not recover its investment
in such shares until that date. Absent any unforeseen circumstance such as a
significant decline in the price of the Stratcomm stock, the Company intends to
sell the Stratcomm shares as soon as possible in order to improve its liquidity.
21
<PAGE> 25
In July 1994 and January 1995, the Company entered into two separate
agreements to acquire interests in other companies, Page-Direct Ltd.
("Page-Direct") and C.E.M. Centry Electronic Monitoring Corporation ("Centry"),
which management believed at that time could enhance the Company's
infrastructure and marketing capabilities. As further described in "Aborted
Acquisitions; Acquisition Policy," these investments were subsequently aborted
without burdening the Company's cash flows too significantly. Management is now
focusing its attention on its core businesses as more fully described in the
section entitled "BUSINESS." Long- term and short-term cash needs of the Company
are more fully described in "Capital Requirements" below.
CAPITAL REQUIREMENTS
Although the Company has been generating gross cash flows of
approximately $150,000 per month since December 31, 1995, the Company will
require additional capital in order to continue the Canadian and United States
roll-outs and otherwise implement its business plan in the manner contemplated.
The acquisition of equipment, establishment of distribution channels and conduct
of a comprehensive marketing and advertising campaign are crucial to the
Company's success. The Company will require additional debt or equity funding to
conduct and complete such activities. No assurance can be given that the
necessary funding will be available to the Company when needed, in sufficient
amounts, on acceptable terms, or at all. If the Company does not receive
sufficient funding on acceptable terms, this could prevent or delay the
marketing, sale and operation of the Company's services and may have a material
adverse effect on the Company's business, operating results and financial
condition.
Management is attempting to obtain additional debt or equity funding
and trying to mitigate the need for such additional funding. One critical
element in management's plan to overcome the Company's present financial
condition is to raise additional debt or equity funding as needed through
private placements or other exempt offerings. For example, the Company raised
$2,189,529 in the second half of calendar 1995 and early calendar 1996 through
the sale of Convertible Debentures and raised $850,000 in April and May 1996
through the sale of Preferred Stock. Although no assurance can be given that the
necessary funding will be available to the Company when needed, in sufficient
amounts, on acceptable terms, or at all, management believes it is likely that
the Company will be able to obtain sufficient funding to support its operations
and its planned marketing and advertising campaign during the twelve months
following March 31, 1996.
A second critical element in management's plan to overcome the
Company's present financial condition is to mitigate the need for additional
outside funding. Management plans to do this in two ways. First, to minimize the
Company's cash requirements, the Company (i) has reduced staff to minimal safe
operating levels, (ii) has compensated certain members of senior management in
stock rather than cash, and (iii) has sought to control expenses. Second, and
particularly critical to the long-term viability of the Company, the Company
must decrease the need for additional outside funding by generating cash
internally, i.e., through sales. For a discussion of the Company's plans with
respect to increasing its sales, see "BUSINESS - The Company's Marketing
Strategy" and "BUSINESS - The Company's Plan of Distribution." Although no
assurance can be given that any sales made by the Company will be at volumes and
prices sufficient for the Company to achieve significant revenues, eliminate or
decrease the need for additional outside financing, and achieve profitable
operations, management believes it is likely that its marketing and sales
efforts will, in the long-term, result in sufficient sales to decrease the need
for additional outside financing and achieve profitable operations.
ABORTED ACQUISITIONS; ACQUISITION POLICY
On July 22, 1994, the Company entered into an agreement to acquire
Page-Direct, a wireless communications company. Prior to cancellation of the
agreement, the Company had issued 271,052 Tracker Canada Exchangeable Preference
Shares to the owner of Page-Direct for 46.2% of the outstanding shares of
Page-Direct and had advanced $178,350 to Page-Direct at an interest rate equal
to the Royal Bank of Canada prime rate plus 2%. In June 1995, the owner of
Page-Direct exercised his option under the agreement to reacquire his interest
in Page-Direct, he returned the Exchangeable Preference Shares to the Company,
Page-Direct repaid the loan, and the agreement was cancelled.
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<PAGE> 26
By agreement dated January 31, 1995, the Company, through Tracker
Canada, committed to purchase up to 35.9% of the voting common shares of Centry
through a private placement of an 8% convertible debenture in the principal
amount of $405,260 (CDN $575,000). Tracker Canada advanced certain funds to
Centry under the debenture and agreed to provide, over nine months,
administrative services in the amount of $50,746 (CDN $72,000). In consideration
therefor, Tracker Canada received 510,275 common shares of Centry, which
represented approximately 9.87% of Centry's common shares then issued. Tracker
Canada also secured a voting trust and option agreement over 1,248,087 common
shares (approximately 17.2%) of Centry from the founders of Centry and prepaid
consulting services agreements in exchange for 78,005 Exchangeable Preference
Shares. The agreement contemplated that as payments were made under the
debenture, Tracker Canada would receive additional shares in Centry such that
upon payment of the entire convertible debenture, Tracker Canada would have
voting control of 53.1% of Centry.
Subsequently, the Company entered into agreements with Centry which
released the Company from its obligation to fund the debenture and which
provided that the Company would receive a 3% commission of total gross revenues
on any deal entered into by Centry with certain companies. The Company has
satisfied all of its administrative services obligations to Centry.
The above-described acquisitions were completely independent. To the
Company's knowledge, no common ownership or management exists between Centry and
Page-Direct and their principals or promoters. The Company's original purpose in
entering into the acquisitions was to acquire companies which the Company at the
time believed would assist it in advancing its longer-term strategy of locating
lost or stolen possessions through real-time asset tracking technologies. The
acquisitions were aborted because the Company was unable to generate sufficient
capital to support both its own marketing launch and the capital requirements of
the acquisitions. Since making these acquisitions, management has determined
that it is in the best interests of the Company to concentrate on the
development of its core business (i.e., its personal property identification and
recovery system and its card registration service) and to use its capital and
other resources to support the development of that business. Accordingly, the
Company has no present plans to make other acquisitions in the future.
INFLATION; SEASONALITY
While inflation has not had a material impact on operating results and
management does not expect inflation to have a material impact on operating
results, there can be no assurance that the business of the Company, on a
consolidated basis, will not be affected by inflation in the future. While the
Company's business to date has not been seasonal and management does not expect
that its business will be seasonal in the future, there can be no assurance that
the business of the Company, on a consolidated basis, will not be seasonal in
the future.
BUSINESS
BUSINESS OVERVIEW
The Company is a development stage company which has developed and
has begun to market, sell and operate a personal property identification and
recovery system which uses advanced bar code and laser scanning technology to
aid in the identification and recovery of lost or stolen personal possessions.
The Company launched its service in a limited test market in Toronto,
Canada in October 1994 and is slowly continuing to expand its service throughout
Canada. The Company recently began test marketing in the United States and has
begun to introduce its service to various communities in the United States. The
Company offers its services through diverse marketing channels such as joint
promotional partners, selected retailers, direct response, door-to-door
canvassing, telemarketers, and network referral marketers. To facilitate its
identification and recovery service, the Company is attempting to organize a
network of strategic partnerships and scanning locations in high traffic public
areas, including courier companies, law enforcement agencies, lost and found
departments and major tourist attractions. There can be no assurance, however,
that the Company will be able to establish and maintain such a network or
successfully market its service through such channels. In addition, there can be
no assurance that competitors will not enter the market with similar or superior
products and services. See
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<PAGE> 27
"BUSINESS - Competition" and "RISK FACTORS - Competition." The continuation of
the Canadian and United States roll-outs and the development of future markets
will depend on certain factors, including demand for the Company's service and
adequate financing and capital, over which the Company may have little or no
control. There can be no assurance that the Company will be successful in its
attempt to secure financing on terms acceptable to the Company. See "BUSINESS -
Capital Requirements."
The Company's longer-term strategy is to develop an umbrella of
recovery services ranging from the current identification and recovery service
packages to laser etching the Company's symbology at point of manufacture. There
can be no assurance, however, that the Company will be able to implement its
longer-term strategy. See "BUSINESS - The Company's Solution."
In addition to recovery services, the Company has implemented and
offers a card registration service.
NEED FOR THE COMPANY'S PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM
The Company believes that only a portion of the population has taken
steps to label or otherwise identify its belongings in the past because of
skepticism concerning the possibility of recovery and the value of taking
measures to increase the likelihood of recovery. In addition, the Company
believes that various existing methods of labeling or otherwise identifying
valuables have not achieved mass market acceptance, create concerns for security
conscious owners, or have been ineffective in returning valuables to their
owners, because: (a) identification is sometimes impossible because the labels
used did not have good adhesive qualities or were not able to endure wear and
tear; and (b) many owners record only the serial numbers of their possessions,
thus making it almost impossible for the police or a "Good Samaritan" to trace
the owners and return the possessions.
THE COMPANY'S SOLUTION
Based upon research conducted by the Company, management believes that
there is a need for a personal property identification and recovery service
that:
* makes it convenient for members to identify their possessions;
* enables members to identify their possessions without placing
personal information on the possessions;
* provides a better method of identification that will remain on
possessions and will remain intact;
* provides a system that will make the identification process
easy;
* makes the return of the possessions simple and cost effective;
* motivates more people who find valuables to be "Good
Samaritans" by returning the valuables to their rightful
owners; and
* thereby improves the chances that members will recover their
lost or stolen possessions.
The Company believes that its personal property identification and recovery
system meets these needs.
The Company plans to expand its recovery service by having
manufacturers of products such as computer chips, bicycles, power tools,
electronic equipment, cameras and auto parts apply the Company's coding, through
laser etching or other methods, directly onto or into products at the source of
manufacture. The Company believes that this expansion of its service will be
attractive to manufacturers because (i) it will add value to their products by
showing that they care about their customers and their customers' ability to
recover lost or stolen items and (ii) the coding will enhance the ability of
manufacturers and distributors to combat retail and warranty fraud. There can be
no assurance, however, that the Company will be able to successfully expand its
service in this fashion.
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<PAGE> 28
THE COMPANY'S PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM
The Company provides a totally integrated personal property
identification and recovery system. The Company's strategy is to provide a
personal property identification and recovery system that does not merely
provide another method of identifying articles, but instead provides a simpler
method of identifying articles as well as a complete identification and recovery
service that will help return the articles back to members when the articles are
located. The Company's system is comprised of four key elements: (1) an
identification device; (2) a scanning network; (3) a computer database; and (4)
a pick up and delivery system.
THE IDENTIFICATION DEVICE. The Company offers its members special
encoded labels that are attached to the members' personal possessions and
contain ownership information in advanced bar code form (PDF 417 symbology). In
addition to the coding, a North American 1-800 number, a toll free worldwide
number, and the "call to action" phrase "IF FOUND CALL" are printed on the
labels. The Company believes that its labels provide a better method of
identification that will remain on possessions and will remain intact because
the labels: (i) use a 1.0 mil strong, permanent acrylic adhesive; (ii) have high
cohesion; (iii) have good resistance to heat, cold and ultraviolet rays; (iv)
have good quick-stick, peral and shear strength; (v) include a hard layer
coating on the exterior of the label for abrasion resistance and resistance to
solvents; and (vi) are read by PDF 417 technology which allows scanning even if
the labels are partially defaced. Eventually, the Company plans to expand its
service by having manufacturers of products such as computer chips, bicycles,
power tools, electronic equipment, cameras and auto parts apply such coding
directly onto or into products at the source of manufacture. There can be no
assurance, however, that the Company will be able to so expand its service.
THE SCANNING NETWORK. The Company has begun to locate the scanning
equipment required to scan the PDF 417 encoded labels at key points of recovery
in major metropolitan areas in North America. Scanning locations are expected to
include police stations, major transportation lost and founds, and certain high
traffic public facilities, such as theme parks and other tourist attraction
venues. In addition, arrangements have been made with a national courier company
in Canada, Purolator Courier Ltd. ("Purolator"), to maintain scanning locations.
See "BUSINESS - Key Suppliers" and "RISK FACTORS - Sources of Supply." As of
June 25, 1996, the Company had placed scanners into 40 police stations and other
sites in Canada (16 in Ontario and 24 outside Ontario). Negotiations to place
scanners in the United States have begun. As of June 25, 1996, the Company had
letters of intent from more than 125 police and sheriff locations throughout the
United States to accept the Company's scanners, but had installed only 16
scanners in the United States pursuant to those letters of intent. There can be
no assurance that these letters of intent will result in additional placed
scanners.
THE COMPUTER DATABASE. After a member's lost item has been found and
then scanned, the labels are linked electronically to a central computer
database. Each label is registered to a particular member, and the computer
database contains membership information that permits the Company to identify
the member who owns a retrieved article. The Company's computer database
operates in a fast, multiple-user environment with easy-to-read and
easy-to-fill-in screens that accommodate multiple member service entries and
minimize member waiting times.
To ensure the security and integrity of its membership and recovery
code databases, the Company uses a combination of program design, technology and
Company policies. The integrity of the label/member relational link is critical
to the proper operation of the Company's personal property identification and
recovery system as it provides the facility through which the rightful owner of
a recovered item is identified, thus enabling the Company to return the
recovered property to the member. The Company uses five methods to establish a
secure member/label relation: (i) the Company policy of "zero tolerance" for
matching errors; (ii) the use of two secure servers, an NT member database
server and unix label database server; (iii) the use of FoxPro database software
across all platforms; (iv) the process of linking and verifying the member ID
number and summary or "master" recovery code during order assembly and
fulfillment on two levels using a bar code scanner to reduce the risk of human
error; and (v) the use of a data entry screen with mandatory prompts and a
verification algorithm by the link established during direct response
activation.
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<PAGE> 29
The privacy and protection of the membership and recovery code
databases are secured through: (i) the Company policy not to release membership
information to any third party (other than police agencies); (ii) the use of
four levels of system redundancy -- tape backup, equipment replacement
inventory, off-site redundant system, and hard copy record keeping; and (iii)
the prevention of unauthorized server access through the use of (a) serialized,
password protected copy written proprietary software used by recovery terminals;
(b) a separate communication server for remote access; (c) distinct
communication and network protocols between the remote access server and the
membership database server; and (d) a system audit by an independent third party
which indicated that the membership database could not be accessed remotely and
that system integrity is high.
No security system or procedures are foolproof and many aspects of the
Company's operations involve some degree of security risk. Any material breach
of security could have a material adverse effect on the Company's business,
operating results and financial condition.
THE PICK UP AND DELIVERY SYSTEM. Once the label has been scanned and
the computer database has notified a Company service representative of the
location and owner of an article, a Company service representative then notifies
the member that his or her possession has been found and informs the member of
the item's location. The identified item may then be picked up by the member or,
upon the member's request, delivered to the member safely and promptly by
courier at the member's expense. The Company also has implemented and offers a
supplemental service called the "Tracker Plus" service, which covers the full
cost of returning possessions to members.
THE COMPANY'S CARD REGISTRATION SERVICE
In addition to the Company's personal property identification and
recovery system, the Company has implemented and is currently offering a card
registration service marketed through telemarketers. This service permits a
member, with a single toll free phone call, to: (i) cancel all of the member's
lost or stolen debit and credit cards; (ii) request replacement cards; (iii)
request a wire of emergency funds or replacement airline tickets (charged to the
member's credit card); (iv) request a change of address for all cards; and (v)
be covered on fraudulent charges on cards, after notifying the Company, in an
amount of up to $6,000. There can be no assurance that the Company will be able
to successfully market its card registration service or that the Company will be
able to compete successfully with companies offering similar services. See
"BUSINESS - Competition" and "RISK FACTORS - Competition."
THE IACP ENDORSEMENT
The International Association of Chiefs of Police (the "IACP"), a
nonprofit organization of approximately 14,000 members from the world's law
enforcement community founded in 1893, has endorsed the Company's personal
property identification and recovery system. The Company's present license
agreement with the IACP runs through February 12, 1999. Under the license
agreement with the IACP, the Company has agreed to pay the IACP the greater of
$100,000 per year or a fee based on the total number of subscribers of the
Company calculated as follows:
<TABLE>
<CAPTION>
Number of
Subscribers Per Capita Amount
----------- -----------------
<S> <C>
0 - 1,000,000 $0.20 (20 cents)
1,000,001 - 5,000,000 $0.10 (10 cents)
More than 5,000,000 $0.075 (7.5 cents)
</TABLE>
THE COMPANY'S MARKETING STRATEGY
THE PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM. The Company
is attempting to position itself as a credible and worthwhile, but not fail
safe, service that provides peace of mind (like insurance) and has a favorable
price-to-value relationship. The guiding principle behind the Company's
marketing strategy is that the Company is in the business of providing a totally
integrated personal property identification and recovery service, not merely
selling identification labels. The benefit of this service to the Company's
members is an increase in the probability of recovery of the members' lost and
stolen possessions. Thus, one key to the Company's long-term success will be the
effectiveness of the Company's personal property identification and recovery
system in helping to improve the existing low recovery rates. There can be no
assurance, however, that the Company will be able to achieve any particular
increase in these recovery rates for its members or to increase the overall
recovery rate for lost and stolen items in general. As of June 25, 1996, the
Company had received reports of 20 losses and had made 65 successful recoveries
of its members' personal possessions.
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<PAGE> 30
Another portion of the Company's marketing strategy is to pursue an
aggressive and preemptive North American roll-out of the Company's service. By
establishing a critical mass of labels in the marketplace, the Company hopes to
establish a de facto "identification" standard. The Company believes that this
can be done if (1) the initial distribution of labels is performed on a large
scale and done quickly and (2) the public is confident that the Company's
personal property identification and recovery system improves recovery rates and
therefore is of value to the consumer. The Company will attempt to establish
credibility and confidence in the marketplace by, among other things, utilizing
fusion marketing through the establishment of affiliations, alliances,
sponsorships, and promotional programs with well recognized, stable and
reputable organizations that have an interest in the protection, security, loss
prevention or insurance industries. There can be no assurance that the Company
will be able to establish a critical mass of labels and a broad network of
compatible scanners early enough to establish a leading and sustainable market
position or that the Company will be able to establish credibility and
confidence in the marketplace. Any inability by the Company to do so could have
a material adverse effect on the Company's business, operating results and
financial condition.
THE CARD REGISTRATION SERVICE. The Company is currently gaining a small
market share in the card registration industry. The Company believes that it not
only offers a competitive product, but also adds the extra feature of its
recovery services to the list of benefits offered to members of the card
registration service.
THE COMPANY'S PLAN OF DISTRIBUTION
THE PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM. The Company
is approaching the distribution of subscriptions to its personal property
identification and recovery service in several ways.
First, the Company is selling its service at the "grass roots" level
via direct marketing. The Company anticipates that this direct marketing will be
through door-to-door canvassing in major urban high density locales, through
telemarketing, through direct mail solicitations, through multi-level marketing
or through a combination of more than one of these techniques. On April 8, 1996,
the Company entered into a marketing agreement with Tracker Referral Network
International, Inc. ("Tracker Referral"), a direct sales company in the business
of marketing through independent distributors using a proprietary marketing
plan. Under the agreement, Tracker Referral was appointed as the Company's
exclusive multi-level marketing company in the United States and was granted
non-exclusive rights to make direct commercial sales to third party businesses
in the United States, in both cases provided that certain sales quotas are
achieved. The agreement is for an initial term of five years and automatically
renews for an additional five years upon Tracker Referral's attainment of the
specified sales quotas. Additionally, the Company is obligated to provide the
Company's products and marketing materials to Tracker Referral at prices
specified in the agreement.
Second, the Company is beginning to establish promotional programs with
retailers of consumer specialty products that have a high potential for loss
such as home electronics, luggage, sporting goods, bicycles, cameras and higher
valued fashion items. For example, the Company has entered into an agreement
with Samsonite Canada, Inc. ("Samsonite") pursuant to which the Company will
supply to Samsonite 70,000 tags that Samsonite will affix to its merchandise to
provide Samsonite customers an explanation of the benefits of the Company's
personal property identification and recovery system and receive a free luggage
tag with a Tracker recovery label. The Company agreed to reimburse Samsonite
for the cost of affixing and shipping the tags and granted exclusivity to
Samsonite in the luggage industry in Canada through March 6, 1997. Upon
achievement of certain sales quotas, Samsonite may continue the promotion and
its exclusivity in Canada for an additional year.
The Company also has entered into an agreement with Sony of Canada Ltd.
("Sony") pursuant to which Sony store representatives will resell to Sony's
retail customers kits purchased from the Company by Sony. For the life of the
program, Sony will include a write up on the program in each of its monthly
newsletters. Sony also will include a feature on the program in a one-quarter
page advertisement within Sony's national brochure. Under the agreement, the
Company is obligated to provide to Sony a yearly commission equal to 20% of the
renewal revenues received by the Company related to kits sold by Sony for two
renewal terms. The agreement also provides the Company with the right, subject
to Sony's ability to cancel such right at any time, to promote the kits using
the name "Sony."
The Company also plans to establish promotional programs with other
selected national retail chains chosen for their potential to lend credibility
to the Company's service and for their reach in selected markets. The Company
believes its service adds value to retailers' products because the service shows
that the retailers care about
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<PAGE> 31
their customers and their customers' ability to recover lost or stolen items. To
encourage such retailers to promote the Company's service as a value added to
the items purchased from the retailers, the Company may provide retailers with
commissions, limited time exclusivity within a particular market, cooperative
marketing and advertising funding, and special timed promotions. In addition,
the Company has entered into an agreement with Merchant Partners Limited
Partnership ("Merchant Partners") through which Merchant Partners will actively
introduce and promote the Company to, among others, Montgomery Ward & Co.
Incorporated ("Montgomery Ward"), ValueVision International, Inc., and all
subsidiaries of Montgomery Ward (collectively, "Prospects"). For the
consideration paid to Merchant Partners for such services, see "DESCRIPTION OF
SECURITIES - Merchant Partners Option." There can be no assurance that the
agreement with Merchant Partners will result in any sales to the Prospects.
Third, although the Company does not anticipate that such programs will
constitute a large percentage of its sales, the Company is developing other
joint promotions (such as the arrangement with Samsonite described above), a
bulk sales program in which the Company would sell its service in bulk to, for
example, product manufacturers, and a fixed asset management program.
THE CARD REGISTRATION SERVICE. The Company is currently marketing
subscriptions in its card registration service through telemarketing. The
Company also plans to attempt to develop contractual relationships with credit
card issuers for sales of subscriptions to the issuers' cardholders. As of the
date of this Prospectus, however, the Company had no contractual relationships
with any credit card issuers and there can be no assurance that it will be able
to develop any such relationships. See "RISK FACTORS - COMPETITION" and
"BUSINESS - Competition."
On January 12, 1996, the Company entered into an independent contractor
agreement with Datatrack, Inc. ("Datatrack") pursuant to which Datatrack
conducts telemarketing efforts for the Company in the United States with respect
to the card registration service. Provided certain sales quotas are met, the
agreement runs for consecutive automatically renewing one year terms and
provides Datatrack a right of first refusal to provide services to the Company
if the business is expanded beyond the United States or if the card registration
service is sold by any method other than telemarketing. Under the agreement,
the Company is obligated to pay weekly commissions to Datatrack in an amount
equal to 50% of the net proceeds of final sales made by Datatrack.
GENERAL. Although the Company has been generating cash flows of
approximately $150,000 per month since December 31, 1995, there can be no
assurance that the Company's plan of distribution will be successful. To achieve
significant revenues and profitable operations on a continuing basis, the
Company must successfully market, sell and distribute its personal property
identification and recovery system and its card registration service. There can
be no assurance that the Company will be able to do so. In addition, there can
be no assurance that any sales made by the Company will be at volumes and prices
sufficient for the Company to achieve significant revenues and profitable
operations.
The Company has no material backlog of orders because the Company fills
orders for its personal property identification and recovery system and card
registration service as received out of existing inventory.
The Company has granted, and may grant in the future, commissions and
other payments in connection with the distribution of its services. Although
such arrangements generally call for commissions or other payments only out of
sales actually made, certain arrangements call for certain guaranteed payments.
INTERNATIONAL OPERATIONS
The Company has operations in Canada and recently began test marketing
in the United States. In addition, the Company has signed a letter agreement
with Amerasia International Holdings Limited ("Amerasia") pursuant to which
Amerasia will assist the Company in selling licenses for overseas markets. Under
the agreement, the Company is obligated to pay to Amerasia 8% of the exclusivity
fee(s) that the Company may receive in good funds from the licensees and 2% of
the ongoing paid sales generated by the Company from the licensees. There can be
no assurance, however, that this letter agreement will result in any sales of
foreign licenses.
International operations are subject to inherent risks, including
unexpected changes in regulatory requirements, currency exchange rates, tariffs
and other barriers, difficulties in staffing and managing foreign
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<PAGE> 32
operations, and potentially adverse tax consequences. There can be no assurance
that these factors will not have a material adverse impact on the Company's
ability to market its system on an international basis.
KEY SUPPLIERS
The Company's ability to market, sell and operate its personal property
identification and recovery system depends in part on its ability to procure the
necessary scanning equipment, labels and courier services. In this regard, the
Company has agreements or preliminary understandings in place with Symbol
Technologies Inc. ("Symbol"), Purolator Courier Inc. ("Purolator"), Mail Boxes
Etc. USA ("Mail Boxes Etc."), and DHL International Express Ltd. ("DHL").
Although the Company has preliminary understandings and agreements with
suppliers of such equipment, labels and services, the Company's agreements or
understandings tend to be informal, may be difficult to enforce, and may be
subject to termination. Accordingly, there can be no assurance that such
equipment, labels and services will be available when needed by the Company or
on terms favorable to the Company. Any unavailability of such equipment, labels
or services on terms favorable to the Company could prevent or delay the
development, marketing, sale, operation and effectiveness of the Company's
personal property identification and recovery system and could have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company procures scanning equipment from Symbol. Symbol's PDF 417
is an advanced two-dimensional stacked symbology. In 1992, Symbol introduced the
PDF 1000 laser scanner, the first laser scanner to read this two-dimensional bar
code. The PDF 1000 laser scanner scans thirty times faster than current
conventional scanners, decodes in a rastering pattern across and down the PDF
417 symbol, reads both PDF 417 (two-dimensional codes) and linear bar codes
(one-dimensional codes), and is able to read poorly printed or damaged codes
that have been defaced up to 60%. The Company has a preliminary understanding
with Symbol whereby, subject to certain minimum annual purchase requirements,
the Company was granted the exclusive right to use, for personal property
identification and recovery purposes, Symbol's PDF 1000 laser scanners in
Canada, the United States and Europe through the end of calendar year 1996.
Pursuant to its original understanding with Symbol, the Company was required to
purchase specified numbers and dollar amounts of laser scanners during each of
calendar years 1994, 1995 and 1996 in order to maintain its exclusive right. The
Company did not meet the minimum commitment level for 1994 or 1995. Although it
does not have a formal agreement to do so, the Company has been working in
conjunction with Symbol and has obtained an informal understanding to maintain
the Company's exclusive right provided the Company purchases at least 830 laser
scanners during calendar year 1996. There can be no assurance that the Company
will be able to meet this commitment. Further, the Company's understandings with
Symbol are informal, may be difficult to enforce, may be subject to early
termination, and are set to expire at the end of calendar year 1996 in any
event. Thus, there can be no assurance that the Company has an enforceable
exclusive right to use, for personal property identification and recovery
purposes, Symbol's PDF 1000 laser scanners in these geographic areas.
In the United States, the Company has entered into an agreement with
Mail Boxes Etc. pursuant to which Mail Boxes Etc. will accept, pack and ship
items for the Company. For courier services, the Company uses Purolator in
Canada, uses UPS (through Mail Boxes Etc.) in the United States and has engaged
DHL for use in other parts of the world.
COMPETITION
The Company is aware of one company that is planning to introduce a
personal property identification and recovery system similar to the Company's.
The Company believes that this competitor may offer a service that provides
labels for identification purposes and an 800-number through which the finder
and the owner of an item may be put in contact with each other to make their own
arrangements for the return of the item to the owner. The Company believes that
this company will not offer an integrated system, like the Company's, which not
only provides a means of identifying an item, but also provides a complete
pick-up and delivery system.
The successful introduction of such services by this or any other
competitors, or the introduction by competitors of ineffective systems that
damage the credibility of the Company's industry as a whole, may have a
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<PAGE> 33
material adverse effect on the Company's business, operating results and
financial condition. Moreover, the expansion of services or an increase in the
level of competition by this competitor, or the entry of new competitors, could
have a material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully with existing or new competitors in the personal property
identification and recovery business.
With respect to the Company's card registration service, the Company's
market share is small and the market is highly competitive. Competitors include
Signature, CUC International, American Express and others. These competitors
have longer operating histories, benefit from substantially greater market
recognition and have substantially greater financial and marketing resources
than the Company. In addition, certain competitors have contractual
relationships with credit card issuers for sales of subscriptions to the
issuers' cardholders. Competition in this third party endorsed segment of the
credit card industry is intense. Factors affecting the outcome of competition
with respect to the third party endorsed segment include the quality and
reliability of the services to be offered, subscriber acquisition strategy and
expertise (which is highly dependent upon creative talents), operational
capability, reputation, financial stability of the company supplying the
services, the confidence of credit card issuers in the company's management, the
compensation or fee paid to the credit card issuer and the security maintained
by the company with respect to the credit card and credit data of which it has
custody. As of the date of this Prospectus, the Company had no contractual
relationships with any credit card issuers and there can be no assurance that it
will be able to develop any such relationships. This may place the Company at a
competitive disadvantage with respect to its card registration service. In
addition, an increase in the level of competition from existing competitors, or
the entry of new competitors, may have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company will be able to compete successfully with existing or
new competitors in the card registration business.
INTELLECTUAL PROPERTY PROTECTION AND INFRINGEMENT
The Company's success will depend, in part, on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. The Company will rely on a combination of
trade secret and trademark laws, nondisclosure and other contractual agreements,
and technical measures to protect the confidential information, know-how and
proprietary rights relating to its personal property identification and recovery
system. The Company has filed for trademark and service mark protection in the
United States and Canada over the following: (i) "All is not lost(TM)"; (ii)
"Use it or lose it(TM)"; (iii) "Tracker: The Ultimate Warranty(TM)"; (iv)
"Tracker(TM)"; and (v) the Tracker logo. The application in the United States
for all marks except "Tracker(TM)" and the Tracker logo have been restricted to
services only as opposed to goods. In addition, the Company has filed an
international patent application pursuant to the Patent Cooperation Treaty for
its personal property identification and recovery system. There can be no
assurance, however, that these will mature into an issued patent or issued
trademarks or service marks or that any patent, trademark or service mark
obtained or licensed by the Company will be held valid and enforceable if
asserted by the Company against another party. In addition, the above
protections may not preclude competitors from developing a personal property
identification and recovery system that is competitive with the Company's
system. The Company does not believe that its products and trademarks and other
confidential and proprietary rights infringe upon the proprietary rights of
third parties. There can be no assurance, however, that third parties will not
assert infringement claims against the Company in the future. The successful
assertion of such claims would have a material adverse effect on the Company's
business, operating results and financial condition.
CAPITAL REQUIREMENTS
Although the Company has begun to achieve ongoing significant cash
flows (approximately $150,000 per month since December 31, 1995), the Company
will require additional capital in order to implement its business plan in the
manner contemplated. The acquisition of equipment, establishment of distribution
channels and conduct of a comprehensive marketing campaign are critical to the
Company's success. During the upcoming twelve months, the Company will require
additional debt or equity financing to conduct and complete such activities, as
it is anticipated that cashflows from revenues will not be sufficient to fund
the business plan until March 1997. In addition, there can be no assurance that
cashflows from revenues will be sufficient to fund the business plan in the
timeframe anticipated by the Company, if at all. Although no assurance can be
given that the necessary funding
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<PAGE> 34
will be available to the Company when needed, in sufficient amounts, on
acceptable terms, or at all, management believes it is likely that the Company
will be able to obtain sufficient funding for its operations. Any failure to
receive sufficient funding when needed, in sufficient amounts, and on acceptable
terms could prevent or delay the marketing, sale and operation of the Company's
personal property identification and recovery system and its card registration
service and could have a material adverse effect on the Company's business,
operating results and financial condition. Moreover, the report of independent
accountants covering the Company's financial statements expressed substantial
doubt about its ability to continue as a going concern because it is a
development stage company and has not yet been able to attract significant
outside financing or generate significant revenues. Failure to obtain
sufficient funding on acceptable terms could affect the Company's ability to
continue as a going concern.
EMPLOYEES
As of June 25, 1996, the Company employed a total of 34 persons,
including 2 in management, 5 in administration and accounting, 20 in operations
(14 of whom are part-time), 3 in sales and marketing and 4 in information
systems. The Company's future success will depend in large part on its ability
to attract, train and retain highly skilled and qualified personnel. There can
be no assurance that the Company will be successful in attracting, training and
retaining such personnel.
None of the Company's employees is represented by a labor union. The
Company has experienced no work stoppages, and the Company believes that its
relations with its employees are excellent.
LITIGATION
The Company is not a party to any material litigation and is not aware
of any pending or threatened litigation that would have a material adverse
effect upon the Company's business, operating results or financial condition.
The Company believes that the Securities and Exchange Commission may be
inquiring into trading in the Company's securities. The Company has no reason to
believe that it is the target of any such inquiry, or that any activity of the
Company would result in any liability under the federal securities laws.
GOVERNMENTAL REGULATIONS
Except as described in the next two paragraphs, the Company is not
subject to any governmental regulations other than those applicable to
businesses generally. Although the Company believes it is in substantial
compliance with all currently applicable regulations, additional regulations
could be enacted in the future that could have an adverse effect on the
Company's business, operating results and financial condition.
The Company is marketing its services through the use of telemarketing
and may be subject to state regulation of telemarketing if it is deemed to be a
telemarketer within the meaning of such regulations. Although such regulations
vary greatly from state to state, they generally require telemarketers (as
defined in the regulations) to (i) apply for and obtain a state registration or
license before conducting telemarketing; (ii) disclose certain information to
consumers (for example, the identify of the telemarketer, information regarding
gifts or premiums that customers may be eligible to receive, and that sales made
as a result of a telephone solicitation are not final unless followed by a
signed contract); and/or (iii) file a surety bond or a certificate of deposit
with the state. Further, state regulations typically confer on consumers certain
rights, such as the right to cancel a sales agreement made with a telemarketer.
A telemarketer's failure to comply with the regulations may result in civil
and/or criminal liability.
In addition, the Company, through Tracker Referral pursuant to a
marketing agreement with Tracker Referral, is marketing its personal property
identification and recovery services through the use of multi-level marketing.
See "BUSINESS - The Company's Plan of Distribution - The Personal Property
Identification and Recovery System." Tracker Referral's multi-level marketing
system is or may be subject to or affected by extensive government regulation,
including but not limited to federal and state regulation (which varies from
state to state) of the offer and sale of business franchises, business
opportunities and securities. Various governmental agencies monitor multi-level
marketing activities. Although such multi-level marketing is performed by
Tracker Referral rather than by the Company, and although the Company believes
that Tracker Referral's multi-level marketing system is in substantial
compliance with all currently applicable regulations, there can be no assurance
that Tracker Referral will be found to be in compliance with existing
regulations as a result of, among other things, misconduct by independent
contractors over whom Tracker Referral has limited control, the ambiguous nature
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<PAGE> 35
of certain of the regulations, and the considerable interpretive and enforcement
discretion given to regulators. Any assertion or determination that Tracker
Referral or its independent contractors are not in compliance with existing
regulations, or the enactment of additional regulations in the future, could
have an adverse effect on the Company's business, operating results and
financial condition. Further, any failure to comply could cause Tracker Referral
or the Company to pay fines as well as to quit doing business in any state where
it is out of compliance.
The Company believes that compliance with federal, state or provincial,
and local provisions which have been enacted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, will not have any material effect upon the Company's capital
expenditures, earnings and competitive position. The Company does not believe
that it will incur any material capital expenditures for environmental control
facilities for the remainder of its current fiscal year and the next fiscal
year.
PROPERTIES
Tracker Canada currently leases office premises in Toronto and has
entered into a lease agreement for these premises. The term of the lease is ten
(10) years, which commenced on January 1, 1994. The lease requires payment of an
annual base rent of $22,000 for the first five years. Thereafter the lease calls
for rent at market value less twenty percent (20%). If the present lease cannot
be renewed or if Tracker Canada elects not to renew the lease, Tracker Canada
does not anticipate any difficulty in securing adequate new space.
The Company believes that suitable additional space will be available
as needed if future expansion is required.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
Company's executive officers and directors as of June 25, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- --------------------------------------------------------------------
<S> <C> <C>
I. Bruce Lewis 55 Tracker U.S.: Chief Executive Officer, President and Chairman of
the Board of Directors; Tracker Canada: President, Chief Operating
Officer, Chief Executive Officer and Chairman of the Board of
Directors
Mark J. Gertzbein 41 Tracker U.S.: Executive Vice President, Chief Financial Officer,
Secretary, Treasurer and Deputy Chairman of the Board of Directors;
Tracker Canada: Senior Vice President of Finance, Chief Financial
Officer, Secretary and Director
Ed J. Korhonen 60 Tracker U.S.: Director
Quincy A.S. McKean III 39 Tracker U.S.: Director
Charles J. Coronella 63 Tracker U.S.: Director
Wolfgang Kyser 49 Tracker U.S.: Director
Leonard Yakobovits 37 Tracker U.S.: Director
</TABLE>
I. BRUCE LEWIS has been the Chairman of the Board of Directors and
Chief Executive Officer of Tracker U.S. since June 30, 1994. Mr. Lewis has also
served Tracker U.S. as President since August 12, 1995. Mr. Lewis also serves
Tracker Canada as its Chief Executive Officer and Chairman of the Board of
Directors and has so served since May 1993. For the period from 1980 through May
1990, Mr. Lewis was President and a Director of Albert Berg Limited and its
subsidiaries. Albert Berg was petitioned into bankruptcy by its creditors in May
1990. From June 1988 to August 1990, he served as the President of Cape Breton
Chemical Corporation, a start-up PVC flexible stretch wrap manufacturer. From
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<PAGE> 36
May 1990 through May 1993, Mr. Lewis was also a consultant to various companies
in the areas of management and acquisition financing.
MARK J. GERTZBEIN has been the Deputy Chairman of the Board of
Directors, the Executive Vice President and the Chief Financial Officer,
Secretary and Treasurer of Tracker U.S. since June 30, 1994. In addition, Mr.
Gertzbein has served as the Senior Vice President of Finance, the Chief
Financial Officer and Secretary of Tracker Canada since his appointment in July
1993 and as a Director of Tracker Canada since May 1993. From August 1984 to
June 1988, he served Albert Berg Limited as Vice President, Finance and
Administration. Albert Berg was petitioned into bankruptcy by its creditors in
May 1990. From June 1988 to August 1990, he served as the Chief Financial
Officer of Cape Breton Chemical Corporation, a start-up PVC flexible stretch
wrap manufacturer. From August 1990 to June 1991, Mr. Gertzbein consulted
various companies on administrative, accounting and tax related issues. From
June 1991 to July 1993, he served as the Corporate Controller for Summit
Cosmetics, Inc., an exclusive warehouse and distributor in the cosmetics and
fragrance industry.
ED J. KORHONEN has been a Director of Tracker U.S. since November 1,
1995. He was the President, Chief Operating Officer and a Director of Tracker
Canada from May 1993 through May 1996. Since resigning from his positions with
Tracker Canada in May 1996, Mr. Korhonen has been the Executive Vice President
of Eco Logic International Inc. Mr. Korhonen served Nabisco Brands Limited as
President of Confectionery, Industrial Products and Grocery Divisions from 1977
to 1988 and was President of Maple Leaf Flour Products from 1989 to 1991. He has
subsequently engaged in business consulting with a company, Ed Korhonen
Management, he founded in 1991 and was a partner in the management consulting
firm of Sniderman & Wood from January 1992 through May 1993. Mr. Korhonen also
consults with Tracker Canada.
QUINCY A.S. MCKEAN III has been a Director of Tracker U.S. since June
30, 1994. Mr. McKean was a director of Ultra Capital Corp., the predecessor
entity of the Company, from February 1992 to June 1994. From January 1987
through March 1990, Mr. McKean was employed by First Fidelity Bank, N.A./First
Fidelity Brokers of Newark, New Jersey, where he managed retail and
institutional accounts. From March 1990 through July 1994, he was a registered
representative with Kidder Peabody & Co. in New York City. Since July 1994, Mr.
McKean has been associated, as a registered representative, with the New York
securities firm of Mercer, Bokert, Buckman and Reid, Inc.
CHARLES J. CORONELLA has been a Director of Tracker U.S. since June 30,
1994. Since 1995, Mr. Coronella has been the Chairman and Chief Executive
Officer of Executive Service Corp. of Arizona. He has been a Director of Acordia
of Arizona since 1993 and has been its Chairman of the Board since 1996. Acordia
of Arizona is a wholly-owned subsidiary of Acordia, Inc., a New York Stock
Exchange listed company. Mr. Coronella served as President and Chief Executive
Officer of Chase Bank of Arizona from 1991 to 1994. Prior to that, Mr. Coronella
served as a consultant to The Chase Manhattan Corporation from 1990 to 1991.
From 1989 to 1990, Mr. Coronella was responsible for the management of Chase
Manhattan Bank's United States banking subsidiaries.
WOLFGANG H. KYSER has been a Director of Tracker U.S. since June 30,
1994. Since 1986 Mr. Kyser has been a principal and the Chief Executive Officer
of KHB Investments Corporation, which deals with foreign investments in Canada
and the United States. Since 1995 Mr. Kyser has been a principal and the
President of Kyser Pacific Group, which invests in and develops real estate.
From December 1987 through September 1992, he was the sole director of "687292",
an Ontario company which held real estate. In November 1992, "687292" was
petitioned into bankruptcy by its creditors. Mr. Kyser also is a Director of AEG
Sorting Systems, Inc. and Olympia Business Machines Ltd.
LEONARD YAKOBOVITS has been a Director of Tracker U.S. since September
8, 1995. Since 1985 Mr. Yakobovits has been the President of Dezco Holding &
Trading, a North American clear-out specialist and distributor for branded
consumer products. Mr. Yakobovits also consults with Tracker Canada.
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<PAGE> 37
CLASSIFICATION OF BOARD OF DIRECTORS OF TRACKER U.S.
Tracker U.S.'s Certificate of Incorporation and Bylaws provide that the
Board of Directors is divided into three classes of directors, with the classes
to be as nearly equal in number as possible. The Certificate of Incorporation
and Bylaws provide that approximately one-third of the directors of Tracker U.S.
will continue to serve until the 1996 annual meeting of stockholders,
approximately one-third will continue to serve until the 1997 annual meeting of
stockholders, and approximately one-third will continue to serve until the 1998
annual meeting of stockholders. Messrs. McKean and Coronella have been elected
to serve until the 1996 Annual Meeting of Stockholders. Messrs. Lewis, Gertzbein
and Yakobovits have been elected or appointed to serve until the 1997 Annual
Meeting of Stockholders. Messrs. Kyser and Korhonen have been elected to serve
until the 1998 Annual Meeting of Stockholders.
The classification of the Board of Directors will make it more
difficult for stockholders to change the composition of the Board of Directors
and could discourage a third party from attempting to obtain control of Tracker
U.S. See "DESCRIPTION OF SECURITIES - Anti-takeover Effects of Provisions of the
Certificate of Incorporation and Bylaws - Classified Board of Directors."
COMMITTEES OF THE BOARD OF DIRECTORS OF TRACKER U.S.
The Executive Committee is comprised of I. Bruce Lewis and Mark J.
Gertzbein. The Audit Committee, which is comprised of Messrs. Coronella
(Chairman), McKean and Gertzbein, is responsible for: (i) reviewing and
recommending the engagement each year of the Company's independent auditors;
(ii) consulting with the independent auditors on the adequacy of the Company's
internal controls; (iii) reviewing, with the independent auditors, the auditors'
reports on the Company's financial statements; and (iv) taking such other steps
as the Audit Committee deems necessary to carry out the normal functions of an
audit committee. The Ethics Committee is comprised of Wolfgang H. Kyser and
Charles J. Coronella. The Compensation Committee, which is comprised of Messrs.
Coronella (Chairman) and McKean, is responsible for: (i) determining the
compensation of the Company's senior officers; (ii) reviewing recommendations by
management as to the compensation of other officers and key personnel; and (iii)
reviewing management's succession program. Further, the Compensation Committee
administers the Company's 1994 Stock Incentive Plan (the "1994 Plan").
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Non-employee directors are paid $500 for attendance at each meeting of
the Board of Directors or a committee meeting and an annual retainer of $10,000.
On August 16, 1995, the Company issued 41,143 shares of Common Stock to Mr.
Coronella in lieu of $36,000 compensation owed to him for his service as a
director and 31,429 shares of Common Stock to Mr. McKean in lieu of $27,500
compensation owed to him for his service as a director. On September 28, 1995,
the Company issued 26,286 shares of Common Stock to Mr. Kyser in lieu of $23,000
compensation owed to him for his service as a director. On October 17, 1995, the
Company issued 10,000 shares of Common Stock to Mr. Yakobovits in lieu of
$10,000 compensation owed to him for his service as a director. On May 3, 1996,
the Company issued 10,000 shares of Common Stock to each of Messrs. Coronella
and McKean in lieu of $4,500 compensation owed to him for his service as a
director, issued 5,556 shares of Common Stock to Mr. Kyser in lieu of $2,500
compensation for his service as a director, and issued 8,889 shares of Common
Stock to Mr. Yakobovits in lieu of $4,000 for his service as a director. In
addition, non-employee directors are eligible to receive options to purchase
shares of the Company's Common Stock. See "EXECUTIVE COMPENSATION - 1994 Stock
Incentive Plan - Stock Options for Non-employee Directors."
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<PAGE> 38
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth the compensation paid to the Chief
Executive Officer and to the three other executive officers (the "Named
Executive Officers") for services rendered in all capacities to the Company
during the fiscal years ended March 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ----------------
RESTRICTED STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY($) AWARDS ($)
- ------------------------------------------------------ ------------ ----------------
<S> <C> <C> <C>
I. Bruce Lewis, Chief Executive Officer(1) . . .1996 $175,000 --
1995 178,350 --
Mark J. Gertzbein, Executive Vice President, 1996 175,000 413,437
Chief Financial Officer(2) . . . . . . . . . . .1995 178,350 --
Gregg C. Johnson, President(3) . . . . . . . . .1996 194,000 413,437
1995 178,350 --
Ed J. Korhonen, President (Tracker Canada)(4) . .1996 139,000 --
1995 142,680 --
</TABLE>
- ------------------------------
(1) Through BL Consulting Services, Mr. Lewis contracted with Tracker Canada
for annual compensation in the amount of $178,350. In connection with the
Reorganization, the Company and Mr. Lewis entered into a
stockholder-approved employment agreement which originally provided for
base annual salary in the amount of $440,000. The Company has amended the
employment agreement with Mr. Lewis, and coordinated the consulting
agreement between Tracker Canada and BL Consulting Services, to terminate
the consulting agreement between Tracker Canada and BL Consulting Services
as of the effective date of the employment agreement between the Company
and Mr. Lewis, to provide for a total compensation for the year ended
March 31, 1995 in the amount of $178,350 and to reduce the annual base
salary under the employment agreement between the Company and Mr. Lewis to
$175,000 effective April 1, 1995.
(2) Through MJG Management Accounting Services Ltd., Mr. Gertzbein contracted
with Tracker Canada for annual compensation in the amount of $178,350. In
connection with the Reorganization, the Company and Mr. Gertzbein entered
into a stockholder- approved employment agreement which originally
provided for base annual salary in the amount of $350,000. The Company has
amended the employment agreement with Mr. Gertzbein, and coordinated the
consulting agreement between Tracker Canada and MJG Management Accounting
Services Ltd., to terminate the consulting agreement between Tracker
Canada and MJG Management Accounting Services Ltd. as of the effective
date of the employment agreement between the Company and Mr. Gertzbein, to
provide for a total compensation for the year ended March 31, 1995 in the
amount of $178,350 and to reduce the annual base salary under the
employment agreement between the Company and Mr. Gertzbein to $175,000
effective April 1, 1995. On April 11, 1995, subsequent to fiscal year end,
the Compensation Committee granted Mr. Gertzbein 315,000 shares of
restricted stock under the 1994 Plan.
(3) Through Spire Consulting Group, Inc., Mr. Johnson contracted with Tracker
Canada for annual compensation in the amount of $178,350. In connection
with the Reorganization, the Company and Mr. Johnson entered into a
stockholder-approved employment agreement which originally provided for
base annual salary in the amount of $350,000. The Company amended the
employment agreement with Mr. Johnson, and coordinated the consulting
agreement between Tracker Canada and Spire Consulting Group, Inc., to
terminate the consulting agreement between Tracker Canada and Spire
Consulting Group, Inc. as of the effective date of the employment
agreement between the Company and Mr. Johnson, to provide for
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<PAGE> 39
a total compensation for the year ended March 31, 1995 in the amount of
$178,350 and to reduce the annual base salary under the employment
agreement between the Company and Mr. Johnson to $175,000 effective April
1, 1995. On April 11, 1995, subsequent to fiscal year end, the
Compensation Committee granted Mr. Johnson 315,000 shares of restricted
stock under the Plan. Mr. Johnson resigned from all positions with the
Company effective August 12, 1995 but continued to act as a consultant
through March 31, 1996. To date, the Company has not paid any compensation
to Mr. Johnson under the Consulting Agreement.
(4) Mr. Korhonen resigned from all positions with Tracker Canada effective as
of May 17, 1996. He continues to serve as a non- employee director of
Tracker U.S. and a consultant to Tracker Canada.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
On June 30, 1994 the Company, in connection with the Reorganization,
entered into stockholder approved employment agreements with Messrs. Lewis,
Gertzbein and Johnson. The agreements originally provided for base salaries at
annual rates equal to $440,000, $350,000 and $350,000, respectively. Effective
July 12, 1995, upon recommendation of the Compensation Committee of the Board of
Directors and with the agreement of each of Messrs. Lewis, Gertzbein and
Johnson, each of these employment agreements was amended to reduce annual base
salaries to $175,000, with a maximum relocation allowance of $25,000 and a
maximum car allowance of $10,000. In addition, each such person is eligible for
discretionary bonuses. Mr. Johnson has subsequently resigned from all positions
with the Company and the employment agreement with Mr. Johnson, therefore, has
terminated.
Pursuant to his employment agreement, Mr. Gertzbein is entitled to an
annual profit sharing bonus of 1.75% of the Company's consolidated pre-tax
profits in excess of $2,000,000; provided, however, that such bonus shall not
exceed $1,000,000 in any year. The agreement also provides for a one-time cash
bonus equal to one year's base salary upon the successful completion of certain
financing arrangements being pursued by the Company. The agreements for Messrs.
Lewis and Gertzbein have an initial term of three years with one year renewal
terms thereafter, and provide for the payment of a relocation allowance equal to
25% of each such executive's base salary and a car allowance of not more than
7.5% of each such executive's base salary, subject to the caps described above.
Each agreement provides that the executive is entitled to participate in any
stock option, stock purchase, annual bonus, pension, profit sharing, life
insurance and medical benefit plans and such other fringe benefits that may be
applicable to the Company's senior executive employees.
If either Mr. Lewis' or Mr. Gertzbein's employment is terminated by the
Company for cause (as defined in the executive's employment agreement) or during
the probationary period or by the executive for any reason (other than for good
reason (also as defined)), the executive will be entitled to his compensation
through the date of termination. If, prior to a Change of Control of the
Company, employment is terminated due to the executive's death or disability by
the Company other than for cause or by the executive for good reason, the
executive would be entitled to receive all compensation through the date of
termination, plus the continuation of base salary for the greater of one year or
the remainder of the term of the agreement. In addition, the Company will
maintain for Messrs. Lewis and Gertzbein for 12 months, or, if earlier, through
the date the executive obtains alternative employment, such executive's
participation in the employee benefit plans of the Company in which the
executive was eligible to participate immediately before termination, to the
extent permissible under such plans. The executive (or his legal representative)
also will have the right to exercise all vested stock options outstanding at the
termination date in accordance with the plans governing those options. The
Company will use its best efforts to remove the restrictions from any restricted
stock held by the executive at termination. If the executive's employment is
terminated after a Change of Control, either for good reason or without cause,
the executive will receive all the benefits he would have received for such a
termination prior to a Change of Control, and all unvested stock options held by
the executive shall become immediately fully vested. Payments made in
conjunction with a Change of Control are limited to an amount that will not
result in either a loss of the income tax deduction of the Company under
Internal Revenue Code Section 280G or an excise tax under Code Section 4999.
The Company entered into a Consulting Agreement with Gregg C. Johnson,
which took effect upon his resignation as President of the Company on August
12, 1995. The Consulting Agreement provides for (a) a monthly fee of $10,000
until March 31, 1996, (b) a commission of 10% on funds raised for the Company,
(c) a commission
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<PAGE> 40
of 5% of net sales, if any, generated by the Company from certain marketing
arrangements up to July 12, 1997, to a maximum of $500,000, (d) a commission of
up to 8% of net sales generated from any other sales arrangement introduced and
negotiated (subject to Company prior approval) by Mr. Johnson, up to July 12,
1998, (e) release by the Company from his $56,786 (as of August 31, 1995)
indebtedness to the Company upon his returning to the Company 2,986 shares of
the Company's Common Stock, and (f) reimbursement of preapproved business
related expenses. To date, the Company has not paid any compensation to Mr.
Johnson under the Consulting Agreement and Mr. Johnson has not returned the
2,986 shares to the Company.
1994 STOCK INCENTIVE PLAN
GENERAL. On June 30, 1994, the stockholders approved the 1994 Stock
Incentive Plan and on November 1, 1995 the stockholders approved certain
amendments to the 1994 Stock Incentive Plan (collectively, the "1994 Plan"). The
1994 Plan is intended to enable Tracker U.S. to attract, retain and motivate
officers, other key employees and non-employee directors of and consultants to
Tracker U.S. and to provide such persons with incentives and rewards for
superior performance more directly linked to profitability of the Company's
business and increases in shareholder value. Individuals are selected for
participation in the 1994 Plan by a Compensation Committee of the Board of
Directors (the "Committee"). An aggregate of 1,250,000 shares of Common Stock
have been reserved for issuance under the 1994 Plan, subject to adjustment in
the event of a stock split, stock dividend or other change in the Common Stock
or the capital structure of Tracker U.S. The total number of persons who may
receive grants under the 1994 Plan is estimated by Tracker U.S. to be
approximately twenty-one (21). The total number of non-employee directors who
may receive grants under the 1994 Plan is estimated to be approximately five
(5). In no event shall the aggregate number of shares covered by grants and
awards to any one individual participating in the 1994 Plan exceed 315,000
shares per year or 315,000 shares over the term of the 1994 Plan. Options that
expire unexercised may again be issued under the 1994 Plan subject to the
foregoing limitations. The 1994 Plan is administered by the Committee, which has
the exclusive power to determine whether to grant, and the terms and conditions
of any grant of, stock options, stock appreciation rights, performance shares,
performance units, restricted shares or deferred shares to participants and to
resolve all questions relating to the administration of the 1994 Plan. Members
of the Committee are not eligible to receive grants or awards under the 1994
Plan other than the automatic grants to non-employee directors. See "EXECUTIVE
COMPENSATION - 1994 Stock Incentive Plan - Stock Options for Non-Employee
Directors."
STOCK OPTIONS. Under the 1994 Plan, the Committee may grant options to
purchase shares of Common Stock, including options qualifying as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to employees as additional compensation for their services
to Tracker U.S. Options may be granted prior to termination of the 1994 Plan,
which will occur on the earlier of June 29, 2004 or the date on which all awards
available for issuance in the last year of the 1994 Plan will have been issued
or canceled. Options granted are subject to adjustment in the event of a stock
split, stock dividend or other change in the Common Stock or the capital
structure of Tracker U.S.
Options are exercisable over such period as determined by the
Committee, but no incentive stock option may be exercised after ten years from
the date of grant. However, the option term of incentive stock options which are
granted to holders of ten percent or more of Tracker U.S.'s combined voting
power shall not exceed five years from the date of grant. Options may be
exercisable in installments as determined by the Committee and are evidenced by
option agreements. No option may be transferred other than by will or by the
laws of descent and distribution. Options generally cannot be exercised after
the termination of service, except under certain circumstances where such
termination of service is with the consent of the Committee or due to
retirement, disability or death, in which event the Committee (subject in any
case to the foregoing limitation on the maximum term of incentive stock options)
may take any action it deems equitable or in the best interests of Tracker U.S.
The purchase price of Common Stock subject to an incentive stock option cannot
be less than 100% of the fair market value of such Common Stock on the date of
grant. The purchase price of Common Stock subject to a nonqualified option may
be less than, equal to or greater than the fair market value of such Common
Stock on the date of grant. However, if any individual to whom an incentive
stock option is granted is the owner of stock (as determined under Section
424(d) of the Code) possessing 10% or more of the total combined voting power of
all classes of Stock of Tracker U.S. or any subsidiary of Tracker U.S., then the
purchase price per share shall not be less than 110% of
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<PAGE> 41
the fair market value of such Common Stock on the date of grant. The option
price may be due upon exercise of the option and may be paid in cash, check,
shares of Common Stock or other consideration acceptable to the Committee
(including restricted stock), or may be deferred through a sale and remittance
procedure with a Company-designated brokerage firm. Grants may also provide for
reload option rights upon the exercise of options, provided that the term of any
such reload option will not extend beyond the term of the option originally
exercised.
APPRECIATION RIGHTS. The Committee may also grant appreciation rights
in tandem with an option or freestanding and unrelated to an option. An
appreciation right entitles the participant to receive from Tracker U.S. an
amount payable in cash, shares of Common Stock or a combination of cash and
Common Stock equal to the positive difference between the fair market value of a
share of Common Stock on the date of exercise and the appreciation right grant
price, subject to any ceiling that may be imposed by the Committee. The
Committee may specify that a grant of an appreciation right: (i) is subject to a
waiting period before becoming exercisable; (ii) may be exercised within
specified periods of time; or (iii) may be exercised only upon the occurrence of
certain events, including a Change of Control (as defined below) or a Corporate
Transaction (as defined below). Additionally, with respect to a tandem
appreciation right, the Committee may provide that such right may be exercised
only when the related option, or similar right, is exercisable and the per share
market value of Tracker U.S.'s Common Stock on the date of exercise of the
appreciation right exceeds the exercise price of the related option. In no event
shall the aggregate appreciation rights granted to any one individual
participating in the 1994 Plan exceed 315,000 per year or 315,000 over the term
of the 1994 Plan.
PERFORMANCE SHARES AND PERFORMANCE UNITS. Performance shares and
performance units entitle the participant to receive cash or shares of Common
Stock, or a combination thereof, based upon the degree of achievement of
pre-established management objectives over a pre-established performance period
determined by the Committee in its discretion. The Committee may adjust the
management objectives, and the related minimum acceptable level of achievement,
after the date of grant to avoid distortion that would otherwise result from
events not related to the performance of the participants occurring after the
date of grant. Management objectives are fixed by the Committee in its
discretion on the basis of such criteria and to accomplish such objectives as
the Committee may select. The Committee has sole discretion to determine the
participants eligible for performance shares or performance units, the duration
of each performance period, the value of each performance unit and the number of
shares or units earned on the basis of Tracker U.S.'s performance relative to
the established objectives. At the end of the performance period, the Committee
will determine the number of performance shares and the number of performance
units which have been earned on the basis of Tracker U.S.'s performance in
relation to the performance objectives. Generally, a participant must be an
employee at the end of the performance period to receive the performance shares
or units; provided, however, that if the participant dies, retires, becomes
disabled or ceases to be an employee prior to the end of the period with the
Committee's consent, and in certain other circumstances, the Committee may take
any action it deems equitable or in the best interests of Tracker U.S. The
number of performance units that are granted under the 1994 Plan shall not
exceed 750,000 in the aggregate over the term of the 1994 Plan.
RESTRICTED STOCK. A grant of restricted stock consists of a specified
number of shares of Common Stock that is contingently awarded in amounts
determined by the Committee and is subject to forfeiture to Tracker U.S. under
such conditions and at such times as the Committee may determine. An employee
who has been awarded restricted shares may vote and receive dividends, if any,
on restricted shares, but may not sell, assign, transfer, pledge or otherwise
encumber restricted shares during the restricted period. If a participant's
employment ceases prior to the end of the restricted period either with the
consent of Tracker U.S. or upon the occurrence of his death, disability or
retirement, the restrictions may lapse with respect to some portion or all of
the restricted stock as determined by the Committee. If a participant's
employment terminates prior to the end of the restricted period for any other
reason, all of the participant's restricted shares and restricted units are
forfeited. Grants may be without additional consideration or in consideration of
a payment by the participant that is less than the fair market value of the
restricted stock on the grant date. On April 11, 1995, Tracker U.S. granted
315,000 shares of restricted Common Stock to each of Gregg C. Johnson and Mark
J. Gertzbein pursuant to the 1994 Plan.
DEFERRED SHARES. The Committee may grant deferred shares to
participants under the 1994 Plan. Each grant or sale of deferred shares will be
subject to the fulfillment of conditions and a deferral period specified by
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<PAGE> 42
the Committee. During the deferral period, the participant will have no right to
transfer the award, no right of ownership in the deferred shares, and no right
to vote the deferred shares. The Committee, however, may authorize payment of
dividend equivalents on the deferred shares in cash or shares of Common Stock of
Tracker U.S. on a current, deferred or contingent basis. Grants may be made
without additional consideration or in consideration of a payment by the
participant that is less than the fair market value on the grant date.
STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS. Under the 1994 Plan as
originally adopted, each non-employee director elected or appointed on or after
the effective date of the 1994 Plan was, upon election, automatically granted an
option to purchase 10,000 shares of Common Stock. The price per share to be paid
at the time such option is exercised by a non-employee director equals 100% of
the fair market value of the Common Stock on the date of the grant of the
option. The 1994 Plan provides that options granted to non-employee directors
have a maximum term of ten years and are exercisable ratably in annual
installments over three years. The option price is due upon exercise of the
option and may be paid in cash, check, shares of Common Stock or other
consideration acceptable to the Committee or may be deferred through a sale and
remittance procedure with a Company-designated brokerage firm. All options
granted to a non-employee director who dies or becomes disabled while serving as
a director will become immediately and fully exercisable at the time of such
termination of service as a director, and all of his options may be exercised
within twelve months after such cessation of service. If a former non-employee
director should die within six months after cessation of Board service, the
personal representative of such former director's estate may exercise those
options in which the former director was vested at the time of death for a
twelve month period following the death of the former director. If a
non-employee director's service terminates for any reason other than those
stated above, options which are not then exercisable will be canceled and
options which are then exercisable may be exercised at any time within six
months after the date of such termination (but not later than the expiration
date of the respective options). All options granted to non-employee directors
vest immediately upon a "Change of Control" of Tracker U.S. (as defined below).
The portion of the 1994 Plan applicable to non-employee directors is designed to
be self-executing. Effective July 12, 1994, four such grants with an exercise
price of $7.95 per share were made to the four initial non-employee directors.
As a result of Mr. O'Malley's resignation after serving one year on the Board of
Directors, he holds vested options to purchase 3,333 shares; the balance of the
options were cancelled. Effective September 8, 1995 a grant of options to
purchase 10,000 shares at an exercise price of $1.81 per share was made to a
newly appointed director.
The amendments to the 1994 Plan approved by the stockholders on
November 1, 1995 provide for automatic stock option grants for 10,000 shares
each year to Eligible Directors (defined below). This Automatic Option Grant
Program would be limited to those persons who serve as non-employee members of
the Board and who do not beneficially own, directly or indirectly, or represent
any stockholder that beneficially owns, directly or indirectly, more than 5% of
the Company's Common Stock outstanding from time to time ("Eligible Directors").
Each individual who first becomes an Eligible Director after the date of
approval of the amendment to the 1994 Plan by the stockholders would
automatically be granted a nonqualified option to purchase 10,000 shares of
Common Stock. On every anniversary (after December 31, 1995) of his initial
election or appointment, each person who is at that time serving as an Eligible
Director would automatically be granted a nonqualified option to purchase 10,000
shares of Common Stock. There would be no limit on the number of automatic
option grants that any one Eligible Director may receive. In addition to the
amendment to the automatic grant provisions, the amendments to the 1994 Plan
provide that the exercise price of options granted pursuant to such automatic
grants would be reduced to a price 25% below the average trading price of the
Company's Common Stock for the 30 days immediately prior to the grant date.
CHANGE OF CONTROL; CORPORATE TRANSACTIONS. The Committee has the
discretion to accelerate benefits under the 1994 Plan in the event of a Change
of Control or a Corporate Transaction.
Under the 1994 Plan, "Change of Control" is a change in ownership or
control of Tracker U.S. effected through either of the following transactions:
a. the direct or indirect acquisition by any person or related group
of persons (other than Tracker U.S. or a person that directly or
indirectly controls, is controlled by, or is under common control
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<PAGE> 43
with, Tracker U.S.) of beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of securities possessing more than
50% of the total combined voting power of the outstanding
securities of Tracker U.S. pursuant to a tender or exchange offer
made directly to Tracker U.S.'s stockholders or other transaction,
in each case which the Board does not recommend that Tracker
U.S.'s stockholders accept; or
b. a change in the composition of the Board over a period of 36
consecutive months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such
period by at least a majority of the Board members described in
clause (i) who were still in office at the time such election or
nomination was approved by the Board.
Under the 1994 Plan, "Corporate Transaction" means any of the following
stockholder-approved transactions to which Tracker U.S. is a party:
a. a merger or consolidation in which Tracker U.S. is not the
surviving entity, except for a transaction the principal purpose
of which is to change the state in which Tracker U.S. is
incorporated;
b. the sale, transfer or other disposition of all or substantially
all of the assets of Tracker U.S. in complete liquidation or
dissolution of Tracker U.S.; or
c. any reverse merger in which Tracker U.S. is the surviving entity
but in which securities possessing more than 50% of the total
combined voting power of the outstanding securities of Tracker
U.S. are transferred to a person or persons different from the
persons holding those securities immediately prior to such merger.
TERMINATION, AMENDMENT AND ACCELERATION. The Board of Directors of
Tracker U.S. may amend, suspend or terminate the 1994 Plan at any time, but no
such action may in any way impair the rights of recipients under any options or
shares of restricted stock previously granted or any agreement executed under
the 1994 Plan. Further, no amendment may increase the total number of shares,
appreciation rights or performance units (or shares) which may be issued under
the 1994 Plan, reduce the minimum purchase price for shares subject to options,
extend the maximum period during which options may be exercised or change the
employees eligible to participate in the plan without the approval of the
holders of a majority of the shares of Tracker U.S. Common Stock present or
represented at a meeting duly called and held for such purpose; provided,
however, that such shareholder approval is required only to the extent that Rule
16b-3, as promulgated by the Securities and Exchange Commission under the
Exchange Act, requires the approval of the stockholders of a company of any
material amendment to any employee benefit plan of such company.
LOAN PROGRAM. The Committee may, in its discretion, permit Tracker U.S.
to finance the exercise of Company options and the payment of related taxes by
means of loans to the participants. The Committee may also allow participants to
pay the exercise price or purchase price in installments or may authorize the
payment of a cash bonus to allow participants to exercise options and rights
under the 1994 Plan. Each loan will be evidenced by a promissory note to be
entered into by the participant in favor of Tracker U.S. Each loan, including
extensions, will be on such terms as the Committee determines. Loans or
installment payments may be authorized with or without security or collateral.
The maximum credit available will be the exercise or purchase price of the
acquired shares (less the par value of the shares) plus any related federal,
state and local income and employment tax liability, subject to any applicable
margin borrowing limitation. The Committee also has the authority to forgive all
or a portion of the borrower's indebtedness in circumstances it deems
appropriate; provided, however, that the Committee may not forgive that portion
of a loan owed to cover par value.
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<PAGE> 44
REGISTRATION. Tracker U.S. plans to file a registration statement to
register the shares of Common Stock reserved for issuance under the 1994 Plan.
Shares issued upon exercise of outstanding stock options and sold after the
effective date of any such registration statement generally will be available
for resale in the public market.
As of June 25, 1996, no grants had been made under the 1994 Plan, other
than the automatic option grants to the non-employee directors and the grants of
315,000 shares of restricted stock to each of Messrs. Johnson and Gertzbein
discussed above.
CASH BONUS ARRANGEMENT
Tracker U.S.'s Discretionary Cash Bonus Arrangement (the "Cash Bonus
Arrangement") is designed to provide a mechanism to allow specified employees to
share in the profits of Tracker U.S. Employees of Tracker U.S. who customarily
work at least 35 hours per week and have been employed for at least 12
consecutive months, and have been designated for participation by the
Compensation Committee are eligible to receive cash bonuses under the Cash Bonus
Arrangement. Tracker U.S. estimates that approximately twenty-one (21) employees
are eligible to participate in the Cash Bonus Arrangement. Bonuses may be based
on merit, production or other individualized criteria, or may be paid based on
each Eligible Employee's (as defined in the 1994 Plan) assigned portion of a
bonus pool established in the discretion of the Compensation Committee. If
bonuses are to be paid based on a bonus pool, the Compensation Committee will
determine the criteria upon which the amount of each year's bonus pool will be
based prior to the beginning of any such year. The Committee may also divide
Eligible Employees into classes and may designate the portion of any bonus pool
to be assigned to each such class. Any bonuses will be paid not later than 45
days after the end of the fiscal year for which the bonus is awarded. No bonuses
have been paid yet under the Cash Bonus Arrangement.
1995 STOCK WAGE AND FEE PAYMENT PLAN
The Company's Board of Directors adopted a 1995 Stock Wage and Fee
Payment Agreement (the "Wage Plan") on September 28, 1995. The purpose of the
Wage Plan is to retain and motivate participants in the Wage Plan and to provide
them with incentives and rewards more directly linked to the profitability of
the Company's business and increases in stockholder value.
Six employees and one director of the Company were eligible to, and
elected to, participate in the Plan. Under the Plan, the participants agreed to
receive an aggregate of 770,000 shares of the Company's Common Stock in lieu of
certain wage payments or fees that the participants had earned before October 1,
1995 but had not yet been paid and in lieu of all of their respective wage
payments or fees for the period from October 1, 1995 through September 30, 1996.
The number of shares granted to the participants was based upon a price per
share of Common Stock of $1.00. The participants elected to receive the
following numbers of shares:
<TABLE>
<CAPTION>
Name of Participant Number of Shares Dollar Value
------------------- ---------------- ------------
<S> <C> <C>
I. Bruce Lewis 192,400 $192,400
Mark J. Gertzbein 215,100 215,100
Ed J. Korhonen 152,000 152,000
Christopher H. Creed 100,500 100,500
Jonathan B. Lewis 40,000 40,000
Gigi M. Lipton 60,000 60,000
Leonard Yakobovits 10,000 10,000
------- --------
Total 770,000 $770,000
======= ========
</TABLE>
No fees, commissions or other charges will be paid by the participants
in connection with the grants of shares to such persons under the Wage Plan. The
Wage Plan may not be altered, amended or modified except by written agreement
signed by the participants, Tracker U.S. and Tracker Canada. As the Wage Plan is
a contract among the participants, Tracker U.S. and Tracker Canada relating to a
designated issuance of shares in lieu of
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<PAGE> 45
wages or fees and is not an ongoing employee benefits program pursuant to which
grants or awards can be made on an ongoing basis or pursuant to which plan funds
are invested for the benefit of participants, there is no separate
administration of the Wage Plan. The Company has registered the shares issued
under the Wage Plan under the Securities Act of 1933, as amended.
PROPOSED 1996 STOCK WAGE PLAN
The Company is considering adopting a Stock Wage Payment Agreement for
the period October 1, 1996--September 30, 1997 (the "1996 Wage Plan") under
which stock would be granted to certain employees, including employees who are
Affiliates, in lieu of all or part of their cash compensation. The terms are
still being developed. An important objective is the retention of employees. In
addition, as an incentive for employees to accept stock as wages instead of
cash, the number of shares granted to some participants in lieu of cash may be
based on a price per share of less than fair market value. For others, the
number of shares granted may be based on the fair market value of the stock and,
for those who held all such shares for a set period, the Company would guaranty
that the future value of the stock would be at a premium of the fair market
value at the time of grant (i.e., that the value of the stock would then be
greater than the cash wages that were forgone).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company has entered into employment agreements containing severance
arrangements with certain of its executive officers, which provide for payment
under certain circumstances to each officer of compensation through the
remainder of the terms of the agreements. See "EXECUTIVE COMPENSATION -
Employment Contracts, Termination of Employment and Change of Control." The
Company's Certificate of Incorporation and By-laws provide for indemnification
of all Directors and officers. In addition, each Director of the Company has
entered into a separate indemnification agreement with the Company.
Upon the inception of Tracker Canada in May 1993, Tracker Canada issued
to certain members of management, in aggregate, 5,089,286 common shares,
including 2,857,143 shares to Mr. Lewis, 628,578 shares to Mr. Gertzbein and
642,858 shares to Mr. Johnson, in consideration for the assignment of rights
with respect to certain inventions and a patent application and as inducements
for such persons to join Tracker Canada. Mr. Lewis and Mr. Johnson have
subsequently disposed of a limited number of such shares. As part of the
Reorganization, the Tracker Canada common shares were reclassified into
Exchangeable Preference Shares.
CERTAIN RELATIONSHIPS
Tracker Canada contracted with Messrs. Lewis, Gertzbein and Johnson
through BL Consulting Services, MJG Management Accounting Services Ltd. and
Spire Consulting Group, Inc., respectively. Under these management and
consulting contracts, Tracker Canada agreed to pay each of the foregoing
entities annual compensation of $178,350. The agreements expired as of the
effective date of the employment agreements between the Company and each of
Messrs. Lewis, Gertzbein and Johnson. See "EXECUTIVE COMPENSATION - Employment
Contracts, Termination of Employment and Change of Control."
INDEBTEDNESS OF MANAGEMENT
As of March 31, 1996, Mr. Johnson was indebted to the Company by way of
a loan in the amount of $58,226. The loan is evidenced by a promissory note
bearing interest at an annual rate of 5% and is payable upon demand. See
"EXECUTIVE COMPENSATION--Employment Contracts, Termination of Employment and
Change of Control." As of March 31, 1995 Mr. Lewis was indebted to the Company
by way of a loan in the amount of $138,275. Mr. Lewis repaid the loan in full
prior to the end of the quarter ended June 30, 1995. The Company does not
anticipate making any future loans to related parties. Further, the Company has
agreed with certain state regulatory authorities that so long as the Company's
securities are registered in such states, or one year from the date of this
Prospectus, whichever is longer, the Company will not make loans to its
officers, directors, employees, or principal shareholders, except for loans made
in the ordinary course of business, such as travel advances, expense account
advances, relocation advances, or reasonable salary advances.
TRANSACTIONS WITH PROMOTERS
In connection with the Company's private equity placements, placement
commissions amounting to $0 for the year ended March 31, 1996 and $115,282 for
the year ended March 31, 1995 were paid to the beneficial owners of Stalia
Holdings B.V., an affiliate of Saturn, Mr. Avron Shore, Mr. Jack Stritcharuk and
Mr. Steve Heard, all of whom are or were stockholders, and $371,846 for the
period from inception (May 6, 1993) to March 31, 1994 were paid to Mr. Majid
Al-Refai. Commissions amounting to $85,646 for the year ended March 31, 1996
were paid to Wheel of Fortune Corp. S.A., a stockholder, in connection with the
Company's securing holders of the Convertible Debentures.
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<PAGE> 46
FUTURE TRANSACTIONS WITH AFFILIATES
The Company's management believes that the terms of the transactions
described above are no less favorable to the Company than those that could have
been obtained from unaffiliated third parties. Further, all future transactions
between the Company and its executive officers, Directors, employees, 5%
stockholders and affiliates (including for example future loans and any
forgiveness of loans, none of which is contemplated) will be subject to the
approval of a majority of the independent, disinterested members of the Board of
Directors. In addition, such future transactions will be for bona fide business
purposes and will be on terms that are no less favorable to the Company than
those that could be negotiated with unaffiliated parties.
REORGANIZATION
On July 12, 1994, Tracker U.S. (then Ultra Capital Corp., a Nevada
corporation) and Tracker Canada completed the Reorganization contemplated by the
Reorganization Agreement, dated as of May 26, 1994, by and among Tracker U.S.,
Jeff W. Holmes, R. Kirk Blosch and Tracker Canada, as amended (the
"Reorganization Agreement"). The Reorganization resulted in a change in control
of Tracker U.S. Pursuant to the Reorganization Agreement, Tracker U.S. acquired
all the issued and outstanding voting shares of Tracker Canada in exchange for
shares of Tracker U.S.'s capital stock representing, at the time, approximately
90% of the total voting shares of Tracker U.S. As part of the Reorganization,
Tracker U.S. (then Ultra Capital Corp.) changed its domicile from Nevada to
Delaware and changed its corporate name to "The Tracker Corporation of America."
Pursuant to the Reorganization Agreement, Tracker U.S. authorized a new
series of Class B Voting Common Stock ("Voting Stock") having full voting
rights, which were conferred upon the Tracker Canada shareholders as part of the
Reorganization in each case equal to the number of Exchangeable Preference
Shares held by the Tracker Canada shareholder. See "DESCRIPTION OF SECURITIES--
Class B Voting Common Stock." Tracker U.S. delivered 6,235,225 shares of its
newly authorized Voting Stock to Montreal Trust Company of Canada ("Montreal
Trust") to be held pursuant to the terms of an Exchange Agency and Voting Trust
Agreement (the "Exchange Agreement"). The Exchange Agreement permits the Tracker
Canada shareholders to direct the voting of the Voting Stock.
The common shares of Tracker Canada, other than the Class A common
shares issued to Tracker U.S., were reclassified into Exchangeable Preference
Shares, a new class of Tracker Canada stock. The Exchangeable Preference Shares
are exchangeable for Reserved Common Shares (as defined below) of Tracker U.S.
on a one-to-one basis commencing July 12, 1995. On July 12, 2002, all of the
Exchangeable Preference Shares then outstanding shall be automatically exchanged
for shares of Tracker U.S. Common Stock. Upon any exchange of Exchangeable
Preference Shares for Common Stock, whether voluntary or automatic, the
Exchangeable Preference Shares will be cancelled and a corresponding number of
shares of the Voting Stock will be returned to Tracker U.S.
The holders of the Exchangeable Preference Shares have voting, dividend
and liquidation rights that are in parity with those of the shares of the
Tracker U.S. Common Stock. These parallel rights were created in the following
manner:
a. Tracker U.S. placed 6,235,225 shares of the Voting Stock with
Montreal Trust for the benefit of the holders of the Exchangeable
Preference Shares. The beneficial owners of the Voting Stock
(i.e., the holders of the Exchangeable Preference Shares) have the
right to vote the Voting Stock under procedures set forth in the
Exchange Agreement and collectively controlled approximately 90%
of the voting power of Tracker U.S. at the time of the closing of
the Reorganization Agreement. Although the Voting Stock is
redeemable by Tracker U.S., Tracker U.S. has agreed not to redeem
the Voting Stock until such time as the Exchangeable Preference
Shares are exchanged into Reserved Common Shares (as defined
below).
b. Tracker U.S. irrevocably reserved 6,235,225 shares of its
authorized, unissued Common Stock for issuance to holders of
Exchangeable Preference Shares. Under the terms of the
Reorganization Agreement, these shares will be used for the
exchange of the Exchangeable Preference Shares into
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<PAGE> 47
shares of the Tracker U.S. Common Stock on a one-to-one basis.
These reserved and unissued shares are referred to herein as the
"Reserved Common Shares."
c. The exchange of the Exchangeable Preference Shares for the
Reserved Common Shares will be accomplished through an exchange
trust created under the Exchange Agreement. Under the Exchange
Agreement, Montreal Trust, as Trustee, has agreed, at any time on
or after July 12, 1995, to (i) exchange with any holder of the
Exchangeable Preference Shares any or all of the Exchangeable
Preference Shares held by such holder for Reserved Common Shares
on a one-to-one basis, and (ii) return to Tracker U.S. a
certificate representing the corresponding number of shares of
Voting Stock.
d. Under the Exchange Agreement, Tracker U.S. has agreed not to
declare and pay any cash dividends on its Common Stock unless it
also causes Tracker Canada to declare and pay cash dividends on
the Exchangeable Preference Shares at the same time and in the
same manner as the dividends paid on the Tracker U.S. Common
Stock. Additionally, under a Guarantee Agreement with Tracker
Canada, Tracker U.S. must provide Tracker Canada with adequate
funds, through a contribution to capital surplus, to pay such
dividends to the holders of the Exchangeable Preference Shares.
The Guarantee Agreement also obligates Tracker U.S. to satisfy the
liquidation value of the Exchangeable Preference Shares in the
event of the liquidation of Tracker Canada. Under the Guarantee
Agreement, the liquidation value per share is calculated as if
Tracker U.S. were liquidated on the same date and each issued and
outstanding Exchangeable Preference Share were an issued and
outstanding share of Tracker U.S. Common Stock. Tracker U.S. has
the option to pay the liquidation value of the Exchangeable
Preference Shares in cash or in Reserved Common Shares.
In the Reorganization Agreement, Tracker U.S. agreed to file a
registration statement relating to the Reserved Common Shares. This Prospectus
is part of a registration statement filed by Tracker U.S. under the Securities
Act pursuant to the Reorganization Agreement. See "DESCRIPTION OF SECURITIES -
Registration Rights."
At a special meeting of stockholders held June 30, 1994, the
stockholders of Tracker U.S. (then Ultra Capital Corp.) approved the
Reorganization and several corporate proposals, including the change in domicile
from Nevada to Delaware, the change in corporate name, the adoption of the
Delaware certificate of incorporation and bylaws, employment agreements with
senior management and the 1994 Plan.
INVESTMENT BY SATURN INVESTMENTS, INC.
In March 1994, prior to the Reorganization, Tracker Canada received an
investment of CDN $3,350,000 from Stalia Holdings B.V. ("Stalia") for units
consisting of common shares of Tracker Canada and warrants to purchase common
shares of Tracker Canada. In connection with that investment by Stalia, Tracker
Canada on March 14, 1994 entered into a Stock Option Agreement with Stalia (the
"Stalia Option Agreement") and Tracker Canada and certain of its stockholders
entered into a Right of First Refusal, Co-Sale and Voting Agreement with Stalia
(the "Stalia Agreement"). As described below, Stalia has transferred its shares
and its rights under the Stalia Option Agreement and the Stalia Agreement to
Saturn Investments, Inc. ("Saturn").
In the Stalia Option Agreement, Tracker Canada granted to Stalia the
right to purchase an additional amount of common shares that would provide
Stalia (when combined with common shares held by Stalia at the time of exercise)
with ownership of 25% of Tracker Canada's issued and outstanding voting equity.
The purchase price of such shares is their Fair Market Value. The Stalia Option
Agreement defines "Fair Market Value" as the price at which such shares could
reasonably be expected to be sold in an arms-length transaction, occurring on
the date on which Stalia proposes to purchase such shares, for cash to a person
not employed by, controlled by, in control of or under common control with
Tracker Canada. Absent evidence of fraud, the determination of the Board of
Directors of Tracker Canada of the Fair Market Value is final and conclusive.
Stalia may exercise the option with respect to all (but not less than all) of
such shares by giving Tracker Canada written notice of the date on which it
intends to so exercise the option, which date shall be not less than 60 nor more
than 120 days following the date
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<PAGE> 48
of the written notice. Stalia's option terminates, among other things, upon the
earlier of (a) the closing date of Tracker Canada's first public offering of its
equity securities pursuant to a registration statement filed with the Securities
and Exchange Commission (the "Commission") or (b) March 14, 1999. Because the
registration statement of which this Prospectus is a part was filed with the
Commission and relates to a public offering of the Company's equity securities,
the Company believes that the Stalia Option Agreement terminates as of the date
such registration statement is declared effective by the Commission.
In the Stalia Agreement, Tracker Canada granted to Stalia a right of
first refusal to purchase its pro rata share of all New Securities which Tracker
Canada may from time to time propose to issue and sell. The Stalia Agreement
defines "New Securities" to mean any capital stock, rights to purchase capital
stock, and securities of any type convertible into capital stock; provided,
however, that "New Securities" does not include: (i) securities issued pursuant
to a stock dividend, stock split, combination or other reclassification, (ii)
securities covered by a registration statement declared effective by the
Commission or a final prospectus for which a receipt has been issued by the
relevant securities regulatory authority in each of the Provinces of Canada
where the securities are issued and sold, (iii) certain shares issued pursuant
to the exercise of warrants, and (iv) certain shares issued for a specified
price pursuant to a private placement underwritten by an investment banker. This
right of first refusal could make it more difficult for the Company to raise
additional equity financing under terms satisfactory to the Company.
The Stalia Agreement also provides Stalia with certain rights of
co-sale. Specifically, if any Controlling Shareholder, as defined in the
Agreement, receives an offer to purchase any of the shares owned by the
Controlling Shareholder, the Controlling Shareholder must promptly notify
Saturn in writing of the terms and conditions of the purchase offer. Within
thirty days after receiving notice of the purchase offer, Saturn then has the
right to participate in the sale pursuant to the terms and conditions of the
offer. As a result, if Saturn exercises its right, the number of shares that
the Controlling Shareholder is entitled to sell is reduced by up to an amount
equal to Saturn's pro rata share (i.e., the percentage of the total shares
owned by the Controlling Shareholder and Saturn that are owned by Saturn).
Saturn does not have co-sale rights in connection with sales to relatives (or
trusts) of the Controlling Shareholders or sales in a registered public
offering. The Stalia Agreement further provides that in the case of permitted
transfers, the Controlling Shareholder must inform the company and Saturn of
the transfer prior to effecting it and, in the case of a transfer to a relative
or trust, the transferee must furnish to Saturn a written agreement to be bound
by the provisions of the Stalia Agreement. The Stalia Agreement further
provides that any transfers in violation of the Agreement are void.
The Stalia Agreement also provides Stalia with the right (which to date
has not been exercised) to have one representative on Tracker Canada's Board of
Directors, which representative may be removed only with the written consent of
Stalia. Certain controlling shareholders agreed to vote their shares in favor of
the election of Stalia's representative to the Board of Directors. Stalia's
representative may be removed from the Board of Directors only with the written
consent of Stalia. Upon any resignation or removal of Stalia's representative,
certain controlling stockholders of the Company must exercise their best efforts
to replace such director as soon as possible with another nominee of Stalia. In
addition, by separate letter agreement, the Company confirmed that Tracker
Canada agrees to (a) allow Stalia or a nominee to attend Board meetings; (b)
provide Stalia with copies of all communications regularly made to the
directors; (c) use best efforts to elect a nominee of Stalia to the Tracker
Canada Board; (d) provide monthly updates on Tracker Canada's business and
affairs; and (e) provide Stalia's counsel with all documentation relating to
issues which may affect Stalia.
The Stalia Agreement further provides, as a protective provision in
favor of Stalia, that, without first obtaining the written consent of Stalia,
certain controlling stockholders must not vote for, and must exercise their best
efforts as significant shareholders to ensure that the Board of Directors does
not approve: (a) the liquidation or dissolution of the Company; (b) the
declaration or payment of any dividends or the making of any distribution out of
the ordinary course of the Company's business to the shareholders of the
Company; (c) the repurchase by the Company of any of its capital stock; or (d)
any material alteration in the rights, preferences, privileges and restrictions
of the common stock or warrants held by Stalia. In addition, certain controlling
shareholders must exercise their best efforts to ensure that such controlling
stockholders and Stalia together at all times control the majority of the voting
rights of the Company to ensure that the voting rights and protective provisions
are complied with.
The Stalia Agreement terminates upon the earlier of (a) the closing
date of the Company's first public offering of its equity securities pursuant to
a registration statement filed with the Commission or pursuant to a final
prospectus for which a receipt has been issued by the relevant securities
regulatory authority in each of the Provinces of Canada where the shares are
offered or sold or (b) March 14, 1999. Because the registration statement of
which this Prospectus is a part was filed with the Commission and relates to a
public offering of the Company's equity securities, the Company believes that
the Stalia Agreement terminates as of the date such registration statement is
declared effective by the Commission as the registration statement relates to a
public offering of the Company's equity securities.
Although the Stalia Option Agreement and the Stalia Agreement
originally were between Tracker Canada and Stalia, Stalia's consent to the
Reorganization was necessary pursuant to the terms of the Stalia Agreement.
Thus, at or about the time of the Reorganization, in connection with obtaining
Stalia's consent to the Reorganization, Tracker U.S., Tracker Canada and certain
controlling shareholders agreed that all obligations under the Stalia Agreement
applicable to Tracker Canada also apply to Tracker U.S., that references to
Tracker Canada in the Stalia Agreement shall be deemed to be references to
Tracker U.S. as well, and that references in the Stalia Agreement
45
<PAGE> 49
to common shares of Tracker Canada shall be deemed to be references to the
common stock of Tracker Canada as well as the Common Stock of Tracker U.S. In
addition, Tracker Canada confirmed to Stalia that none of Stalia's rights under
the Stalia Option Agreement or the Stalia Agreement would be adversely affected
by the Reorganization. Accordingly, all the provisions discussed above apply to
Tracker U.S. as well as Tracker Canada notwithstanding that the original Stalia
Option Agreement and Stalia Agreement were between Stalia and Tracker Canada.
As of January 31, 1996, Stalia transferred its Tracker Canada
Exchangeable Preference Shares to Saturn, an affiliate of Stalia. Stalia also
transferred to Saturn all of Stalia's rights under the Stalia Option Agreement
and the Stalia Agreement.
CORPORATE RELATIONS GROUP
The Company obtains investor relations services from the Corporate
Relations Group ("CRG"), a stockholder of the Company. Pursuant to its
arrangements with CRG, the Company has paid, or caused to be paid, to CRG
$1,316,780 in cash and stock for investor relations services through June 25,
1996. On November 20, 1995, the Company entered into an agreement pursuant to
which CRG agreed to provide services to the Company for a period of one year and
the Company agreed to pay to CRG $570,000 or 326,000 freely tradeable shares of
Common Stock upon execution of the agreement and to issue options to CRG to
purchase shares of Common Stock as follows: 100,000 shares at $2.00 per share
one year from the date of the agreement, 100,000 shares at $2.40 per share two
years from the date of the agreement, 100,000 shares at $2.60 per share three
years from the date of the agreement, 100,000 shares at $2.80 per share five
years from the date of the agreement, and 100,000 shares at $3.00 per share five
years from the date of the agreement. As of the date of this Prospectus, CRG had
not provided any services under the agreement and the Company had not made any
payment to CRG.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of June 25, 1996 by (i) each person
known to the Company to own beneficially more than 5% of the total voting stock
of the Company (i.e., Common Stock and Class B Voting Common Stock), (ii) the
Chief Executive Officer and the other executive officers of the Company named in
the Summary Compensation Table, (iii) each of the Company's directors, and (iv)
all directors and officers of the Company as a group. Except as otherwise
indicated below, to the knowledge of the Company, all persons listed below have
sole voting and investment power with respect to their shares of Common Stock,
except to the extent that authority is shared by spouses under applicable law.
The Common Stock and the Class B Voting Common Stock, from which the holders of
Exchangeable Preference Shares acquire their voting rights, are the only
outstanding classes of equity securities of Tracker U.S. As of June 25, 1996,
there were 320 record holders of Common Stock and 100 record holders of Class B
Voting Common Stock.
<TABLE>
<CAPTION>
Number of Number of Percentage
Shares of Shares of Class Total of Total
Common B Voting Number of Number of
Beneficial Owner Stock Common Stock Shares Shares(1)
--------------------------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C>
I. Bruce Lewis(2)(3) . . . 177,500 3,408,532 3,586,032 14.8%
180 Dundas Street West,
Suite 1502
Toronto, Ontario, Canada
M5G 1Z8
Mark J. Gertzbein(2) . . . 786,278 0 786,278 3.2%
180 Dundas Street West,
Suite 1502
Toronto, Ontario, Canada
M5G 1Z8
</TABLE>
46
<PAGE> 50
<TABLE>
<CAPTION>
Number of Number of Percentage
Shares of Shares of Class Total of Total
Common B Voting Number of Number of
Beneficial Owner Stock Common Stock Shares Shares(1)
--------------------------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Ed J. Korhonen(2) . . . . 101,750 142,864 244,614 1.0%
180 Dundas Street West,
Suite 1502
Toronto, Ontario, Canada
M5G 1Z8
Quincy A.S. McKean III(9) . 46,082 0 46,082 *
75 West Front Street
Red Bank, New Jersey
07701
Charles J. Coronella(9) . 54,476 0 54,476 *
4521 East Via Los Caballos
Phoenix, Arizona 85028
Leonard Yakobovits(2) . . 8,889 100 8,989 *
P. O. Box 243
Concord, Ontario, Canada
L4K 1B4
Wolfgang H. Kyser(4)(9) . 35,175 2,858 38,033 *
121 Richmond Street West,
#1000
Toronto, Ontario, Canada
M5H 2K1
Gregg C. Johnson(2)(5) . . 585,844 28,572 614,416 2.5%
13470 North 85th Place
Scottsdale, Arizona 85260
Saturn Investments, 3,903,797 1,052,564 4,956,361 20.4%
Inc.(2)(6) . . . . . . . .
c/o Anthony Bonanno, Esq.
Gibson, Dunn & Crutcher
1050 Connecticut Ave., NW
Washington, D.C. 20036-
5306
Ismail A. 4,132,369 1,052,564 5,184,933 21.4%
Abudawood(2)(7)(10) . . . .
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Ayman I. Abudawood(2)(7) . 3,903,797 1,073,264 4,977,061 20.5%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Osama I. Abudawood(2)(7) . 3,903,797 1,125,564 5,029,361 20.7%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Anas I. Abudawood(2)(7) . . 3,903,797 1,067,264 4,971,061 20.5%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
</TABLE>
47
<PAGE> 51
<TABLE>
<CAPTION>
Number of Number of Percentage
Shares of Shares of Class Total of Total
Common B Voting Number of Number of
Beneficial Owner Stock Common Stock Shares Shares(1)
--------------------------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Executive officers and 1,210,150 3,003,781 4,213,931 17.4%
directors
as a group including those
named
above (seven persons)(2)(8)
</TABLE>
- -------------------------
* Less than 1% of the outstanding Common Stock.
(1) Percentage of ownership is based upon 24,257,855 shares of Common Stock
beneficially owned on June 25, 1996, including 10,711,885 shares of Common
Stock, 5,209,762 shares of Class B Voting Common Stock ("Voting Stock"),
currently exercisable warrants for 15,577 Exchangeable Preference Shares,
currently exercisable warrants to purchase 750,000 shares of Common Stock,
currently exercisable options to purchase 9,999 shares of Common Stock,
1,688,959 shares reserved for issuance under the Company's currently
convertible Convertible Debentures (based on the placement of such
debentures through June 25, 1996), which may be converted commencing
October 1, 1995, 3,903,797 shares issuable to Saturn Investments, Inc.
("Saturn") under a currently exercisable option to acquire 25%,
post-exercise issuance, of the outstanding voting equity of the Company,
867,876 shares reserved for issuance to holders of the Company's presently
convertible Convertible Preferred Stock (based on the conversion price in
effect on June 25, 1996), 200,000 shares reserved for issuance under the
TODA Warrant and 900,000 shares reserved for issuance under the Merchant
Partners Options. The Company believes that the option to purchase the
3,903,797 shares terminates as of the date the registration statement of
which this Prospectus is a part is declared effective. See "CERTAIN
RELATIONS AND RELATED TRANSACTIONS -- Investment by Saturn Investments,
Inc."
(2) Pursuant to that certain Exchange Agency and Trust Agreement dated July 12,
1994 among the Company, Tracker Canada and Montreal Trust Company
("Trustee"), the Trustee holds, for the benefit of the holders of
Exchangeable Preference Shares, that number of shares of Voting Stock as
are held by the owners of Exchangeable Preference Shares. By contractual
agreement, prior to the exchange of the Exchangeable Preference Shares,
holders of Exchangeable Preference Shares receive their voting rights from
the Voting Stock held by the Trustee.
(3) Includes 1,236,436 Exchangeable Preference Shares over which Mr. Lewis has
voting power pursuant to agreements with Mr. Gertzbein, Mr. Johnson and Mr.
Jonathan Lewis, Mr. Lewis' son.
(4) Includes 2,858 shares of Class B Voting Common Stock held by Kyser
Investment Corporation, a company of which Mr. Kyser is the sole
stockholder.
(5) Includes 28,572 Exchangeable Preference Shares held by the Trustee for the
benefit of Spire Consulting Group, Inc.
(6) Includes 1,052,564 Exchangeable Preference Shares owned by Saturn and
shares issuable pursuant to the option agreement described below. Pursuant
to an option agreement dated March 14, 1994, Saturn has the right to
acquire that number of shares of the Company's Common Stock which would
provide Saturn (when combined with shares held by Saturn at the time of
exercise) with 25%, post-exercise issuance, of the outstanding voting
equity of the Company. The purchase price of such shares is their fair
market value. Based on the number of shares of the Company's Common Stock
issued and outstanding as of June 25, 1996, Saturn may exercise the option
for 3,903,797 shares of the Company's Common Stock. In addition, Saturn has
a contractual right, which to date it has not exercised, to have one
representative on the Company's Board of Directors, which representative
may be removed only with the written consent of Saturn. Saturn also has the
right to attend Board meetings and to receive certain information regarding
the Company. The Company believes that the option to purchase the 3,903,797
shares terminates as of the date the registration statement of which this
Prospectus is a part is declared effective. See "CERTAIN RELATIONS AND
RELATED TRANSACTIONS -- Investment by Saturn Investments, Inc."
48
<PAGE> 52
(7) Includes 1,052,564 Exchangeable Preference Shares owned by Saturn and
3,903,797 shares underlying Saturn's option. Ismail A. Abudawood is the
sole stockholder, and Ayman I. Abudawood, Osama I. Abudawood and Anas I.
Abudawood are directors, of Saturn. Accordingly, they may be deemed to be
beneficial owners of such shares. The Company believes that the option to
purchase the 3,903,797 shares terminates as of the date the registration
statement of which this Prospectus is a part is declared effective. See
"CERTAIN RELATIONS AND RELATED TRANSACTIONS -- Investment by Saturn
Investments, Inc."
(8) Includes currently exercisable options to acquire 9,999 shares of Company
Common Stock, 607,858 shares held by individuals who are not executive
officers, directors or nominees over which Mr. Lewis has voting power, and
78,005 shares held by individuals who are not executive officers, directors
or nominees over which Mr. Korhonen, or failing him, Mr. Gertzbein, has
voting power.
(9) Includes currently exercisable options to acquire 3,333 shares of Company
Common.
(10) Includes Convertible Debentures which are currently convertible into
228,572 shares of Company Common Stock and which are held by Wafr Holdings
N.V. ("Wafr"). Ismail A. Abudawood beneficially owns Wafr. Accordingly, he
may be deemed to be a beneficial owner of the shares issuable pursuant to
the Convertible Debentures.
SELLING SECURITYHOLDERS
The following table lists the Selling Securityholders and provides certain
information with respect to the shares of Common Stock owned by each Selling
Securityholder as of June 25, 1996 (or later if the Company has actual knowledge
of transfers after such date), which may be offered from time to time pursuant
to this Prospectus. The information contained in the table has been taken from
Selling Securityholder questionnaires and from the Company's records with
respect to Tracker Canada Exchangeable Preference Shares and Exchangeable
Preference Share Warrants and from a shareholder report from the Company's
transfer agent dated June 25, 1996 with respect to shares of Common Stock. There
can be no assurance that the Selling Securityholders will actually sell any of
the shares that may be sold pursuant to this Prospectus. This table assumes the
exchange of any and all of each Selling Securityholder's Tracker Canada
Exchangeable Preference Shares and Exchangeable Preference Share Warrants for
shares of Tracker U.S. Common Stock, the conversion of any and all of each
Selling Securityholder's Convertible Debentures for shares of Common Stock, the
issuance of the CRG Shares and the exercise of the CRG Option for shares of
Tracker U.S. Common Stock, the exercise of the TODA Warrant for shares of
Tracker U.S. Common Stock, and the exercise of the Merchant Partners Option for
shares of Tracker U.S. Common Stock. Unless otherwise indicated by footnote to
the table below, none of the Selling Securityholders has had any position,
office or other material relationship with Tracker U.S. or its affiliates or
predecessors within the past three years other than as a result of ownership of
the Common Stock or other securities of Tracker U.S. or any of its affiliates.
<TABLE>
<CAPTION>
================================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIOR TO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
================================================================================================
<S> <C> <C> <C>
999600 Ontario Inc. 70,654 * 70,654
- -----------------------------------------------------------------------------------------------
Aaron Greenberg 14,286 * 14,286
- -----------------------------------------------------------------------------------------------
Abdul Najimudeen (2) 100 * 100
- -----------------------------------------------------------------------------------------------
Amerasia International 30,000 * 30,000
Holdings Ltd. (2)
- -----------------------------------------------------------------------------------------------
Anas I. Abudawood 14,700 * 14,700
- -----------------------------------------------------------------------------------------------
Andrew Ascenzi (3) 15 * 15
- -----------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 53
<TABLE>
<CAPTION>
==============================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
==============================================================================================
<S> <C> <C> <C>
Andrew Gregory 1,429 * 1,429
- ----------------------------------------------------------------------------------------------
Anton Voronoff 1,360 * 1,360
- ----------------------------------------------------------------------------------------------
Avron Shore 5,142 * 5,142
- ----------------------------------------------------------------------------------------------
Ayman I. Abudawood 20,700 * 20,700
- ----------------------------------------------------------------------------------------------
Baby Shoes, Inc. 228,572 1.4% 228,572
- ----------------------------------------------------------------------------------------------
Barbara and Jackson 25,000 * 25,000
Edwards
- ----------------------------------------------------------------------------------------------
Barry Greenberg 1,786 * 1,786
- ----------------------------------------------------------------------------------------------
Bina Gregory 14,286 * 14,286
- ----------------------------------------------------------------------------------------------
Bob Faulkner (2) 1,100 * 1,100
- ----------------------------------------------------------------------------------------------
Bob Pence (3) 500 * 500
- ----------------------------------------------------------------------------------------------
Boys Town Jerusalem 100,000 * 100,000
Foundation of America
- ----------------------------------------------------------------------------------------------
Brian Rosenbloom 137,143 * 137,143
- ----------------------------------------------------------------------------------------------
Bruce Knox 228,572 1.4% 228,572
- ----------------------------------------------------------------------------------------------
Bruce Lewis (4) 2,329,596 14.6% 2,329,596
- ----------------------------------------------------------------------------------------------
Bryan King 104,202 * 104,202
- ----------------------------------------------------------------------------------------------
Business Centurions 2,000 * 2,000
Centres Inc. (2)
- ----------------------------------------------------------------------------------------------
Cam Brame 25,000 * 25,000
- ----------------------------------------------------------------------------------------------
C.A. Oportunidad, S.A. 346,667 2.2% 346,667
- ----------------------------------------------------------------------------------------------
Carla Collins 25 * 25
- ----------------------------------------------------------------------------------------------
Charlanne Callahan 25,000 * 25,000
- ----------------------------------------------------------------------------------------------
Charles E. Andrews (2) 400 * 400
- ----------------------------------------------------------------------------------------------
Charles J. Coronella (5) 51,143 * 51,143
- ----------------------------------------------------------------------------------------------
Charles L. Hall (3) 2,400 * 2,400
- ----------------------------------------------------------------------------------------------
Christine Rogers (3) 5,720 * 5,720
- ----------------------------------------------------------------------------------------------
Christopher Creed (6) 35,814 * 35,814
- ----------------------------------------------------------------------------------------------
Corporate Relations 826,000 5.2% 826,000
Group
- ----------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 54
<TABLE>
<CAPTION>
==============================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
==============================================================================================
<S> <C> <C> <C>
Credit Mountain Land Co. 23,000 * 23,000
Limited
- ----------------------------------------------------------------------------------------------
D. Dave Consulting 28,572 * 28,572
- ----------------------------------------------------------------------------------------------
David Gellman 40,000 * 40,000
- ----------------------------------------------------------------------------------------------
David Sullivan 10,000 * 10,000
- ----------------------------------------------------------------------------------------------
Dennis Obert (3) 500 * 500
- ----------------------------------------------------------------------------------------------
Dora Aletto (3) 1,000 * 1,000
- ----------------------------------------------------------------------------------------------
Douglas Stewart 21,426 * 21,426
- ----------------------------------------------------------------------------------------------
Dr. H. Joe Greenberg 200,000 1.3% 200,000
- ----------------------------------------------------------------------------------------------
Ed Herbert (2) 970 * 970
- ----------------------------------------------------------------------------------------------
Ed Leinster 228,572 1.4% 228,572
- ----------------------------------------------------------------------------------------------
Edward Shkolnlkov 20,000 * 20,000
- ----------------------------------------------------------------------------------------------
Edward S. McRobbie 3,571 * 3,571
- ----------------------------------------------------------------------------------------------
Edwin J. Korhonen (7) 142,864 * 142,864
- ----------------------------------------------------------------------------------------------
Elizabeth M. McRobbie 3,571 * 3,571
- ----------------------------------------------------------------------------------------------
Ellen Greenberg 1,786 * 1,786
- ----------------------------------------------------------------------------------------------
First Marathon 500 * 500
Securities (for Eitan
Schibi) (3)
- ----------------------------------------------------------------------------------------------
Fondo De Acquisiciones E 245,000 1.5% 245,000
Inversiones
Internacionales
- ----------------------------------------------------------------------------------------------
Frances L. Stewart 45,428 * 45,428
- ----------------------------------------------------------------------------------------------
Franklin & Catherine 16,000 * 16,000
Hough
- ----------------------------------------------------------------------------------------------
Fred Cesare (3) 1,970 * 1,970
- ----------------------------------------------------------------------------------------------
Frederick A. Lenz 171,429 1.1% 171,429
- ----------------------------------------------------------------------------------------------
Gigi Lipton (8) 19,147 * 19,147
- ----------------------------------------------------------------------------------------------
Gordon Cormie (4) 8,906 * 8,906
- ----------------------------------------------------------------------------------------------
Gregg C. Johnson (9) 585,844 3.7% 585,844
- ----------------------------------------------------------------------------------------------
Guy H. Johnson 3,571 * 3,571
- ----------------------------------------------------------------------------------------------
Henri Schkud 213,333 1.3% 213,333
- ----------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 55
<TABLE>
<CAPTION>
================================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
================================================================================================
<S> <C> <C> <C>
Henry Malat (2) 100 * 100
- ------------------------------------------------------------------------------------------------
Herman Henin Revocable 27,273 * 27,273
Living Trust
- ------------------------------------------------------------------------------------------------
Hussain H. Abudawood 44,100 * 44,100
- ------------------------------------------------------------------------------------------------
Ian Penman (3) 500 * 500
- ------------------------------------------------------------------------------------------------
Jack Gertzbein (3) 19,001 * 19,000
- ------------------------------------------------------------------------------------------------
Jack Stricharuk (3) 25,000 * 25,000
- ------------------------------------------------------------------------------------------------
Jacob and Wanda Dorsey 41,666 * 41,666
- ------------------------------------------------------------------------------------------------
James Tanner 7,144 * 7,144
- ------------------------------------------------------------------------------------------------
Jan Neundorf (3) 500 * 500
- ------------------------------------------------------------------------------------------------
Jay C. Gagne 25,000 * 25,000
- ------------------------------------------------------------------------------------------------
Johanna J. Wolf (10) 500 * 500
- ------------------------------------------------------------------------------------------------
John Andrews (11) 10,000 * 10,000
- ------------------------------------------------------------------------------------------------
John Nestor (2) 2,000 * 2,000
- ------------------------------------------------------------------------------------------------
John R. Harper 26,667 * 26,667
Retirement Trust
- ------------------------------------------------------------------------------------------------
Jonathan Lewis (12) 25,000 * 25,000
- ------------------------------------------------------------------------------------------------
Joseph Brown 715 * 1,430
- ------------------------------------------------------------------------------------------------
Ken Brown (3) 500 * 500
- ------------------------------------------------------------------------------------------------
Kim Martin (3) 500 * 500
- ------------------------------------------------------------------------------------------------
Klaus Stahl (3) 2,969 * 2,969
- ------------------------------------------------------------------------------------------------
Kyser Investment 2,858 * 2,858
Corporation
- ------------------------------------------------------------------------------------------------
Leonard Yakobovits (13) 8,989 * 8,989
- ------------------------------------------------------------------------------------------------
Leon Schkud 80,000 * 80,000
- ------------------------------------------------------------------------------------------------
Leon Willis, Jr. 26,667 * 26,667
- ------------------------------------------------------------------------------------------------
Lisa Fahringer (3) 600 * 600
- ------------------------------------------------------------------------------------------------
Majestic Global 121,200 * 121,200
Investments
- ------------------------------------------------------------------------------------------------
Malcolm Newton (2) 100 * 100
- ------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
===================================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
===================================================================================================
<S> <C> <C> <C>
Mark Greenberg 1,786 * 1,786
- ---------------------------------------------------------------------------------------------------
Mark J. Gertzbein (14) 786,078 4.9% 786,078
- ---------------------------------------------------------------------------------------------------
Matthew Ascenzi (3) 15 * 15
- ---------------------------------------------------------------------------------------------------
Mei Na Leung (3) 100 * 100
- ---------------------------------------------------------------------------------------------------
Melanie Casselman (3) 500 * 500
- ---------------------------------------------------------------------------------------------------
Merchant Partners, L.P. 900,000 5.7% 900,000
- ---------------------------------------------------------------------------------------------------
Mercy International 93,086 * 93,086
- ---------------------------------------------------------------------------------------------------
Michael J. Dyrnaes (15) 7,143 * 7,143
- ---------------------------------------------------------------------------------------------------
Michael Joseph 69,700 * 69,700
- ---------------------------------------------------------------------------------------------------
Michael Lee (3) 7,243 * 7,243
- ---------------------------------------------------------------------------------------------------
Miriam Henin 18,824 * 18,824
Revocable Living Trust
- ---------------------------------------------------------------------------------------------------
Mohammad H. Abudawood 14,700 * 14,700
- ---------------------------------------------------------------------------------------------------
Morris Starkman 30,000 * 30,000
- ---------------------------------------------------------------------------------------------------
Morton Greenberg 7,142 * 7,142
- ---------------------------------------------------------------------------------------------------
Nancy Hutchins (3) 600 * 600
- ---------------------------------------------------------------------------------------------------
Omar H. Abudawood 14,700 * 14,700
- ---------------------------------------------------------------------------------------------------
Osama I. Abudawood 63,000 * 63,000
- ---------------------------------------------------------------------------------------------------
Paul Greenberg 1,786 * 1,786
- ---------------------------------------------------------------------------------------------------
Pearl Gertzbein (3) 19,001 * 19,000
- ---------------------------------------------------------------------------------------------------
Phil Harding (3) 1,200 * 1,200
- ---------------------------------------------------------------------------------------------------
Quincy A.S. McKean III 42,749 * 41,429
(16)
- ---------------------------------------------------------------------------------------------------
Renee C. Johnson 3,571 * 3,571
- ---------------------------------------------------------------------------------------------------
Reynold Kern 253,300 1.6% 250,000
- ---------------------------------------------------------------------------------------------------
Richard and Paula Gagne 114,286 * 114,286
- ---------------------------------------------------------------------------------------------------
Richard G. Kahn 71,428 * 71,428
- ---------------------------------------------------------------------------------------------------
Richard Maus 112,500 * 112,500
- ---------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 57
<TABLE>
<CAPTION>
=====================================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
=====================================================================================================
<S> <C> <C> <C>
Richard Scott Revocable 28,302 * 28,302
Trust Part B
- -----------------------------------------------------------------------------------------------------
Robin Ward 25 * 25
- -----------------------------------------------------------------------------------------------------
Rudy Morelli and 7,143 * 7,143
Patricia Ray Morelli
- -----------------------------------------------------------------------------------------------------
Ruth Cappel (3) 50 * 50
- -----------------------------------------------------------------------------------------------------
Ryckman Financial 60,000 * 60,000
Corporation
- -----------------------------------------------------------------------------------------------------
Salwa I. Abudawood 14,700 * 14,700
- -----------------------------------------------------------------------------------------------------
Samih I. Abudawood 14,700 * 14,700
- -----------------------------------------------------------------------------------------------------
Sana I. Abudawood 14,700 * 14,700
- -----------------------------------------------------------------------------------------------------
Sara Zagdanski 3,571 * 7,142
- -----------------------------------------------------------------------------------------------------
Saturn Investments, Inc. 1,052,564 6.6% 1,052,564
- -----------------------------------------------------------------------------------------------------
Scotia McLeod Inc, in 5,714 * 5,714
Trust for Dr. H. Joe
Greenberg
- -----------------------------------------------------------------------------------------------------
Sky Corporation Ltd. 57,144 * 57,144
- -----------------------------------------------------------------------------------------------------
Spire Consulting Group, 28,572 * 28,572
Inc.
- -----------------------------------------------------------------------------------------------------
Stanley L. Alpert 3,040 * 3,040
- -----------------------------------------------------------------------------------------------------
Stephen Dorsey 20,833 * 20,833
- -----------------------------------------------------------------------------------------------------
Steve Heard (2) 25,000 * 25,000
- -----------------------------------------------------------------------------------------------------
Susan Love 58,485 * 58,485
- -----------------------------------------------------------------------------------------------------
Susan A. Vint (17) 18,366 * 18,366
- -----------------------------------------------------------------------------------------------------
Terry Penman (3) 50 * 50
- -----------------------------------------------------------------------------------------------------
The Dundas Edward Centre 50,000 * 50,000
- -----------------------------------------------------------------------------------------------------
The Tolton Buildings 12,500 * 12,500
Limited
- -----------------------------------------------------------------------------------------------------
Tim Shannon 114,286 * 114,286
- -----------------------------------------------------------------------------------------------------
Toda Corporation Limited 200,000 1.3% 200,000
- -----------------------------------------------------------------------------------------------------
Tom and Judy Callahan 25,000 * 25,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 58
<TABLE>
<CAPTION>
===================================================================================================
SHARES OF COMMON PERCENTAGE OF COMMON NUMBER OF SHARES
NAME STOCK OWNED PRIOR TO STOCK OUTSTANDING THAT MAY BE SOLD
THE OFFERING PRIORTO THE OFFERING PURSUANT TO THIS
(1) PROSPECTUS
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<S> <C> <C> <C>
Toni M. Mesi (3) 600 * 600
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Vee Ltd. 243,630 1.5% 243,630
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Victoria Boyce 1,540 * 1,540
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WAFR Holdings, N.V. 228,572 1.4% 228,572
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Wheel of Fortune 413,893 2.6% 413,893
- ---------------------------------------------------------------------------------------------------
Wing Fat Kwok (3) 500 * 500
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Wolfgang H. Kyser (25) 31,842 * 31,842
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</TABLE>
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* Less than 1%.
(1) Percentage of ownership is based upon 15,921,647 shares of Common Stock
outstanding on June 25, 1996, including 10,711,885 shares of Common Stock
and 5,209,762 shares of Class B Voting Stock.
(2) The Selling Securityholder is or was a consultant to Tracker Canada.
(3) The Selling Securityholder is or was an employee of Tracker Canada.
(4) Mr. Lewis is the Chief Executive Officer, President and Chairman of the
Board of Directors of Tracker U.S. and the Chief Executive Officer,
President and Chairman of the Board of Directors of Tracker Canada.
(5) Mr. Coronella is a Director of Tracker U.S.
(6) Mr. Creed is Tracker Canada's Vice President of Operations.
(7) Mr. Korhonen is a Director of Tracker U.S. and the former President,
Chief Operating Officer and Director of Tracker Canada.
(8) Ms. Lipton is Tracker Canada's Director of Information Systems and Vice
President of Information Systems.
(9) Mr. Johnson formerly was the President, General Counsel and Director of
Tracker U.S.
(10) Ms. Wolf is Tracker Canada's Coordinator - Marketing/Administration.
(11) Mr. Andrews is the Company's Manager of Field Operation for Canada and
the Chief of Security/Director of Field Operations for North America.
(12) Mr. Lewis works in Investor Relations for Tracker Canada.
(13) Mr. Yakobovits is a Director of Tracker U.S and a consultant for Tracker
Canada.
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(14) Mr. Gertzbein is the Deputy Chairman of the Board of Directors, Executive
Vice President, Chief Financial Officer, Secretary and Treasurer of
Tracker U.S. He is also a Director and the Senior Vice President of
Finance, Chief Financial Officer and Secretary of Tracker Canada.
(15) Mr. Dyrnaes was Tracker Canada's Assistant Director of Information
Systems.
(16) Mr. McKean is a Director of Tracker U.S. He was a Director of Ultra
Capital Corp., the predecessor of Tracker U.S., from February 1992 to
June 1994.
(17) Ms. Vint was Tracker Canada's Director of Operations and Director of
Sales.
(18) Mr. Kyser is a Director of Tracker U.S.
Because the Selling Securityholders may offer all, some part or none of
the shares of Common Stock which they hold pursuant to the offering contemplated
by this Prospectus, and because this offering is not being underwritten, it is
not possible to predict the number of shares of Common Stock that will be sold
hereby. Accordingly, it is not possible to predict the number of shares or
percentage of shares that will be owned by Selling Securityholders upon
completion of this offering. See "PLAN OF DISTRIBUTION."
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Securityholders.
The shares offered by this Prospectus may not be sold in any state of the
United States unless such shares are registered under the applicable state's
securities laws or there is an applicable exemption from the registration
requirements. In addition, the shares offered by this Prospectus may not be
distributed in Canada unless distributed pursuant to prospectus and registration
exemptions contained in applicable provincial or territorial securities
legislation. Accordingly, Selling Securityholders are advised to consult with
counsel as to their ability to sell the shares in accordance with applicable
state and provincial or territorial laws.
The Selling Securityholders directly, through agents designated from time
to time, or through dealers or underwriters also to be designated, may sell all
or a portion of the shares of Common Stock held by them from time to time while
the Registration Statement of which this Prospectus is a part remains effective
on terms to be determined at the time of sale. The shares of Common Stock held
by the Selling Securityholders may be sold by them in transactions in the
over-the-counter market, in negotiated transactions or by a combination of these
methods, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices. To the extent required, the specific
shares to be sold, the names of the Selling Securityholders, purchase price,
public offering price, the names of any such agent, dealer or underwriter, and
any applicable commission or discount with respect to a particular offer will be
set forth in an accompanying Prospectus Supplement. Such Prospectus Supplement
will also set forth information regarding any indemnification by the Company of
the Selling Securityholders or any underwriter, dealer or agent against certain
liabilities, including liabilities under the Securities Act. Pursuant to the
terms of the Reorganization Agreement, the Company must exercise its best
efforts to maintain the effectiveness of such registration statement for one
year. See "DESCRIPTION OF SECURITIES - Registration Rights."
The aggregate proceeds to the Selling Securityholders from the sale of
shares of Common Stock offered by the Selling Securityholders hereby will be the
prices at which such shares are sold, less any commissions. There can be no
assurance that the Selling Securityholders will sell any or all of the shares of
Common Stock offered hereby. The Company will pay all expenses incident to the
offering and sale of the Common Stock to the public by the Selling
Securityholders other than selling commissions and fees.
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<PAGE> 60
The Selling Securityholders and any broker-dealers or agents that
participate with the Selling Securityholders in sales of the shares of Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act in connection with such shares. In such event, any commission received by
such broker-dealers or agents and any profit on the resale of the shares of
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Pursuant to certain contractual arrangements entered into with certain
Selling Securityholders, the Company and the Selling Securityholders have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act.
DESCRIPTION OF SECURITIES
The authorized capitalization of Tracker U.S. consists of 30,000,000
shares of Common Stock, $0.001 par value per share, 20,000,000 shares of Class B
Voting Common Stock, $.00000007 par value per share, and 500,000 shares of
Preferred Stock, $0.001 par value per share.
COMMON STOCK
As of June 25, 1996, there were 10,711,885 shares of Common Stock
outstanding, held of record by approximately 320 stockholders. Holders of Common
Stock are entitled to one vote for each share held on all matters submitted to a
vote of stockholders and do not have cumulative voting rights. Accordingly,
holders of a majority of the shares of all common stock outstanding, including
the Common Stock and the Class B Voting Stock (described below), entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of
Preferred Stock outstanding from time to time. Upon the liquidation, dissolution
or winding up of Tracker U.S., the holders of all common stock, including the
Common Stock and the Class B Voting Stock (described below), are entitled to
receive ratably the net assets of Tracker U.S. available after the payment of
all debts and other liabilities and subject to the prior rights of any
outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of the Convertible Preferred Stock and
the holders of shares of any other class or series of Preferred Stock that
Tracker U.S. may designate and issue in the future.
Saturn has a contractual right, which to date it has not exercised, to
have one representative on the Company's Board of Directors, which
representative may be removed only with the written consent of Saturn. Saturn
also has the right to attend Board meetings and to receive certain information
regarding the Company. See "CERTAIN RELATIONSHIPS AND TRANSACTIONS - Investment
by Saturn Investments, Inc."
CLASS B VOTING COMMON STOCK
As of June 25, 1996, there were 5,209,762 shares of Class B Voting
Common Stock, par value $.00000007 (the "Voting Stock"), outstanding, held by
Montreal Trust, as Trustee, pursuant to an Exchange Agreement for the benefit of
approximately 100 holders. The Class B Voting Common Stock is redeemable by
Tracker U.S. at par value at any time, has no right to cash dividends, has
liquidation rights of $0.0001 per share (junior to the rights of the holders of
the Common Stock), and has voting rights equivalent to those of the Common
Stock. The beneficial owners of the Voting Stock (i.e., the holders of the
Exchangeable Preference Shares of Tracker Canada) have the right to vote the
Voting Stock under procedures set forth in the Exchange Agreement. Although the
Voting Stock is redeemable by Tracker U.S., Tracker U.S. has agreed not to
redeem the Voting Stock until such times, from time to time, as holders of
Exchangeable Preference Shares of Tracker Canada elect to exchange such shares
into Common Stock of Tracker U.S. Upon the exchange of a holder's Tracker Canada
Exchangeable Preference Shares for Common Stock of Tracker U.S., a corresponding
number of the shares of the Voting Stock will be returned to Tracker U.S. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-Reorganization." The rights,
preferences and privileges of holders of Voting Stock are subject to, and may be
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<PAGE> 61
adversely affected by, the rights of the holders of shares of any class or
series of Preferred Stock that Tracker U.S. may designate and issue in the
future.
EXCHANGEABLE PREFERENCE SHARES
As of June 25, 1996, Tracker Canada had outstanding 5,209,762
Exchangeable Preference Shares. As a result of certain agreements and the Plan
of Arrangement entered into in connection with the Reorganization, holders of
the Exchangeable Preference Shares have voting, dividend and liquidation rights
that are in parity with those of holders of the shares of the Tracker U.S.
Common Stock. In addition, holders of Exchangeable Preference Shares are
entitled to exchange such shares with Tracker U.S. for shares of the Tracker
U.S. Common Stock on a one-to-one basis, subject to adjustment from time to time
to take into account certain events. Accordingly, there are no material
differences between the rights of the holders of the Exchangeable Preference
Shares and the rights of the holders of the Tracker U.S. Common Stock.
Tracker U.S. has deposited shares of Voting Stock in trust with
Montreal Trust under an arrangement that entitles each holder of Exchangeable
Preference Shares (other than Tracker U.S. and Tracker Canada) to vote at
meetings of stockholders of Tracker U.S. on the basis of one vote in Tracker
U.S. for each whole share of Common Stock into which the Exchangeable Preference
Shares held of record by such holder are then exchangeable.
Dividends on the Exchangeable Preference Shares are cumulative and have
priority over dividend payments on the common shares of Tracker Canada.
Dividends payable on each Exchangeable Preference Share shall be an amount equal
to the product obtained by multiplying the applicable exchange rate (i.e., the
rate at which Exchangeable Preference Shares may be exchanged into shares of
Common Stock) by the Canadian dollar equivalent of dividends declared by Tracker
U.S. on each share of the Common Stock of Tracker U.S. Tracker Canada must,
within five business days following the declaration of a dividend by Tracker
U.S., declare a dividend on the Exchangeable Preference Shares in such amount.
Tracker U.S. has agreed, for the benefit of the holders of the Tracker Canada
Exchangeable Preference Shares, not to declare and pay any cash dividends on its
Common Stock unless it also causes Tracker Canada to declare and pay cash
dividends on the Exchangeable Preference Shares at the same time and in the same
manner as the dividends paid on the Tracker U.S. Common Stock. In addition,
Tracker U.S. has agreed to provide Tracker Canada with such funds as may be
necessary to pay any such dividends to holders of the Exchangeable Preference
Shares. Tracker U.S. has never paid any cash dividends on its Common Stock and
does not intend to pay any cash dividends in the foreseeable future. See
"DIVIDEND POLICY." Accordingly, it is unlikely that any dividends will be paid
on the Exchangeable Preference Shares.
The Exchangeable Preference Shares are nonredeemable and, except under
circumstances involving the nonpayment of dividends comparable to those paid on
shares of the Tracker U.S. Common Stock as described above, generally are not
entitled to vote on matters put before the shareholders of Tracker Canada. If,
however, within the 12 months immediately following payment of any dividend upon
the Tracker U.S. Common Stock, Tracker Canada does not declare and pay an
equivalent dividend on the Exchangeable Preference Shares, then the holders of
the Exchangeable Preference Shares will be entitled to exercise 51% of the
voting rights in Tracker Canada until such equivalent dividend has been paid.
Holders of the Tracker Canada Exchangeable Preference Shares are
entitled upon any liquidation, dissolution or winding-up of Tracker Canada,
before any distribution is made to the holders of the common shares of Tracker
Canada or any other shares junior to the Exchangeable Preference Shares, to an
amount equal to the Basic Liquidation Amount, together with an amount equal to
all dividends accrued and unpaid on such Exchangeable Preference Shares. The
"Basic Liquidation Amount" per Exchangeable Preference Share is on any date the
Canadian dollar equivalent of an amount equal to (a) the aggregate value on such
date of the property and assets of Tracker U.S. available for distribution to
the holders of Tracker U.S. Common Stock on such date divided by (b) the sum of
(i) the number of shares of Tracker U.S. Common Stock issued and outstanding on
such date plus (ii) the product of the number of Exchangeable Preference Shares
issued and outstanding on such date multiplied by the applicable exchange rate.
The Basic Liquidation Amount (excluding unpaid dividends) may be satisfied at
Tracker Canada's option in cash or by causing the distribution to each holder of
Exchangeable Preference Shares of the number of shares of the Common Stock of
Tracker U.S. equal to the product of the number of Exchangeable Preference
Shares registered in the name of such holder by the applicable exchange rate.
Tracker U.S. has agreed
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to provide Tracker Canada such funds as may be necessary to satisfy the
liquidation value to which the holders of the Exchangeable Preference Shares are
entitled. In lieu of providing such funds to Tracker Canada, Tracker U.S. may
satisfy its obligation with respect to the payment of the liquidation value of
the Exchangeable Preference shares by issuing to each holder of Exchangeable
Preference Shares the number of shares of the Common Stock of Tracker U.S. for
which such holder is then entitled to exchange such shares.
EXCHANGEABLE PREFERENCE WARRANTS
As of June 25, 1996, Tracker Canada had outstanding warrants to
purchase 15,577 Exchangeable Preference Shares at CDN $14 per share (the
"Exchangeable Preference Warrants") exercisable until various expiration dates,
the last of which is September 23, 1996.
PREFERRED STOCK
Tracker U.S. has an authorized class of 500,000 shares of undesignated
Preferred Stock, par value $0.001 per share. The Board of Directors is
authorized, subject to any limitations prescribed by law, without further action
of the stockholders of Tracker U.S., to issue from time to time such shares of
Preferred Stock in one or more classes or series. The Board is also authorized
to fix or alter the designations, preferences and rights and any qualifications,
limitations or restrictions of the shares of each such class or series of
Preferred Stock, including the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any class or series or the designations of such class or series. It
is possible that the Board could issue, without stockholder approval, Preferred
Stock with voting or dividend rights that could adversely affect the voting
power and dividend rights of the holders of the Common Stock and the Voting
Stock. In addition, under certain circumstances such Preferred Stock could be
used as a means of discouraging, delaying or preventing a change in control of
Tracker U.S.
As of June 25, 1996, the only Preferred Stock outstanding was 100
shares of the Company's $1,000.00 6% Cumulative Convertible Preferred Stock (the
"Convertible Preferred Stock") and 250 shares of the Company's Series B
$1,000.00 6% Cumulative Convertible Preferred Stock (the "Series B Convertible
Preferred Stock"). The Convertible Preferred Stock is not redeemable and, except
as otherwise provided by law, is non-voting. Subject to the prior right of the
holders of any shares of any series of Preferred Stock ranking prior to the
shares of Convertible Preferred Stock with respect to dividends, the holders of
the Convertible Preferred Stock are entitled to receive when, as and if declared
by the Board of Directors: (i) quarterly dividends payable in cash out of funds
legally available for such purpose on the last day of July 1996 and October 1996
(each such date being referred to herein as a "Quarterly Dividend Payment Date")
at an annual rate of $60.00 per share; or, (ii) at the sole option of the
Company, quarterly dividends payable on each Quarterly Dividend Payment Date in
additional shares of Convertible Preferred Stock at an annual rate of 0.06
additional shares per share of Convertible Preferred Stock then outstanding.
In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Convertible Preferred Stock are entitled to receive,
prior to any distribution of any of the assets or funds of the Company to the
holders of the Common Stock or any other shares of stock of the Company ranking
as to such a distribution junior to the Convertible Preferred Stock, an amount
equal to $1,000.00 per share (as adjusted for any stock dividends, combinations
or splits with respect to such shares) plus an amount equal to any accrued but
unpaid dividends thereon to the date fixed for payment of such distribution.
Upon payment of the full preferential amount, the holders of the Convertible
Preferred Stock are not entitled to any further participation in any
distribution of assets by the Company.
Each share of Convertible Preferred Stock is convertible, at the option
of the holder, without the payment of any additional consideration, and at any
time, into such number of shares of Common Stock as is determined by dividing
$1,000.00 plus the amount of any accrued but unpaid dividends through the date
such holder's conversion notice is received by the Company by the Conversion
Price (as hereafter defined). The "Conversion Price" shall be equal to that
amount which is 33% less than the average of the published OTC Bulletin Board
closing bid prices for the Company's Common Stock for the five (5) trading days
preceding, at the election of the holder, the date
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such holder's subscription to purchase the Convertible Preferred Stock was
accepted by the Company or the date such holder's conversion notice is received
by the Company; provided, however, that the Conversion Price shall in no event
be less than $0.15. If the number of shares of Common Stock outstanding at any
time after the date of issuance of the Convertible Preferred Stock is increased
or decreased by a stock dividend, stock split, or combination or
reclassification of the outstanding shares of Common Stock, the Conversion Price
shall be appropriately decreased or increased so that the number of shares of
Common Stock issuable on conversion shall be increased or decreased in
proportion to such increase or decrease in the outstanding shares of Common
Stock.
The Series B Convertible Preferred Stock is identical in all material
respects to the Convertible Preferred Stock except that the Quarterly Dividend
Payment Dates are August 1996 and November 1996 rather than July 1996 and
October 1996.
COMMON WARRANTS
As of June 25, 1996, there were warrants ("Common Warrants") to
purchase 750,000 shares of Common Stock, subject to adjustment, outstanding held
by two holders. The Common Warrants entitle the holders thereof to purchase one
share of Common Stock for a one-year period commencing on July 12, 1995 and
ending on July 12, 1996 (the "Exercise Period"); provided, however, that if the
Common Stock cannot be purchased on margin at a legally marginable price under
applicable laws, rules and regulations at any time during the Exercise Period,
the Exercise Period will be extended so that the warrants expire on the first
date after July 12, 1996 on which the Common Stock can be purchased legally at a
legally marginable price. The per share exercise price of the Common Warrants,
subject to adjustments, is $5 per share.
MERCHANT PARTNERS OPTION
As of July 10, 1996, there was outstanding an option (the "Merchant
Partners Option") to purchase 900,000 shares of Common Stock, subject to
adjustment, held by one holder. The Merchant Partners Option is divided into
three tranches. Tranche I entitles the holder to purchase 200,000 shares through
July 10, 1998 at an exercise price of $0.50 per share, subject to adjustment.
Tranche II entitles the holder to purchase 450,000 shares through July 10, 1999
at an exercise price of $0.75 per share, subject to adjustment; provided,
however, that Tranche II is not exercisable unless and until the Company enters
into one or more Sales Contracts (as defined in the agreement) with a Prospect
(as defined below) before April 10, 1997. Tranche III entitles the holder to
purchase 250,000 shares through July 10, 2001 at an exercise price of $1.00 per
share, subject to adjustment; provided, however, that Tranche III is not
exercisable unless and until the Company enters into one or more Sales Contracts
with a term of three years or more with a Prospect before July 10, 1999. A
Prospect means Signature Financial/Marketing Inc., and all of its subsidiaries,
Montgomery Ward & Co. Incorporated, Montgomery Ward Direct, L.P., ValueVision
International, Inc., and all other subsidiaries of Montgomery Ward & Co.
Incorporated. Merchant Partners, L.P. is an affiliate of each Prospect.
TODA WARRANT
As of June 25, 1996, there was outstanding a warrant (the "TODA
Warrant") to purchase 200,000 shares of Common Stock at an exercise price of
$0.40 per share, subject to adjustment, through May 30, 2001.
CRG SHARES AND OPTIONS
As of June 25, 1996, the Company had agreed to issue to its investor
relations firm ("CRG") options to purchase 100,000 shares at an exercise price
of $2.00 per share through November 19, 1996, 100,000 shares at an exercise
price of $2.40 per share through November 19, 1997, 100,000 shares at an
exercise price of $2.60 per share through November 19, 1998, 100,000 shares at
an exercise price of $2.80 per share through November 19, 2000, and 100,000
shares at an exercise price of $3.00 per share through November 19, 2000. In
addition, the Company may issue to CRG 326,000 shares of Common Stock in lieu of
cash compensation.
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CONVERTIBLE DEBENTURES
As of June 25, 1996, Tracker U.S. had outstanding an aggregate
principal amount of $420,000 of its 15% one-year convertible subordinated
debentures (the "First Series Convertible Debentures"). The interest payments
are payable monthly in advance commencing on August 1, 1995. The principal
balance together with any accrued but unpaid interest shall be paid on August 1,
1996. The First Series Convertible Debentures may be converted into shares of
Common Stock, in whole or in part, from October 1, 1995 through July 31, 1996 at
a conversion rate of $0.4375 per share of Common Stock. The First Series
Convertible Debentures are subordinated to all other indebtedness incurred by
Tracker U.S.
In addition, as of June 25, 1996, Tracker U.S. had outstanding an
aggregate principal amount of $730,000 of its 15% convertible subordinated
debentures (the "Second Series Convertible Debentures"). The interest payments
are payable monthly in advance commencing on October 1, 1995. The principal
balance together with any accrued but unpaid interest shall be paid on October
1, 1996. The Second Series Convertible Debentures outstanding as of June 25,
1996 may be converted into shares of Common Stock, in whole or in part, from
October 1, 1995 through July 31, 1996 at various conversion rates, the weighted
average of which is $1.00143 per share of Common Stock. The Second Series
Convertible Debentures are subordinated to all other indebtedness incurred by
Tracker U.S. The Board of Directors has authorized the issuance of up to an
additional $810,471 aggregate principal amount of Second Series Convertible
Debentures with a conversion price to be not less than $0.9375 per share.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under Tracker U.S.'s Certificate of Incorporation, assuming, as of June
25, 1996, (i) the conversion of all the Convertible Debentures into shares of
Common Stock, (ii) the exchange of all Exchangeable Preference Shares, (iii) the
conversion of all the Convertible Preferred Stock, (iv) the exercise of the
Merchant Partners Option, and (v) the exercise of the TODA Warrant, there will
be 10,421,518 shares of Common Stock and 500,000 shares of Preferred Stock
available for future issuance generally without stockholder approval. The Board
of Directors is authorized, subject to any limitations prescribed by law,
without further action of the stockholders of the Company, to issue from time to
time additional shares of Common Stock and Preferred Stock. These additional
shares may be utilized for a variety of corporate purposes, including for
example a future public offering or private placement to raise additional
capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Common
Stock and Preferred Stock may be to enable the Board of Directors to issue
shares to persons friendly to current management or to issue Preferred Stock
with terms that could render more difficult or discourage an attempt to obtain
control of Tracker U.S. by means of a merger, tender offer, proxy contest or
otherwise, and thereby to protect the continuity of Tracker U.S.'s management.
Such additional shares could also be used to dilute the stock ownership of
persons seeking to obtain control of Tracker U.S.
REGISTRATION RIGHTS
In the Reorganization Agreement, Tracker U.S. covenanted to the
Trustee, the Montreal Trust Company of Canada, for the express benefit of the
holders of the Exchangeable Preference Shares, that Tracker U.S. will, (i) on or
before July 12, 1995 (subject to postponement or delay for up to 120 days under
certain circumstances), file a registration statement under the Securities Act,
covering the exchange of the Exchangeable Preference Shares for the Reserved
Common Shares (the "Share Exchange Offer") and the resale of the Reserved Common
Shares received pursuant to the Share Exchange Offer, (ii) use its best efforts
to cause such registration statement to become effective, and (iii) use its best
efforts to keep the registration statement current, at its expense, for a one
year period following July 12, 1995. This Prospectus is part of a registration
statement filed by Tracker U.S. under the Securities Act pursuant to the
Reorganization Agreement. In addition, if during the two year period commencing
with July 12, 1997 and ending July 12, 1999, Tracker U.S. proposes to register
any of its equity securities under the Act for sale for cash (otherwise than in
connection with the registration of securities issuable pursuant to an employee
stock option, stock purchase or similar plan or pursuant to a merger, exchange
offer or a transaction of a type specified in Rule 145(a) under the Act),
Tracker U.S. shall (a) give the holders of the then
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outstanding Exchangeable Preference Shares notice of the proposed registration,
(b) upon request of a holder, use its best efforts to register the Share
Exchange Offer and the resale of the Reserved Common Shares received pursuant to
the Share Exchange Offer, and (c) use its best efforts to cause such
registration to become and remain effective. No assurance can be given, however,
that any such registration statement referred to in the immediately preceding
sentence will be filed between July 12, 1997 and July 12, 1999, and Tracker U.S.
has no legal duty to file a registration statement during such period.
The holder of 250,000 shares of Common Stock and Common Warrants to
purchase 250,000 shares of Common Stock has contractual rights to demand that
such shares and the shares underlying such Common Warrants be registered under
the Securities Act during the one year period between July 12, 1995 and July 12,
1996, if no current registration statement by Tracker U.S. is on file covering
the shares of Common Stock. All expenses in connection with such registration
shall be borne by Tracker U.S. with respect to the first demand registration,
except that the holder shall pay all underwriting discounts and selling
commissions and all fees and disbursements of any special counsel to any seller
of the securities being registered. The costs of any subsequent demand
registrations shall be borne by the holder. This Prospectus is part of a
registration statement filed to register these shares and the shares underlying
such Common Warrants under the Securities Act.
The holder of common warrants to purchase 500,000 shares of Common
Stock has contractual rights to demand that the shares underlying such common
warrants be registered under the Securities Act during the one year period
between July 12, 1995 and July 12, 1996, if no current registration statement by
Tracker U.S. is on file covering the securities comprising or underlying the
shares and warrants. The holder shall have such rights, however, only if such
holder exercises his common warrants to purchase 500,000 shares of Common Stock
in full prior to making any such demand. No such exercise has yet occurred.
Tracker U.S. may postpone or delay such demand registration under certain
circumstances. All expenses in connection with such registration shall be borne
by Tracker U.S. with respect to the first demand registration, except that the
holder shall pay all underwriting discounts and selling commissions and all fees
and disbursements of any special counsel to any seller of the securities being
registered. The costs of any subsequent demand registrations shall be borne by
the holder.
The holder of 800,000 shares of Common Stock has the right to demand
that such shares be registered under the Securities Act during the five year
period ending on March 15, 2000. Such holder's shares are registrable at its own
expense.
Holders of the First Series Convertible Debentures have the right to
demand that the shares of Common Stock underlying such Convertible Debentures be
registered under the Securities Act. Tracker U.S. must file a registration
statement within 30 business days after it receives notices of conversion that
represent, in the aggregate, 50% or more of the then unpaid principal balance of
all outstanding First Series Convertible Debentures and in any event evidencing
First Series Convertible Debentures with an outstanding principal balance of at
least $300,000. Tracker U.S. shall use its best efforts to cause such
registration statement to become effective by December 1, 1996. All expenses of
such registration, other than underwriting discounts and commissions, shall be
paid by Tracker U.S. This Prospectus is part of a registration statement filed
to register the shares underlying such First Series Convertible Debentures under
the Securities Act.
Holders of the Second Series Convertible Debentures have the right to
demand that the shares of Common Stock underlying such Convertible Debentures be
registered under the Securities Act. Tracker U.S. must file a registration
statement within 30 business days after it receives notices of conversion that
represent, in the aggregate, 50% or more of the then unpaid principal balance of
all outstanding Second Series Convertible Debentures and in any event evidencing
Second Series Convertible Debentures with an outstanding principal balance of at
least $300,000. Tracker U.S. shall use its best efforts to cause such
registration statement to become effective by December 1, 1996. All expenses of
such registration, other than underwriting discounts and commissions, shall be
paid by Tracker U.S. This Prospectus is part of a registration statement filed
to register the shares underlying such Second Series Convertible Debentures
under the Securities Act.
The holder of 25,000 shares of Common Stock has the right to have such
shares included in the first registration statement filed by the Company
following the issuance of such shares. This Prospectus is part of a registration
statement filed to register such shares under the Securities Act.
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The holder of the Merchant Partners Option has (i) two demand
registration rights pursuant to which it can require the Company to register the
Common Stock owned by the holder and maintain the effectiveness of such
registration for at least 90 days, in each case at the holder's and the
Company's expense on an equal basis; (ii) the right to include its shares in any
registration statement filed by the Company (subject to certain exceptions) at
the Company's expense; and (iii) the right to include its shares in the
registration statement of which this Prospectus is a part. This Prospectus is
part of a registration statement filed to register the 900,000 shares underlying
the Merchant Partners Option under the Securities Act.
The holder of the TODA Warrant has the right to have the shares
underlying such warrant included in any registration statement filed by the
Company (subject to certain exceptions) at the Company's expense. This
Prospectus is part of a registration statement filed to register the 200,000
shares underlying the TODA Warrant under the Securities Act.
The shares which may be issued to CRG are required to be freely
tradeable shares. This Prospectus is a part of a registration statement filed to
register the 326,000 CRG Shares and the 500,000 shares underlying the CRG
Options under the Securities Act.
The holder of 112,500 shares of Common Stock has the right to have such
shares registered. This Prospectus is a part of a registration statement filed
to register such shares under the Securities Act.
DIRECTORS' LIABILITY
As authorized by the Delaware General Corporation Law (the "DGCL"), the
Certificate of Incorporation of Tracker U.S. provides that no director of
Tracker U.S. shall be personally liable to Tracker U.S. or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Tracker U.S.
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock purchases, or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of this provision is to eliminate the rights of Tracker U.S. and its
stockholders (through stockholders' derivative suits on behalf of Tracker U.S.)
to recover monetary damages from a director for breach of the fiduciary duty of
care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. In addition, the Certificate of Incorporation provides that any
repeal or modification of this provision by stockholders of Tracker U.S. will
not adversely affect any right or protection of a director existing at the time
of such repeal or modification with respect to acts or omissions occurring prior
to such repeal or modification. This provision does not limit or eliminate the
rights of Tracker U.S. or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Certificate of Incorporation of Tracker U.S. requires Tracker U.S.
to indemnify its directors and officers against expenses and certain other
liabilities arising out of their conduct on behalf of Tracker U.S. to the
maximum extent and under all circumstances provided by law. In addition, the
Bylaws of Tracker U.S. provide more particularly that directors and officers of
Tracker U.S. shall be indemnified against expenses and certain other liabilities
arising out of legal actions brought or threatened against them for their
conduct on behalf of Tracker U.S., provided that each such person acted in good
faith and in a manner he reasonably believed was in or not opposed to the best
interest of Tracker U.S. Indemnification by Tracker U.S. is available in a
criminal action only if such person also had no reasonable cause to believe that
his conduct was unlawful. In the case of an action by or in the right of Tracker
U.S., indemnification is available if such person acted in good faith and in a
manner that he reasonably believed was in or not opposed to the best interests
of Tracker U.S., except as regards a person adjudged to be liable to Tracker
U.S., unless a court shall determine that such person is fairly and reasonably
entitled to indemnity for certain expenses. The provisions of the Certificate of
Incorporation and Bylaws relating to indemnification cannot be amended absent
the approval of two-thirds of the combined voting power of the voting stock of
Tracker U.S.
Tracker U.S. has entered into substantially identical indemnification
agreements with each of its directors. Tracker U.S. has agreed, to the full
extent permitted by the DGCL, as amended from time to time, to indemnify
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each indemnitee against all loss and expense incurred by, or as a result of any
threat of, his being named a party to any completed, pending or threatened
action, suit or proceeding whether civil, criminal, administrative or
investigative by reason that he was a director, officer, employee or agent of
Tracker U.S. or any of its affiliates, or because Tracker U.S. has a right to
judgment in its favor because of his position with Tracker U.S. The indemnitee
will be indemnified so long as he acted in good faith and in a manner reasonably
believed by him to be in or not opposed to the best interest of Tracker U.S. The
agreements provide that the indemnification thereunder is not exclusive of any
other rights the indemnitees may have under the Certificate of Incorporation,
Bylaws or any agreement or vote of stockholders, nor may the Certificate of
Incorporation or Bylaws be amended to affect adversely the rights of any
indemnitee.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Tracker U.S.
pursuant to the foregoing provisions, Tracker U.S. has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of Tracker U.S. for which
indemnification is being sought, nor is Tracker U.S. aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Tracker U.S. is subject to Section 203 of the DGCL ("Section 203"),
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a "Business Combination" (defined as a variety of transactions,
including mergers, as set forth below) with an "Interested Stockholder" (defined
as a person with 15% or more of a corporation's outstanding voting stock) for
three years following the date such person became an Interested Stockholder
unless: (i) before such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction in which the Interested Stockholder became an Interested
Stockholder; (ii) upon consummation of the transaction that resulted in the
Interested Stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially whether
shares subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or following the date on which such person became an Interested
Stockholder, the Business Combination is (x) approved by the board of directors
of the corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of the holders of at least 66-2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
Section 203 defines a Business Combination to include: (i) any merger
or consolidation with an Interested Stockholder or any affiliate or associate
thereof; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets having an aggregate market value equal to 10% or more of
the aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
a corporation; (iii) any transaction which results in the issuance or transfer
by the corporation or by certain subsidiaries thereof of any stock of the
corporation or such subsidiaries to the Interested Stockholder, except (x)
pursuant to the exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the corporation or any subsidiary
which were outstanding prior to the time the stockholder became an Interested
Stockholder or (y) pursuant to a transaction which effects a pro rata
distribution to all stockholders of the corporation; (iv) any transaction
involving the corporation or certain subsidiaries thereof that has the effect of
increasing the proportionate share of the stock of any class or series, or
securities convertible into the stock of any class or series, of the corporation
or any such subsidiary which is owned directly or indirectly by the Interested
Stockholder (except as a result of immaterial changes due to fractional share
adjustments or as a result of the purchase or redemption of shares not caused by
the Interested Stockholder); or (v) any receipt by the Interested Stockholder of
the benefit (except proportionately as a stockholder of such corporation) of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
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ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BYLAWS
Certain provisions of the Certificate of Incorporation and the Bylaws
of Tracker U.S. could have an anti-takeover effect. The Certificate of
Incorporation and Bylaws contain provisions that will increase the probability
that, if an unsolicited attempt is made to acquire Tracker U.S., the public
stockholders will be treated fairly by virtue of the provisions which: (i)
provide that directors may only be removed by a two-thirds (2/3) vote of the
stockholders; (ii) limit the rights of stockholders to amend certain provisions
of the Certificate of Incorporation and Bylaws; (iii) eliminate the rights of
stockholders to take action by written consent (except by unanimous written
consent) and limit the rights of stockholders to call special meetings of the
stockholders; (iv) limit the rights of stockholders to bring new business before
special meetings; and (v) impose certain restrictions, including approval by the
holders of two-thirds (2/3) of the outstanding stock, on certain business
combinations. The provisions will also encourage any person intending to attempt
such acquisitions to negotiate with the Board of Directors and curtail such
person's use of his dominant interest to control both sides of the negotiations.
Under such circumstances, the Board of Directors may be better able to make and
implement reasoned business decisions and protect the interests of stockholders.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES. The Certificate of
Incorporation and Bylaws provide that the Board of Directors will consist of not
less than three nor more than eleven members, the exact number to be determined
from time to time by the affirmative vote of a majority of directors then in
office. Moreover, the Certificate of Incorporation and Bylaws provide that
directors may be removed, with or without cause, by a vote of the holders of
two-thirds (2/3) of the then outstanding shares of Common Stock. This provision,
when coupled with the provision authorizing only the Board of Directors to fill
vacant directorships, may make it more difficult for a stockholder to remove
incumbent directors and simultaneously gain control of the Board of Directors by
filling the vacancies created by such removal with its own nominees. Moreover,
this provision will also make it more difficult to remove a director when the
only reason for such removal may be dissatisfaction with the performance of such
director.
These removal provisions could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
Tracker U.S., even though such an attempt might be beneficial to Tracker U.S.
and its stockholders. Accordingly, stockholders could be deprived of certain
opportunities to sell their stock at a temporarily higher market price.
CLASSIFIED BOARD OF DIRECTORS. The Bylaws provide that the Board of
Directors is divided into three classes of directors, with the classes to be as
nearly equal in size as possible. The Certificate of Incorporation and Bylaws
provide that approximately one-third (1/3) of the directors will continue to
serve until the 1997 annual meeting of stockholders, approximately one-third
(1/3) will continue to serve until the 1998 annual meeting of stockholders, and
approximately one-third (1/3) will continue to serve until the 1999 annual
meeting of stockholders.
The classification of directors may have the effect of making it more
difficult for stockholders to change the composition of the Board of Directors.
At least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Board of Directors. Such a
delay may help ensure that the directors, if confronted by a holder attempting
to force a proxy contest, a tender or exchange offer, or an extraordinary
corporate transaction, would have sufficient time to review the proposal as well
as any available alternatives to the proposal and to act in what they believe to
be the best interest of Tracker U.S. The classification provisions will apply to
every election of directors, however, regardless of whether a change in the
composition of the Board of Directors would be beneficial to Tracker U.S. and
its stockholders and regardless of whether or not a majority of the stockholders
believe that such a change would be desirable.
The classification provisions could also have the effect of
discouraging a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to obtain control of Tracker U.S., even though
such an attempt might be beneficial to Tracker U.S. and its stockholders. The
classification of the Board of Directors could thus increase the likelihood that
incumbent directors will retain their positions. In addition, because the
classification provisions may discourage accumulations of large blocks of stock
by purchasers whose objective is to take control of Tracker U.S. and remove a
majority of the Board of Directors, the classification of the Board of Directors
could
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tend to reduce the likelihood of fluctuations in the market price of the Common
Stock that might result from accumulations of large blocks. Accordingly,
stockholders could be deprived of certain opportunities to sell their shares of
Common Stock at a higher market price than might otherwise be the case.
SPECIAL MEETINGS OF STOCKHOLDERS. The Certificate of Incorporation
provides that special meetings of stockholders may be called only by (i) the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board), or (ii) the Chairman or the Deputy Chairman of the Board of
Directors or the President, or (iii) a stockholder who owns 20% or more of the
issued and outstanding Common Stock (a "20% Stockholder"). Special meetings may
not be called by stockholders other than 20% Stockholders. This provision will
make it more difficult for stockholders other than 20% Stockholders to take
action opposed by the Board of Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate of Incorporation
provides that any action required to be taken or which may be taken by holders
of Common Stock must be effected at a duly called annual or special meeting of
such holders, or by the unanimous written consent of such stockholders. These
provisions may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by the
persons set forth above. The provisions of the Certificate of Incorporation
prohibiting stockholder action by written consent unless the same is unanimous
would prevent the holders of a majority of the voting power of Tracker U.S. from
using the written consent procedure available under the DGCL to take stockholder
action without giving all the stockholders of Tracker U.S. entitled to a vote on
a proposed action the opportunity to participate in determining such proposed
action.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS. The Bylaws
provide that stockholders seeking to bring business before an annual or special
meeting of stockholders must provide timely notice thereof in writing to the
Secretary of Tracker U.S. To be timely, this notice must be received at the
principal executive offices of Tracker U.S. not less than 90 days nor more than
120 days prior to the meeting. If less than 100 days' notice of the meeting is
given to stockholders, then the notice of a stockholder's proposal must be
received not later than the tenth day following the date the notice of the
meeting was mailed. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the meeting: (i) a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, and, in the event that such
business includes a proposal to amend either the Certificate of Incorporation or
the Bylaws, the language of the proposed amendment; (ii) the name and record
address of the stockholder proposing such business; (iii) the class and number
of shares of capital stock of Tracker U.S. that are beneficially owned by such
stockholder; and (iv) any material interest of such stockholder in such
business. The provision requiring timely notice of stockholder business ensures
both orderly meetings and an adequate opportunity for the Board of Directors to
review business to be decided at such meetings. This provision, however, may
also preclude some stockholders from bringing matters before the stockholders
and directors at an annual or special meeting.
SPECIAL VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS; FAIR PRICE
PROVISION. The Certificate of Incorporation provides that any Business
Combination (as defined therein), including any merger, consolidation, sale,
joint venture, plan of liquidation or recapitalization, with an Interested
Stockholder (as hereinafter defined for purposes of this provision only) shall
require the affirmative vote of not less than two-thirds (2/3) of the votes
entitled to be cast by the holders of all the then outstanding shares of voting
stock in the election of directors, voting together as a single class, excluding
any voting stock beneficially owned by such Interested Stockholder. Such
affirmative vote is required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be required, by
law or otherwise.
The two-thirds (2/3) vote requirement shall not apply to a particular
Business Combination, and such Business Combination shall require only such
affirmative vote, if any, as is required by law or otherwise, if such Business
Combination is approved by a majority of the Continuing Directors (as
hereinafter defined) or certain conditions shall have been met regarding the
amount and form of the consideration (the "fair price") to be received by the
stockholders of Tracker U.S. in such Business Combination. Generally, the "fair
price provision" will have been satisfied if the price received by the holders
of shares of Common Stock or other class of voting stock is not
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less than the higher of (i) the highest price paid by the Interested Stockholder
when acquiring any of its shares of Common Stock or other class of stock, as
applicable, during the two-year period preceding the first public announcement
of the Business Combination or the transaction in which it became an Interested
Stockholder, or (ii) the fair market value of such stock on the date of such
public announcement or the date on which the Interested Stockholder became such.
The fair price provision is intended to provide some protection against
certain forms of takeover techniques including two-tiered offers in which the
acquirer seeks as a first step to acquire a controlling equity interest in a
company and then as a second step to acquire the remaining equity interest with
cash or securities that have a value substantially below the consideration paid
to acquire control. Tracker U.S. believes that the fair price provision will
help assure that all of the stockholders will be treated fairly if certain kinds
of Business Combinations are effected. However, the fair price provision may
make it more difficult to accomplish certain transactions that are opposed by
the incumbent Board of Directors and that could be beneficial to stockholders.
The term "Interested Stockholder" for purposes of the fair price
provision means any person (other than, among others, Tracker U.S. or any
employee stock ownership plan of Tracker U.S. or any subsidiary), who is, or has
announced an intention to become, the beneficial holder of voting stock
representing 10% or more of the votes entitled to be cast by the holders of all
the then outstanding shares of voting stock. The term "Continuing Director"
means any member of the Board of Directors on the date the Certificate of
Incorporation was filed and any member of the Board of Directors who thereafter
becomes a member while such person is a member of the Board who is not an
affiliate or associate of the Interested Stockholder and who was a member before
the Interested Stockholder became an Interested Stockholder. All current
directors of Tracker U.S. would be Continuing Directors.
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION.
Subject to the DGCL, the Certificate of Incorporation may generally be amended
by the affirmative vote of a majority of the outstanding shares entitled to vote
thereon, together with the affirmative vote of a majority of the outstanding
shares of each class or series entitled to vote thereon as a class or series in
accordance with the DGCL and the Certificate of Incorporation. Notwithstanding
the foregoing, the amendment, modification or repeal of certain provisions of
the Certificate of Incorporation regarding (i) the shares which Tracker U.S.
shall have authority to issue, (ii) the management of the business and the
conduct of the affairs of Tracker U.S., (iii) any proposed compromise or
arrangement between Tracker U.S. and its creditors, (iv) the authority of
stockholders to act by written consent or to call special meetings, (v) the
indemnification of directors and officers, or (vi) the amendment of any of
certain provisions of the Certificate of Incorporation and the Bylaws, requires
the affirmative vote of the holders of at least two-thirds (2/3) of the combined
voting power of all of the securities entitled to vote generally in the election
of directors. In addition, the amendment, modification or repeal of the fair
price provision and the other anti-takeover provisions of the Certificate of
Incorporation requires the affirmative vote of at least two-thirds (2/3) of the
combined voting power of all the securities entitled to vote generally in the
election of directors. These voting requirements will make it more difficult for
stockholders to make changes in the Certificate of Incorporation that would be
designed to facilitate the exercise of control over Tracker U.S.
AMENDMENT TO CERTAIN BYLAW PROVISIONS. The Bylaws may be altered,
amended or repealed at any meeting of the Board of Directors or the
stockholders; provided, however, that the notice of the proposed change was
given in the notice of such meeting of the Board of Directors or of the
stockholders, as the case may be. Notwithstanding the foregoing, the amendment,
modification or repeal of certain provisions of the Bylaws regarding (i) the
authority of stockholders to call special meetings, (ii) procedures by which
stockholders may bring business before any meeting of stockholders, (iii) the
number and election of directors; or (iv) the indemnification of officers and
directors, requires the affirmative vote of the holders of at least two-thirds
(2/3) of the combined voting power of the then outstanding shares entitled to
vote generally in the election of directors voting together as a single class.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Tracker U.S.'s Common Stock is
Atlas Stock Transfer located in Salt Lake City, Utah.
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SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of shares in the public market
could adversely affect the market price of the Company's shares. Of the
10,711,885 shares of Common Stock that are currently outstanding, 1,509,048 are
freely tradeable and an additional 4,709,181 shares which are being registered
by the Registration Statement of which this Prospectus is a part will, upon
their sale pursuant to this Prospectus, become freely tradeable. All of the
remaining 4,493,656 shares of Common Stock that are currently outstanding are
"restricted securities" that will become eligible for resale in the public
market after expiration of the applicable holding periods. An additional
9,090,298 shares which are being registered by the registration statement of
which this Prospectus is a part will, upon their issuance and sale pursuant to
this Prospectus, if any, become freely tradeable in the public market without
restriction or further registration under the Act, except that any shares
purchased by "affiliates" of the Company, as that term is defined in Rule 144(a)
adopted under the Act, may generally only be sold in compliance with the
applicable provisions of Rule 144.
"Restricted securities" under Rule 144 are securities that were
originally issued and sold by Tracker U.S. in private transactions in reliance
upon exemptions from the registration requirements under the Act. The holders of
these restricted shares will be eligible to sell such shares pursuant to Rule
144 upon the expiration of the applicable two-year holding periods from the
dates such restricted shares were acquired.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held at least two years from
the later of the date of issuance by Tracker U.S. or acquisition from an
affiliate, may sell such securities in brokers' transactions or directly to
market makers, provided that the number of shares sold within any three-month
period does not exceed the greater of 1% of the then outstanding shares of
Tracker U.S.'s Common Stock (approximately 195,785 shares as of June 25, 1996
assuming all Exchangeable Preference Shares are exchanged for Common Stock, all
Convertible Debentures outstanding are converted into Common Stock, shares of
Convertible Preferred Stock outstanding are converted into Common Stock (based
on the conversion price in effect as of June 25, 1996), and the TODA Warrant and
the Merchant Partners Option are exercised in full) or the average weekly
trading volume in Tracker U.S.'s Common Stock in the over-the-counter market
during the four calendar weeks preceding the date on which notice of such sale
was filed under Rule 144. The Securities and Exchange Commission (the
"Commission") has proposed reducing this two-year holding period to one year.
Sales under Rule 144 are also subject to certain provisions relating to notice
of sale and availability of current public information about the Company.
Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other restrictions, but without regard
to the two-year holding period.
Further, under Rule 144(k) as currently in effect, after three years
have elapsed from the later of the issuance of the restricted securities by the
Company or their acquisition from an affiliate, a holder of such restricted
securities who is not an affiliate of the Company at the time of the sale and
has not been an affiliate of the Company for at least three months prior to the
sale would be entitled to sell the shares immediately without regard to the
volume limitations and other conditions described above. The Commission has
proposed reducing this three-year holding period to two years.
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Tracker U.S. intends to file a registration statement on Form S-8 under
the Act to register the shares of Common Stock reserved for issuance under
Tracker U.S.'s 1994 Stock Incentive Plan. See "EXECUTIVE COMPENSATION - 1994
Stock Incentive Plan." Shares issued upon exercise of outstanding stock options
and sold pursuant to the option plans after the effective date of such
registration statements generally will be available for resale in the public
market. In addition, the Company has granted registration rights to certain of
its stockholders (including the Selling Securityholders.) See "DESCRIPTION OF
SECURITIES-Registration Rights."
To date, there has been only a limited public market for the Common
Stock, and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for sale will have on the market price of the Common Stock prevailing from time
to time. Nevertheless, sales of substantial amounts of Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect prevailing market prices and could impair the Company's future ability
to raise capital through the sale of its equity securities.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock being
offered hereby will be passed upon for the Company by Fennemore Craig, a
Professional Corporation, Phoenix, Arizona.
EXPERTS
The consolidated financial statements as of March 31, 1996 and 1995 and
for the years ended March 31, 1996 and 1995 and the periods from inception at
May 6, 1993 through March 31, 1996, 1995 and 1994 included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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THE TRACKER CORPORATION OF AMERICA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Operations for the years ended March 31, 1996 and 1995 and
for the periods from inception (May 6, 1993) through March 31, 1996, 1995 and 1994 . . . . . . . F-4
Consolidated Statement of Cash Flows for the years ended March 31, 1996 and 1995 and
for the periods from inception (May 6, 1993) through March 31, 1996, 1995 and 1994 . . . . . . . F-5
Consolidated Statement of Shareholders' Equity (Deficit) for the years ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
</TABLE>
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THE TRACKER
CORPORATION
OF AMERICA
(A Development Stage Company)
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 1996 and 1995
F-1
<PAGE> 75
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Tracker Corporation of America
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of The
Tracker Corporation of America (the Company), and its subsidiary at March 31,
1996 and 1995, and the results of their operations and their cash flows for the
years ended March 31, 1996 and 1995, and the periods from inception at May 6,
1993 through March 31, 1996, 1995 and 1994 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company is a development stage company
and has not yet been able to obtain significant outside financing. As a result,
there is substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
PRICE WATERHOUSE LLP
Phoenix, Arizona
May 28, 1996
F-2
<PAGE> 76
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 78,844 $ 107,091
Short term investment 221,190 -
Accounts receivable 7,361 4,981
Prepaid expenses and deposits 168,345 544,432
Inventory 115,612 166,003
Note receivable - 178,350
Deferred charges 73,750 -
------------ -----------
Total current assets 665,102 1,000,857
------------ -----------
Due from shareholders 58,226 191,926
Deferred charges 66,234 -
Fixed assets (net) 353,729 437,147
Long-term investment 50,451 39,522
------------ -----------
Total assets $ 1,193,742 $ 1,669,452
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (Deficit)
Current liabilities:
Accounts payable $ 551,553 $ 1,101,424
Accrued liabilities 266,837 334,121
Deferred revenue 115,241 10,998
Convertible subordinated debentures 1,460,000 -
------------ -----------
Total current liabilities 2,393,631 1,446,543
------------ -----------
Deferred revenue 178,883 -
Commitments (Note 13)
Shareholders' equity (deficit):
Preferred stock, $.001 par value, 500,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.001 par value, 30,000,000 shares
authorized, 6,130,929 (2,924,219 - 1995)
shares issued and outstanding 6,131 2,109
Class B voting common stock, $0.00000007 par value, 20,000,000
shares authorized, 6,126,362 (6,378,248 - 1995)
issued and outstanding - -
Paid-in capital 14,013,062 9,707,617
Other capital (1,954,327) (2,086,685)
Accumulated deficit (13,202,738) (7,112,008)
Cumulative translation adjustment (240,900) (288,124)
------------ -----------
Total shareholders' equity (deficit) (1,378,772) 222,909
------------ -----------
Total liabilities and shareholders' equity (deficit) $ 1,193,742 $ 1,669,452
============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 77
THE TRACKER CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period From Inception (May 6, 1993)
Year Ended March 31, through March 31,
---------------------- -------------------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ 106,522 $ 10,187 $ 116,709 $ 10,187 $ --
Cost of goods sold 40,230 4,029 44,259 4,029 --
----------- ----------- ------------ ----------- -----------
Gross profit 66,292 6,158 72,450 6,158 --
----------- ----------- ------------ ----------- -----------
Expenses:
Operational 592,880 687,681 1,429,821 836,941 149,260
Information systems 262,942 465,827 886,046 623,104 157,277
Sales and Marketing 1,031,041 1,737,438 3,374,750 2,343,709 606,271
General and administrative 4,270,159 2,183,795 7,584,571 3,314,412 1,130,617
----------- ----------- ------------ ----------- -----------
Total expenses 6,157,022 5,074,741 13,275,188 7,118,166 2,043,425
----------- ----------- ------------ ----------- -----------
Net loss applicable to common stock $(6,090,730) $(5,068,583) $(13,202,738) $(7,112,008) $(2,043,425)
=========== =========== ============ =========== ===========
Loss per share of common stock
$ (0.57) $ (0.71) $ (1.70) $ (1.14) $ (0.38)
=========== =========== ============ =========== ===========
Weighted average number of shares outstanding 10,637,237 7,100,488 7,755,584 6,255,379 5,333,441
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 78
THE TRACKER CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period From Inception (May 6, 1993)
Year Ended March 31, through March 31,
---------------------- ---------------------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net loss $(6,090,730) $(5,068,583) $(13,202,738) $(7,112,008) $(2,043,425)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation 111,070 94,161 235,346 124,276 30,115
Rent, consulting and marketing
services, employee compensation 2,749,208 799,249 3,872,801 1,123,593 324,344
settled via the issuance of
company shares
Changes in assets and liabilities:
Prepaid expenses and deposits 376,087 (219,317) (185,618) (561,705) (342,388)
Accounts receivable (2,380) (4,981) (7,361) (4,981) --
Short term investment (221,190) -- (221,190) -- --
Inventory 50,391 (166,003) (115,612) (166,003) --
Deferred charges (139,984) -- (139,984) -- --
Deferred revenue 283,126 10,998 294,124 10,998 --
Accounts payable and accrued (617,155) 1,159,885 833,035 1,450,190 290,305
liabilities ----------- ----------- ------------ ----------- ----------
Net cash used in operating activities (3,501,557) (3,394,591) (8,637,197) (5,135,640) (1,741,049)
----------- ----------- ------------ ----------- ----------
Cash Flows from (used in) investing activities:
Acquisition of fixed assets (13,006) (329,840) (589,945) (576,939) (247,099)
Loan to shareholders (8,911) (211,022) (414,638) (405,727) (142,634)
Repayment of loans to shareholders 142,611 152,006 356,412 213,801 2,663
Note receivable -- (200,317) (200,317) (200,317) --
Repayment of note receivable 178,350 21,967 200,317 21,967 --
Long term investment (10,929) (2,290,443) (2,301,372) (2,290,443) --
Unwind of long term investment -- 2,250,921 2,250,921 2,250,921 --
----------- ----------- ------------ ----------- ----------
Net cash from (used in) investing activities 288,115 (606,728) (698,622) (986,737) (387,070)
----------- ----------- ------------ ----------- ----------
Cash flows from (used in) financing activities:
Issuance of common shares 1,177,445 3,030,897 8,922,530 7,745,085 4,714,188
Issuance of convertible subordinated 2,189,529 -- 2,189,529 -- --
debentures
Due to shareholder -- 108,390 108,390 108,390 --
Repayment to shareholder -- (108,390) (108,390) (108,390) --
Share issue costs (214,357) (779,495) (1,459,994) (1,245,637) (466,142)
----------- ----------- ----------- ----------- ----------
Net cash from financing activities 3,152,617 2,251,402 9,652,065 6,499,448 4,248,046
----------- ----------- ----------- ----------- ----------
Effect of exchange rate changes 32,578 (155,976) (237,402) (269,980) (106,943)
----------- ----------- ----------- ----------- ----------
Increase (decrease) in cash and cash (28,247) (1,905,893) 78,844 107,091 2,012,984
equivalents during the period
Cash and cash equivalents, beginning of period 107,091 2,012,984 -- -- --
----------- ----------- ------------ ----------- -----------
Cash and cash equivalents, end of period $ 78,844 $ 107,091 $ 78,844 $ 107,091 $ 2,012,984
=========== =========== ============ ============ ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
The Company issued certain shares of its Class B Common Stock for services and
for nominal values. See Consolidated Statement of Shareholders' Equity
(Deficit).
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 79
THE TRACKER CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Shares Amounts
----------------------------- --------------------------
Class B Paid-in
Common Common Common Capital in
Stock Stock Stock Excess of Par
------ ------- ------ -------------
<S> <C> <C> <C> <C>
Shares issued to officers at inception 5,089,286 $ -
Shares issued for cash 884,729 4,714,188
Shares issued in lieu of rent (Note 12-xi)(cash - $Nil) 60,871 324,344
Share issue costs (466,142)
Translation adjustment
Net loss
--------- ------------
Balance at March 31, 1994 6,034,886 $ 4,572,390
--------- ------------
234,517 1,175,797
5,777 30,121
Shares issued for cash
Shares issued in lieu of rent (Note 12-xi)(cash - $Nil)
Reverse merger with The Tracker Corporation on July 12, 1994 739,219 $ 739 (639)
Shares issued from Regulation S offering (including 79,658
shares at $7 per share for consulting services and 3,571 860,000 860 2,900,840
shares at $5.50 per share for the purchase of fixed assets)
Share proceeds to be received subsequent to March 31, 1995
(cash - $1,505,000) (819,459)
Shares issued for consulting and marketing services (Note 13) 825,000 78,005 825 2,204,153
Less: consulting and marketing services not yet received (814,583)* (815)
Share proceeds received from private placement
on March 15, 1995 500,000 500 349,500
Shares issued to employees for employment services
(Note 12-xi)(cash - $Nil) 25,063 74,409
Share issue costs (779,495)
Translation adjustment
Net loss
--------- --------- ------ ------------
Balances at March 31, 1995 2,109,636 6,378,248 $2,109 $ 9,707,617
========= ========= ====== ============
Amounts
-----------------------------------------
Deficit
Accumulated
Cumulative During
Other Translation Development
Capital Adjustment Stage Total
------- ----------- ------------ -----
Shares issued to officers at inception $ -
Shares issued for cash 4,714,188
Shares issued in lieu of rent (note 12-xi)(cash - $0) 324,344
Share issue costs (466,142)
Translation adjustment $(129,098) (129,098)
Net loss $(2,043,425) (2,043,425)
------------ --------- ----------- ----------
Balance at March 31, 1994 $ 0 $(129,098) $(2,043,425) $2,399,867
----------- --------- ----------- ----------
Shares issued for cash 1,175,797
Shares issued in lieu of rent (note 12-xi)(cash - $0) 30,121
Reverse merger with The Tracker Corporation on July 12, 1994 100
Shares issued from Regulation S offering (including 79,658
shares at $7 per share for consulting services and 3,571
shares at $5.50 per share for the purchase of fixed assets) 2,901,700
Share proceeds to be received subsequent to March 31, 1995
(cash - $1,505,000) (819,459)
Shares issued for consulting and marketing services (note 13) 2,204,978
Less: consulting and marketing services not yet received (2,087,500)
Share proceeds received from private placement (2,086,685)
on March 15, 1995 350,000
Shares issued to employees for employment services
(Note 12-xi)(cash - $Nil) 74,409
Share issue costs (779,495)
Translation adjustment (159,026) (159,026)
Net loss (5,068,583) (5,068,583)
----------- --------- ----------- ----------
Balances at March 31, 1995 (2,086,685) $(288,124) $(7,112,008) $ 222,029
=========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 80
THE TRACKER CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (CONT'D)
<TABLE>
<CAPTION>
Shares Amounts
----------------------- --------------------------------------
Class B Paid-in
Common Common Common Capital in Other
Stock Stock Stock Excess of Par Capital
--------- --------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Share proceeds received re Regulation S offering
made before March 31, 1995 (cash - $225,280) $ - $ 819,459 $ -
Consulting services received re shares issued
before March 31, 1995 (Note 12-xi) (cash - $Nil) 14,582* 14 87,486
Marketing services received re shares issued
to LL Knickerbocker Co. (Note 13) (cash - $Nil) 266,664* 265 666,400
Shares issued to Directors as compensation
(Note 12-xi) (cash - $Nil) 98,858 99 86,402
Shares issued to Amerasia for marketing services
(Note 12-xi) (cash - $Nil) 30,000 44,496
Less: services not yet received (12,500)* (18,630)
Shares cancelled to treasury (cash - $Nil) (171) 1 (1)
Shares issued pursuant to S-8 for employees, consultants 770,000 770 769,230
and a director (Note 12-vii)(cash - $Nil)
Less: employment and consulting services not yet received (340,939)* (341) (340,598)
Shares issued to R. Zuk for cash 200,000 200 199,800
Less: share proceeds to be received (117,000)
Share proceeds received from private placement 250,000 250 249,750
Shares issued upon exercise of warrants at 849,803 619,166
Canadian $1 per share
Shares issued to officers (Note 12-iv)(cash - $Nil) 630,000 630 826,245
Shares issued to a consultant (Note 12-xi)(cash - $Nil) 7,500 8 9,836
Shares issued for investor relation services
(Note 12-vi)(cash - $Nil) 200,000 200 262,300
Less: services not yet received (200,000)* (200) (262,300)
Shares issued to employees for employment services
(Note 12-xi)(cash - $Nil) 14,176 22,716
Shares exchanged as per exchange agreement (cash - $Nil) 1,133,365 (1,133,365) 1,134 (1,134)
Shares issued for conversion from debenture holders 991,434 992 728,537
Share issue cost from April 1, 1995 to March 31, 1996 (214,357)
Translation adjustment
Net loss from April 1, 1995 to March 31, 1996
--------- --------- ------ ----------- -----------
Balance at March 31, 1996 6,130,929 6,126,362 $6,131 $14,013,062 $(1,954,327)
========= ========= ====== =========== ===========
Amounts
------------------------------------------
Deficit
Accumulated
Cumulative During
Translation Development
Adjustment Stage Total
----------- ------------- -----------
Share proceeds received re Regulation S offering
made before March 31, 1995 (cash - $225,280) $ - $ - $ 819,459
Consulting services received re shares issued
before March 31, 1995 (Note 12-xi) (cash - $Nil) 87,500
Marketing services received re shares issued
to LL Knickerbocker Co. (Note 13) (cash - $Nil) 666,665
Shares issued to Directors as compensation
(Note 12-xi) (cash - $Nil) 86,501
Shares issued to Amerasia for marketing services
(Note 12-xi) (cash - $Nil) 44,496
Less: services not yet received (18,630)
Shares cancelled to treasury (cash - $Nil)
Shares issued pursuant to S-8 for employees, consultants 770,000
and a director (Note 12-vii)(cash - $Nil)
Less: employment and consulting services not yet received (340,939)
Shares issued to R. Zuk for cash 200,000
Less: share proceeds to be received (117,000)
Share proceeds received from private placement 250,000
Shares issued upon exercise of warrants at 619,166
Canadian $1 per share
Shares issued to officers (Note 12-iv)(cash - $Nil) 826,875
Shares issued to a consultant (Note 12-xi)(cash - $Nil) 9,844
Shares issued for investor relation services
(Note 12-vi)(cash - $Nil) 262,500
Less: services not yet received (262,500)
Shares issued to employees for employment services
(Note 12-xi)(cash - $Nil) 22,716
Shares exchanged as per exchange agreement (cash - $Nil)
Shares issued for conversion from debenture holders 729,529
Share issue cost from April 01, 1995 to March 31, 1996 (214,357)
Translation adjustment 47,224 47,224
Net loss from April 1, 1995 to March 31, 1996 (6,090,730) (6,090,730)
--------- ------------ -----------
Balance at March 31, 1996 $(240,900) $(13,202,738) $(1,378,772)
========= ============ ===========
</TABLE>
* 1,074,276 common shares and 12,500 Class B common shares have been subscribed
for but remain unissued as at March 31, 1996.
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE> 81
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS/CORPORATE HISTORY:
The Tracker Corporation of America (the "Company"), through a wholly-owned
subsidiary, The Tracker Corporation ("Tracker Canada"), is engaged in the
development, marketing and operation of a unique system to aid in the recovery
of lost or stolen items using advanced bar code and laser scanning technologies.
The Company was formed under the name "Ultra Capital Corp." ("Ultra") in
February 1986 under the laws of the State of Nevada to serve as a vehicle to
acquire or merge with an operating company. The Company changed its name from
Ultra on July 1, 1994 when, as more fully discussed below, Ultra merged with
Tracker Canada.
The Company was reincorporated in Delaware on July 1, 1994. Effective July 12,
1994, the Company merged with Tracker Canada. Concurrent with the effective
date, Ultra changed its name to The Tracker Corporation of America and changed
its year-end from December 31 to March 31. In conjunction with the merger, the
common stock of Tracker Canada was reclassified as exchangeable preference stock
which is exchangeable on a one-for-one basis for shares of the common stock of
the Company beginning July 12, 1995 through July 12, 2002. An equal number of
shares of Class B Voting Common Stock (Class B shares) is held in trust for
exchangeable preference shareholders who can direct the voting of the Class B
shares. The Class B shares will be canceled upon the exchange of the
exchangeable preference shares for the Company's common stock.
For accounting purposes, the merger was treated as a reverse merger/acquisition
with recapitalization of Tracker Canada as the acquirer because, among other
factors, the assets and operations of Tracker Canada significantly exceed those
of Ultra and the shareholders of Tracker Canada control the Company after the
merger. The merger was treated for accounting and financial reporting purposes
as an issuance of shares by Tracker Canada and, accordingly, pro forma
information is not presented as the merger is not a business combination. The
historical consolidated financial statements prior to July 12, 1994 are those of
Tracker Canada. The merger has been recorded at the value of Ultra's net
tangible assets as of the effective date. The accumulated deficit of Tracker
Canada is carried forward and the common stock and paid-in capital of Tracker
Canada prior to the merger have been retroactively restated for the equivalent
number of shares received in the merger and carried forward.
The Company utilizes state-of-the-art proprietary technology providing a service
to aid in the recovery of lost or stolen possessions. The Company's members
receive a series of individualized, digitally-encoded labels that can be
applied to personal belongings. In the event a labelled item is recovered, the
Company's technology allows for the identification of the item's owner. After
identification, the Company's 24-hour service network coordinates the return of
the item to its owner via an international courier network. The Company's
Worldwide Identification and Recovery Service is endorsed by the International
Association of Chiefs of Police.
NOTE 2 - GOING CONCERN
The Company has been in a development stage since May 6, 1993, its inception.
The Company's successful launch to the marketplace, and ultimately to the
attainment of profitable operations, is dependent on its ability to obtain
adequate sources of financing and revenue generation. Management is currently
working to secure adequate sources of capital through private placements of
securities. The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
F-8
<PAGE> 82
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of The Tracker
Corporation of America and its wholly-owned subsidiary, The Tracker Corporation.
All significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers liquid investments with an original maturity of three
months or less to be cash equivalents.
DEVELOPMENT COSTS
Development costs are expensed as incurred.
INVENTORY
The inventory is stated at the lower of cost or market value with cost being
determined by the average cost method. Inventory predominantly consists of raw
materials as the Company fulfills its sales orders on a just in time basis, when
received. No significant work-in-progress or finished goods were held by the
Company at year end.
DEFERRED CHARGES
Deferred charges relate to unamortized commission and are amortized on a
straight line basis over the term of the related agreement.
REVENUE RECOGNITION AND DEFERRED REVENUE
Revenue for Company services is recognized on a straight-line basis over the
term of the services offered and is shown net of sales discounts and allowances.
Amounts received for which service has not yet been provided, are recorded as
deferred revenue. The average length of the membership agreement varies from
monthly to a five-year period.
FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation. Depreciation and
amortization are determined using the straight-line method over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Scanning equipment and computer hardware 5 years
Computer software 1 year
Office furniture and equipment 5 years
Leasehold improvements term of the lease
Kiosk equipment 5 years
</TABLE>
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's wholly-owned Canadian subsidiary are
translated at the March 31, 1996 exchange rate while revenues, expenses and cash
flows are translated at average rates in effect for the period.
F-9
<PAGE> 83
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried in the accompanying consolidated balance
sheet at amounts that approximate fair value unless separately disclosed.
EARNINGS PER SHARE
Primary earnings per share are calculated based on net profit (loss) divided by
the weighted average number of shares of common stock and Class B voting common
stock outstanding.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual results could differ
from those estimates. Estimates are used when accounting for inventory
obsolescence, depreciation and amortization, taxes, and contingencies.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year balances to conform to
the current year presentation.
ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," establishes financial and reporting standards for stock-based
employee compensation plans. This statement defines the fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. The accounting requirements are effective for transactions
entered into in fiscal years beginning after December 15, 1995. The disclosure
requirements are effective for fiscal years beginning after December 31, 1995.
Pro forma disclosures required for entities that elect to continue to measure
compensation cost using APB Opinion No. 25 must include the effects of all
awards granted in fiscal years that begin after December 15, 1994. The Company
has not completed an evaluation of the effect of this statement.
NOTE 4 - SHORT-TERM INVESTMENT:
The amount of $221,190 represents a short-term investment in 288,462 shares of
Stratcomm Media Ltd., which is a publicly traded company on the Vancouver Stock
Exchange, and represents less than a 4% interest in that company. The shares
owned by the Company were restricted from trading for a period of 12 months
starting May 30, 1995. The investment, which is carried as available for sale,
is carried at cost which approximates fair value.
F-10
<PAGE> 84
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PREPAID EXPENSES AND DEPOSITS:
Prepaid expenses and deposits comprise the following:
<TABLE>
<CAPTION>
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Investor relations $ -- $325,267
Marketing and celebrity 120,992 --
Rent 450 115,147
Other 46,903 104,018
------- --------
$168,345 $544,432
======== ========
</TABLE>
NOTE 6 - NOTE RECEIVABLE:
At March 31, 1995, the Company had advanced $178,350 to Page-Direct Ltd. (a
wireless communications company for which the Company had entered into an
agreement to purchase). The related note receivable bore interest at the Royal
Bank of Canada prime rate plus 2% and was payable on demand. The note was repaid
in June 1995 in conjunction with the cancellation of the subject agreement.
Subsequent to March 31, 1995, the owner of Page-Direct Ltd. exercised its option
under the agreement to re-acquire its interest in Page-Direct. Prior to the
exercise of this option, the Company had issued 271,052 exchangeable preference
shares in its Canadian subsidiary to the owner of Page-Direct in exchange for
46.2% of the outstanding shares of Page-Direct Ltd. Such exchangeable preference
shares were returned to the Company in June 1995. The Company had recorded the
exercise of the reversionary option by the owner of Page Direct Ltd. as if it
had occurred as of March 31, 1995.
NOTE 7 - DUE FROM SHAREHOLDERS:
Promissory notes reflecting loans to shareholders bear interest at 5% per annum
and are due on demand.
NOTE 8 - DEFERRED CHARGES:
Deferred charges consist of the following:
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Current:
Deferred sales commission $47,222 $ --
Other 26,528 --
------- ------
$73,750 $ --
Long term: ======= ======
Deferred sales commission $61,680 $ --
Other 4,554 --
------- ------
$66,234 $ --
======= ======
</TABLE>
F-11
<PAGE> 85
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - FIXED ASSETS:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Scanning equipment $ 106,471 $ 99,364
Computer equipment 257,189 250,152
Computer software 31,988 30,845
Office furniture and equipment 67,254 54,950
Leasehold improvements 66,840 64,674
Kiosk equipment 63,496 61,438
--------- ---------
Total original cost 593,238 561,423
Less: Accumulated depreciation 239,509 124,276
--------- ---------
$ 353,729 $ 437,147
========== =========
</TABLE>
Depreciation expense for the year ended March 31, 1996 was $111,070 and was
$94,161 for the year ended March 31, 1995.
NOTE 10 - LONG-TERM INVESTMENT:
The amount of $50,451 represents the original cost to acquire 633,002 common
shares of C.E.M. Centry Electronic Monitoring Corporation ("Centry"), a publicly
listed Canadian company trading on the Vancouver Stock Exchange, which
approximates fair value. This investment represents approximately 11.96% of
Centry's total common shares issued.
NOTE 11 - ACCRUED LIABILITIES:
Accrued liabilities comprise the following:
<TABLE>
<CAPTION>
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Payroll and employee benefits $ - $ 178,980
Director fees 11,000 44,500
Finder fees for convertible debentures 52,906 -
Other 202,931 110,641
--------- ---------
$ 266,837 $ 334,121
========= =========
</TABLE>
NOTE 12 - CAPITAL STOCK:
(i) The Company's Common Stock and Class B Voting Common Stock share ratably as
to dividends. The Class B Voting Common Stock is held in trust pursuant to the
terms of an exchange agency and voting trust agreement with holders of
exchangeable preference shares in the Canadian subsidiary. The agreement permits
the persons holding the exchangeable shares to direct the voting of the Class B
common shares and provides a mechanism for the exchange of exchangeable shares
for a like number of common shares.
F-12
<PAGE> 86
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CAPITAL STOCK: (CONT'D)
(ii) At March 31, 1996, outstanding warrants had been issued and were
outstanding to acquire 17,348 exchangeable preference shares (1,185,880 at March
31, 1995) of the Canadian subsidiary at Canadian $14 per share. These warrants
expire two years after the date of issuance. For further discussion on
outstanding warrants refer to Note 17.
(iii) On March 15, 1995, the Company entered into an agreement and sold, for net
proceeds of $350,000, 500,000 units comprised of 500,000 restricted common
shares and 500,000 warrants to purchase 500,000 restricted common shares to
Kuplen Group Investment ("KGI"). The warrants are exercisable during the one
year period commencing July 12 1995 to July 12, 1996 at a price of $5.00 per
share. In the event that the common stock underlying the warrants cannot be
purchased legally on margin at a marginable price, then the exercise period will
be extended until the first day that the common stock becomes marginable. In
order to secure registration rights of the restricted shares, KGI must exercise
the warrants on a 1:1 basis with the common shares.
(iv) (a) During the year ended March 31, 1995, the Company adopted a plan that
allows for the granting of options, appreciation rights, restricted stock and
certain other stock-based performance incentives to certain officers as
determined at the discretion of the compensation committee of the board of
directors. On April 11, 1995, the Company issued stock, pursuant to stock
grants, of 630,000 shares of common stock, restricted as to transferability, to
certain officers of the Company.
(b) The Company issued the following options and warrants:
<TABLE>
<CAPTION>
March 31, Exercise March 31, Exercise
1996 Price 1995 Price
-------------------------------------------------------
<S> <C> <C> <C> <C>
OPTIONS:
Opening 40,000 $7.95 0 n/a
Granted during the year (*) 10,000 $1.81 40,000 $7.95
Exercised during the year 0 n/a 0 n/a
Expired/canceled during year (10,000) $7.95 0 n/a
------ ------
Closing 40,000 40,000
====== ======
</TABLE>
* 40,000 options were issued in July 1994 and 10,000 options were
issued in September 1995 to non-employee directors and vest
proportionately over a period of three years.
<TABLE>
<CAPTION>
March 31, Exercise March 31, Exercise
1996 Price 1995 Price
-------------------------------------------------------
<S> <C> <C> <C> <C>
WARRANTS (COMMON STOCK AND
CLASS B)
Opening 1,685,880 n/a 0 n/a
Issued during the year 250,000 $5.00 500,000 $5.00
Issued during the year 0 n/a 1,185,880 Cdn$14.00
Exercised during the year (849,803) Cdn$1.00 0 n/a
Expired during the year (318,729) Cdn$14.00 0 n/a
--------- ----------
Closing 767,348 1,685,880
========= ==========
</TABLE>
(v) On May 1, 1995, the Company entered into an agreement and sold, for net
proceeds of $250,000, 250,000 units comprised of 250,000 restricted common
shares and 250,000 warrants to purchase 250,000 restricted common shares to
Reynold Kern. The warrants are exercisable during the one year period
commencing July 12, 1995 to July 12, 1996 at a price of $5.00 per share. In the
event that the common stock underlying the warrants cannot be purchased legally
on margin at a marginable price, then the exercise period will be extended until
the first day that the common stock becomes marginable.
F-13
<PAGE> 87
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CAPITAL STOCK: (CONTINUED)
(vi) In June 1995, the Company issued 200,000 shares of common stock, restricted
as to transferability for a period of two years from the date of issuance, to
Robert Zuk for certain investor relations services for the Company.
(vii) In October 1995, the Company issued 770,000 shares of common stock
pursuant to the registration statement on S-8 to six key employees and one
director as payment in lieu of prior accrued salaries and fees and as an advance
of their salaries and fees up to September 30, 1996. The shares issued were all
valued at $1.00 per share.
(viii) On November 1, 1995, at its annual general meeting, the shareholders
approved the increase of the authorized number of common shares from 20,000,000
to 30,000,000 shares.
(ix) Other capital
As at March 31, 1996, 1,074,276 common shares and 12,500 Class B common shares
have been subscribed for but remain unissued as the services for which these
shares were subscribed for have yet to be received.
<TABLE>
<CAPTION>
From inception
Year ended March 31, (May 6, 1993)
through March
1995 1994 31, 1996
---------------------------------------
<S> <C> <C> <C>
Opening,
Marketing services not yet received $1,999,200 $ 0 $ 0
Deferred compensation costs 0 0 0
Deferred consulting costs 87,485 0 0
Rent 0 0 0
---------------------------------------
$2,086,685 $ 0 $ 0
Shares subscribed but not issued
(future services),
Marketing services not yet received $ 0 $1,999,200 $1,999,200
Deferred compensation costs 1,706,031 74,409 1,780,440
Deferred consulting costs 910,819 782,204 1,693,023
Rent 0 30,121 354,465
---------------------------------------
$2,616,850 $2,885,934 $5,827,128
Charged to expense as services are received,
Marketing services not yet received $ 666,400 $ 0 $ 666,400
Deferred compensation costs 1,365,432 74,409 1,439,841
Deferred consulting costs 717,376 694,719 1,412,095
Rent 0 30,121 354,465
---------------------------------------
$2,749,208 $ 799,249 $3,872,801
Closing,
Marketing services not yet received $1,332,800 $1,999,200 $1,332,800
Deferred compensation costs 340,599 0 340,599
Deferred consulting costs 280,928 87,485 280,928
Rent 0 0 0
---------------------------------------
$1,954,327 $2,086,685 $1,954,327
=======================================
</TABLE>
(x) 991,434 shares were issued due to the conversion of subordinated debentures
totalling $729,529 and $1,460,000 in subordinated debentures remain outstanding
as at March 31, 1996.
F-14
<PAGE> 88
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CAPITAL STOCK: (CONTINUED)
(xi) The Company has, from inception to present, issued shares in exchange for
(a) employment services, (b) consulting and marketing services, and (c)
consideration in lieu of rental payments.
NOTE 13 - COMMITMENTS:
LEASES
The Company has a lease agreement for its current office premises. The term of
the lease is ten years which commenced January 1, 1994 and requires payment
of an annual base rent of $22,000 for the first five years and thereafter market
value less 20%. In addition, the Company is required to pay its share of
property taxes and all operating costs.
Rental expense for the year ended March 31, 1996 amounted to $233,705 and
$219,183 for the year ended March 31, 1995.
EXCLUSIVE DISTRIBUTION RIGHTS
The Company amended its arrangement with Symbol Technologies Inc. for the
exclusive right to use its PDF bar code scanning technology in Canada, the
United States and Europe. The commitment under this arrangement is as follows:
<TABLE>
<CAPTION>
Units Amount
----- ------
<S> <C> <C>
1996 830 $ 554,000
</TABLE>
MARKETING AGREEMENT
On March 15, 1995, the Company entered into an agreement with The L.L.
Knickerbocker Company, Inc., of California ("Knickerbocker") which provides for
a television and radio marketing campaign to be initially launched in the
California marketplace. As part of the compensation for services to be performed
by Knickerbocker, the Company has paid Knickerbocker a fee of $212,975 and
issued 800,000 restricted common shares, valued at $2.50 per share based on the
trading price of the Company's shares on the date of the agreement. These common
shares bear a legend restricting Knickerbocker from selling them for two years
from March 15, 1995, without the prior written consent of the Company.
THE IACP ENDORSEMENT
The Company has secured the endorsement of the International Association
of Chiefs of Police ("IACP"), a nonprofit organization of approximately
14,000 members from the world's law enforcement community founded in 1893. The
Company's present license agreement with the IACP began in February 1996 and
runs through February 1999. Under the agreement, the Company has agreed to pay
IACP, on a quarterly basis in arrears, the greater of $100,000 per year or a
fee based on the total number of subscribers of the Company calculated as
follows:
<TABLE>
<CAPTION>
Number of Subscribers Per Capita Amount
- --------------------- -----------------
<S> <C>
0 - 1,000,000 $0.20
1,000,001 - 5,000,000 $0.10
More than 5,000,000 $0.075
</TABLE>
INVESTOR MEDIA & PUBLIC RELATIONS
The Company entered into an agreement dated November 20, 1995 with Corporate
Relations Group, Inc. ("CRG"), of Winter Park, Florida to provide advertising,
printing and investor relations for investor media and public relations support
to the Company with services to commence in mid-1996. The agreement covers a
twelve month period and may be cancelled without penalty at the Company's
option. As consideration for the services to be provided by CRG, the Company
will pay to CRG, at the Company's option, either $570,000 in cash or the
equivalent number of common shares assigned a value of $1.75 on the agreement
date. The Company has also agreed to issue options to purchase a total of
500,000 common shares noted as follows:
100,000 common shares at $2.00 1 year from the date of the agreement
100,000 common shares at $2.40 2 years from the date of the agreement
100,000 common shares at $2.60 3 years from the date of the agreement
100,000 common shares at $2.80 4 years from the date of the agreement
100,000 common shares at $3.00 5 years from the date of the agreement
F-15
<PAGE> 89
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - RELATED PARTY TRANSACTIONS:
Prior to the date of incorporation (May 6, 1993), the founder and other key
members of management agreed to receive 5,089,286 exchangeable preference shares
in consideration for the assignment of international patents covering the
Tracker Canada system and as inducements to join the Company, respectively. No
value has been assigned to these shares.
The Company currently retains certain key management personnel under contract.
Included in expenses are consulting and management fees paid under the
aforementioned contracts totaling, in the aggregate, $589,390 for the year ended
March 31, 1996 and $737,462 for the year ended March 31, 1995.
Placement commissions amounting to $Nil for the year ended March 31, 1996 and
$115,282 for the year ended March 31, 1995 paid to related parties in connection
with the Company's private equity placement are included as a reduction in paid-
in capital.
Commissions amounting to $85,646 for the year ended March 31, 1996 and $Nil for
the year ended March 31, 1995 were paid to related parties in connection with
the Company's issuance of convertible subordinated debentures.
See also Note 12(iv) and (vii).
NOTE 15 - INCOME TAXES:
The estimated deferred tax asset of $3,696,000 and $2,290,000, representing
benefit for the income tax effects of the accumulated losses for the period from
inception (May 6, 1993) to March 31, 1996 and March 31, 1995, respectively, has
not been recognized due to the uncertainty of future realization of such
benefits. Estimated net operating losses aggregating $10,561,000 expire starting
in 2001, the benefit of these losses has not been reflected in these
consolidated financial statements.
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Deferred tax liabilities $ - $ -
Deferred tax assets
Net operating losses 3,696,000 2,290,000
----------- -----------
3,696,000 2,290,000
Valuation allowance (3,696,000) (2,290,000)
----------- -----------
$ 0 $ 0
----------- -----------
</TABLE>
The valuation allowance increased by $1,406,000 during the year.
F-16
<PAGE> 90
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - CONVERTIBLE SUBORDINATED DEBENTURES:
The Company has outstanding at March 31, 1996 convertible subordinated
debentures in the amount of $1,460,000 bearing interest at 15% annually, which
are repayable within one year. The interest payments are payable monthly in
advance. The principal amount may be converted, at the holder's option, into
shares of the Company's common stock, in whole or in part, beginning on October
1, 1995 at a conversion price as shown below. The debentures are subordinated to
all other indebtedness incurred by the Company. The Company paid $32,740 in cash
and accrued 52,906 restricted common shares (valued at $52,906) in placement
commissions to finders of arm's length third party private investors. The
following lists the conversion rates:
<TABLE>
<CAPTION>
No. of shares
Principal Conversion rate on conversion
--------- --------------- -------------
<S> <C> <C>
$ 730,000 $0.4375 per share of common stock 1,668,575
375,000 $0.9375 per share of common stock 400,000
125,000 $1.00 per share of common stock 125,000
30,000 $1.06 per share of common stock 28,302
70,000 $1.0625 per share of common stock 65,883
30,000 $1.10 per share of common stock 27,273
75,000 $1.20 per share of common stock 62,499
25,000 $1.25 per share of common stock 20,000
---------- ---------
$1,460,000 2,397,532
---------- ---------
</TABLE>
Total interest paid and included in general and administrative expenses is
$181,311 and $Nil for the year ended March 31, 1996 and 1995, respectively.
NOTE 17 - SUBSEQUENT EVENTS:
On May 3, 1996, Tracker U.S. issued 52,906 restricted shares of Common Stock to
Wheel of Fortune as settlement of finder's fees in the amount of $52,906 in
connection with the sale of the Second Series Convertible Debentures.
Of the warrants issued since inception to acquire exchangeable preference shares
of the Canadian subsidiary at Canadian $14 per share, there remained only 15,577
outstanding as 1,771 warrants have expired since March 31, 1996. As described in
Note 12(ii), these warrants expire two years after the date of issuance.
During April and May 1996, the Company issued 600 shares of $1,000 6%
Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock"). The
Convertible Preferred Stock is not redeemable and, except as otherwise provided
by law, is non-voting. Subject to the prior right of the holders of any shares
of any series of Preferred Stock ranking prior to the shares of Convertible
Preferred Stock with respect to dividends, the holders of the Convertible
Preferred Stock are entitled to receive when, as and if declared by the Board of
Directors: (i) quarterly dividends payable in cash out of funds legally
available for such purpose on the last day of July 1996 and October 1996 (each
such date being referred to herein as a "Quarterly Dividend Payment Date") at an
annual rate of $60.00 per share; or, (ii) at the sole option of the Company,
quarterly dividends payable on each Quarterly Dividend Payment Date in
additional shares of Convertible Preferred Stock at an annual rate of 0.06
additional shares per share of Convertible Preferred Stock then outstanding.
F-17
<PAGE> 91
THE TRACKER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - SUBSEQUENT EVENTS: (CONTINUED)
In the event of any liquidation, dissolution or winding up of the Company, the
holders of the Convertible Preferred Stock are entitled to receive, prior to any
distribution of any of the assets or funds of the Company to the holders of the
Common Stock or any other shares of stock of the Company ranking as to such a
distribution junior to the Convertible Preferred Stock, an amount equal to
$1,000 per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus an amount equal to any accrued but unpaid
dividends thereon to the date fixed for payment of such distribution. Upon
payment of the full preferential amount, the holders of the Convertible
Preferred Stock are not entitled to any further participation in any
distribution of assets by the Company.
Each share of Convertible Preferred Stock is convertible, at the option of the
holder, without the payment of any additional consideration, and at any time,
into such number of shares of Common Stock as is determined by dividing
$1,000 plus the amount of any accrued but unpaid dividends through the date
such holder's conversion notice is received by the Company by the Conversion
Price (as hereafter defined). The "Conversion Price" shall be equal to that
amount which is 33% less than the average of the published OTC Bulletin Board
closing bid prices for the Company's Common Stock for the five (5) trading days
preceding, at the election of the holder, the date such holder's subscription to
purchase the Convertible Preferred Stock was accepted by the Company or the date
such holder's conversion notice is received by the Company; provided, however,
that the Conversion Price shall in no event be less than $0.15. If the number of
shares of Common Stock outstanding at any time after the date of issuance of the
Convertible Preferred Stock is increased or decreased by a stock dividend, stock
split, or combination or reclassification of the outstanding shares of Common
Stock, the Conversion Price shall be appropriately decreased or increased so
that the number of shares of Common Stock issuable on conversion shall be
increased or decreased in proportion to such increase or decrease in the
outstanding shares of Common Stock.
During May 1996, the Company issued 250 shares of Series B $1,000 6%
Cumulative Convertible Preferred Stock (the "Series B Convertible Preferred
Stock"). The Series B Convertible Preferred Stock is identical in all material
respects to the Convertible Preferred Stock except that the Quarterly Dividend
Payment Dates are August 1996 and November 1996 rather than July 1996 and
October 1996.
Subsequent to March 31, 1996, the Company issued 2,319,729 shares of Common
Stock of which 708,573 shares were issued upon conversion of $310,000 of
Convertible Subordinated Debentures and 1,611,156 shares issued upon conversion
of $500,000 shares of Convertible Preferred Stock noted above.
F-18
<PAGE> 92
-----------------------------
PROSPECTUS
-----------------------------
THE TRACKER CORPORATION OF AMERICA - 13,799,479 SHARES OF COMMON STOCK
-----------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE REGISTRANT OR ANY SELLING SECURITYHOLDER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF TRACKER U.S. SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
-----------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PRICE RANGE OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . 15
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . 18
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . 34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . 46
SELLING SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 49
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 56
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . 57
SHARES ELIGIBLE FOR FUTURE SALE . . . . . . . . . . . . . . . . . . . 68
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 70
-----------------------------
, 1996
-----------------
<PAGE> 93
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred by
the Company in connection with the offering described in this Registration
Statement:
<TABLE>
<S> <C>
SEC Registration Fees . . . . . . . . . . . $ 6,692.97
Blue Sky Fees and Expenses . . . . . . . . . *
----------
Legal Fees and Expenses . . . . . . . . . . *
----------
Accounting Fees and Expenses . . . . . . . . *
----------
Transfer Agent Fees . . . . . . . . . . . . *
----------
Printing Expenses . . . . . . . . . . . . . *
----------
Miscellaneous . . . . . . . . . . . . . . . *
----------
TOTAL . . . . . . . . . . . . . . . . *
==========
</TABLE>
- ---------------------
* To be completed by amendment.
None of such expenses will be borne by the Selling Securityholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by the Delaware General Corporation Law (the "DGCL"), the
Certificate of Incorporation of Tracker U.S. provides that no director of
Tracker U.S. shall be personally liable to Tracker U.S. or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Tracker U.S.
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock purchases under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. In addition, Section 145 of the DGCL and the
Company's Bylaws, under certain circumstances, provide for the indemnification
of the Company's officers and directors against liabilities which they may incur
in such capacities. A summary of the circumstances in which such indemnification
is provided for is contained herein, but that description is qualified in its
entirety by reference to the Company's Bylaws.
In general, any officer, director, employee or agent may be indemnified
against expenses, including attorneys' fees, fines, settlements or judgments
which were actually and reasonably incurred in connection with a legal
proceeding, other than one brought by or on behalf of the Company, to which he
was a party as a result of such relationship, if he acted in good faith, and in
the manner he believed to be in the Company's best interest and not unlawful. If
the action is brought by or on behalf of the Company, the person to be
indemnified must have acted in good faith in a manner he believed to have been
in the Company's best interest and must not have been adjudged liable for
negligence or misconduct.
No person seeking indemnification may be denied indemnification unless
the Board of Directors or the stockholders of the Company determine in good
faith, or independent legal counsel for the Company opines in writing, that the
standards for indemnification have not been met. A successful defense is deemed
conclusive evidence of a person's right to be indemnified against expenses.
II-1
<PAGE> 94
The Company may advance funds to pay the expenses of any person
involved in such action provided that the Company receives an undertaking that
the person will repay the advanced funds if it is ultimately determined that he
is not entitled to indemnification.
The Company has entered into substantially identical indemnification
agreements with each of its directors. The Company has agreed, to the full
extent permitted by the DGCL as amended from time to time, to indemnify each
indemnitee against all loss and expenses incurred by, or as a result of any
threat of, his being named a party to any completed, pending or threatened
action, suit or proceeding whether civil, criminal, administrative or
investigative by reason that he was a director, officer, employee or agent of
the Company or any of its affiliates, or because the Company has a right to
judgment in its favor because of his position with the Company. The indemnitee
will be indemnified so long as he acted in good faith and in a manner reasonably
believed by him to be in or not opposed to the Company's best interest. The
agreements provide that the indemnification thereunder is not exclusive of any
other rights the indemnitees may have under the Company's Certificate of
Incorporation, Bylaws or any agreement or vote of stockholders, nor may the
Certificate of Incorporation or Bylaws be amended to affect adversely the rights
of any indemnitee. The foregoing description is qualified in its entirety by
reference to the indemnification agreements.
Indemnification of directors and officers is also discussed in
"DESCRIPTION OF SECURITIES - Directors' Liability."
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On July 14, 1994, Tracker Canada issued 6,235,225 Exchangeable
Preference Shares to the holders of its common stock in exchange for their
common stock. In addition, since July 14, 1994, Tracker Canada has issued an
additional 740,283 Exchangeable Preference Shares to holders of warrants to
purchase Tracker Canada common stock that were already outstanding as of July
14, 1994 (the "July 14, 1994 Warrants") and have been exercised since such date.
In addition, there are July 14, 1994 Warrants to purchase 312,785 Exchangeable
Preference Shares that have not yet been exercised. The Exchangeable Preference
Shares are exchangeable, on a one-to-one basis commencing July 12, 1995, into
Tracker U.S. Common Stock. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Reorganization." The Company relied upon, and will continue to rely upon with
respect to July 14, 1994 Warrants that have not yet been exercised, the
exemption from registration provided by Section 3(a)(10) of the Securities Act.
The Company believes that the Section 3(a)(10) exemption was and is available
because there was an exchange of securities, a hearing on the fairness of the
exchange at which the persons exchanging the securities (i.e., the holders of
the Tracker Canada common stock) had the right to appear, and court approval of
the fairness of the terms and conditions of the exchange.
Since July 14, 1994, Tracker Canada also has issued new Exchangeable
Preference Shares and new warrants to purchase Exchangeable Preference Shares
that are not related to the July 14, 1994 Warrants. These issuances are set
forth in the table below:
<TABLE>
<CAPTION>
======================================================================================================
Name of Investor Securities Sold Value of Consideration Date of Issuance
---------------- --------------- ---------------------- ----------------
(CDN $)
-------
(When consideration is
other than cash, form of
consideration is noted
parenthetically.)
======================================================================================================
<S> <C> <C> <C>
999600 Ontario Inc. 4,006 shares and 4,006 $28,042 (in lieu of September 28, 1994
warrants rent)
- ------------------------------------------------------------------------------------------------------
Amerasia International 30,000 shares Value uncertain. September 14, 1995
Holdings Limited (Issued as part of
consideration for
contract with Amerasia.)
- ------------------------------------------------------------------------------------------------------
</TABLE>
II-2
<PAGE> 95
<TABLE>
<CAPTION>
======================================================================================================
Name of Investor Securities Sold Value of Consideration Date of Issuance
---------------- --------------- ---------------------- ----------------
(CDN $)
-------
(When consideration is
other than cash, form of
consideration is noted
parenthetically.)
======================================================================================================
<S> <C> <C> <C>
Anas I. Abudawood 7,350 shares and 7,350 $51,450 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Anas I. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Andrew Ascenzi 15 shares $49.50 March 10, 1995
- ------------------------------------------------------------------------------------------------------
Ayman I. Abudawood 10,350 shares and 10,350 $72,450 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Ayman I. Abudawood 10,350 shares upon $10,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Bina Gregory 14,286 warrants $100,000 June 14, 1995
- ------------------------------------------------------------------------------------------------------
*Bob Faulkner 1,000 shares Value uncertain. September 7, 1995
(Issued as part of
consideration for
cancellation of
consulting arrangement
with Mr. Faulkner.)
- ------------------------------------------------------------------------------------------------------
Carla Collins 25 shares $123 (in lieu of December 15, 1994
promotional fee)
- ------------------------------------------------------------------------------------------------------
*Charles L. Hall 2,000 shares $9,800 (Issued as part December 15, 1994
of consideration for
cancellation of
consulting arrangement
with Mr. Hall.)
- ------------------------------------------------------------------------------------------------------
Christine Rogers 3,750 shares $18,375 (in lieu of December 15, 1994
wages)
- ------------------------------------------------------------------------------------------------------
*David Sullivan 5,000 shares and 5,000 $35,000 September 12, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Gigi Lipton 10,000 shares $20,790 (in lieu of February 15, 1995
wages)
- ------------------------------------------------------------------------------------------------------
Gordon Cormie 8,906 shares $8,906 (in lieu of January 31, 1995
consulting fees)
- ------------------------------------------------------------------------------------------------------
Hussain H. Abudawood 22,050 shares and 22,050 $154,350 September 29, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Hussain H. Abudawood 22,050 shares upon $22,050 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Jack Gertzbein 2,500 shares $5,000 (in lieu of September 7, 1995
wages)
- ------------------------------------------------------------------------------------------------------
</TABLE>
II-3
<PAGE> 96
<TABLE>
<CAPTION>
======================================================================================================
Name of Investor Securities Sold Value of Consideration Date of Issuance
---------------- --------------- ---------------------- ----------------
(CDN $)
-------
(When consideration is
other than cash, form of
consideration is noted
parenthetically.)
======================================================================================================
<S> <C> <C> <C>
John Andrews 4,596 shares $16,250 (in lieu of September 18, 1995
consulting fees)
- ------------------------------------------------------------------------------------------------------
John Andrews 833 shares $4,082 (in lieu of January 5, 1995
consulting fees)
- ------------------------------------------------------------------------------------------------------
Klaus Stahl 2,969 shares $2,969 (in lieu of January 31, 1995
consulting fees)
- ------------------------------------------------------------------------------------------------------
Lisa Fahringer 500 shares $2,450 (in lieu of December 15, 1994
wages)
- ------------------------------------------------------------------------------------------------------
Matthew Ascenzi 15 shares $49.50 March 10, 1995
- ------------------------------------------------------------------------------------------------------
Mohammad H. Abudawood 7,350 shares and 7,350 $51,450 September 28, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Mohammad H. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Omar H. Abudawood 7,350 shares and 7,350 $51,450 September 29, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Omar H. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Osama I. Abudawood 31,500 shares and 31,500 $220,500 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Osama I. Abudawood 31,500 shares upon $31,500 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Pearl Gertzbein 2,500 shares $5,000 (in lieu of September 7, 1995
wages)
- ------------------------------------------------------------------------------------------------------
Phil Harding 200 shares $980 January 5, 1995
- ------------------------------------------------------------------------------------------------------
Robin Ward 25 shares $123 (promotional December 15, 1994
appearance fee)
- ------------------------------------------------------------------------------------------------------
Roy Bradshaw 66,130 shares $66,130 (in lieu of January 31, 1995
consulting fees)
- ------------------------------------------------------------------------------------------------------
Salwa I. Abudawood 7,350 shares and 7,350 $51,450 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Salwa I. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Samih I. Abudawood 7,350 shares and 7,350 $51,450 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Samih I. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
</TABLE>
II-4
<PAGE> 97
<TABLE>
<CAPTION>
======================================================================================================
Name of Investor Securities Sold Value of Consideration Date of Issuance
---------------- --------------- ---------------------- ----------------
(CDN $)
-------
(When consideration is
other than cash, form of
consideration is noted
parenthetically.)
======================================================================================================
<S> <C> <C> <C>
Sana I. Abudawood 7,350 shares and 7,350 $51,450 September 30, 1994
warrants
- ------------------------------------------------------------------------------------------------------
Sana I. Abudawood 7,350 shares upon $7,350 April 25, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
*Stanley Alpert 1,520 shares and 1,520 $10,640 September 8, 1994
warrants
- ------------------------------------------------------------------------------------------------------
*Stanley Alpert 1,520 shares upon $1,520 April 13, 1995
exercise of warrants
- ------------------------------------------------------------------------------------------------------
Susan Vint 3,580 shares $9,380 (issued pursuant August 10, 1995
to employment contract)
======================================================================================================
</TABLE>
- --------------------
*Represents a U.S. person.
In connection with the sales in the above table, Tracker U.S. relied
upon the exemption from registration provided by Section 4(2) of the Securities
Act. Tracker U.S. believes that the Section 4(2) exemption was available because
no general solicitation or advertising was employed and the individual
transactions were privately negotiated between the parties who had full access
to all relevant information. In addition, except as otherwise noted by an
asterisk in the above table, the sales were made to persons Tracker U.S.
believes are not U.S. persons and were made outside the United States.
Accordingly, Tracker U.S. believes that such sales to non-U.S. persons outside
the United States are outside the jurisdiction of the United States and
therefore not subject to registration under the Securities Act. In connection
with the sales in the above table to members of the Abudawood family, Tracker
Canada paid a commission or finder's fee to the members of the Abudawood family
of 8,000 Exchangeable Preference Shares. In connection with the sale in the
above table to David Sullivan, Tracker Canada paid a commission or finder's fee
to Avron Shore of CDN $3,500.
On September 27, 1994, Tracker U.S. sold 785,000 shares of Common Stock
to Fondo de Aquisiciones E Inversiones Internacionales X L, S.A. ("Fondo") of
Costa Rica for $4.02 per share or a total of $3,155,700. 200,000 of such shares
were returned by Fondo to Tracker U.S., leaving outstanding a total of 585,000
shares for $4.02 per share or a total of $2,351,700. Tracker U.S. relied upon
the exemption from registration provided by Regulation S under the Securities
Act. Tracker U.S. believes that the Regulation S exemption was available because
the sale occurred outside the United States. In addition, Tracker U.S. relied
upon the exemption from registration provided by Section 4(2) of the Securities
Act. Tracker U.S. believes that the Section 4(2) exemption was available because
no general solicitation or advertising was employed and the individual
transactions were privately negotiated between the parties who had full access
to all relevant information.
On October 19, 1994, Tracker U.S. issued 25,000 shares of Common Stock
to Steve Heard for investor relations services valued at $150,000, or $6.00 per
share.
On January 26, 1995, Tracker U.S. sold 137,500 shares of Common Stock
to Bank Sarasin & Co. of Zurich, Switzerland for $2.00 per share or a total of
$275,000. Tracker U.S. relied upon the exemption from registration provided by
Regulation S under the Securities Act. Tracker U.S. believes that the Regulation
S exemption was available because the sale occurred outside the United States.
In addition, Tracker U.S. relied upon the exemption from registration provided
by Section 4(2) of the Securities Act. Tracker U.S. believes that the
II-5
<PAGE> 98
Section 4(2) exemption was available because no general solicitation or
advertising was employed and the individual transactions were privately
negotiated between the parties who had full access to all relevant information.
Tracker U.S. paid a commission or finder's fee of $27,500 to Steve Heard in
connection with this transaction.
On February 8, 1995, Tracker U.S. sold 137,500 shares of Common Stock
to Anker Bank of Zurich Switzerland for $2.00 per share or a total of $275,000.
Tracker U.S. relied upon the exemption from registration provided by Regulation
S under the Securities Act. Tracker U.S. believes that the Regulation S
exemption was available because the sale occurred outside the United States. In
addition, Tracker U.S. relied upon the exemption from registration provided by
Section 4(2) of the Securities Act. Tracker U.S. believes that the Section 4(2)
exemption was available because no general solicitation or advertising was
employed and the individual transactions were privately negotiated between the
parties who had full access to all relevant information. Tracker U.S. paid a
commission or finder's fee of $27,500 to Steve Heard in connection with this
transaction.
On March 15, 1995, Tracker U.S. sold 500,000 units to Jason Kuplen for
$0.70 per unit or a total of $350,000. Each unit consisted of one share of
Common Stock and one warrant to purchase a share of Common Stock with an
exercise price of $5.00 per share.
On March 15, 1995, Tracker U.S. sold 800,000 shares of Common Stock to
The L.L. Knickerbocker Company, Inc. in exchange for marketing services valued
at $2,000,000, or $2.50 per share.
On May 1, 1995, Tracker U.S. sold 250,000 units to Reynold Kern for
$1.00 per unit or a total of $250,000. Each unit consisted of one share of
Common Stock and one warrant to purchase a share of Common Stock with an
exercise price of $5.00. Tracker U.S. paid a commission or finders fee of 7,500
shares of unregistered Common Stock to Jeff Holmes in connection with this
transaction on June 22, 1995.
On May 23, 1995, Tracker U.S. sold 200,000 shares of Common Stock to
Robert Zuk in exchange for investor relations services valued at $262,500, or
$1.3125 per share.
On July 11, 1995, Tracker U.S. sold 200,000 shares of Common Stock to
Robert Zuk for $200,000, or $1.00 per share. To date, Tracker U.S. has received
only $83,000 pursuant to this sale and has been unable to collect the remaining
$117,000. A claim has been filed in the Canadian courts against Mr. Zuk to
attempt to recover the remaining $117,000 and for other damages. There can be no
assurance that the Company will be able to recover such $117,000.
From July 1995 through September 1995, Tracker U.S. sold 15%
Convertible Subordinated Debentures in an aggregate principal amount of
$1,000,000 (the "First Series Convertible Debentures"). The principal amount may
be converted into shares of Common Stock, in whole or in part, beginning on
October 1, 1995, at a conversion rate of $0.4375 per share of Common Stock.
Tracker U.S relied upon the exemptions from registration provided by Section
4(6) and Section 4(2) of the Securities Act. Tracker U.S. believes that the
Section 4(2) exemption was available because no general solicitation or
advertising was employed and the individual transactions were privately
negotiated between the parties who had full access to all relevant information.
Tracker U.S. believes that the Section 4(6) exemption was available because the
sales were made solely to accredited investors. In addition, Tracker U.S. relied
upon the exemption from registration provided by Regulation D under the
Securities Act. The investors were Ed Leinster, Baby Shoes, Inc., Knox Nursery,
Inc., Bruce R. Knox, Corporate Relations Group, Inc., Richard L. and Paula A.
Gagne, Tim B. Shannon, Brian C. Rosenbloom, Jimmy D. Dowda, Arnold Zousmer,
Frederick A. Lenz, and Stalia Holdings B.V.
From August 1995 through April 1996, Tracker U.S. issued 1,152,512
shares of Common Stock to holders of Tracker Canada Exchangeable Preference
Shares in exchange for an equivalent number of Exchangeable Preference Shares.
Tracker U.S. relied upon the exemption from registration provided by Section
3(a)(9). Tracker U.S. believes that the Section 3(a)(9) exemption was available
because the exchange was effectively with one of Tracker U.S.'s existing
securityholders, notwithstanding the fact that the exchange was actually with a
securityholder of Tracker U.S.'s wholly-owned subsidiary Tracker Canada, because
the dividend, liquidation and voting rights of the Tracker Canada Exchangeable
Preference Shares and of the shares of the Tracker U.S. Common Stock are
II-6
<PAGE> 99
identical and because the Exchangeable Preference Shares do not provide their
holders with any rights to the assets of Tracker Canada other than amounts
attributable to the shares of Tracker U.S. Common Stock.
On August 16, 1995, Tracker U.S. issued 41,143 shares of Common Stock
to Charles J. Coronella in lieu of $36,000 compensation owed to him by Tracker
U.S. for his service as a director.
On August 16, 1995, Tracker U.S. issued 31,429 shares of Common Stock
to Quincy A.S. McKean III in lieu of $27,500 compensation owed to him by Tracker
U.S. for his service as a director.
From September 1995 through March 1996, Tracker U.S. sold 15%
Convertible Subordinated Debentures in an aggregate principal amount of
$1,189,529 (the "Second Series Convertible Debentures"). The principal amount
may be converted into shares of Common Stock in whole or in part, beginning on
October 1, 1995, at various conversion rates set forth in the individual
debentures, the weighted average of which is $1.045972 per share of Common
Stock. Tracker U.S. relied upon the exemptions from registration provided by
Section 4(6) and Section 4(2) of the Securities Act. Tracker U.S. believes that
the Section 4(2) exemption was available because no general solicitation or
advertising was employed and the individual transactions were privately
negotiated between the parties who had full access to all relevant information.
Tracker U.S. believes that the Section 4(6) exemption was available because the
sales were made solely to accredited investors. In addition, Tracker U.S. relied
upon the exemption from registration provided by Regulation D under the
Securities Act. The investors were Henri B. Schkud, Leon I. Schkud, Bryan P.
King, Leon F. Willis, Jr., Richard Scott Revocable Trust, Part B, Richard G.
Kahn, John R. Harper Inc. retirement trust, Roberto Veitia, Herman Henin
revocable living trust, Wheel of Fortune Trust, Miriam Henin revocable living
trust, Edward Shkolnikov, Stephen Dorsey, Jacob and Wanda Dorsey, Tom and Judy
Callahan, Charlanne Callahan, Cam M. Brame, Jay C. Gagne, Barbara and Jackson
Edwards, MOI, Wheel of Fortune, and Wentex. Tracker U.S. paid Wheel of Fortune a
finder's fee of 52,906 shares of Common Stock valued at $52,906.
On September 28, 1995, Tracker U.S. issued 26,286 shares of Common
Stock to Wolfgang H. Kyser in lieu of $23,000 compensation owed to him by
Tracker U.S. for his service as a director.
From January through March 1996, Tracker U.S. issued 617,144 shares of
Common Stock to holders of First Series Convertible Debentures upon the
conversion of such debentures. From February through May 1996, Tracker U.S.
issued 408,290 shares of Common Stock to holders of Second Series Convertible
Debentures upon the conversion of such debentures. Tracker U.S. relied upon the
exemption from registration provided by Section 3(a)(9) because these issuances
were exchanges with Tracker U.S.'s existing securityholders. The Company also
relied upon the Section 4(2) exemption because no general solicitation or
advertising was employed and the individual conversions were privately made by
parties who had full access to all relevant information.
In April and May 1996, Tracker U.S. issued 600 shares of Convertible
Preferred Stock for $600,000 to Sage Capital Investments, Inc., Andreas Hassell,
Derrick M.A. Barton, and Antonio Rosello. Tracker U.S. relied upon the exemption
from registration provided by Regulation S under the Securities Act. Tracker
U.S. believes that the Regulation S exemption was available because the sales
occurred outside the United States. In addition, Tracker U.S. relied upon the
exemption from registration provided by Section 4(2) of the Securities Act.
Tracker U.S. believes that the Section 4(2) exemption was available because no
general solicitation or advertising was employed and the individual transactions
were privately negotiated between the parties who had full access to all
relevant information. Tracker U.S. paid commissions of $78,000 (including a
non-accountable expense allowance) to White Star Management, Inc. in connection
with such sales. Tracker U.S. paid Richard Maus a finder's fee of $66,000
($21,000 plus 112,500 shares of Common Stock valued at $0.40 per share).
On June 5, 1996, Tracker U.S. issued 112,500 shares of Common Stock to
Richard Maus in lieu of $45,000 of a finder's fee in connection with the sale of
the Convertible Preferred Stock.
On May 3, 1996, Tracker U.S. issued 10,000 shares of Common Stock to
Charles J. Coronella in lieu of $4,500 compensation owed to him by Tracker U.S.
for his service as a director, issued 10,000 shares to Quincy A.S. McKean III in
lieu of $4,500 compensation owed to him by Tracker U.S. for his service as a
director, issued 5,556 shares to Wolfgang H. Kyser in lieu of $2,500
compensation owed to him by Tracker U.S. for his service
II-7
<PAGE> 100
as a director, and issued 8,889 shares to Leonard Yakobovits in lieu of $4,000
compensation owed to him by Tracker U.S. for his service as a director.
On May 3, 1996, Tracker U.S. issued 52,906 shares of Common Stock to
Wheel of Fortune for finder's fees in the amount of $52,906 in connection with
the sale of the Second Series Convertible Debentures.
None of the above sales was registered under the Securities Act. Except
as otherwise noted above with respect to particular sales, the Company relied
upon the exemption from registration provided by Section 4(2) of the Securities
Act. The Company believes that the Section 4(2) exemption was available because
no general solicitation or advertising was employed and the individual
transactions were privately negotiated between the parties who had full access
to all relevant information. Except as otherwise noted above with respect to
particular sales, there were no underwriting commissions or discounts in
connection with any of the above sales.
With respect to sales by Tracker Canada of Exchangeable Preference
Shares or warrants to purchase Exchangeable Preference Shares, Tracker U.S. is
reporting such sales in this Item 15 because such Exchangeable Preference Shares
or warrants are ultimately exchangeable into Tracker U.S. Common Stock and
because the Exchangeable Preference Shares have voting rights in Tracker U.S.,
through the Tracker U.S. Class B Voting Common Stock, that are equivalent to
those of the shares of Common Stock. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS - Reorganization" and "DESCRIPTION OF SECURITIES." Accordingly,
Tracker U.S. is reporting such sales in its disclosure of recent sales of
unregistered securities even though: (i) such securities were sold not by the
registrant, Tracker U.S., but by Tracker Canada; and (ii) Section 2(3) of the
Securities Act provides that the issue of a right or privilege, when originally
issued with a security, giving the holder of such security the right to convert
such security into another security of the same issuer or of another person, or
giving a right to subscribe to another security of the same issuer or of another
person, which right cannot be exercised until some future date, shall not be
deemed to be an offer or sale of such other security. Tracker U.S. has included
information relating to sales of the Exchangeable Preference Shares and warrants
of Tracker Canada in this Item 15 solely in the interest of full disclosure to
the Commission. Tracker U.S. does not concede, however, that such sales of the
Tracker Canada securities are "sales" within the meaning of Section 2(3) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1++++ Reorganization Agreement Among Ultra Capital Corp. (the predecessor of the Registrant), Jeff
W. Holmes, R. Kirk Blosch and the Tracker Corporation dated May 26, 1994, as amended by
Amendment Number One dated June 16, 1994, Amendment Number Two dated June 24, 1994, and
Amendment Number Three dated June 30, 1994, Extension of Closing dated June 23, 1994, and
July 11, 1994 letter agreement.
2.2+++++ Agreement and Plan of Merger dated July 1, 1994 between Ultra Capital Corp. (the predecessor
of the Registrant) and the Registrant
3.1++++ Certificate of Incorporation, as corrected by Certificate of Correction of Certificate of
Incorporation dated March 27, 1995, and as amended by Certificate of Amendment to the
Certificate of Incorporation dated November 1, 1995, Certificate of Designation of Rights,
Preferences and Privileges of $1,000.00 6% Cumulative Convertible Preferred Stock of the
Registrant dated April 19, 1996, and Certificate of Designation of Rights, Preferences and
Privileges of Series B $1,000.00 6% Cumulative Convertible Preferred Stock of the Registrant
dated June 5, 1996
3.2+++++ Bylaws
</TABLE>
II-8
<PAGE> 101
<TABLE>
<S> <C>
4.1+++++ Specimen Common Stock Certificate
5.1* Opinion of Fennemore Craig, P.C.
9.1+++++ Agreement dated December 21, 1993 among 1046523 Ontario Limited, Gregg C. Johnson and
Bruce Lewis
9.2+++++ Right of First Refusal, Co-Sale and Voting Agreement dated March 14, 1994 between The
Tracker Corporation, Stalia Holdings B.V., I. Bruce Lewis, MJG Management Accounting
Services Ltd., Spire Consulting Group, Inc., 1046523 Ontario Limited, Mark J. Gertzbein,
Gregg C. Johnson and Jonathan B. Lewis, as confirmed by letter dated June 22, 1994 and
Agreement dated July 1994
10.1+++++ 1994 Stock Incentive Plan of the Registrant, as amended by Amendment No. 1 to the 1994 Stock
Incentive Plan
10.2+++++ Discretionary Cash Bonus Arrangement of the Registrant
10.3+++++ Form of Indemnification Agreement entered into between the Registrant and each of its Directors
10.4+++++ Employment Agreement dated June 30, 1994 between the Registrant and I. Bruce Lewis, as
amended by Amendment to Employment Agreement dated July 12, 1995
10.5+++++ Employment Agreement dated June 30, 1994 between the Registrant and Mark J. Gertzbein, as amended
by Amendment to Employment Agreement dated July 12, 1995
10.6++ Marketing Agreement between the Registrant and The L.L. Knickerbocker Company, Inc. dated
March 15, 1995
10.7+++++ Lease dated October 18, 1993 between The Dundas/Edward Centre Inc. and The Tracker Corporation
10.8+++++ Corporate Relations Agreement dated February 24, 1994 between Corporate Relations Group,
Inc. and The Tracker Corporation, as amended by letter agreement dated January 16, 1995 and
by Amendment to Corporate Relations and Marketing Agreement dated June 22, 1995
10.9+++++ Consulting arrangement with Gregg C. Johnson effective August 12, 1995
10.10+++++ Right of First Refusal, Co-Sale and Voting Agreement dated March 14, 1994 between
The Tracker Corporation, Stalia Holdings B.V., I. Bruce Lewis, MJG Management Accounting
Services Ltd., Spire Consulting Group, Inc., 1046523 Ontario Limited, Mark J. Gertzbein,
Gregg C. Johnson and Jonathan B. Lewis, as confirmed by letter dated June 22, 1994 and
Agreement dated July 1994 (contained in Exhibit 9.2)
10.11+++++ Stock Option Agreement dated March 14, 1994 between The Tracker Corporation and Stalia
Holdings B.V., as confirmed by letter dated June 22, 1994
10.12+++++ Letter from DHL International Express Ltd to The Tracker Corporation dated March 8, 1994
10.13+++++ Agreement dated September 1994 between The Tracker Corporation and Purolator Courier Ltd.
10.14+++++ National Account Agreement dated September 15, 1994 between Mail Boxes Etc. USA, Inc. and
the Registrant, as amended by Amendment to National Account Agreement dated September 14,
1994
</TABLE>
II-9
<PAGE> 102
<TABLE>
<S> <C>
10.15+++++ Letter agreement dated March 15, 1995 between The Tracker Corporation and Black Photo
Corporation, as amended by facsimile amendment dated March 4, 1995
10.16+++++ Letter agreement dated September 14, 1995 between The Tracker Corporation and Amerasia
International Holdings Limited
10.17+++++ Letter Agreement dated August 31, 1995 between The Tracker Corporation and Tokai Boeki Co. Ltd.
10.18++++ Letter agreement dated October 5, 1993 between The Tracker Corporation and Symbol
Technologies, Inc., as amended by letter from The Tracker Corporation to Symbol Technologies
Canada, Inc. dated November 23, 1995, and letter from Symbol Technologies Canada, Inc. to
The Tracker Corporation dated November 27, 1995
10.19+++++ Assignment World-Wide dated May 12, 1994 from I. Bruce Lewis to the Tracker Corporation
10.20+++++ Exchange Agency and Trust Agreement dated July 12, 1994 among Ultra Capital Corp. (the
predecessor of the Registrant), The Tracker Corporation and Montreal Trust Company of Canada
10.21+++++ Guarantee Agreement dated July 12, 1994 between Ultra Capital Corp. (the predecessor of the
Registrant) and The Tracker Corporation
10.22+++++ 1995 Stock Wage and Fee Payment Agreement
10.23+++++ Agreement dated August 10, 1995 between The L.L. Knickerbocker Company, Inc. and the
Registrant
10.24+++ Share Purchase Agreement dated July 29, 1994 among The Tracker Corporation, Page-Direct
Ltd., Marc Bombenon, Marc Bombenon Enterprises Ltd. and 614593 Alberta Ltd.
10.25+++++ General Release dated June 15, 1995 among The Tracker Corporation, 614593 Alberta Ltd.,
1069232 Ontario Inc., Gowling, Strathy & Henderson, Page-Direct Ltd., Marc Bombenon
Enterprises Ltd. and Mark Bombenon.
10.26++++++ Agreement Between The International Association of Chiefs of Police and The Tracker
Corporation dated February 13, 1996
10.27++++++ Letter agreement dated January 24, 1996 between The Tracker Corporation and Consumers
Distributing Inc.
10.28++++++ The Tracker Corp./Tracker Referral Network, Int'l Marketing Agreement dated April 8, 1996
between The Tracker Corporation and Tracker Referral Network, Int'l
10.29++++++ Letter agreement dated March 6, 1996 between The Tracker Corporation and Samsonite Canada Inc.
10.30++++++ Letter agreement dated March 22, 1996 between The Tracker Corporation and Sony of Canada Ltd.
10.31++++++ Lead Generation/Corporate Relations Agreement dated November 20, 1995 between The Tracker
Corporation and Corporate Relations Group, Inc., as amended by Amendment to the Marketing
Agreement between the Registrant and Corporate Relations Group, Inc. dated December 5, 1995
10.32++++++ Independent Contractor Agreement between The Tracker Corporation and Datatrack Inc. dated
January 12, 1996
</TABLE>
II-10
<PAGE> 103
<TABLE>
<S> <C>
10.33++++++ Services Agreement, Registration Rights Agreement and Options Agreement dated July 10, 1996
between Merchant Partners L.P. and the Registrant
21.1+++++ List of subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2* Consent of Fennemore Craig, P.C. (contained in their opinion filed as Exhibit 5.1 to this
Registration Statement)
24.1+++++ Powers of Attorney (contained on page II-13)
____________________
* To be filed by amendment.
+ Incorporated by reference from the Registrant's Current Report on
Form 8-K dated July 12, 1994.
++ Incorporated by reference from the Registrant's Current Report on
Form 8-KA dated February 28, 1995 (filed March 15, 1995).
+++ Incorporated by reference from the Registrant's Current Report on
Form 8-K dated July 29, 1994 (filed August 12, 1994).
++++ Previously filed in connection with the Registrant's Registration
Statement on Form S-1 (No. 33-99686) and refiled herewith with
supplemental material.
+++++ Incorporated by reference from the Registrant's Registration
Statement on Form S-1 (No. 33-99686).
++++++ Incorporated by reference from the Registrant's Current Report
on Form 10-K (filed July 15, 1996).
</TABLE>
(b) Financial Statement Schedules
None
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-11
<PAGE> 104
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-12
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Toronto, Province of Ontario Canada, on July 16, 1996.
THE TRACKER CORPORATION OF AMERICA
By: /s/ I. Bruce Lewis
---------------------------------------
I. Bruce Lewis, Chairman of the Board
of Directors, President, and Chief
Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No.
1 to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ I. Bruce Lewis Chairman of the Board of July 16, 1996
- ---------------------------------- Directors, President and Chief
I. Bruce Lewis Executive Officer (Principal
Executive Officer)
/s/ Mark J. Gertzbein Executive Vice President, July 16, 1996
- ---------------------------------- Secretary, Treasurer, Chief
Mark J. Gertzbein Financial Officer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Quincy A.S. McKean III Director July 16, 1996
- ----------------------------------
Quincy A.S. McKean III
/s/ Wolfgang H. Kyser Director July 16, 1996
- ----------------------------------
Wolfgang H. Kyser
/s/ Charles J. Coronella Director July 16, 1996
- ----------------------------------
Charles J. Coronella
/s/ Leonard Yakobovits Director July 16, 1996
- ----------------------------------
Leonard Yakobovits
/s/ Ed J. Korhonen Director July 16, 1996
- ----------------------------------
Ed J. Korhonen
*/s/ Mark J. Gertzbein Attorney-in-Fact July 16, 1996
- ----------------------------------
Mark J. Gertzbein
</TABLE>
II-13
<PAGE> 106
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
<S> <C>
2.1 Reorganization Agreement Among Ultra Capital Corp. (the predecessor
of the Registrant), Jeff W. Holmes, R. Kirk Blosch and the Tracker
Corporation dated May 26, 1994, as amended by Amendment Number One
dated June 16, 1994, Amendment Number Two dated June 24, 1994, and
Amendment Number Three dated June 30, 1994, Extension of Closing
dated June 23, 1994, and July 11, 1994 letter agreement.
3.1 Certificate of Incorporation, as corrected by Certificate of
Correction of Certificate of Incorporation dated March 27, 1995, and
as amended by Certificate of Amendment to the Certificate of
Incorporation dated November 1, 1995, Certificate of Designation of
Rights, Preferences and Privileges of $1,000.00 6% Cumulative
Convertible Preferred Stock of the Registrant dated April 19, 1996,
and Certificate of Designation of Rights, Preferences and Privileges
of Series B $1,000.00 6% Cumulative Convertible Preferred Stock of
the Registrant dated June 5, 1996
10.18 Letter agreement dated October 5, 1993 between The Tracker
Corporation and Symbol Technologies, Inc., as amended by letter from
The Tracker Corporation to Symbol Technologies Canada, Inc. dated
November 23, 1995, and letter from Symbol Technologies Canada, Inc.
to The Tracker Corporation dated November 27, 1995
23.1 Consent of Price Waterhouse LLP
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
REORGANIZATION AGREEMENT
by and among
ULTRA CAPITAL CORP., A NEVADA CORPORATION
JEFF W. HOLMES AND R. KIRK BLOSCH
AND
THE TRACKER CORPORATION, A CORPORATION
ORGANIZED UNDER THE LAWS OF THE PROVINCE
OF ONTARIO, CANADA
---------------------
AS OF MAY 26, 1994
----------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Premises............................................................................................... 1
Agreement.............................................................................................. 1
ARTICLE I.............................................................................................. 1
REPRESENTATIONS AND WARRANTIES OF TRACKER (CANADA)............................................ 1
Section 1.01 Organization........................................................ 1
Section 1.02 Capitalization...................................................... 2
Section 1.03 Subsidiaries........................................................ 2
Section 1.04 Financial Statements................................................ 2
Section 1.05 Information......................................................... 3
Section 1.06 Options or Warrants................................................. 3
Section 1.07 Absence of Certain Changes or Events................................ 3
Section 1.08 Title and Related Matters........................................... 4
Section 1.09 Litigation and Proceedings.......................................... 5
Section 1.10 Contracts........................................................... 5
Section 1.11 Material Contract Defaults.......................................... 5
Section 1.12 No Conflict With Other Instruments.................................. 6
Section 1.13 Governmental Authorizations......................................... 6
Section 1.14 Compliance With Laws and Regulations................................ 6
Section 1.15 Insurance........................................................... 6
Section 1.16 Approval of Agreement............................................... 6
Section 1.17 Material Transactions or Affiliations............................... 7
Section 1.18 Labor Relations..................................................... 7
Section 1.19 Tracker (Canada) Shareholder List................................... 7
Section 1.20 Tracker (Canada) Schedules.......................................... 7
ARTICLE II............................................................................................. 8
REPRESENTATIONS AND WARRANTIES
OF ULTRA CAPITAL AND THE ULTRA CAPITAL SHAREHOLDERS......................................... 8
Section 2.01 Organization........................................................ 9
Section 2.02 Capitalization...................................................... 9
Section 2.03 Subsidiaries........................................................ 10
Section 2.04 Financial Statements................................................ 10
Section 2.05 Information......................................................... 10
Section 2.06 Options or Warrants................................................. 11
Section 2.07 Absence of Certain Changes or Events................................ 11
Section 2.08 Title and Related Matters........................................... 12
Section 2.09 Litigation and Proceedings.......................................... 12
Section 2.10 Contracts........................................................... 12
Section 2.11 No Conflict With Other Instruments.................................. 13
Section 2.12 Governmental Authorizations......................................... 13
Section 2.13 Compliance With Laws and Regulations................................ 13
Section 2.14 Insurance........................................................... 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 2.15 Approval of Agreement............................................... 13
Section 2.16 Continuity of Business Enterprise................................... 13
Section 2.17 Material Transactions or Affiliations............................... 14
Section 2.18 Labor Relations..................................................... 14
Section 2.19 Ultra Capital Schedules............................................. 14
ARTICLE III............................................................................................ 15
PLAN OF ARRANGEMENT........................................................................... 15
Section 3.01 Restructuring....................................................... 15
Section 3.02 Exchange Agency and Voting Trust Agreement and Guarante............. 17
Section 3.03 The Share Exchange Offer............................................ 18
Section 3.04 Application for Judicial Approval of Arrangement Documens and
Exemption from Registration under Section 3(a)(10) of the 1933 Act.. 20
Section 3.05 Form of Transaction................................................. 20
Section 3.06 Closing............................................................. 20
Section 3.07 Closing Events...................................................... 21
Section 3.08 Termination......................................................... 21
ARTICLE IV............................................................................................. 23
SPECIAL COVENANTS............................................................................. 23
Section 4.01 Shareholder Action of Ultra Capital................................. 23
Section 4.02 Additional Financing................................................ 23
Section 4.03 Report on Form 8-K.................................................. 23
Section 4.04 Access to Properties and Records.................................... 24
Section 4.05 Availability of Rule 144............................................ 24
Section 4.06 Third Party Consents................................................ 24
Section 4.07 Actions Prior to Closing............................................ 24
Section 4.08 Waiver of Registration Rights....................................... 25
Section 4.09 Ultra Capital Shareholders Covenant................................. 25
ARTICLE V.............................................................................................. 26
CONDITIONS PRECEDENT TO OBLIGATIONS OF ULTRA CAPITAL.......................................... 26
Section 5.01 Accuracy of Representations......................................... 26
Section 5.02 Shareholder Approval................................................ 26
Section 5.03 Judicial Approval................................................... 26
Section 5.04 Shareholder Approval................................................ 27
Section 5.05 Officer's Certificate............................................... 27
Section 5.06 No Material Adverse Change.......................................... 27
Section 5.07 Good Standing....................................................... 27
Section 5.08 Opinion of Counsel to Tracker (Canada).............................. 27
Section 5.09 Opinion of General Counsel of Tracker (Canada)...................... 28
Section 5.10 Financial Condition of Tracker (Canada); Manual Listing............. 28
Section 5.11 Acknowledgement of Agreement by Trustee of Exchange Trust............29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 5.12 Board Approval...................................................... 29
Section 5.13 Termination under Section 3.08...................................... 29
Section 5.14 Other Items......................................................... 29
ARTICLE VI............................................................................................. 29
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRACKER
(CANADA)................................................................................... 29
Section 6.01 Accuracy of Representations......................................... 29
Section 6.02 Shareholder Approval................................................ 29
Section 6.03 Repayment of Loans to Ultra Capital Shareholders.................... 30
Section 6.04 Officer's Certificate............................................... 30
Section 6.05 No Material Adverse Change.......................................... 30
Section 6.06 Good Standing....................................................... 30
Section 6.07 Opinion of Counsel to Ultra Capital................................. 30
Section 6.08 Liabilities......................................................... 31
Section 6.09 Acknowledgement of Agreement by Trustee of Exchange Trust........... 32
Section 6.10 Judicial Approval................................................... 32
Section 6.11 Board Approval...................................................... 32
Section 6.12 Termination under Section 3.08...................................... 32
Section 6.13 Filings............................................................. 32
Section 6.14 Filing of Proxy Statement with SEC.................................. 32
Section 6.15 Other Items......................................................... 32
ARTICLE VII............................................................................................ 32
MISCELLANEOUS................................................................................. 32
Section 7.01 Brokers............................................................. 32
Section 7.02 Governing Law....................................................... 32
Section 7.03 Notices............................................................. 33
Section 7.04 Attorneys' Fees..................................................... 33
Section 7.05 Confidentiality..................................................... 34
Section 7.06 Third Party Beneficiaries........................................... 34
Section 7.07 Entire Agreement.................................................... 34
Section 7.08 Survival; Indemnification........................................... 34
Section 7.09 Counterparts........................................................ 36
Section 7.10 Amendment or Waiver................................................. 36
Section 7.11 Costs............................................................... 36
Section 7.12 Exhibits and Schedules.............................................. 36
Section 7.13 Headings............................................................ 37
Section 7.14 Prevailing Document................................................. 37
Exhibit A Shareholders of Record of Tracker (Canada)
Exhibit B Articles of Amendment of Tracker (Canada)
Exhibit C Articles of Arrangement of Tracker (Canada)
Exhibit D Exchange Agency and Voting Trust Agreement
Exhibit E Guarantee
</TABLE>
iii
<PAGE> 5
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT (the "Agreement"), is entered into as of
the 26th day of May, 1994, by and among Ultra Capital Corp., a Nevada
corporation (hereinafter referred to as "Ultra Capital"); Jeff W. Holmes and R.
Kirk Blosch (hereinafter referred to as the "Ultra Capital Shareholders"); and
The Tracker Corporation, a corporation organized under the laws of the Province
of Ontario, Canada (hereinafter referred to as "Tracker (Canada)"), based on the
following:
PREMISES
Tracker (Canada) has determined that it is in its best interest to be
acquired by a corporation domiciled in the United States to improve its access
to the United States' capital markets, and thereby, significantly increase
Tracker (Canada)'s ability to obtain funding to meet the financing requirements
to expand its business operations into international markets.
This Agreement provides for the reorganization of Tracker (Canada) and
Ultra Capital, all on the terms and conditions hereinafter provided.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived from this Agreement, it is hereby agreed
as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF TRACKER (CANADA)
As an inducement to and to obtain the reliance of Ultra Capital and the
Ultra Capital Shareholders, except as set forth in this Agreement, on any
Tracker (Canada) Schedules (as hereinafter defined) or on the Tracker Financial
Statements (as hereinafter defined), Tracker (Canada) represents and warrants as
follows:
Section 1.01 Organization. Tracker (Canada) is a corporation duly
organized, validly existing, and in good standing under the laws of Ontario and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the countries,
provinces and states in which the character and location of the assets owned by
it or the nature of the business transacted by it requires qualification and
where failure to qualify would have a materially adverse effect on Tracker
(Canada). Included in the Tracker (Canada) Schedules are complete and correct
copies of the articles of incorporation and bylaws (or comparable charter
documents) of Tracker (Canada) as in effect
<PAGE> 6
on the date hereof. The execution and delivery of this Agreement do not violate
any provision of Tracker (Canada)'s articles of incorporation or its bylaws. The
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not violate any provision of Tracker (Canada)'s
articles of incorporation, as amended pursuant to Article III herein, or bylaws.
Tracker (Canada) has taken all corporate action required by law, its articles of
incorporation, its bylaws, or otherwise to authorize the execution and delivery
of this Agreement. Tracker (Canada) has full corporate power, authority, and
legal right and has taken all corporate action required by law, its articles of
incorporation, as amended pursuant to Article III herein, bylaws, and otherwise
to consummate the transactions herein contemplated.
This Agreement has been duly executed and delivered by Tracker (Canada)
and constitutes, and any other agreements relating to this Agreement, when
executed and delivered by Tracker (Canada), will be duly executed and delivered
and will constitute, the legal, valid and binding obligations of Tracker
(Canada), enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights and remedies and to the exercise of judicial
discretion in accordance with general principles of equity.
Section 1.02 Capitalization. As of the date hereof, the authorized
capitalization of Tracker (Canada) consists of an unlimited number of common
shares (the "Tracker (Canada) Common Shares"), no par value, of which 42,341,596
shares were issued and outstanding and 4,283,504 shares were unissued but
reserved as of May 26, 1994. All issued and outstanding shares are legally
issued, fully paid, and nonassessable and not issued in violation of the
preemptive or other rights of any person.
Section 1.03 Subsidiaries. Tracker (Canada) does not have any
subsidiaries and does not own, beneficially or of record, any shares of any
other corporation or any partnership interest or similar interest in any other
entity.
Section 1.04 Financial Statements.
(a) Included in the Tracker (Canada) Schedules is the audited
balance sheet of Tracker (Canada) at March 31, 1994 (the "Tracker
Balance Sheet"), and the related audited statements of operations,
stockholders' equity, and cash flows for the period from inception on
May 6, 1993, through March 31, 1994, together with the notes thereto
and the opinion of Price Waterhouse, Chartered Accountants, with
respect to such financial statements (collectively, the "Tracker
Financial Statements").
(b) The Tracker Financial Statements are true and correct as
of the dates shown and have been prepared in accordance with United
States and Canadian generally accepted accounting principles. The
Tracker Balance Sheet presents fairly as of its effective date the
financial condition of Tracker (Canada). As of the date of such Balance
Sheet, Tracker (Canada) did not have any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet
or the notes thereto, prepared in accordance with United States and
Canadian generally accepted accounting principles, except as and to the
extent reflected or reserved against therein. All assets and
liabilities
2
<PAGE> 7
reflected therein are properly reported and present fairly the
financial position of Tracker (Canada) in accordance with United States
and Canadian generally accepted accounting principles.
(c) Tracker (Canada) has no liabilities with respect to the
payment of any federal or provincial taxes (including any deficiencies,
interest, or penalties), except for taxes accrued but not yet due and
payable.
(d) Tracker (Canada) has filed all federal and provincial
income tax returns required to be filed by it from inception to the
date hereof.
(e) The books and records, financial and others, of Tracker
(Canada) are in all material respects complete and correct and have
been maintained in accordance with good business and accounting
practices.
(f) Tracker (Canada) has no material contingent liabilities,
direct or indirect, matured or unmatured.
Section 1.05 Information. The information concerning Tracker (Canada)
set forth in this Agreement and in the Tracker (Canada) Schedules is complete
and accurate in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made, not
misleading.
Section 1.06 Options or Warrants. There are no existing options,
warrants, calls, reservations or commitments of any character relating to the
authorized and unissued Tracker (Canada) common stock, except options, warrants,
calls, or commitments, if any, to which Tracker (Canada) is not a party and by
which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Since March 31,1994:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Tracker
(Canada) or (ii) any damage, destruction, or loss to Tracker (Canada)
(whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or condition of
Tracker (Canada);
(b) Tracker (Canada) has not (i) except for any amendments
pursuant to Article III herein, amended its articles of incorporation
or bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are extraordinary or material
considering the business of Tracker (Canada); (iv) made any material
change in its method of management, operation, or accounting; (v)
entered into any other material transactions outside the ordinary
course of Tracker (Canada)'s business; (vi) made any accrual or
arrangement for or payment of bonuses
3
<PAGE> 8
or special compensation of any kind or any severance or termination pay
to any present or former officer or employee; (vii) increased the rate
of compensation payable or to become payable by it to any of its
officers or directors or any of its employees whose monthly
compensation exceeds $5,000; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement,
or other employee benefit plan, payment, or arrangement made to, for,
or with its officers, directors, or employees;
(c) Tracker (Canada) has not (i) granted or agreed to grant
any options, warrants, or other rights for its stocks, bonds, or other
corporate securities calling for the issuance thereof; (ii) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the most recent Tracker
Balance Sheet, and current liabilities incurred since that date in the
ordinary course of business; (iv) sold or transferred, or agreed to
sell or transfer, any of its assets, properties, or rights (except
assets, properties, or rights not used or useful in its business which,
in the aggregate have a value of less than $10,000), or canceled, or
agreed to cancel, any debts or claims (except debts or claims which in
the aggregate are of a value of less than $10,000); (v) made or
permitted any amendment or termination of any contract, agreement, or
license to which it is a party if such amendment or termination is
material, considering the business of Tracker (Canada); or (vi) issued,
delivered, or agreed to issue or deliver any stock, bonds, or other
corporate securities, including debentures (whether authorized and
unissued or held as treasury stock); and
(d) to the best knowledge of Tracker (Canada), Tracker
(Canada) is not in violation of any law or regulation the violation of
which would materially and adversely affect the business, operations,
properties, assets, or condition of Tracker (Canada).
Section 1.08 Title and Related Matters. Tracker (Canada) has good and
marketable title to all of its properties, inventory, interests in properties,
and assets, real and personal, which are reflected in the Tracker Financial
Statements or acquired after that date (except properties, interests in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent and (b)
such imperfections of title and easements as do not and will not materially
detract from or interfere with the present or proposed use of the properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties. Tracker (Canada) owns or has the right
to use all procedures, techniques, business plans, methods of management, or
other information utilized in connection with Tracker (Canada)'s business, the
loss of which would result in a materially adverse effect on its business or
financial condition. To the best knowledge of Tracker (Canada), its products do
not infringe on the patent, copyrights, trade secrets, or other proprietary
right of any third person.
4
<PAGE> 9
Section 1.09 Litigation and Proceedings. There are no material actions,
suits, or proceedings pending or, to the knowledge of Tracker (Canada),
threatened by or against Tracker (Canada), or affecting Tracker (Canada) or its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind,
nor is it aware of any basis for such actions, suits or proceedings. Tracker
(Canada) does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, award, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
Section 1.10 Contracts.
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which Tracker (Canada) is a
party or by which it or any of its properties are bound, which are
material to the operations of Tracker (Canada) taken as a whole;
(b) Tracker (Canada) is not a party to or bound by, and the
properties of Tracker (Canada) are not subject to, any contract,
agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction,
decree, or award which materially and adversely affects, or in the
future may (as far as Tracker (Canada) can now foresee) materially and
adversely affect, the business, operations, properties, assets, or
condition of Tracker (Canada); and
(c) Tracker (Canada) is not a party to any oral or written (i)
contract for the employment of any officer or employee which is not
terminable on 30 days (or less) notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which Tracker (Canada) is
a primary obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations,
which, in the aggregate do not exceed $10,000; (v) consulting or other
similar contracts with an unexpired term of more than one year or
providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) agreement with any present or
former officer or director of Tracker (Canada); or (viii) contract,
agreement, or other commitment involving payments by it of more than
$10,000 in the aggregate.
Section 1.11 Material Contract Defaults. Tracker (Canada) is not in
default in any material respect under the terms of any outstanding contract,
agreement, lease, or other commitment which is material to the business,
operations, properties, assets, or condition of Tracker (Canada), and there is
no event of default or other event which, with notice or lapse of time or both,
would constitute a default in any material respect under any such contract,
agreement, lease, or other commitment in respect of which Tracker (Canada) has
not taken adequate steps to prevent such a default from occurring.
5
<PAGE> 10
Section 1.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Tracker
(Canada) is a party or to which any of its properties or operations are subject.
No provision of the articles of incorporation or other instruments or agreements
to which Tracker (Canada) is a party or by which it is bound or to which it or
its properties or assets are subject requires the consent or authorization of
any other person or entity as a condition precedent to the consummation of the
transactions contemplated by this Agreement.
Section 1.13 Governmental Authorizations. Tracker (Canada) holds all
licenses, franchises, permits, and other governmental authorizations which are
legally required to enable Tracker (Canada) to conduct its business in all
material respects as conducted on the date hereof. Except for its articles of
incorporation, as amended (or comparable charter documents), there are no
licenses, permits, or other governmental authorizations, requests, or
applications therefor pursuant to which Tracker (Canada) carries on or proposes
to carry on its business (except those which, in the aggregate, are immaterial
to the present or proposed business of Tracker (Canada)). Except for the
approval of the Ontario Court of Justice (General Division) (the "Ontario
Court") of the Articles of Arrangement (substantially in the form of Exhibit C
attached hereto), Plan of Arrangement (substantially in the form of Appendix I
of Exhibit C attached hereto), this Agreement and all transactions contemplated
thereunder (collectively referred to herein as the "Arrangement Documents") and
compliance with Canadian provincial and U.S. federal and state securities and
corporation laws, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any Canadian or foreign court or
other governmental body is required in connection with the execution and
delivery by Tracker (Canada) of this Agreement and the consummation by Tracker
(Canada) of the transactions contemplated hereby.
Section 1.14 Compliance With Laws and Regulations. Tracker (Canada) has
complied with all applicable Canadian and foreign statutes and regulations of
any federal, provincial, state or other governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets, or condition of Tracker
(Canada) or except to the extent that noncompliance would not result in any
material liability for Tracker (Canada).
Section 1.15 Insurance. All of the insurable properties of Tracker
(Canada) are insured for Tracker (Canada)'s benefit in the amount of not less
than 80% of their replacement value against all risks customarily insured
against by persons owning or operating similar properties in the localities
where such properties are located and under valid and enforceable policies
issued by insurers of recognized responsibility. Such policy or policies
containing substantially equivalent coverage will be outstanding and in full
force at the Closing Date, as hereinafter defined.
Section 1.16 Approval of Agreement. The board of directors of Tracker
(Canada) has authorized the execution and delivery of the Arrangement Documents
by Tracker (Canada), has approved the transactions contemplated hereby, and has
approved the submission of the
6
<PAGE> 11
Arrangement Documents to the shareholders of Tracker (Canada) for their approval
with the recommendation that the Arrangement Documents be accepted.
Section 1.17 Material Transactions or Affiliations. Set forth in the
Tracker (Canada) Schedules is a copy or description of every material contract,
agreement, or arrangement between Tracker (Canada) and any predecessor and any
person who was at the time of such contract, agreement, or arrangement an
officer, director, or person owning of record, or known by Tracker (Canada) to
own beneficially, 10% or more of the issued and outstanding common stock of
Tracker (Canada) and which is to be performed in whole or in part after the date
hereof. Except as otherwise disclosed herein, no officer, director, or 10%
shareholder of Tracker (Canada) has, or has had since inception of Tracker
(Canada), any interest, direct or indirect, in any material transaction with
Tracker (Canada). There are no commitments by Tracker (Canada), whether written
or oral, to lend any funds to, borrow any funds from, or enter into any other
material transaction with, any such affiliated person.
Section 1.18 Labor Relations. Tracker (Canada) has never had a work
stoppage resulting from labor problems. To the best knowledge of Tracker
(Canada), no union or other collective bargaining organization is organizing or
attempting to organize any employee of Tracker (Canada).
Section 1.19 Tracker (Canada) Shareholder List. Attached hereto is a
list of the shareholders of record of Tracker (Canada) as of the date hereof.
Section 1.20 Tracker (Canada) Schedules. Tracker (Canada) has delivered
to Ultra Capital the following schedules, which are collectively referred to as
the "Tracker (Canada) Schedules" and which consist of separate schedules dated
as of the date of execution of this Agreement and instruments and data as of
such date, all certified by the executive vice president of Tracker (Canada) as
complete, true, and correct:
(a) a schedule containing complete and correct copies of the
articles of incorporation and bylaws (or comparable charter documents)
of Tracker (Canada) and any amendments thereto in effect as of the date
of this Agreement;
(b) a schedule including the Tracker Financial Statements
identified in Section 1.04(a);
(c) a schedule listing all existing Options, Warrants, Calls,
or Commitments of any character relating to the authorized and unissued
Tracker (Canada) Common Shares, except Options, Warrants, Calls, or
Commitments, if any, to which Tracker (Canada) is not a party and by
which it is not bound;
(d) a schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of Tracker (Canada) since the most recent Tracker
(Canada) balance sheet provided to Ultra Capital;
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(e) a schedule containing a description of all real property
owned by Tracker (Canada), together with a description of every
mortgage, deed of trust, pledge, lien, agreement, encumbrance, claim,
or equity interest of any nature whatsoever in such real property;
(f) a schedule containing true and correct copies of all
material contracts, agreements, or other instruments to which Tracker
(Canada) is a party or by which it or its properties are bound,
specifically including all contracts, agreements, or arrangements
referred to in Section 1.10;
(g) a schedule containing copies of the insurance policies
referred to in Section 1.15;
(h) a schedule describing any material transactions with
affiliates pursuant to Section 1.17 of this Agreement;
(i) a list of all executive employees of Tracker (Canada),
setting forth the current compensation of each and indicating whether
such employees are employed pursuant to written agreements; and
(j) a schedule setting forth any other information, together
with any required copies of documents, required to be disclosed in the
Tracker (Canada) Schedules by Sections 1.01 through 1.19.
The Tracker (Canada) Schedules attached hereto form a part of this
Agreement. The capitalized terms used in the Tracker (Canada) Schedules shall
have the meanings ascribed to them in this Agreement, unless otherwise defined
in such schedule or unless the context otherwise requires. Each reference in the
Tracker (Canada) Schedules to a Section of this Agreement is for convenience
only, and does not imply that the disclosure is relevant only to that Section
and each matter referred to in the Tracker (Canada) Schedules shall be deemed to
have been disclosed for all relevant purposes in all other Tracker (Canada)
Schedules attached to this Agreement.
Tracker (Canada) shall cause the Tracker (Canada) Schedules and the
instruments and data delivered to Ultra Capital hereunder to be updated after
the date hereof up to and including the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF ULTRA CAPITAL AND THE ULTRA CAPITAL SHAREHOLDERS
As an inducement to, and to obtain the reliance of, Tracker (Canada),
except as set forth in this Agreement, on any Ultra Capital Schedules (as
hereinafter defined) or on the Ultra Financial Statements (as hereinafter
defined), Ultra Capital and the Ultra Capital Shareholders, jointly and
severally represent and warrant as follows:
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Section 2.01 Organization. Ultra Capital is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Nevada, and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets and to
carry on its business in all material respects as it is now being conducted, and
there is no jurisdiction in which it is not qualified in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the Ultra Capital Schedules are complete
and correct copies of the certificate of incorporation and bylaws of Ultra
Capital as in effect on the date hereof. The execution and delivery of this
Agreement do not violate any provision of Ultra Capital's certificate of
incorporation or its bylaws. The consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not violate any
provision of Ultra Capital's certificate of incorporation, either as filed in
Delaware or as amended and restated in Nevada, as the case may be, pursuant to
Article III herein, or bylaws. Ultra Capital has taken all corporate action
required by law, its certificate of incorporation, its bylaws, or otherwise to
authorize the execution and delivery of this Agreement, except for obtaining the
approval of its shareholders. Except for such approval, Ultra Capital has full
corporate power, authority, and legal right and has taken all corporate action
required by law, its certificate of incorporation, either as filed in Delaware
or as amended and restated in Nevada, as the case may be, pursuant to Article
III herein, bylaws, or otherwise to consummate the transactions herein
contemplated.
To the best knowledge of the Ultra Capital Shareholders, during the
period from March 31, 1992 to the present date, Ultra Capital has complied in
all material respects with the applicable requirements of the Securities Act of
1933, as amended, (the "1933 Act") and the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and with the rules and regulations promulgated under
such acts. With respect to the period prior to March 31, 1992, the Ultra Capital
Shareholders have not received notice or demand of any act or action taken or
omitted to be taken by Ultra Capital which resulted or is alleged to have
resulted in a material violation of the provisions of such securities acts and
regulations, and the Ultra Capital Shareholders are not aware of any basis for
any such notice or demand.
This Agreement has been duly executed and delivered by Ultra Capital
and the Ultra Capital Shareholders and constitutes, and any other agreements
relating to this Agreement, when executed and delivered by Ultra Capital and the
Ultra Capital Shareholders, will be duly executed and delivered and will
constitute, the legal, valid and binding obligations of Ultra Capital and Ultra
Capital Shareholders, enforceable against each of them in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws applicable to creditors' rights and remedies and to the exercise
of judicial discretion in accordance with general principles of equity.
Section 2.02 Capitalization. Ultra Capital's authorized capitalization
consists of 20,000,000 shares of common stock, par value $0.001, (the "Ultra
Capital Common Stock") 560,045 of which are issued and outstanding, and 500,000
shares of preferred stock, par value $0.001, none of which are issued and
outstanding. All issued and outstanding shares are legally issued, fully paid,
and nonassessable and not issued in violation of the preemptive or other rights
of any person. Following the recapitalization pursuant to which the issued and
outstanding
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shares of the Ultra Capital Common Stock will be forward split on a
1.32147-for-1 basis, Ultra Capital will have a total of approximately 740,081
shares of Ultra Capital Common Stock outstanding.
Section 2.03 Subsidiaries. Ultra Capital does not have any subsidiaries
and does not own, beneficially or of record, shares of any other corporation or
any partnership or other similar interest in any other entity.
Section 2.04 Financial Statements.
(a) Included in the Ultra Capital Schedules are the audited
balance sheets of Ultra Capital as of December 31, 1993 and 1992 (the
"Ultra Balance Sheets"), and the related audited statements of
stockholders' equity, income and retained earnings, and cash flows for
the years ended December 31, 1993, 1992, and 1991, together with the
notes to such statements and the opinion of Jones, Jensen, Orton &
Company, certified public accountants, with respect to such financial
statements (collectively, the "Ultra Financial Statements").
(b) The Ultra Financial Statements are true and correct as of
the dates shown and have been prepared in accordance with United States
generally accepted accounting principles consistently applied
throughout the periods involved. The Ultra Balance Sheets present
fairly as of their respective dates the financial condition of Ultra
Capital. As of the dates of such Balance Sheets, Ultra Capital did not
have any liabilities or obligations (absolute or contingent) which
should be reflected in a balance sheet or the notes thereto prepared in
accordance with United States generally accepted accounting principles,
except as and to the extent reflected or reserved against therein. All
assets and liabilities reflected therein are properly reported and
present fairly the financial position of Ultra Capital, in accordance
with United States generally accepted accounting principles.
(c) Ultra Capital has no liabilities with respect to the
payment of any federal, state, county, local, or other taxes (including
any deficiencies, interest, or penalties), except for taxes accrued but
not yet due and payable.
(d) Ultra Capital has filed all state, federal, and local
income tax returns required to be filed by it from inception through
the date hereof.
(e) The books and records, financial and others, of Ultra
Capital are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(f) Ultra Capital has no material contingent liabilities,
direct or indirect, matured or unmatured.
Section 2.05 Information. The information concerning Ultra Capital set
forth in this Agreement and the Ultra Capital Schedules is complete and accurate
in all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required
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to make the statements made, in light of the circumstances under which they were
made, not misleading.
Section 2.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to authorized and
unissued Ultra Capital Common Stock: except for 130,000 shares reserved for
issuance under the 1992 Stock Option and Stock Award Plan, and options,
warrants, calls, or commitments, if any, to which Ultra Capital is not a party
and by which it is not bound. No options, warrants or shares have been granted
or awarded under the 1992 Stock Option and Stock Award Plan.
Section 2.07 Absence of Certain Changes or Events. Since December 31,
1993:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Ultra
Capital; or (ii) any damage, destruction, or loss to Ultra Capital
(whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or condition of
Ultra Capital;
(b) Ultra Capital has not (i) except for either the
certificate of incorporation in Delaware or the amended and restated
certificate of incorporation for Nevada, as contemplated by Article III
herein, amended its certificate of incorporation or bylaws; (ii)
declared or made, or agreed to declare or make any payment of dividends
or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its
capital stock; (iii) waived any rights of value which in the aggregate
are extraordinary or material considering the business of Ultra
Capital; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material
transactions; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its employees whose
monthly compensation exceeds $5,000; or (viii) made any increase in any
profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement,
made to, for, or with its officers, directors, or employees;
(c) Ultra Capital has not (i) granted or agreed to grant any
options, warrants, or other rights for its stocks, bonds, or other
corporate securities calling for the issuance thereof; (ii) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business which have been
disclosed in writing to Tracker (Canada); (iii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the most recent Ultra Balance
Sheet, and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or
transfer, any of its assets, property, or rights (except assets,
property, or rights not used or useful in its business which, in the
aggregate have a value of less than $5,000), or cancelled, or agreed to
cancel, any debts or claims
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(except debts or claims which in the aggregate are a value of less than
$5,000); (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of Ultra
Capital; or (vi) issued, delivered, or agreed to issue or deliver any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of Ultra Capital or the Ultra
Capital Shareholders, Ultra Capital is not in violation of any law or
regulation the violation of which would materially and adversely affect
the business, operations, properties, assets, or condition of Ultra
Capital.
Section 2.08 Title and Related Matters. Ultra Capital owns no real
property. Ultra Capital has good title to all of the assets which are reflected
in the most recent Ultra Balance Sheet or acquired after that date (except
assets sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances except
statutory liens or claims not yet delinquent.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
or proceedings pending or, to the knowledge of Ultra Capital and the Ultra
Capital Shareholders, threatened by or against or affecting Ultra Capital, at
law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind, nor
are they aware of any basis for such actions, suits or proceedings. Ultra
Capital does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, award, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality and the Ultra
Capital Shareholders are not aware of any such default.
Section 2.10 Contracts.
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which Ultra Capital is a
party or by which it or any of its properties are bound;
(b) Ultra Capital is not a party to or bound by any contract,
agreement, commitment, or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree,
or award which materially and adversely affects, or in the future may
(as far as Ultra Capital or the Ultra Capital Shareholders can now
foresee) materially and adversely affect, the business, operations,
properties, assets, or condition of Ultra Capital; and
(c) Ultra Capital is not a party to or bound by any material
oral or written (i) contract for the employment of any officer or
employee; (ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan, agreement,
or arrangement covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract, or indenture
relating to the borrowing of money; (iv) guaranty of any obligation;
(v) consulting or other similar
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contract providing for payments in excess of $1,000 in the aggregate;
(vi) collective bargaining agreement; (vii) agreement with any present
or former officer or director of Ultra Capital; or (viii) contract,
agreement, or other commitment involving payments by it of more than
$1,000 in the aggregate.
Section 2.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute a default under, any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Ultra Capital is a party or to which
any of its assets or operations are subject. No provision of the certificate of
incorporation or other instruments or agreements to which Ultra Capital or the
Ultra Capital Shareholders are a party or by which any of them is bound or to
which any of them or their respective properties or assets are subject requires
the consent or authorization of any other person or entity as a condition
precedent to the consummation of the transactions contemplated by this
Agreement.
Section 2.12 Governmental Authorizations. Ultra Capital has all
licenses, franchises, permits, and other government authorizations that are
legally required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with U.S.
federal and state securities or corporation laws, no authorization, approval,
consent, or order of, or registration, declaration, or filing with, any U.S. or
foreign court or other governmental body is required in connection with the
execution and delivery by Ultra Capital of this Agreement and the consummation
by Ultra Capital of the transactions contemplated hereby.
Section 2.13 Compliance With Laws and Regulations. Ultra Capital has
complied with all applicable U.S. and foreign statutes and regulations of any
federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets, or condition of Ultra
Capital or except to the extent that noncompliance would not result in any
material liability to Ultra Capital.
Section 2.14 Insurance. Ultra Capital owns no insurable properties and
carries no casualty or liability insurance.
Section 2.15 Approval of Agreement. The board of directors of Ultra
Capital has authorized and approved the execution and delivery of this Agreement
by Ultra Capital and consummation of the transactions contemplated hereby and
will promptly submit this Agreement and the transactions contemplated hereby for
consideration by its shareholders with the recommendation that such proposals be
approved.
Section 2.16 Continuity of Business Enterprise. Ultra Capital has no
commitment or present intention to liquidate Tracker (Canada) or sell or
otherwise dispose of a material portion of Tracker (Canada)'s business or assets
following the consummation of the transactions contemplated herein.
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Section 2.17 Material Transactions or Affiliations. There exists no
material contract, agreement, or arrangement between Ultra Capital and any
person who was at the time of such contract, agreement, or arrangement an
officer, director, or person owning of record or known by Ultra Capital to own
beneficially, 10% or more of the issued and outstanding common stock of Ultra
Capital and which is to be performed in whole or in part after the date hereof
or was entered into not more than three years prior to the date hereof. No
officer, director, or 10% shareholder of Ultra Capital has, or has had during
the last preceding full fiscal year, any known interest in any material
transaction with Ultra Capital which was material to the business of Ultra
Capital. Ultra Capital has no commitment, whether written or oral, to lend any
funds to, borrow any money from, or enter into any other material transaction
with any such affiliated person.
Section 2.18 Labor Relations. Ultra Capital has never had a work
stoppage resulting from labor problems. Ultra Capital has no employees other
than its officers and directors.
Section 2.19 Ultra Capital Schedules. Ultra Capital has delivered to
Tracker (Canada) the following schedules, which are collectively referred to as
the "Ultra Capital Schedules," which are dated as of the date of this Agreement,
all certified by an officer of Ultra Capital to be complete, true, and accurate:
(a) a schedule containing complete and accurate copies of the
certificate of incorporation and bylaws of Ultra Capital and any
amendments thereto as in effect as of the date of this Agreement;
(b) the Ultra Financial Statements identified in Section
2.04(a);
(c) copies of the quarterly reports of Ultra Capital on Form
10-Q for the quarters ended March 31, June 30, and September 30, 1993
and March 31, 1994, a copy of Ultra Capital's annual report on Form
10-K for the year ended December 31, 1993, and copies of all current
reports of Ultra Capital on Form 8-K since its inception;
(d) a schedule containing true and correct copies of all
material contracts, agreements, or other instruments to which Ultra
Capital is a party or by which it or its properties are bound,
specifically including all contracts, agreements, or arrangements
referred to in Section 2.10 (whether or not material);
(e) a schedule describing any material transactions with
affiliates pursuant to Section 2.17 of this Agreement;
(f) a list of all executive employees of Ultra Capital,
setting forth a job description and the current compensation of each
and indicating whether such employees are employed pursuant to written
agreements;
(g) copies of all federal, state and local income tax returns
filed by Ultra Capital in the possession of Ultra Capital or the Ultra
Capital Shareholders; and
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(h) a schedule setting forth any other information required to
be disclosed in the Ultra Capital Schedules by Sections 2.01 through
2.19.
The Ultra Capital Schedules attached hereto form a part of this
Agreement. The capitalized terms used in the Ultra Capital Schedules shall have
the meanings ascribed to them in this Agreement, unless otherwise defined in
such schedule or unless the context otherwise requires. Each reference in the
Ultra Capital Schedules to a Section of this Agreement is for convenience only,
and does not imply that the disclosure is relevant only to that Section and each
matter referred to in the Ultra Capital Schedules shall be deemed to have been
disclosed for all relevant purposes in all other Ultra Capital Schedules
attached to this Agreement.
Ultra Capital shall cause the Ultra Capital Schedules and the
instruments to be delivered to Tracker (Canada) hereunder to be updated after
the date hereof up to and including the Closing Date.
ARTICLE III
PLAN OF ARRANGEMENT
Section 3.01 Restructuring. Tracker (Canada) or Ultra Capital, as the
case may be, shall, at or prior to the Closing Date, cause the following
transactions and events to take place in the following order: (i) Section
3.04(a); (ii) Subsections (a) through (f) of Section 3.01, in that order; (iii)
Section 3.04(b); (iv) Section 3.02; and (iv) Section 3.03, and Tracker (Canada)
or Ultra Capital, as the case may be, shall do all such things and execute and
deliver all such documents as are necessary, or in the opinion of their
respective boards of directors desirable, to give effect thereto.
(a) Shareholder Action of Tracker (Canada). Tracker (Canada)
shall cause a meeting of the Tracker (Canada) shareholders to be called
and held for the purpose of authorizing and approving, by way of
special resolution, the Arrangement Documents, all in accordance with
the applicable provisions of the laws of Ontario. Tracker (Canada)
shall also submit to its shareholders at such meeting proposals to
authorize and approve, by way of special resolution, articles of
amendment pursuant to which:
(i) an unlimited number of Class "A" Common Shares
(the "Tracker (Canada) Class A Common Shares") are authorized,
which Class A Common Shares shall have the rights, privileges,
restrictions and conditions set forth in Exhibit B attached
hereto; and
(ii) cause all of the outstanding shares of the
Tracker (Canada) Common Shares to be consolidated on a seven
to one basis as set forth in Exhibit B attached hereto.
As provided under the terms of the outstanding warrants to
purchase shares of Tracker (Canada) Common Shares, the warrant holders shall
become entitled to purchase the
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number of Exchangeable Shares, rather than shares of Tracker (Canada) Common
Shares, as adjusted for the recapitalization in this subsection.
(b) Shareholder Action of Ultra Capital. Ultra Capital shall,
at a special meeting of its shareholders, present for the authorization
and approval of such shareholders, the Arrangement Documents. Ultra
Capital shall also submit to its shareholders at such meeting proposals
to:
(i) authorize and approve a recapitalization pursuant
to which the issued and outstanding shares of Ultra Capital
Common Stock shall be forward split on a 1.32147-for-1 basis,
so that the number of such shares is increased to
approximately 740,081;
(ii) as requested by Tracker (Canada), authorize and
approve a merger resulting in the reincorporation of Ultra
Capital in Delaware; provided, however, that Tracker (Canada)
shall have the option to withdraw such request, thereby
electing to leave Ultra Capital as a corporation incorporated
under the laws of Nevada (rather than reincorporating in
Delaware); in the event that Ultra Capital reincorporates in
Delaware, Ultra Capital shall use its best efforts to obtain
the consent of the Tracker Fund, L.P. to the use of the name
"The Tracker Corporation" in Delaware;
(iii) authorize and approve either a certificate of
incorporation and bylaws for Ultra Capital as it is
reincorporated in Delaware or, authorize and approve an
amended and restated certificate of incorporation and amended
and restated bylaws for Ultra Capital in Nevada, as the case
may be, which, in either case shall:
(A) create a new Class "B" Voting Common
Stock (the "Ultra Voting Stock") having no par value;
no right to cash dividends; and liquidation rights of
$0.0001 per share, junior to the rights of the
holders of the Ultra Capital Common Stock; and shall
be redeemable and entitled to one vote per share
voting together as a single class with the holders of
the issued and outstanding shares of Ultra Capital
Common Stock;
(B) change the name of Ultra Capital to a
name selected by Tracker (Canada);
(C) adopt a fair price provision
satisfactory to Tracker (Canada);
(D) adopt for the bylaws a provision
satisfactory to Tracker (Canada) which requires that
shareholders give advance notice to the corporation
of any shareholder proposal to be made at upcoming
shareholder meetings; and
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(E) include such other provisions in the
certificate of incorporation and bylaws as may be
requested by Tracker (Canada); and
(iv) authorize and approve the proposals as are set
forth in Section 4.01 herein.
(c) If Ultra Capital is to be reincorporated in Delaware,
Ultra Capital shall file a certificate of incorporation in Delaware and
articles of merger both in Delaware and Nevada, or alternatively, if
Ultra Capital shall maintain Nevada as its state of incorporation, file
an amended and restated certificate of incorporation in Nevada, to
effect the foregoing provisions.
(d) Tracker (Canada) shall file Articles of Amendment,
substantially in the form of Exhibit B attached hereto.
(e) Ultra Capital shall acquire 100 shares of the Tracker
(Canada) Class A Common Stock for $1.00 per share and Tracker (Canada)
shall issue a share certificate representing such shares in the name of
Ultra Capital.
(f) Tracker (Canada) shall file Articles of Arrangement,
substantially in the form of Exhibit C attached hereto, for a change,
redesignation and division of the Tracker (Canada) Common Shares into a
new class of shares designated as Exchangeable Preference Shares (the
"Exchangeable Shares"), having the rights, privileges, restrictions and
conditions set forth therein.
Section 3.02 Exchange Agency and Voting Trust Agreement and Guarantee.
(a) Exchange Agency and Voting Trust Agreement. Ultra Capital
shall and shall request Montreal Trust Company or such other
institution as Tracker (Canada) shall designate, as Trustee for the
benefit of the holders of the Exchangeable Shares, to execute and
deliver the Exchange Agency and Voting Trust Agreement (the "Exchange
Trust") substantially in the form of Exhibit D attached hereto and
Ultra Capital hereby agrees that it will issue the number of shares of
the Ultra Voting Stock equal to the number of Exchangeable Shares in
the name of the Trustee, to be held for the benefit of the holders of
the Exchangeable Shares in proportion to their relative ownership of
the aggregate number of issued and outstanding Exchangeable Shares
calculated from time to time and to be administered in accordance with
the terms of the Exchange Trust.
(b) The Guarantee. Ultra Capital and Tracker (Canada) hereby
agree to execute and deliver a Guarantee Agreement substantially in the
form of Exhibit E attached hereto (the "Guarantee"), pursuant to which
Ultra Capital shall agree that (i) in the event Tracker (Canada) does
not have adequate funds with which to pay any dividends on the
Exchangeable Shares which are required to be paid pursuant to Tracker
(Canada)'s Articles of Arrangement, Ultra Capital shall make a
contribution to Tracker (Canada)'s capital surplus to fund the payment
of the dividend by Tracker (Canada) to the holders of the Exchangeable
Shares, and (ii) in the event of a liquidation of Tracker
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(Canada), Ultra Capital shall guarantee a liquidation value of the
Exchangeable Shares, to be calculated in accordance with Tracker
(Canada)'s Articles of Arrangement and the terms and conditions of the
Guarantee.
Section 3.03 The Share Exchange Offer.
(a) Reservation of Unissued Shares of Ultra Capital Common
Stock. Prior to or on the Closing Date, Ultra Capital shall irrevocably
reserve and set aside for issuance in accordance with the terms and
conditions of the Exchange Trust the full number of shares of Ultra
Capital Common Stock deliverable upon the exchange of all shares of the
Exchangeable Shares then outstanding (including, as shares outstanding
for this purpose, the aggregate number of Exchangeable Shares which
would be issuable upon conversion of all warrants to purchase Tracker
(Canada) Common Shares). For purposes of this Agreement, the "Share
Exchange Offer" shall mean the exchange of Exchangeable Shares for the
Ultra Capital Common Stock reserved and set aside for issuance under
the Exchange Trust.
(b) Registration.
(i) Mandatory Registration. Ultra Capital hereby
covenants to the Trustee of the Exchange Trust, for the
express benefit of the holders of the Exchangeable Shares,
that on or about the first anniversary of the Closing Date
(the "First Anniversary"), Ultra Capital shall (A) file a
registration statement under the 1933 Act with the Securities
and Exchange Commission (the "SEC") covering the Share
Exchange Offer and resale of any shares of Ultra Capital
Common Stock received pursuant to the Share Exchange Offer
(the "Registration Statement"), (B) use its best efforts to
cause the Registration Statement to become effective, and (C)
use its best efforts to keep the Registration Statement
current, at the sole expense of Ultra Capital, for a one year
period following the First Anniversary (the "Mandatory
Registration"); provided, however, if, after the Registration
Statement has become effective, an exchange undertaken
pursuant to the Share Exchange Offer or resale of shares of
Ultra Capital Common Stock received pursuant to the Share
Exchange Offer (the "Exchange or Resale") pursuant to such
Registration Statement is interfered with by any stop order,
injunction or other order or requirement of any applicable
governmental authority, such registration shall be deemed not
to have been effected unless such stop order, injunction or
any other order or requirement shall subsequently have been
vacated or otherwise removed.
(ii) Suspension of Registration. Ultra Capital may
postpone or delay, for up to 120 days (the "Suspension
Period"), the Mandatory Registration (A) if, on the First
Anniversary, Ultra Capital would be required to prepare any
financial statements other than those it customarily prepares,
(B) if and (subject to the foregoing 120 day limit) for so
long as, in the good faith judgment of the lead managing
underwriter of a then proposed or pending public offering or
private placement by Ultra Capital of its securities, who so
advises Ultra Capital and the
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holders of the Exchangeable Shares in writing within ten days
prior to the First Anniversary that the Mandatory Registration
would, if not postponed or delayed, materially and adversely
affect such public offering or private placement or the market
for such Ultra Capital securities in general or (C) if, within
ten days of the First Anniversary, Ultra Capital notifies the
holders of the Exchangeable Shares that in the good faith
judgment of the Board of Directors of Ultra Capital (1) such
filing or effectiveness would, if not postponed or delayed,
materially and adversely affect a proposed or pending
acquisition, merger, corporate reorganization or other
transaction or circumstance which is material to Ultra Capital
and which, prior to the First Anniversary, was presented to
the Board of Directors of Ultra Capital (each, a "Material
Circumstance"), or (2) a disclosure to the public of such
Material Circumstance would be required under the United
States securities laws solely by reason of the filing of a
registration statement in connection with the Mandatory
Registration (it being agreed that Ultra Capital shall use all
reasonable efforts to minimize the length of the Suspension
Period provided for in the foregoing clauses (A), (B) and (C))
and give prompt notice of the termination thereof if prior to
the end of the Suspension Period.
(iii) Piggyback Registrations. If during the two year
period commencing with the third anniversary of the Closing
Date and ending with the fifth anniversary of the Closing Date
(the "Piggyback Registration Period"), Ultra Capital proposes
to register any of its equity securities under the 1933 Act
for sale for cash (otherwise than in connection with the
registration of securities issuable pursuant to an employee
stock option, stock purchase or similar plan or pursuant to a
merger, exchange offer or a transaction of a type specified in
Rule 145(a) under the 1933 Act), Ultra Capital shall give the
holders of the then outstanding Exchangeable Shares (the
"Holders") notice of such proposed registration at least 30
days prior to the filing of a registration statement. At the
written request of any Holder delivered to Ultra Capital
within 20 days after the receipt of the notice from Ultra
Capital, which request shall request the registration of the
Exchange or Resale, and Ultra Capital shall use its best
efforts to register the Exchange or Resale under the 1933 Act,
and to cause such registration (a "Piggyback Registration") to
become and remain effective.
(iv) Registration with Respect to the Stock Incentive
Plan. On or about the First Anniversary, Ultra Capital shall
file a registration statement on Form S- 8 covering the stock
issued pursuant to the Stock Incentive Plan and the resale of
any Ultra Capital Common Stock underlying any stock options
granted pursuant to the Stock Incentive Plan and Ultra Capital
shall use its best efforts to cause that registration
statement to become effective.
(v) Further Obligations of Ultra Capital Whenever
under the preceding subsections of this Section 3.03(b), Ultra
Capital is required hereunder to register the Exchange or
Resale, it agrees that it shall use its best efforts to
diligently prepare and file with the SEC a registration
statement and such amendments and supplements to the
registration statement and the prospectus used
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in connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the 1933 Act with respect to the sale of
securities covered by such registration statement for the
period necessary to complete the proposed public offering.
(c) Exchange Period; Redemption of Ultra Voting Stock;
Automatic Conversion. Commencing on and after the first anniversary of
the Closing Date and continuing through the fifth anniversary of the
Closing Date (the "Exchange Period"), Ultra Capital agrees that the
holders of the Exchangeable Shares shall be entitled to exchange, in
accordance with the terms and conditions of the Exchange Trust, each
Exchangeable Share held by such shareholder for one share of the Ultra
Capital Common Stock reserved pursuant to Section 3.03(a) or as
adjusted in accordance with the terms of the Exchange Trust.
Section 3.04 Application for Judicial Approval of Arrangement Documents
and Exemption from Registration under Section 3(a)(10) of the 1933 Act. Tracker
(Canada) hereby covenants to:
(a) as soon as practicable after execution of this Agreement,
apply for an interim order from the Ontario Court in connection with the
Arrangement Documents and shall call a meeting of the shareholders of Tracker
(Canada) in accordance with such interim order for the purpose of authorizing
and approving the Arrangement Documents; and
(b) as soon as practicable after the shareholder meetings of
Tracker (Canada), apply for a final order from the Ontario Court approving the
Arrangements Documents.
Section 3.05 Form of Transaction. As indicated in this Article III, the
parties to this Agreement presently intend that the transactions contemplated
herein will take the form of a plan of arrangement. Notwithstanding such intent
and the subsections of this Article III, however, Tracker (Canada) shall have
the right, but not the obligation, to restructure this transaction as an
exchange of stock, a merger, amalgamation or other similar form of consolidation
of Tracker (Canada) and Ultra Capital if such restructuring will not be
prejudicial to the Ultra Capital Shareholders and Tracker (Canada) deems such
restructuring to be beneficial to Tracker (Canada) or its shareholders or
Tracker (Canada) is unable to satisfy any other condition to closing including
the requisite approval of the Ontario Court or the performance of any act by the
shareholders of Tracker (Canada) other than the shareholder approval required
under Ontario law. If such restructuring is required pursuant to this Section
3.05, the parties shall cooperate with one another in good faith to amend this
Agreement and any other agreements or instruments as necessary to reflect the
transaction as restructured.
Section 3.06 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), within the five day period selected by
either party in a notice to the other party commencing with the last to occur
of: (i) the Ultra Capital and Tracker (Canada) shareholders' meetings; (ii) such
date as may be prescribed by any federal, state or provincial regulatory agency
or authority, pursuant to any federal, state, or provincial law, rule, or
regulation; or (iii) the date on which the Ontario
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Court hands down its final order approving the Arrangement Documents, prior to
which the consummation of the transactions contemplated hereby may not be
effectuated; provided, however, that either party shall have the right to extend
such five day period for up to two additional five day periods. Such Closing
shall take place at the office of Canadian counsel to Tracker (Canada), Gowling,
Strathy & Henderson, at 10:00 a.m. on the Closing Date.
Section 3.07 Closing Events. At the Closing, each of the respective
parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, or other instruments
required by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence the
transactions contemplated hereby. All proceedings to be taken and all documents
to be delivered and exchanged at the Closing shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
or documents deemed executed or delivered until all have been taken, delivered
and executed.
Section 3.08 Termination.
(a) This Agreement may be terminated by the board of directors
of either Ultra Capital or Tracker (Canada) at any time prior to the
Closing Date if:
(i) there shall be any actual or threatened action or
proceeding before any court or any governmental body which
shall seek to restrain, prohibit, or invalidate the
Arrangement Documents and which, in the judgment of such board
of directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed under the
Arrangement Documents; provided, however, that any proceeding
or deliberations by the Ontario Court regarding the fairness
of the Arrangement Documents, or any judicial or other
appropriate governmental authority in Ontario, including but
not limited to requests for additional information, in
connection with such authority's determination as to whether
to approve the Arrangement Documents and any other
transactions or actions necessary to effectuate the
transactions contemplated by this Agreement, shall not be
deemed to constitute an actual or threatened action or
proceeding before any court or any governmental body which
shall seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement;
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory or judicial authority,
including, but not limited to, a final order from the Ontario
Court disapproving the Arrangement Documents, or in the
judgment of such board of directors, made in good faith and
based on the advice of counsel, there is a substantial
likelihood that any such approval will not be obtained or will
be obtained only on a condition or conditions which would be
unduly burdensome, making it inadvisable to proceed with such
transactions; provided, however, that the board of directors
of Ultra Capital shall not be entitled to terminate this
Agreement based on its judgment, whether made in good
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faith or not, that there is a substantial likelihood that the
approval of any judicial or other appropriate governmental
authority in Ontario, including, but not limited to, the
Ontario Court, will not be obtained or will be obtained only
on a condition or conditions which would be unduly burdensome;
or
(iii) there shall have been any change after the date
of the latest balance sheets of Ultra Capital and Tracker
(Canada), respectively, in the assets, properties, business,
or financial condition of Ultra Capital or Tracker (Canada),
which could have a materially adverse effect on the value of
the business of Ultra Capital or Tracker (Canada),
respectively, except reductions in assets as a result of costs
reasonably and necessarily incurred in connection with the
transactions contemplated by this Agreement or any changes
disclosed in the Ultra Capital or Tracker (Canada) Schedules,
as the case may be, dated as of the date of execution of this
Agreement.
In the event of termination of this Agreement pursuant to this
subsection (a) of Section 3.08, no obligation, right, or liability
shall arise hereunder, and each party shall bear all of the expenses
incurred by such party in connection with the negotiation, drafting,
and execution of this Agreement and the transactions herein
contemplated.
(b) This Agreement may be terminated at any time prior to the
Closing by action of the board of directors of Ultra Capital if Tracker
(Canada) shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement or if any of the
representations or warranties of Tracker (Canada) contained herein
shall be inaccurate in any material respect. If this Agreement is
terminated pursuant to this subsection (b) of section 3.08, this
Agreement shall be of no further force or effect, and no obligation,
right, or liability shall arise hereunder, except that Tracker (Canada)
shall reimburse Ultra Capital for all costs and expenses actually
incurred by it in connection with this Agreement, which were incurred
from and after the date hereof.
(c) This Agreement may be terminated at any time prior to the
Closing by action of the board of directors of Tracker (Canada) if
Ultra Capital shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any of
the representations or warranties of Ultra Capital or the Ultra Capital
Shareholders contained herein shall be inaccurate in any material
respect. If this Agreement is terminated pursuant to this subsection
(c) of Section 3.08, this Agreement shall be of no further force or
effect and no obligation, right, or liability shall arise hereunder,
except that Ultra Capital shall be responsible for reimbursing Tracker
(Canada) for all costs and expenses actually incurred in connection
with this Agreement which were incurred from and after the date hereof.
(d) This Agreement may be terminated at any time prior to the
Closing by action of the board of directors of Tracker (Canada) or
Ultra Capital if the Closing has not taken place by June 24, 1994;
provided, however, that either Tracker (Canada) or Ultra Capital may
extend such date as a matter of right for up to an additional 20 days.
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(e) This Agreement may be terminated at any time prior to the
Closing should five percent or more of the shareholders of Tracker
(Canada) notify it of their intent to dissent to the Articles of
Arrangement and Plan of Arrangement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Shareholder Action of Ultra Capital. Ultra Capital shall,
at the special meeting of its shareholders called pursuant to Section 3.01(b)
hereof, submit to its shareholders at such meeting the following proposals, in
addition to the proposals set forth in Section 3.01(b) above, to:
(a) elect the designees of Tracker (Canada) as directors of
Ultra Capital, effective on the closing of the transactions contemplated hereby;
(b) authorize and approve a 1994 Stock Incentive Plan in a
form to be provided by Tracker (Canada) to Ultra Capital;
(c) authorize and approve a cash bonus arrangement for the
purpose of paying periodic cash bonuses based on profits, in a form to be
provided by Tracker (Canada) to Ultra Capital; provided, that such authorization
shall permit the board of directors, or a committee thereof, of Ultra Capital to
amend such cash bonus arrangement, either before or after its adoption, in any
way it may deem necessary or appropriate;
(d) authorize and approve employment agreements to be provided
by Tracker (Canada) to Ultra Capital; and
(e) take such other actions as may be mutually agreed upon by
Ultra Capital and Tracker (Canada).
The current directors of Ultra Capital shall not stand for re-election.
Tracker (Canada) shall provide Ultra Capital with the information and
descriptions of the proposals described in Section 3.01(b) and Subsections (b),
(c) and (d) of this Section 4.01 for inclusion in Ultra Capital's proxy
statement.
Section 4.02 Additional Financing. As soon as practicable following the
Closing, Ultra Capital shall use its best efforts in good faith to complete a
private placement or public offering of a minimum of 625,000 shares of Ultra
Capital Common Stock at an offering price of not less than $8.00 per share.
Ultra Capital shall not be liable for its role in connection with any such
private placement or public offering, if despite using its best efforts in good
faith, such offering is not successfully completed.
Section 4.03 Report on Form 8-K. Ultra Capital shall file a current
report on Form 8-K with respect to the acquisition of Tracker (Canada) by Ultra
Capital and the other transactions contemplated by this Agreement. Such report
shall be filed within the time periods required by
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the SEC, shall contain all information of Ultra Capital and Tracker (Canada),
financial and otherwise, required to be included therein and Ultra Capital shall
undertake to submit a draft of the Form 8-K to Tracker (Canada)'s U.S. Counsel
prior to the filing thereof.
Section 4.04 Access to Properties and Records. Upon the execution of
this Agreement, Ultra Capital and Tracker (Canada) will each afford to the
officers and authorized representatives of the other full access to the
properties, books, and records of Ultra Capital and Tracker (Canada), as the
case may be, in order that each may have full opportunity to make such
reasonable investigation as it shall desire, and each will furnish the other
with such additional financial and operating data and other information as to
the business and properties of Ultra Capital and Tracker (Canada), as the case
may be, as the other shall from time to time reasonably request.
Section 4.05 Availability of Rule 144. Each of the parties acknowledges
that the shares of Ultra Capital Common Stock to be exchanged pursuant to the
Share Exchange Offer, at or after the first anniversary of the Closing, will be
"restricted securities," as that term is defined in Rule 144 promulgated
pursuant to the 1933 Act. Ultra Capital is under no obligation, except as set
forth herein, to register such shares under the 1933 Act or to register the
Ultra Capital Common Stock pursuant to section 12(g) of the 1934 Act.
Notwithstanding the foregoing, however, Ultra Capital will use its best efforts
to: (a) timely prepare and disseminate the required information and financial
statements so as to make available to the shareholders of Ultra Capital the
provisions of Rule 144 pursuant to subparagraph (c)(1) thereof; and (b) within
five days of any written request of any shareholder of Ultra Capital, Ultra
Capital will provide to such shareholder written confirmation of compliance with
such of the foregoing subparagraph as may then be applicable. The shareholders
of Ultra Capital holding restricted securities of Ultra Capital as of the date
of this Agreement, and their respective heirs, administrators, personal
representatives, successors, and assigns, are intended third party beneficiaries
of the provisions set forth herein. The covenants set forth in this section 4.05
shall survive the Closing and the consummation of the transactions herein
contemplated.
Section 4.06 Third Party Consents. Ultra Capital and Tracker (Canada)
agree to cooperate with each other to obtain any required third party consents
to this Agreement and the transactions contemplated herein.
Section 4.07 Actions Prior to Closing.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the Ultra Capital or Tracker
(Canada) Schedules or as permitted or contemplated by this Agreement,
Ultra Capital and Tracker (Canada), respectively, will each:
(i) carry on its business in substantially the same
manner as it has heretofore;
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(ii) maintain and keep its properties in states of
good repair and condition as at present, except for
depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligations under material contracts, leases, and instruments
relating to or affecting its assets, properties, and business;
(v) use its best efforts to maintain and preserve its
business organization intact, to retain its key employees, and
to maintain its relationship with its material suppliers and
customers; and
(vi) fully comply with and perform in all material
respects all obligations and duties imposed on it by all
federal and state laws and all rules, regulations, and orders
imposed by federal or state governmental authorities.
(b) From and after the date of this Agreement until the
Closing Date, neither Ultra Capital nor Tracker (Canada) will:
(i) make any change in their respective certificates
of incorporation or bylaws, except to the extent necessary to
give effect to the Arrangement Documents;
(ii) take any action described in section 1.07 in the
case of Tracker (Canada), or in section 2.07, in the case of
Ultra Capital, (all except as permitted therein or as
disclosed in the applicable party's schedules); or
(iii) enter into or amend any contract, agreement, or
other instrument of any of the types described in such party's
schedules, except that a party may enter into or amend any
contract, agreement, or other instrument in the ordinary
course of business involving the sale of goods or services.
Section 4.08 Waiver of Registration Rights. The Ultra Capital
Shareholders shall provide Ultra Capital and Tracker (Canada) with written
waivers, waiving and terminating any registration rights they may have with
respect to or arising out of the warrants issued to such persons in February,
1992 and any other registrations rights they or any other existing Ultra Capital
shareholders may have.
Section 4.09 Ultra Capital Shareholders Covenant. The Ultra Capital
Shareholders, and each of them, hereby covenant to vote their shares of Ultra
Capital Common Stock in favor of the approval of the Arrangement Documents.
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ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF ULTRA CAPITAL
The obligations of Ultra Capital under this Agreement are subject to
the satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations. The representations and
warranties made by Tracker (Canada) in this Agreement were true when made and
shall be true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and Tracker (Canada) shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Tracker (Canada) prior to or at
the Closing. Ultra Capital shall be furnished with a certificate, signed by a
duly authorized officer of Tracker (Canada) and dated the Closing Date, to the
foregoing effect.
Section 5.02 Shareholder Approval.
(a) The shareholders of Tracker (Canada) shall have approved
this Agreement and the transactions contemplated herein and shall also
have:
(i) approved Articles of Amendment in a form
substantially similar to Exhibit B attached hereto by a
resolution passed by not less than two-thirds of the votes
cast by the holders of the Tracker (Canada) Common Shares who
are present and vote either in person or by proxy at a meeting
of the holders of Tracker (Canada) Common Shares duly called,
held and conducted pursuant to section 182 of the Ontario
Business Corporations Act, R.S.O. 1990, as amended, to
consider such Articles of Amendment; and
(ii) approved Articles of Arrangement in a form
substantially similar to Exhibit C attached hereto by a
resolution passed by not less than two-thirds of the total
votes cast by the holders of the Tracker (Canada) Class A
Common Shares who are present and vote either in person or by
proxy at a meeting of the holders of the Tracker (Canada)
Class A Common Shares duly called, held and conducted pursuant
to (i) the terms of the interim order of the Ontario Court and
(ii) section 182 of the Ontario Business Corporations Act,
R.S.O. 1990, as amended, to consider such Articles of
Arrangement.
(b) The shareholders of Ultra Capital shall have approved the
Arrangement Documents and shall have approved all of the proposals
submitted to such shareholders pursuant to Section 3.01(b) and Section
4.01 of this Agreement at a duly noticed and held meeting of such
shareholders.
Section 5.03 Judicial Approval. The Ontario Court shall have entered a
final order approving the Arrangement Documents pursuant to a proceeding that
complies with the SEC No
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Action correspondence setting forth the requirements for exemption from
registration under section 3(a)(10) of the 1933 Act.
Section 5.04 Shareholder Approval. Tracker (Canada) shall have received
the consent of any Tracker (Canada) shareholder whose consent to this Agreement
and the transactions contemplated herein is required under any existing contract
binding on Tracker (Canada).
Section 5.05 Officer's Certificate. Ultra Capital shall have been
furnished with a certificate dated the Closing Date and signed by a duly
authorized officer of Tracker (Canada) to the effect that no litigation,
proceeding, investigation, or inquiry is pending or, to the best knowledge of
Tracker (Canada), threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement.
Section 5.06 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business, or operations of Tracker (Canada), nor shall any event have
occurred which, with the lapse of time or the giving of notice, may cause or
create any material adverse change in the financial condition, business, or
operations of Tracker (Canada).
Section 5.07 Good Standing. Ultra Capital shall have received a
certificate of good standing, or the equivalent thereof, from the appropriate
government office in Ontario, dated as of a date within ten days prior to the
Closing Date certifying that Tracker (Canada) is in good standing as a
corporation under the laws of Ontario.
Section 5.08 Opinion of Counsel to Tracker (Canada). Ultra Capital
shall receive an opinion dated the Closing Date of Canadian counsel to Tracker
(Canada), satisfactory to Ultra Capital, to the effect that:
(a) Tracker (Canada) is a corporation duly organized, validly
existing, and in good standing under the laws of Ontario and that to
the best of such counsel's knowledge, without independent
investigation, Tracker (Canada) has the corporate power to own all of
its properties and assets and to carry on its business in all material
respects as it is now being conducted;
(b) to the best knowledge of such legal counsel, the execution
and delivery by Tracker (Canada) of this Agreement and the consummation
of the transactions contemplated by this Agreement in accordance with
the terms hereof will not conflict with or result in the breach of any
term or provision of Tracker (Canada)'s articles of incorporation, as
amended in the manner provided in Article III hereof, or bylaws (or
similar charter documents);
(c) the authorized capitalization of Tracker (Canada) consists
of 100 Class A Common Shares, of which 100 shares were issued and
outstanding as of the Closing Date and approximately 6,660,729 shares
of the Exchangeable Preference Shares of which 6,660,729 shares are
issued and outstanding as of the Closing Date; and
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(d) this Agreement has been duly and validly authorized,
executed, and delivered by Tracker (Canada).
In rendering the foregoing opinion, counsel for Tracker (Canada) may rely on
certificates of officers and directors of Tracker (Canada) as to matters of
fact.
Section 5.09 Opinion of General Counsel of Tracker (Canada). Ultra
Capital shall receive an opinion dated the Closing Date of the general counsel
of Tracker (Canada), satisfactory to Ultra Capital, to the effect that:
(a) Tracker (Canada) is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities;
(b) Tracker (Canada) has qualified to do business as a foreign
corporation in the states, provinces and countries in which the
character and location of the assets owned by it or the nature of the
business transacted by it requires qualification;
(c) the execution and delivery by Tracker (Canada) of this
Agreement and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not constitute a
default or give rise to a right of termination, cancellation, or
acceleration under any material mortgage, indenture, deed of trust,
license agreement, or other obligation or violate any court order,
writ, injunction, or decree applicable to Tracker (Canada), or its
properties or assets;
(d) all issued and outstanding shares are legally issued,
fully paid, and nonassessable and not issued in violation of the
preemptive rights of any person; and except as set forth in the Tracker
(Canada) Schedules, there are no outstanding subscriptions, options,
rights, warrants, convertible securities, or other agreements or
commitments obligating Tracker (Canada) to issue any additional shares
of its capital stock of any class;
(e) the notice of the meeting of the Tracker (Canada)
shareholders held to approve the Arrangement Documents was given in
accordance with the terms of the interim order of the Ontario Court;
(f) there are no actions, suits, or proceedings pending or
threatened by or against Tracker (Canada), or affecting Tracker
(Canada) or its properties, at law or in equity, before any court or
other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind.
Section 5.10 Financial Condition of Tracker (Canada); Manual Listing.
Prior to Closing, Tracker (Canada) shall have total assets with a value of not
less than U.S.$4,000,000 and net assets (total assets minus total liabilities)
of not less than U.S.$2,000,000. Tracker (Canada) shall provide Ultra Capital
with evidence satisfactory to Ultra Capital that such requirements have been
satisfied.
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Section 5.11 Acknowledgement of Agreement by Trustee of Exchange Trust.
The institution named as Trustee of the Exchange Trust, as named in the Exchange
Agency and Voting Trust Agreement and in Section 3.02 of this Agreement shall
have acknowledged this Agreement in writing.
Section 5.12 Board Approval. Tracker (Canada) shall, subject to the
fiduciary obligations of its Board of Directors, cause its Board of Directors to
recommend to its shareholders the approval of the Arrangement Documents and to
vote the shares of Tracker (Canada) Common Shares owned by them in favor of the
approval of the Arrangement Documents.
Section 5.13 Termination under Section 3.08. Neither the board of
directors of Tracker (Canada) or the board of directors of Ultra Capital shall
have terminated this Agreement pursuant to Section 3.08 herein.
Section 5.14 Other Items. Tracker (Canada) shall have taken or
performed any and all actions to be taken by Tracker (Canada) pursuant to the
provisions of Article III and IV herein, and Ultra Capital shall have received
such further documents, certificates, or instruments relating to the
transactions contemplated hereby as Ultra Capital may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRACKER (CANADA)
The obligations of Tracker (Canada) under this Agreement are subject to
the satisfaction, at or before the Closing Date, of the following conditions:
Section 6.01 Accuracy of Representations. The representations and
warranties made by Ultra Capital and the Ultra Capital Shareholders in this
Agreement were true when made and shall be true as of the Closing Date (except
for changes therein permitted by this Agreement) with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date, and Ultra Capital shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by Ultra
Capital prior to or at the Closing. Tracker (Canada) shall have been furnished
with a certificate, signed by a duly authorized executive officer of Ultra
Capital and by the Ultra Capital Shareholders and dated the Closing Date, to the
foregoing effect.
Section 6.02 Shareholder Approval. Tracker (Canada) shall have received
the consent of any Tracker (Canada) shareholder whose consent to this Agreement
and the transactions contemplated herein is required under any existing contract
binding on Tracker (Canada);The shareholders of Ultra Capital shall have
approved the Arrangement Documents and shall have approved all of the proposals
submitted to such shareholders pursuant to Section 3.01(b) and Section 4.01 of
this Agreement at a duly noticed and held meeting of such shareholders and the
shareholders of Tracker (Canada) shall have approved this Agreement and the
transactions contemplated herein and shall also have approved the Articles of
Amendment and the Articles of Arrangement in the manner provided in Section 5.02
herein.
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Section 6.03 Repayment of Loans to Ultra Capital Shareholders. Prior to
the Closing Date, Tracker (Canada) shall have been furnished with a certificate
dated the Closing Date and signed by a duly authorized executive officer of
Ultra Capital to the effect that any loans from Ultra Capital to an Ultra
Capital Shareholder have been repaid in full by such Ultra Capital Shareholder.
Section 6.04 Officer's Certificate. Tracker (Canada) shall have been
furnished with a certificate dated the Closing Date and signed by a duly
authorized executive officer of Ultra Capital to the effect that no litigation,
proceeding, investigation, or inquiry is pending or, to the best knowledge of
Ultra Capital, threatened, which might result in an action to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
Section 6.05 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business, or operations of Ultra Capital, taken as a whole, nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of Ultra Capital. For purposes of this Section 6.05, a
reduction in the assets of Ultra Capital as a result of costs reasonably and
necessarily incurred in connection with this Agreement shall not constitute a
material adverse change in the financial condition of Ultra Capital.
Section 6.06 Good Standing. Tracker (Canada) shall have received a
certificate of good standing from the Secretary of State or other appropriate
office of the state of Nevada or Delaware, as the case may be, with respect to
Ultra Capital dated as of a date within ten days prior to the Closing Date
certifying that Ultra Capital is in good standing as a corporation in the state
of Nevada or Delaware, as the case may be.
Section 6.07 Opinion of Counsel to Ultra Capital. Tracker (Canada)
shall receive an opinion dated the Closing Date of counsel to Ultra Capital,
Mark Schneider, satisfactory to Tracker (Canada), to the effect that:
(a) Ultra Capital is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada or
Delaware, as the case may be, and has the corporate power and is duly
authorized, qualified, franchised, and licensed under all applicable
laws, regulations, ordinances, and orders of public authorities to own
all of its properties and assets and to carry on its business in all
material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the
business transacted by it requires qualification;
(b) to the best knowledge of such legal counsel, the execution
and delivery by Ultra Capital of this Agreement and the consummation of
the transactions contemplated by this Agreement in accordance with the
terms hereof will not conflict with or result in the breach of any term
or provision of either Ultra Capital's certificate of incorporation in
Delaware or amended and restated certificate of incorporation in
Nevada, as the case may be, or bylaws or constitute a default or give
rise to a right of termination,
30
<PAGE> 35
cancellation, or acceleration under any material mortgage, indenture,
deed of trust, license agreement, or other obligation or violate any
court order, writ, injunction, or decree applicable to Ultra Capital,
or its properties or assets;
(c) the authorized capitalization of Ultra Capital consists of
20,000,000 shares of Common Stock, par value $0.001, of which 560,045
shares are issued and outstanding prior to the proposed 1.32147-for-1
forward split, 740,081 shares of which are outstanding as of the
Closing Date and approximately 6,660,729 shares of Ultra Capital Common
Stock reserved under Article III herein, 500,000 shares of Preferred
Stock, par value $0.001, none of which has been issued, and 6,660,729
shares of Class B Voting Common Stock, no par value, shares of which
are issued and outstanding as of the Closing Date. All issued and
outstanding shares are legally issued, fully paid, and nonassessable
and not issued in violation of the preemptive rights of any person. To
the best knowledge of such legal counsel, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or
other agreements or commitments obligating Ultra Capital to issue any
additional shares of its capital stock of any class;
(d) this Agreement has been duly and validly authorized,
executed, and delivered and constitutes the legal and binding
obligation of Ultra Capital, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors
generally;
(e) to the best knowledge of such counsel, during the period
from March 31, 1992 to the present date, Ultra Capital has complied in
all material respects with the applicable requirements of the 1933 Act
and the 1934 Act and with the rules and regulations promulgated under
such acts. With respect to the period prior to March 31, 1992, such
counsel has not received notice or demand of any act or action taken or
omitted to be taken by Ultra Capital which resulted or is alleged to
have resulted in a material violation of the provisions of such
securities acts and regulations. Ultra Capital has duly obtained all
requisite United States governmental approvals and made all of the
filings required of Ultra Capital under applicable United States
securities laws, in respect of the transactions contemplated herein
from the date hereof and through the Closing Date.
(f) to the best knowledge of such counsel, there are no
actions, suits, or proceedings pending or threatened by or against
Ultra Capital, or affecting Ultra Capital or its properties, at law or
in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any
kind.
In rendering the foregoing opinion, counsel for Ultra Capital may rely on
certificates of officers and directors of Ultra Capital as to matters of fact.
Section 6.08 Liabilities. Ultra Capital shall not have any liabilities
or obligations (absolute or contingent) as of the time of the Closing.
31
<PAGE> 36
Section 6.09 Acknowledgement of Agreement by Trustee of Exchange Trust.
The institution named as Trustee of the Exchange Trust, as named in the Exchange
Agency and Voting Trust Agreement and in Section 3.02 of this Agreement shall
have acknowledged this Agreement in writing.
Section 6.10 Judicial Approval. The Ontario Court shall have entered a
final order approving the Arrangement Documents pursuant to a proceeding that
complies the SEC No Action correspondence setting forth the requirements for
exemption from registration under section 3(a)(10) of the 1933 Act.
Section 6.11 Board Approval. Ultra Capital shall, subject to the
fiduciary obligations of its Board of Directors, cause its Board of Directors to
recommend to its shareholders the approval of the Arrangement Documents and to
vote the shares of Ultra Capital Common Stock owned by them in favor of the
approval of the Arrangement Documents.
Section 6.12 Termination under Section 3.08. Neither the board of
directors of Tracker (Canada) nor the board of directors of Ultra Capital shall
have terminated this Agreement pursuant to Section 3.08 herein.
Section 6.13 Filings. Tracker (Canada) shall have caused the Articles
of Amendment, described in Section 3.01(d) and the Articles of Arrangement,
described in Section 3.01(f) to be properly filed.
Section 6.14 Filing of Proxy Statement with SEC. Ultra Capital shall
have filed four copies of its proxy statement with the SEC not later than the
date on which it is first sent or given to the shareholders of Ultra Capital.
Section 6.15 Other Items. Ultra Capital shall have taken or performed
any and all actions to be taken by Ultra Capital pursuant to the provisions of
Articles III and IV herein, and Tracker (Canada) shall have received such
further documents, certificates, or instruments relating to the transactions
contemplated hereby as Tracker (Canada) may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Brokers. Ultra Capital and Tracker (Canada) agree that
they are not obligated to pay any compensation to any finders or brokers for
bringing the parties together or who were instrumental in the negotiation,
execution, or consummation of this Agreement. Each party agrees to indemnify the
other against any claim by any third person for any commission, brokerage, or
finders' fee or other payment with respect to this Agreement or the transactions
contemplated hereby based on any alleged agreement or understanding between such
party and such third person, whether express or implied, from the actions of
such party.
Section 7.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with
32
<PAGE> 37
respect to matters of state law, with the laws of Arizona; provided, however,
the laws of Nevada or Delaware, as the case may be, shall govern the internal
corporate affairs of Ultra Capital and Ontario law shall govern the internal
corporate affairs of Tracker (Canada).
Section 7.03 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Ultra Capital, to: Jeff W. Holmes, President
Ultra Capital Corp.
8555 East Voltaire Avenue
Scottsdale, Arizona 85260
and with a copy to: Mark N. Schneider
Attorney at Law
455 South 300 East, Suite 350
Salt Lake City, Utah 84111
If to Tracker (Canada), Gregg C. Johnson, Executive Vice President
to: The Tracker (Canada) Corporation
180 Dundas Street West, 26th Floor
Toronto, Ontario, Canada M5G 1ZB
and with a copy to: Grant V. Sawiak
Mary E. Martin
Gowling, Strathy & Henderson
Suite 4900
Commerce Court West
Toronto, Ontario, Canada M5L 1J3
and with a copy to: Robert J. Hackett
Fennemore Craig
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004-2390
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 7.04 Attorneys' Fees. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the nonbreaching party or parties for all costs, including reasonable
attorneys' fees, to be fixed by the court and not a jury, incurred in connection
therewith and in enforcing or collecting any judgment rendered therein.
33
<PAGE> 38
Section 7.05 Confidentiality. Each party hereto agrees with the other
parties that, unless and until the transactions contemplated by this Agreement
have been consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director, or employee,
or from any books or records or from personal inspection, of such other party,
and shall not use such data or information or disclose the same to others,
except (i) to the extent such data or information is published, is a matter of
public knowledge, or is required by law to be published; and (ii) to the extent
that such data or information must be used or disclosed in order to consummate
the transactions contemplated by this Agreement. If disclosure is permitted
pursuant to (i) or (ii) above, the parties shall cooperate with one another in
preparing and releasing the information to be disclosed. Notwithstanding the
provisions of Section 3.08 and any other provision of this Agreement to the
contrary, the provisions of this Section 7.05 shall remain in full force and
effect unless and until the transactions contemplated by this Agreement are
consummated.
Section 7.06 Third Party Beneficiaries. This contract is solely among
Ultra Capital, the Ultra Capital Shareholders, and Tracker (Canada), and, except
as specifically provided otherwise herein, no director, officer, stockholder,
employee, agent, independent contractor, or any other person or entity shall be
deemed to be a third party beneficiary of this Agreement.
Section 7.07 Entire Agreement. This Agreement represents the entire
agreement among the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein. This Agreement may not be amended or modified,
except by a written agreement signed by all parties hereto.
Section 7.08 Survival; Indemnification.
(a) The representations, warranties, and covenants of the
respective parties shall survive the Closing Date and the consummation
of the transactions herein contemplated for a period of two years.
Neither the period of survival nor the liability of any party with
respect to its respective representations, warranties and covenants
shall be reduced by the level of any investigation made at any time by
or on behalf of any other party.
(b) The Ultra Capital Shareholders jointly and severally shall
indemnify and hold harmless Tracker (Canada) and its officers,
directors, employees, agents, successors and assigns (each a "Tracker
Indemnified Party") for, from and against any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable
attorneys' and consultants' fees and expenses) actually suffered or
incurred by the Tracker Indemnified Parties (including, without
limitation, any action or proceeding brought or otherwise initiated by
any of the Tracker Indemnified Parties) (hereinafter a "Loss") arising
out of or resulting from: (i) the breach of any representation,
warranty or covenant made by Ultra Capital or the Ultra Capital
Shareholders in this Agreement or in any document, instrument or
schedule
34
<PAGE> 39
delivered by Ultra Capital or the Ultra Capital Shareholders in
connection with this Agreement, or (ii) any and all Losses suffered or
incurred by Tracker (Canada), the shareholders of Tracker (Canada) or
Ultra Capital by reason of or in connection with any claim or cause of
action of any third party to the extent arising out of any action,
inaction, event, condition, liability or obligation of either Ultra
Capital or the Ultra Capital Shareholders occurring or existing prior
to the Closing; provided, however that the aggregate liability of the
Ultra Capital Shareholders under this Section 7.08 shall be limited to
U.S.$2,000,000.
(c) Tracker (Canada) (the "Indemnitor") shall indemnify and
hold harmless Ultra Capital, the Ultra Capital Shareholders and their
affiliates, officers, directors, employees, agents, successors and
assigns (each an "Ultra Indemnified Party") for, from and against any
and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys' and consultants' fees and expenses)
actually suffered or incurred by the Ultra Indemnified Parties or any
of then (including, without limitation, any action or proceeding
brought or otherwise initiated by any of the Ultra Indemnified Parties)
(hereinafter a "Loss") arising out of or resulting from: (i) the breach
of any representation, warranty or covenant made by Tracker (Canada) in
this Agreement or in any document, instrument or schedule delivered by
Tracker (Canada) in connection with this Agreement, or (ii) any and all
Losses suffered or incurred by an Ultra Indemnified Party by reason of
or in connection with any claim or cause of action of any third party
to the extent arising out of any action, inaction, event, condition,
liability or obligation of Tracker (Canada) occurring or existing prior
to the Closing; provided, however that the liability of Tracker
(Canada) under this Section 7.08 shall be limited to U.S.$2,000,000.
(d) For purposes of this Section 7.08(d) the Ultra Capital
Shareholders or Tracker (Canada), as the case may be, shall be referred
to as an "Indemnitor" and the Ultra Indemnified Parties or the Tracker
Indemnified Parties, as the case may be, shall be referred to as an
"Indemnified Party." An Indemnified Party shall give the appropriate
Indemnitor notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of Indemnification
under this Agreement, within 30 days of such determination, stating the
amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect
of which such right of indemnification is claimed or arises. The
obligations and liabilities of the Indemnitors under this Section 7.08
with respect to Losses arising from claims of any third party which are
subject to the indemnification provided for in this Section 7.08
("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified Party
shall receive notice of any Third Party Claim, the Indemnified Party
shall give the appropriate Indemnitor notice of such Third Party Claim
within 30 days of the receipt by the Indemnified Party of such notice;
provided, however, that the failure to provide such notice shall not
release an Indemnitor from any of its obligations under this Section
7.08 except to the extent such Indemnitor is materially prejudiced by
such failure and shall not relieve such Indemnitor from any other
obligation or liability that it may have to any Indemnified Party
otherwise than under this Section 7.08. If an Indemnitor acknowledges
in writing
35
<PAGE> 40
its obligation to indemnify the Indemnified Party hereunder against any
Losses that may result from such Third Party Claim, then such
Indemnitor shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if
it gives notice of its intention to do so to the Indemnified Party
within five days of the receipt of such notice from the Indemnified
Party; provided, however, that if there exists or is reasonably likely
to exist a conflict of interest that would make it inappropriate in the
sole and absolute judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and the appropriate
Indemnitor, then the Indemnified Party shall be entitled to retain its
own counsel, in each jurisdiction for which the Indemnified Party
determines in its sole and absolute judgment that counsel is required,
at the expense of such Indemnitor. In the event an Indemnitor exercises
the right to undertake any defense against any such Third Party Claim
as provided above, the Indemnified Party shall cooperate with such
Indemnitor in such defense and make available to such Indemnitor, at
its expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the
Indemnified Party's control relating thereto as is reasonably required
by the Indemnitor. Similarly, in the event the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third
Party Claim, the appropriate Indemnitor shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified
Party, at such Indemnitor's expense, all such witnesses, records,
materials and information in such Indemnitor's possession or under such
Indemnitor's control relating thereto as is reasonably required by the
Indemnified Party. No such Third Party Claim may be settled by an
Indemnitor without the prior written consent of the Indemnified Party.
Section 7.09 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.10 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
Section 7.11 Costs. Each party to this Agreement shall pay its own
costs and expenses, including but not limited to the fees and disbursements of
its counsel, incurred in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby.
Section 7.12 Exhibits and Schedules. All exhibits and schedules
attached hereto form a part of this Agreement and are hereby incorporated by
reference.
36
<PAGE> 41
Section 7.13 Headings. The headings in this Agreement are inserted for
convenience only and do not affect its construction.
Section 7.14 Prevailing Document. In the event of any ambiguity or
conflict arising between the terms of this Agreement and the terms of any other
agreements or instruments to be executed in connection with the transactions
contemplated herein the terms of such other agreements or instruments shall
prevail.
[The remainder of this page has been left blank intentionally.]
37
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ULTRA CAPITAL CORP., a Nevada
corporation
ATTEST:
/s/ By /s/ Jeff W. Holmes
- ----------------------------- ----------------------------
Duly Authorized Officer Jeff W. Holmes, President and Director
and
By /s/ R. Kirk Blosch
----------------------------
R. Kirk Blosch, Vice President and
Secretary/Treasurer and Director
THE TRACKER CORPORATION, an
Ontario corporation
ATTEST:
/s/ By /s/ Gregg C. Johnson
- ----------------------------- ----------------------------
Duly Authorized Officer Gregg C. Johnson, Executive
Vice President
and
By /s/ Mark J. Gertzbein
----------------------------
Mark J. Gertzbein, Chief
Financial Officer
Ultra Capital Shareholders, in their personal
capacities
/s/ Jeff W. Holmes
----------------------------
Jeff W. Holmes
/s/ R. Kirk Blosch
----------------------------
R. Kirk Blosch
38
<PAGE> 43
EXHIBIT A
SHAREHOLDERS OF RECORD OF TRACKER (CANADA)
AS OF MAY 26, 1994
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NUMBER OF ISSUED SHARES
- ------------------- -----------------------
<S> <C>
John Andrews 25,000
Joseph Brown 5,000
Susan Brown 100,000
Christopher Creed 250,000
D. Dave Consulting 100,000
Michael J. Dyrnaes 50,000
Mark J. Gertzbein 50
Mark J. Gertzbein,
In Trust 4,400,000
Aaron Greenberg 50,000
Barry Greenberg 6,250
Ellen Greenberg 6,250
Dr. H. Joe Greenberg 700,000
Mark Greenberg 6,250
Morton Greenberg 25,000
Paul Greenberg 6,250
Andrew Gregory 10,000
Franklin & Catherine Hough 50,000
Gregg C. Johnson,
In Trust 4,500,000
</TABLE>
<PAGE> 44
<TABLE>
<S> <C>
Guy H. Johnson 25,000
Renee C. Johnson 25,000
Paul F. Kavanagh 1,000,000
Edwin J. Korhonen 1,000,050
Michael Lee 50,000
Bruce Lewis,
In Trust 20,000,000
Jonathan Lewis,
In Trust 3,000,000
Gigi M. Lipton 50,000
Edward S. McRobbie 25,000
Elizabeth McRobbie 25,000
Mercy International (CH) 1,500,000
MJG Management Accounting Services Ltd. 400,000
Scotie McLeod Inc.,
In Trust for Dr. H. Joe Greenberg 20,000
Spire Consulting Group, Inc. 200,000
Stalia Holdings B.V 3,350,000
Douglas Stewart 25,000
Frances Stewart 100,000
James Tanner 25,000
Anton Voronoff 3,000
Wheel of Fortune Trust 265,000
Perce Young,
In Trust 300,000
Sara Zagdanski 25,000
</TABLE>
<PAGE> 45
<TABLE>
<C> <C>
999600 Ontario Inc. 438,496
1046523 Ontario Limited 200,000
----------
TOTAL NUMBER OF ISSUED SHARES 42,341,596
==========
</TABLE>
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NUMBER OF UNISSUED BUT
- ------------------- RESERVED SHARES
---------------
<S> <C>
Dr. H. Joe Greenberg 15,000
Douglas Stewart 25,000
Tier I Investors 4,016,504
Wheel of Fortune Trust 227,000
---------
TOTAL NUMBER OF UNISSUED
BUT RESERVED SHARES 4,283,504
=========
</TABLE>
<PAGE> 46
EXHIBIT "B"
ARTICLES OF AMENDMENT
1. The present name of the corporation is THE TRACKER CORPORATION
2. The name of the corporation is changed to (if applicable):
3. Date of incorporation/amalgamation: 06 May 1993.
4. The articles of the corporation are amended as follows: See page 1a.
<PAGE> 47
1a
IT IS RESOLVED THAT the articles of the Corporation are amended as
follows:
I. Increase in Capital
A. The authorized capital of the Corporation is increased by
creating an unlimited number of Class A Common Shares.
B. After giving effect to the foregoing, the authorized capital
of the Corporation shall consist of:
(a) an unlimited number of Common Shares; and
(b) an unlimited number of Class A Common Shares.
II. Rights Attaching to Common Shares
The rights, privileges, restrictions and conditions attaching to the
Common Shares shall be as follows:
(a) Dividends
The holders of the Common Shares shall have the right to
receive such dividends (if any) as the directors in their
discretion may declare.
(b) Voting Rights
The holders of the Common Shares shall be entitled to receive
notice of and to attend and vote at all meetings of the
shareholders of the Corporation and each Common Share held
shall confer the right to one (1) vote in person or by proxy
at all meetings of the shareholders of the Corporation.
(c) Return of Capital
Subject to the prior rights of the holders of any shares
ranking above the Common Shares, upon the liquidation,
dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or upon any other distribution of
its assets among its shareholders for the purpose of
winding-up its affairs, the holders of the Common Shares shall
be entitled to receive $.01 per Common Share.
<PAGE> 48
1b
After payment of the above-noted amount, all of the remaining
property and assets of the Corporation available for
distribution to the holders of the Common Shares and the Class
A Common Shares shall be paid or distributed equally share for
share to the holders of the Common Shares and the Class A
Common Shares, respectively, without preference or
restriction.
III. Rights Attaching to Class A Common Shares
The rights, privileges, restrictions and conditions attaching to the
Class A Common Shares shall be as follows:
(a) Dividends
The holders of the Class A Common Shares shall have the right
to receive such dividends (if any) as the directors in their
discretion may declare.
(b) Voting Rights
The holders of the Class A Common Shares shall be entitled to
receive notice of and to attend and vote at all meetings of
the shareholders of the Corporation and each Class A Common
Share held shall confer the right to one (1) vote in person or
by proxy at all meetings of the shareholders of the
Corporation.
(c) Return of Capital
Subject to the prior rights of the holders of the Common
Shares and any other shares ranking above the Class A Common
Shares, upon the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or upon any
other distribution of its assets among its shareholders for
the purpose of winding-up its affairs, all of the remaining
property and assets of the Corporation available for
distribution to the holders of the Class A Common Shares and
the Common Shares shall be paid or distributed equally share
for share to the holders of the Class A Common Shares and the
Common Shares, respectively, without preference or
restriction.
IV. Share Split
The Common Shares which are issued and outstanding immediately prior to
the filing of these Articles of Amendment are changed into a different
number of Common Shares on the basis of 1 Common Share for each 7
Common Shares issued and outstanding.
<PAGE> 49
1c
No fractional Common Shares of the Corporation will be issued. The
number of Common Shares of the Corporation to be received by existing
shareholders of Common Shares of the Corporation following the
above-noted share split will be rounded up or down to the nearest whole
number of shares.
<PAGE> 50
5. The amendment has been duly authorized as required by Sections 168 &
170 (as applicable) of the Business Corporations Act.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
______________________, 1994.
These articles are signed in duplicate.
THE TRACKER CORPORATION
By
--------------------------------------
(Signature) (Description of Office)
<PAGE> 51
EXHIBIT "C"
ARTICLES OF ARRANGEMENT
1. The name of the corporation is: THE TRACKER CORPORATION
2. The new name of the corporation if changed by the arrangement.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
3. Date of incorporation/amalgamation: 6 May 1993
4. The arrangement has been approved by the shareholders of the
corporation in accordance with section 181 of the Business Corporation
Act.
5. A copy of the arrangement is attached to these articles as Exhibit "A".
6. The arrangement was approved by the court on __________, 1994.
7. The terms and conditions to which the scheme is made subject by the
Order have been complied with.
These articles are signed in duplicate.
________________________________________
(Name of Corporation)
By______________________________________
(Signature) (Description of Office)
<PAGE> 52
APPENDIX I
PLAN OF ARRANGEMENT UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT, 1990 (ONTARIO)
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.01 Definitions
In this plan of arrangement except as defined below and unless
something in the subject matter or context is inconsistent therewith,
capitalized words shall have the meanings ascribed thereto in the Reorganization
Agreement:
"Arrangement" means the reorganization by way of arrangement of Tracker under
section 182 of the OBCA as contemplated in this Plan;
"Certificate of Arrangement" means the certificate of arrangement endorsed upon
the articles of arrangement by the Director;
"Corporation" or "Tracker" means The Tracker Corporation, a corporation
incorporated under the laws of Ontario;
"Director" means the director appointed under the OBCA;
"Effective Date" means the date of the Certificate of Arrangement;
"Effective Time" means 12:01, a.m. (Eastern Standard time) on the Effective
Date;
"Exchange Agency and Trust Agreement" means the agreement dated between Ultra,
Tracker and Montreal Trust Company;
"Exchangeable Preference Shares" means the new class of shares in the capital of
Tracker into which the outstanding Tracker Common Shares will be reclassified by
virtue of the Plan of Arrangement;
"OBCA" means the Ontario Business Corporations Act, 1990, and all regulations
thereunder; "Plan" means this plan of arrangement;
"Reorganization Agreement" means the reorganization agreement (including all
appendices thereto) between Tracker and Ultra dated May 26, 1994 to which this
Plan of Arrangement is attached as Appendix I, as the same may be amended from
time to time;
"Tracker Class A Common Shares" means the Class A common shares of Tracker as
the same are constituted on the day prior to and following the Effective Date;
<PAGE> 53
-2-
"Tracker Common Shares" means the Common Shares of Tracker (other than the
Tracker Class A Common Shares) as the same are constituted just prior to the
Effective Date;
"Ultra" means Ultra Capital Corp, a Nevada corporation incorporated under the
laws of the State of Nevada and as may be incorporated under the laws of any
other State in the United States from time to time;
"Ultra Voting Stock" means the shares of Voting Stock, par value U.S. $0.0001
per share of Ultra which will be entitled to vote but which will not be entitled
to dividends and will be entitled to only a nominal amount upon redemption or
liquidation;
1.02 Interpretation Not Affected by Headings, etc.
The division of this Plan into articles and sections and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.03 Number, Etc.
Unless the context requires the contrary, words importing the singular
only shall include the plural and vice versa and words importing the use of any
gender shall include all genders.
1.04 Meaning
Words and phrases used herein and defined in the OBCA shall have the
same meaning herein as in the OBCA unless the context otherwise requires.
ARTICLE 2.
REORGANIZATION AGREEMENT
2.01 Reorganization Agreement
This Plan is made pursuant to and subject to the provisions of the
Reorganization Agreement and the Exchange Agency and Trust Agreement.
ARTICLE 3.
3.01 Agreement to the Arrangement
Tracker and Ultra hereby agree to the Arrangement upon the terms and
conditions herein set forth.
3.02 Effect of the Arrangement
<PAGE> 54
-3-
As of the Effective Time:
(a) the Arrangement under the terms and conditions prescribed
herein shall become effective;
(b) the articles of arrangement of the Corporation shall be deemed
to be the articles of incorporation of the Corporation and the
Certificate of Arrangement shall be deemed to be the
certificate of incorporation of the Corporation.
ARTICLE 4.
CORPORATION
4.01 Name
The name of the Corporation shall be The Tracker Corporation.
4.02 Business and Powers of the Corporation
There shall be no restriction or limit to the business or businesses
which the Corporation is authorized to carry on or the powers that the
Corporation is authorized to exercise.
4.03 Registered Office
The registered office of the Corporation shall be located at Suite
2600, 180 Dundas Street West, Toronto, Ontario.
4.04 Authorized Capital
The authorized capital of the Corporation shall consist of:
(a) an unlimited number of shares designated as Class A Common
Shares;
(b) an unlimited number of shares designated as Exchangeable
Preference Shares.
4.05 Features of Shares in the Capital of the Corporation
The rights, privileges, restrictions and conditions attaching to the
different classes of Shares of the Corporation are set forth in Schedule "A"
attached hereto which forms a part hereof.
4.06 Directors
<PAGE> 55
-4-
(a) Minimum and Maximum. The number of directors of the
Corporation shall be a minimum of one (1) and a maximum of
fifteen (15), the precise number to be determined from time to
time by resolution of the board of directors of the
Corporation.
(b) First Directors. On the Effective Date, the number of
directors of the Corporation shall be 5. The first directors
of the Corporation who shall hold office until the first
annual meeting of the shareholders of the Corporation or until
their successors are duly elected or appointed, shall be the
persons whose names, addresses and Canadian residence status
appear below:
<TABLE>
<CAPTION>
Name Residence Address Canadian Resident
- ---- ----------------- -----------------
<S> <C> <C>
I. Bruce Lewis - Yes
Mark J. Gertzbein - Yes
Ed J. Korhonen - Yes
Majid B.H. Al-Refai - No
Aymin I. Abu Dawood - No
</TABLE>
The first directors of the Corporation shall hold office until the first annual
meeting of the shareholders of the Corporation or until their successors are
duly elected or appointed.
4.07 Officers
The Officers of the Corporation shall, until changed by the directors
of the Corporation, be as follows:
<TABLE>
<CAPTION>
Office Name
------ ----
<S> <C>
Chairman of the Board I. Bruce Lewis
President Ed J. Korhonen
Chief Financial Officer Mark Gertzbein
Secretary Gregg Johnson
</TABLE>
4.08 Fiscal Year
<PAGE> 56
-5-
The fiscal year end of the Corporation shall be March 31st in each year
until such time as it is changed by the directors of the Corporation.
4.09 By-laws
The general by-laws of the Corporation shall be the bylaws of Tracker
until repealed, amended or altered. A copy of the proposed by-laws may be
examined during business hours in the Toronto offices of Messrs. Gowling,
Strathy & Henderson, Suite 4000, Commerce Court West, Toronto, Ontario M5L 1J3.
ARTICLE 5.
SPECIAL PROVISIONS
5.01 Place of Meeting, etc.
Subject to the provisions of the OBCA, the meetings of the board of
directors and of any committee thereof (if any) of the Corporation may be held
at any place within or outside of Ontario.
5.02 Borrowing, etc.
The directors of the Corporation may, without authorization from the
shareholders from time to time:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the
Corporation, including, without limitation, bonds, debentures,
notes or other similar obligations of the Corporation whether
secured or unsecured;
(c) subject to the OBCA, give a guarantee on behalf of the
Corporation to secure the performance of an obligation of any
person;
(d) charge, mortgage, hypothecate, pledge or otherwise create a
security interest in all or any currently owned or
subsequently acquired property of the Corporation, including,
without limitation, book debts, rights, powers, franchises and
undertakings, to secure any such debt obligation or any money
borrowed or any other debt or liability of the Corporation;
(e) to the maximum extent permitted by law, by resolution
delegate, either generally or in any particular case, any or
all of the powers of the Corporation aforesaid to a director,
a committee of directors or an officer of the Corporation, and
any
<PAGE> 57
-6-
reference in this paragraph 5.02(e) to directors includes, for
greater certainty, any such authorized delegate; and
(f) authorize (any such authorization to be evidenced by a
certified copy of a resolution of directors or by power of
attorney or deed or other instrument) any director, officer or
employee of the Corporation or any other person or persons,
whether connected with the Corporation or not, to sign,
execute and give on behalf of the Corporation all agreements,
indentures, instruments and other documents necessary or
desirable for the purposes aforesaid and to draw, make,
accept, endorse, execute and issue cheques, promissory notes,
bills of exchange, bills of lading and other negotiable or
transferable instruments and the same and all renewals thereof
or substitutions therefor so signed shall be binding upon the
Corporation.
5.03 Number of Shareholders
The number of shareholders of the Corporation, exclusive of persons who
are in its employment and exclusive of persons who, having been formerly in the
employment of the Corporation, were, while in that employment and have continued
after termination of that employment to be shareholders of the Corporation, is
hereby limited to not more than fifty, two or more persons who are the joint
registered owners of one or more shares being counted as one shareholder.
5.04 Restrictions on Transfers of Shares
No shareholder of the Corporation shall be entitled to transfer any
share or shares of the Corporation without the consent of the directors of the
Corporation expressed by a resolution passed by the votes of a majority of the
board of directors of the Corporation at a meeting of the board of directors to
the Corporation or by a resolution in writing signed by all the directors of the
Corporation.
5.05 No Invitation to the Public
Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
ARTICLE 6.
ISSUANCE OF SHARES UPON ARRANGEMENT
6.01 Conversion of Shares of Corporation
Upon the consummation of the Arrangement, the issued and outstanding
common shares (other than Class A common shares) in the capital of the
Corporation which are issued and outstanding immediately prior to the
Arrangement shall be converted as follows: for every one
<PAGE> 58
-7-
(1) issued and outstanding Tracker Common Share held by a shareholder of the
Corporation prior to the Effective Date, such shareholder shall receive one (1)
Exchangeable Preference Share;
6.02 Class A Common Shares
All issued and outstanding Class A Common Shares held by a shareholder
of the Corporation prior to the Effective Date shall be retained by that
shareholder following the Effective Date. The return of capital rights attached
to the Class A Shares are amended on and after the Effective Date as set out in
Schedule A.
6.03 Surrender of Shares
At any time after the Effective Date, a holder of Tracker Common Shares
in the capital of the Corporation prior to the Effective Date may surrender to
the Corporation the certificates representing such shares and, subject to the
provisions of the OBCA and this Agreement, such shareholder, in return therefor,
shall be entitled to receive certificates evidencing Exchangeable Preference
Shares of the Corporation on the basis set out in Section 6.01 hereof.
6.04 Stated Capital
The stated capital of the issued shares of the Corporation immediately
prior to the Effective Date and of the shares of the Corporation issued on
conversion of the shares of the Corporation pursuant to Section 6.01 hereto and
the stated capital of the Class A Common Shares shall be as follows:
<TABLE>
<CAPTION>
Shares Stated Capital
------ --------------
<S> <C>
(a) Pre-Arrangement Tracker Common Shares outstanding $
(b) Tracker Exchangeable Preference Shares issued on
exchange of Tracker Common Shares $
(c) Class A Common Shares $
</TABLE>
<PAGE> 59
SCHEDULE A
TO THE ARTICLES OF ARRANGEMENT
THE TRACKER CORPORATION
EXCHANGEABLE PREFERENCE SHARES
The rights, privileges, restrictions and conditions attaching to the
Exchangeable Preference Shares are as follows:
1. RANKING OF EXCHANGEABLE PREFERENCE SHARES
1.1 The Exchangeable Preference Shares shall be entitled to a preference
over the Class A common shares of the Corporation ("Common Shares") and over any
other shares ranking junior to the Exchangeable Preference Shares, with respect
to priority in payment of dividends accrued on the Exchangeable Preference
Shares and in the distribution of assets in the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs.
2. DIVIDENDS
2.1 Holders of the Exchangeable Preference Shares shall be
entitled to receive, and the Corporation shall pay thereon, as and when declared
by the Board of Directors of the Corporation, out of any or all profits or
surplus then available for the payment of dividends, cumulative preferential
dividends in the amounts determined as set out below.
2.2 The dividends payable on each Exchangeable Preference Share
shall be an amount equivalent to the product obtained by multiplying the
applicable Exchange Rate (as hereinafter defined in subsection 3.1) by the
Canadian dollar equivalent (as hereinafter defined in subsection 4.1) of
dividends declared by the board of directors of Ultra Capital Corp. ("Ultra"), a
Nevada corporation, to be payable on each share in the common stock of Ultra (an
"Ultra Common Share").
2.3 The board of directors of the Corporation shall, within 5
Business Days (as hereinafter defined) following the declaration of a dividend
by the board of directors of Ultra on the Ultra Common Shares, declare a
dividend on the Exchangeable Preference Shares in an amount per Exchangeable
Preference Share equal to the Canadian dollar equivalent of the amount per Ultra
Common Shares of the first mentioned declared dividend on the Ultra Common Share
multiplied by the Exchange Rate in effect on the date such dividend is declared.
As used in these share conditions, the term "Business Day" shall mean any day on
which chartered banks, generally, are open for business in Toronto, Ontario.
2.4 The record date for the determination of the persons entitled
to receive payment of and the payment date for any dividend declared on the
Exchangeable Preference Shares shall be the same dates as the record date and
payment date respectively for the corresponding dividend declared on the Ultra
Common Shares. For the purpose of calculating accrued
<PAGE> 60
2
dividends on the Exchangeable Preference Shares, a dividend on the Exchangeable
Preference Shares shall accrue on the record date for the corresponding dividend
declared on the Ultra Common Shares.
3. THE EXCHANGE RATE
3.1 As used in these share conditions, the term "Exchange Rate"
refers to the initial exchange rate at which the holders of Exchangeable
Preference Shares may exchange Ultra Common Shares for Exchangeable Preference
Shares pursuant to an exchange agency and trust agreement (the "Exchange Trust
Agreement") by and among Ultra, the Corporation and Montreal Trust Company, a
corporation organized and existing under the laws of the Province of Ontario,
dated as of the effective date of the Articles of Arrangement to which these
share conditions are appended (the "Date of the Amendments"). As of the Date of
the Amendments the Exchange Rate is one (1) Exchangeable Preference Share for
one (1) Ultra Common Share. The Exchange Rate may be adjusted from time to time
as hereinafter provided.
If Ultra shall:
(i) subdivide the outstanding Ultra Common Shares into a greater
number of shares,
(ii) reduce, combine or consolidate the outstanding Ultra Common
Shares into a smaller number of shares, or
(iii) issue additional Ultra Common Shares by way of a stock
dividend,
the Exchange Rate in effect on the effective date of such subdivision or
reduction, combination or consolidation or on the record date for such issue of
Ultra Common Shares by way of a stock dividend, as the case may be, shall, in
the case of the events referred to in (i) and (iii) above, be increased in
proportion to the increase in the number of outstanding Ultra Common Shares
resulting from such subdivision or such dividend, or, in the case of (ii) above,
shall be decreased in proportion to the decrease in the number of outstanding
Ultra Common Shares resulting from such reduction, combination or consolidation;
such adjustment shall be made successively whenever any event referred to in
this paragraph 3.1 shall occur; any such issue of Ultra Common Shares by way of
a stock dividend shall be deemed to have been made on the record date for the
stock dividend for the purpose of calculating the number of outstanding Ultra
Common Shares under paragraphs 3.1(i) and 3.1(ii) of this subsection 3.1.
3.2 In the case of any reclassification of, or other change
in, the outstanding Ultra Common Shares, other than a subdivision or reduction,
combination or consolidation, the dividends payable on the Exchangeable
Preference Shares will be based upon the class or classes of shares received by
the holders of Ultra Common Shares and the Exchange Rate shall be adjusted in
such manner as the board of directors of the Corporation shall determine to be
appropriate on a basis consistent with the provisions of this section 3.
<PAGE> 61
3
3.3 If Ultra is consolidated with or merged with or into another
corporation (other than a consolidation or a merger which does not result in any
reclassification of or change in the outstanding Ultra Common Shares), the
dividends to which the holders of Exchangeable Preference Shares are entitled
shall be based upon the capital stock of the resulting corporation, if any,
received by the holders of Ultra Common Shares and the Exchange Rate shall be
adjusted, in each case in such manner as the board of directors of the
Corporation shall determine to be appropriate on a basis consistent with the
provisions of this section 3. This provision shall similarly apply to successive
consolidations and mergers.
3.4 No adjustment in the Exchange Rate shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such rate; provided, however, that any adjustments which by reason of
this subsection 3.4 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
3.5 If any question shall at any time arise with respect to the
amount of adjustments in the Exchange Rate or with respect to the amount of any
cash payments made in lieu of issuing a fractional share, such question shall be
conclusively determined by the auditors of the Corporation.
3.6 The Corporation shall at the request of a holder of
Exchangeable Preference Shares give written notice to such holder of the
Exchange Rate then in effect.
4. CANADIAN DOLLAR EQUIVALENT
4.1 The Canadian dollar equivalent per share of a distribution in
a foreign currency on Ultra Common Shares shall be based on the mid-rate between
the noon selling and buying rates of Canadian dollars against the foreign
currency as reported by the Bank of Canada on the record day set for the
declaration of the corresponding dividend on Ultra Common Shares. If no such
selling or buying rates for the affected currency are quoted by the Bank of
Canada on the said date, the directors of the Corporation may instead refer to
the selling and buying rates quoted by a chartered bank or recognized exchange
market or by the Bank of Canada on another date close to the date in question or
use such other reasonable method as they consider desirable under the
circumstances. In determining the Canadian dollar equivalent per share of a
distribution in a foreign currency or in kind the directors of the Corporation
may rely on the reasonable advice of independent experts, and such directors
shall not be subject to liability because of their reasonable reliance on, or
for any action taken in reasonable reliance on, the advice given by such
experts.
5. RESTRICTIONS ON DISTRIBUTIONS ON JUNIOR SHARES
5.1 So long as any of the Exchangeable Preference Shares are
outstanding, the Corporation shall not at any time without, but may at any time
with, the approval of the holders of the Exchangeable Preference Shares given as
specified in section 9 hereof:
<PAGE> 62
4
(a) pay any dividends on the Class A Common Shares or on shares of
any other class of shares of the Corporation ranking junior to
the Exchangeable Preference Shares with respect to priority in
the payment of dividends;
(b) redeem or purchase or make any capital distribution in respect
of the Class A Common Shares or shares of any other class of
shares of the Corporation ranking junior to the Exchangeable
Preference Shares with respect to priority in the payment of
dividends or on liquidation distributions;
(c) purchase less than all of the Exchangeable Preference Shares;
(d) redeem or purchase any other shares of the Corporation ranking
equally with the Exchangeable Preference Shares with respect
to the payment of dividends or on liquidation distributions;
or
(e) issue any Exchangeable Preference Shares or any other shares
of the Corporation ranking equally with the Exchangeable
Preference Shares.
unless all dividends accrued on the Exchangeable Preference Shares shall have
been declared and paid in full or an amount set aside for such payment.
6. PURCHASES OF EXCHANGEABLE PREFERENCE SHARES
6.1 The Corporation may, at any time and from time to time,
purchase for cancellation the whole or any part of the Exchangeable Preference
Shares at the lowest price at which, in the opinion of the directors of the
Corporation, such shares are obtainable.
6.2 The directors may issue authorized but unissued Class A Common
Shares in exchange for Exchangeable Preference Shares acquired by the
Corporation in satisfaction of the purchase price therefor and, unless otherwise
required by the Ontario Business Corporations Act (the "Act"), a purchase of
Exchangeable Preference Shares in exchange for Class A Common Shares shall be
deemed to be a conversion of Exchangeable Preference Shares into Class A Common
Shares for the purposes of any adjustments to the stated capital accounts
maintained for the Exchangeable Preference Shares and the Class A Common Shares.
7. DISTRIBUTION ON LIQUIDATION
7.1 The "Basic Liquidation Amount" per Exchangeable Preference
Share shall on any date be and mean the Canadian dollar equivalent of an amount
equal to the quotient obtained by dividing:
(a) the aggregate value on such date, determined as hereinafter
provided, of the property and assets of Ultra available for
distribution to the holders of Ultra Common Shares upon a
liquidation of Ultra on such date, by
<PAGE> 63
5
(b) the sum of (i) the aggregate number of Ultra Common Shares
issued and outstanding on such date plus (ii) the product
obtained by multiplying the aggregate number of Exchangeable
Preference Shares issued and outstanding on such date by the
Exchange Rate in effect on such date.
7.2 In the event of the liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, the holders of the
Exchangeable Preference Shares shall be entitled to receive from the property
and assets of the Corporation in respect of each Exchangeable Preference Share
held, before any distribution of any part of the assets of the Corporation among
the holders of Class A Common Shares or shares ranking junior to the
Exchangeable Preference Shares, an amount equal to the Basic Liquidation Amount,
together with an amount equal to all dividends accrued and unpaid on such
Exchangeable Preference Shares.
7.3 The Corporation may, at its option, and subject to the OBCA,
satisfy its obligation to pay the Basic Liquidation Amount to the holders of the
Exchangeable Preference Shares by either paying such amount in cash or by
transferring or causing to be transferred to each holder of Exchangeable
Preference Shares a number of Ultra Common Shares equal to the product obtained
by multiplying the number of Exchangeable Preference Shares registered in the
name of such holder by the Exchange Rate.
7.4 After the Corporation has paid or satisfied its obligations to
pay the holders of the Exchangeable Preference Shares the amount, if any,
payable to them pursuant to subsection 7.2 hereof, such holders shall not be
entitled to share in any further distribution of the property or assets of the
Corporation
7.5 The board of directors of the Corporation shall determine the
value of the properties and assets of Ultra for the purposes of this section 7
and in so doing shall obtain and rely upon one or more valuations of such
property and assets prepared by independent qualified financial advisors. Copies
of such reports shall be made available to each holder of Exchangeable
Preference Shares. The value so determined by the directors, when certified by
the auditors of the Corporation, shall be deemed, for the purposes of this
section 7, to be the value of the property and assets of Ultra The directors
shall not, however, be required to make a determination of such value or to
obtain such valuations if the Corporation satisfies its obligation to pay the
Basic Liquidation Amount in respect of each Exchangeable Preference Share by
making the distribution of Ultra Common Shares provided for in paragraph 7.3
hereof.
8. VOTING RIGHTS
8.1 Except as hereinafter provided, the holders of the
Exchangeable Preference Shares shall not, as such, have any voting rights for
the election of directors or for any other purpose, nor shall the holders of
Exchangeable Preference Shares be entitled to receive notice of or to attend any
meeting of shareholders of the Corporation. If, however, within the 12 months
immediately following payment or distribution of any dividend upon the Ultra
Common Shares,
<PAGE> 64
6
the Corporation does not declare and pay or distribute an equivalent dividend on
the Exchangeable Preference Shares as provided in section 2.3 hereof, then from
and after the expiration of such 12 month period and until such dividend has
been declared and paid or distributed, each Exchangeable Preference Share shall
entitle the holder thereof to notice of and to vote at all meetings of
shareholders of the Corporation at which the holders of Common Shares may vote,
and the number of votes attaching to each Exchangeable Preference Share shall be
such that all of the then outstanding Exchangeable Preference Shares together
shall entitle the holders thereof to exercise 51% of all the votes that may be
exercised at such meeting.
9. APPROVAL OF HOLDERS OF EXCHANGEABLE PREFERENCE SHARES
9.1 The approval of the holders of the Exchangeable Preference
Shares as to any matters referred to in these provisions may be given as
specified below:
(a) Any approval given by the holders of Exchangeable Preference
Shares shall be deemed to have been sufficiently given if it
shall have been given in writing by the holders of at least 66
2/3% of the outstanding Exchangeable Preference Shares or by a
resolution passed at a meeting of holders of Exchangeable
Preference Shares duly called and held upon not less than 21
days' notice at which the holders of at least 25% of the
outstanding Exchangeable Preference Shares are present or are
represented by proxy and carried by the affirmative vote of
not less than 66 2/3% of the votes cast at such meeting. If at
any such meeting of the holders of 25% of the outstanding
Exchangeable Preference Shares are not present or represented
by proxy within one-half hour after the time appointed for
such meeting then the meeting shall be adjourned to such date
not less than 15 days thereafter and to such time and place as
may be designated by the chairman appointed by those present,
and not less than 10 days' written notice shall be given of
such adjourned meeting. At such adjourned meeting the holders
of Exchangeable Preference Shares present or represented by
proxy may transact the business for which the meeting was
originally called and a resolution passed thereat by the
affirmative vote of not less than 66 2/3% of the votes cast at
such meeting shall constitute the approval of the holders of
the Exchangeable Preference Shares.
(b) On every poll taken at every such meeting every holder of
Exchangeable Preference Shares shall be entitled to one vote
in respect of each Exchangeable Preference Share held Subject
to the foregoing, the formalities to be observed in respect of
the giving or waiving of notice of any such meeting and the
conduct thereof shall be those from time to time prescribed in
the Act and the by-laws of the Corporation with respect to
meetings of shareholders.
CLASS A COMMON SHARES
<PAGE> 65
7
The rights, privileges, restrictions and conditions attaching to the
Class A Common Shares are as follows:
1. DIVIDENDS
1.1 The holders of the Class A Common Shares shall have the right
to receive such dividends (if any) as the directors in their discretion may
declare.
2. VOTING RIGHTS
2.1 The holders of the Class A Common Shares shall be entitled to
receive notice of and to attend and vote at all meetings of the shareholders of
the Corporation and each Class A Common Share held shall confer the right to one
(1) vote in person or by proxy at all meetings of the shareholders of the
Corporation.
3. RETURN OF CAPITAL
3.1 Subject to the prior rights of the holders of the Exchangeable
Preference Shares and any shares ranking above the Class A Common Shares, upon
the liquidation, dissolution or winding-up of the Corporation, whether voluntary
or involuntary, or upon any other distribution of its assets among its
shareholders for the purpose of winding-up its affairs, the holders of the Class
A Common Shares shall be entitled to receive all of the remaining property and
assets of the Corporation available for distribution.
<PAGE> 66
EXHIBIT "D"
EXCHANGE AGENCY AND TRUST AGREEMENT
This EXCHANGE AGENCY AND TRUST AGREEMENT (the "Agreement") made and
entered into as of this ______ day of _______________, 1994, by and among:
ULTRA CAPITAL CORP., a Nevada corporation;
(hereinafter called ("Tracker U.S.")
- and -
THE TRACKER CORPORATION, a corporation organized and existing under the
Ontario Business Corporations Act;
(hereinafter called "Tracker")
- and -
MONTREAL TRUST COMPANY, a corporation organized and existing under the
laws of the Province of Ontario;
(their successors or assigns hereunder, hereinafter called the
"Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to Articles of Arrangement dated ___________, 1994,
(the "Articles of Arrangement"), which have been duly approved by the Board of
Directors and the shareholders of Tracker, Tracker proposes to amend its
Articles to provide for a change, redesignation and division (the
"Reclassification") of certain shares of its issued and outstanding capital,
which Reclassification shall become effective upon the issuance of a Certificate
of Arrangement by the Director appointed under the Ontario Business Corporations
Act (the "Effective Date");
WHEREAS, pursuant to the provisions of the Articles of Arrangement, all
of the issued and outstanding common shares of Tracker will be changed,
redesignated and divided into a new class of shares designated as "Exchangeable
Preference Shares" (the "Tracker Exchangeable Preference Shares");
WHEREAS, pursuant to the terms and conditions of the Reorganization
Agreement dated as of May 26, 1994, among Tracker and Tracker U.S. (the
"Reorganization
<PAGE> 67
-2-
Agreement") and the provisions of the respective charters of Tracker U.S. and
Tracker, as amended or to be amended in contemplation of the Reclassification,
(i) the Tracker Exchangeable Preference Shares are to be exchangeable for
Tracker U.S. Common Shares (as hereinafter defined); and (ii) voting rights in
Tracker U.S. are to be afforded to the holders, from time to time, of Tracker
Exchangeable Preference Shares, and accordingly a procedure is to be established
whereby such voting rights will be exercisable by such holders by and through a
trustee, who will hold legal title to the shares of capital stock of Tracker
U.S. to which such voting rights appertain for the benefit of such holders, and
a procedure is to be established whereby the holders, from time to time, of
Tracker Exchangeable Preference Shares may exchange such shares for Tracker U.S.
Common Shares.
NOW THEREFORE, in consideration of these premises and the mutual
covenants herein set forth, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and in order (i) to provide for
the exchange of Tracker Exchangeable Preference Shares for Tracker U.S. Common
Shares by the holders, from time to time, of Tracker Exchangeable Preference
Shares, and to provide the procedure for effecting such exchanges, (ii) to
declare the terms and provisions upon and subject to which the Trustee is to
receive, hold, administer and dispose of certain shares of Tracker U.S. Voting
Stock (as hereinafter defined), and (iii) to provide that Tracker U.S. shall not
declare cash dividends on the Tracker U.S. Common Shares without causing Tracker
to declare a corresponding cash dividend on the Tracker Exchangeable Preference
Shares, the parties hereto hereby agree as follows:
1. ISSUANCE OF TRACKER U.S. VOTING STOCK
1.01 On the Effective Date, or as soon thereafter as is
practicable, at the direction and on behalf of _____________ [Settlor], Tracker
U.S. shall, as part of the consideration for the Tracker Class A Common Shares
received by Tracker U.S. pursuant to the Reorganization Agreement, issue to the
Trustee shares of Tracker U.S. Voting Stock in a number at least equal to the
number of Tracker Exchangeable Preference Shares then outstanding, to have and
to hold such shares as herein provided, for the respective use and benefit of
the Beneficiaries (as hereinafter defined), upon and subject to the terms and
conditions as hereinafter provided.
1.02 In the event that at any time the number of shares of Tracker
U.S. Voting Stock then held by the Trustee shall be insufficient to afford the
then holders of Tracker Exchangeable Preference Shares the number of votes per
share which such holders shall be then entitled to exercise pursuant to Article
6 of this Agreement, [Settlor] shall forthwith purchase from Tracker U.S. for
the price of $0.001 per share, and settle on the Trust (as hereinafter defined)
for the benefit of such holders, and Tracker U.S. shall so sell for such price
and such purposes, such number of shares of Tracker U.S. Voting Stock as may be
necessary to afford such holders such voting rights as they are entitled.
<PAGE> 68
-3-
1.03 In the event that [the Settlor] shall fail to fulfill its
obligations under section 1.02 hereof, Tracker U.S. shall, so long as it is
legally entitled to do so under applicable law, forthwith declare a stock
dividend on the Tracker U.S. Voting Stock, in an amount sufficient to afford the
then holders of Tracker Exchangeable Preference Shares the number of votes that
they are then entitled to exercise pursuant to Article 6 hereof.
1.04 Subject to Article 12 hereof, the stock certificate or
certificates representing the Shares shall at all times be held in a safe
deposit or custodial account, for and on behalf of the Trustee, with a bank or
trust institution situated in the Province of Ontario selected by the Trustee.
2. RESERVATION AND ISSUANCE OF TRACKER U.S. COMMON SHARES
Tracker U.S. shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting exchanges for Tracker Exchangeable Preference Shares, the
full number of Tracker U.S. Common Shares deliverable upon the exchange of all
shares of Tracker Exchangeable Preference Shares then outstanding (including as
shares outstanding for this purpose the aggregate number of Tracker Exchangeable
Preference Shares which would be issuable upon conversion of all Warrants and
other securities issued by Tracker which are convertible into Tracker
Exchangeable Preference Shares then outstanding); and Tracker U.S. shall issue,
from time to time, to holders of Tracker Exchangeable Preference Shares, through
the Trustee pursuant to this Agreement, Tracker U.S. Common Shares, upon
presentation by such holders to the Trustee, in the manner hereinafter provided,
of their Tracker Exchangeable Preference Shares.
3. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings unless the context otherwise requires:
(a) "BENEFICIARIES" shall mean the holders from time to time of
Tracker Exchangeable Preference Shares including, where
applicable, the holders of any Warrants or other securities
issued by Tracker which are convertible into Tracker
Exchangeable Preference Shares;
(b) "BUSINESS DAY" shall mean a day upon which chartered banks are
generally open for business in Toronto, Ontario;
(c) "EXCHANGE RATE" shall have the meaning set forth in Section
7.02 of this Agreement;
(d) "LIST" shall have the meaning described thereto in Section
6.05 hereof;
<PAGE> 69
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(e) "SHARES" shall mean the shares of Tracker U.S. Voting Stock
deposited with the Trustee, from time to time, pursuant to
this Agreement;
(f) "SPECIAL RESOLUTION" shall mean a resolution passed at
meetings duly called and held in accordance with the by-laws
of Tracker then in effect by not less than two-thirds of the
votes cast by the holders of each class of shares in the
capital of Tracker (other than the Tracker Common Shares)
entitled by the Ontario Business Corporations Act at that time
to vote in respect of a change in the rights, privileges,
restrictions, or conditions of the Tracker Exchangeable
Preference Shares;
(g) "TRACKER EXCHANGEABLE PREFERENCE SHARES" shall mean the
Tracker Exchangeable Preference Shares of Tracker resulting
from the Reclassification, and shall include any additional
such shares issued from time to time by Tracker thereafter;
(h) "TRACKER U.S. COMMON SHARES" shall mean shares of Common
Stock, par value $1.00 per share, of Tracker U.S.;
(i) "TRACKER U.S. VOTING STOCK" shall mean shares of Voting Stock,
par value $0.0001 per share, of Tracker U.S.;
(j) "TRUST" shall mean the trust created by this Agreement;
(k) "TRUST ESTATE" shall mean the Shares, any other securities and
any money or other property which may be held by the Trustee
from time to time pursuant to this Agreement; and
(l) "WARRANTS" means the stock purchase warrants to purchase
common shares of Tracker which were issued by Tracker on or
before June 8, 1994 and which may be exercised on or before
June 7, 1996;
4. PURPOSES OF AGREEMENT, GENERAL DUTIES, RIGHTS AND POWERS OF TRUSTEE
4.01 The purposes of this Agreement are:
(a) To create the Trust to hold the Shares and to exercise the
voting rights thereof for an on behalf of the Beneficiaries as
herein provided;
(b) To provide for the issuance of Tracker U.S. Common Shares to
the holders, from time to time, of Tracker Exchangeable
Preference Shares in exchange for such Tracker Exchangeable
Preference Shares, as hereinafter provided; and
<PAGE> 70
-5-
(c) To evidence the agreement of Tracker U.S. not to declare any
cash dividends on the Tracker U.S. Common Shares unless it
shall cause Tracker to declare an equivalent cash dividend on
the Tracker Exchangeable Preference Shares.
4.02 Subject to Article 12 of this Agreement, all of the shares of
Tracker U.S. Voting Stock issued, from time to time, by Tracker U.S. shall be
issued to, deposited with and held of record by the Trustee. During the term of
the Trust, and subject to the terms and conditions hereof, the Trustee shall
possess and be vested with full legal ownership of all Shares and shall be
entitled to exercise all of the rights and powers of an owner with respect to
all Shares; provided, however, that the Trustee shall at all times hold all
Shares and the legal title thereof solely for the benefit of the Beneficiaries;
and provided, further, that, except as specifically authorized by this
Agreement, the Trustee shall have no power or authority to sell, transfer, vote
or otherwise deal in or with the Shares and no part of the Shares shall be used
or disposed of by the Trustee for any purpose other than the purposes for which
this Trust is created as set forth herein.
4.03 Tracker shall use its best efforts to cause each certificate
representing Tracker Exchangeable Preference Shares to bear an appropriate
legend notifying the holder thereof of (i) his beneficial ownership of a
corresponding number of Shares deposited with the Trustee, (ii) his right to
instruct the Trustee with respect to the voting of such Shares, and (iii) the
rights of such holder to exchange the Tracker Exchangeable Preference Shares
represented by such certificate through the Trustee for Tracker U.S. Common
Shares, pursuant to the terms and conditions of this Agreement.
4.04 The Trustee shall invest any monies forming, from time to
time, a part of the Trust Estate in demand or time deposits or short-term
certificates of deposit issued by any bank, or short-term guaranteed investment
certificates issued by the Trustee.
4.05 The Trustee shall keep available for inspection by Tracker
U.S. and Tracker, at its principal corporate trust office in Toronto, Ontario,
correct and complete books and records of account relating to the Trust created
hereby.
4.06 The powers, duties and authorities of the Trustee hereunder
are limited to holding title to the Trust Estate, voting the Shares in
accordance with the provisions of this Agreement, granting proxies as provided
in this Agreement, and distributing to the holders, from time to time, of
Tracker Exchangeable Preference Shares the Tracker U.S. Common Shares (and, in
the case of a distribution of the Shares pursuant to Article 12 hereof, shares
of Tracker U.S. Voting Stock and any monies distributable pursuant to Article
12) to which such holders are entitled, all as provided herein. However, in the
exercise of such power and authority and the discharge of such duties, the
Trustee shall have, and is hereby granted, such incidental and additional powers
and authority not in conflict with any of the provisions hereof as the Trustee,
acting in good faith and in the reasonable exercise of its discretion, may deem
necessary, appropriate or desirable to effectuate the purposes of this Trust.
Any exercise of such
<PAGE> 71
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discretionary powers by the Trustee shall be final and conclusive upon all
Beneficiaries and upon all persons whomsoever. The Trustee shall not be liable
for any action taken, suffered or omitted by it in good faith and believed by it
to be authorized or within the discretion or rights or powers conferred upon it
by this Agreement.
4.07 The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement at the request, order or
direction of any Beneficiary (except for the exercise of its power to vote the
Shares pursuant to Article 6 hereof, subject to Section 6.10 hereof) unless such
Beneficiary shall have furnished to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
4.08 No bond shall be required of the Trustee and no successor
trustee appointed hereunder shall be required to furnish a bond.
4.09 The Trustee shall not be held liable for any loss which may
occur by reason of depreciation in the value of any part of the Trust Estate, or
for any loss incurred on any investment of funds made pursuant to Section 4.04
hereof, except to the extent that such loss is attributable to fraud, gross
negligence, wilful misconduct or bad faith on the part of the Trustee.
4.10 On or before May 31st in every year hereafter, so long as any
Shares are on deposit with the Trustee, the Trustee shall transmit to Tracker
U.S. and Tracker a brief report, dated as of the preceding March 31, with
respect to (a) the property and funds comprising the Trust Estate as of such
date, (b) the number of exchanges and the aggregate number of Tracker
Exchangeable Preference Shares so exchanged for Tracker U.S. Common Shares by
the Trustee on behalf of holders of Tracker Exchangeable Preference Shares
during the fiscal year ended on such date, and (c) any action taken by the
Trustee in the performance of its duties under this Agreement which it has not
previously reported and which, in the Trustee's opinion, materially affects the
Trust Estate. In addition, the Trustee shall promptly transmit to the
Beneficiaries a brief report concerning the occurrence of any event which, in
the Trustee's opinion, materially affects the Trust Estate.
4.11 The Trustee shall, to the extent n prepare and file on behalf
of the Trust appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system through
which Tracker Exchangeable Preference Shares are traded.
4.12 Tracker and Tracker U.S. hereby irrevocably authorize the
Trustee to (a) consult, communicate and otherwise deal with, at any time, the
respective registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Tracker Exchangeable Preference Shares, the
Tracker U.S. Voting Stock and the Tracker U.S. Common Shares, and (b)
requisition, from time to time, (i) from any such registrar or transfer agent
any information
<PAGE> 72
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readily available from the records maintained by it which the Trustee may
reasonably require for the discharge of its duties and responsibilities under
this Agreement, and (ii) from the respective transfer agents of the Tracker
Exchangeable Preference Shares and the Tracker U.S. Common Shares and any
subsequent transfer agent of such shares, the share certificates issuable upon
the exercise of the right to exchange Tracker Exchangeable Preference Shares for
Tracker U.S. Common Shares in the manner specified in Article 7 hereof. Tracker
and Tracker U.S. hereby irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. Tracker and Tracker U.S. will
supply their respective transfer agents with duly executed share certificates
for the purpose of effecting exchanges of shares pursuant to Article 7 hereof,
and Tracker U.S. will provide or otherwise make available any cash or scrip
certificates which may be issuable as provided in Section 7.08 of this
Agreement.
4.13 (a) The Trustee hereby acknowledges that the Shares are
redeemable, in whole or in part, at any time by Tracker U.S. and agrees to
surrender the Shares, or any portion thereof, to Tracker U.S. upon demand, for
the amount of $0.0001 per share of Tracker U.S. Voting Stock so redeemed;
provided, however, that Tracker U.S. shall not redeem any of the Shares, and the
Trustee shall not be obligated to comply with a demand for any such redemption,
to the extent that the number of Shares remaining with the Trustee after such
redemption is less than the number of such shares necessary to afford the
holders of Tracker Exchangeable Preference Shares then outstanding the voting
rights to which such holders are entitled pursuant to Article 6 hereof.
(b) In the event of any distribution of the Shares pursuant to
Article 12 of this Agreement, Tracker U.S. shall not thereafter redeem any
shares of Tracker U.S. Voting Stock from any holder thereof except to the extent
that such holder owns of record or beneficially, directly or indirectly, a
number of such shares in excess of the number necessary to confer on such holder
the voting rights to which such holder is entitled pursuant to Section 6.02
hereof on account of his ownership of a corresponding number of Tracker
Exchangeable Preference Shares. For purposes of this subsection 4.13(b),
Tracker U.S. may treat each person in whose name shares of Tracker U.S. Voting
Stock or Tracker Exchangeable Preference Shares are registered as the owner of
such shares.
(c) Any fraction of a cent payable to the Trustee or any other
holder of shares of Tracker U.S. Voting Stock on account of any redemption or
purchase thereof shall be rounded upward to the nearest whole cent.
5. ACCEPTANCE OF TRUST
The Trustee hereby accepts the Trust and assumes the duties hereby
created and imposed upon it, subject to the following terms and conditions:
(a) The Trustee shall not be liable for any action (including,
without limitation, the voting of the Shares deposited
hereunder) taken or omitted
<PAGE> 73
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to be taken by it hereunder or in connection herewith except
for its own gross negligence, wilful misconduct or bad faith.
(b) The Trustee may consult with legal counsel, who may be legal
counsel for Tracker U.S. or Tracker, and the written advice of
such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted
to be taken by the Trustee hereunder in good faith and in
reliance thereon.
(c) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of
any such agent or attorney appointed with due care by it
hereunder.
(d) The Trustee may own stock or other securities (including
evidences of indebtedness) of Tracker U.S. of Tracker to the
same extent and in the same manner as though it were not the
Trustee hereunder. The Trustee shall not be disqualified from
acting as registrar, transfer agent, paying agent or in any
fiduciary capacity for, or from engaging in customary business
and banking activities for or with, any Beneficiary, Tracker
U.S. or Tracker.
(e) The Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any instruction, advice, notice, opinion or
other document believed by it to be genuine and to have been
signed or presented by the proper party or parties and,
subject to subsection 5(a) and 5(b) hereof, shall be under no
liability with respect to any action taken or omitted to be
taken in accordance with such instruction, advice, notice,
opinion or other document.
(f) The Trustee shall not be required to exercise any of the
rights and powers vested in it hereby which would violate any
applicable law or which in its reasonable judgment would
involve it in any expense or liability, including, without
limitation, the payment of any taxes, unless it shall have
been furnished with reasonable security or indemnity against
such expenses and liabilities which might be incurred by it in
exercising any such rights or powers and Tracker U.S. and
Tracker jointly and severally undertake and agree to provide
such security and indemnity as may be required.
(g) The Trustee undertakes to perform such duties and only such
duties as set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement
against the Trustee.
<PAGE> 74
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(h) The Trustee may treat the person in whose name any shares of
Tracker Exchangeable Preference Shares are registered as the
owner of such shares for all purposes whatsoever.
(i) The Trustee may at any time request written instructions from
Tracker U.S. or Tracker with respect to the interpretation of
this Agreement or any action to be taken or suffered or not
taken hereunder and shall be entitled to withhold action
hereunder until it shall have received such written
instructions from Tracker U.S. or Tracker.
(j) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any instruction, advice,
notice, opinion or other document, but the Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matter as it may see fit.
6. VOTING OF SHARES; DISTRIBUTION TO BENEFICIARIES
6.01 The Trustee, as the stockholder of record of the Shares, shall
be entitled to one vote for each such Share held by it. All of the voting rights
with respect to any Shares held by the Trustee from time to time shall be and
remain vested in and exercised by the Trustee, including the right to consent to
or to vote in person or by proxy all or any of such Shares upon any matter,
question or proposition whatsoever that may properly come before the
stockholders of Tracker U.S.; provided, however, that subject to Section 6.10
hereof, the Trustee shall vote such Shares held by it only to the extent that it
is instructed to do so pursuant to this Article 6 by the holders of Tracker
Exchangeable Preference Shares issued and outstanding and entitled to instruct
the Trustee as to the voting thereof at the time such vote is held.
6.02 Each holder, from time to time, of Tracker Exchangeable
Preference Shares (except Tracker and Tracker U.S.) shall be entitled to
instruct the Trustee with respect to the voting of (or to vote personally, in
the event that (i) the Shares have been distributed to the Beneficiaries
pursuant to Article 12 hereof, or (ii) such holder has elected to attend the
meeting of stockholders of Tracker U.S. in accordance with Section 6.06 hereof)
the number of shares of Tracker U.S. Voting Stock corresponding to the number of
whole Tracker U.S. Common Shares for which Tracker Exchangeable Preference
Shares owned by such holder are then exchangeable.
6.03 Upon receipt by the Trustee of notice of a meeting of the
stockholders of Tracker U.S., the Trustee shall, as soon as practicable
thereafter, mail or cause to be mailed to each of the holders of Tracker
Exchangeable Preference Shares specified in the List (as defined in Section 6.05
hereof) provided by Tracker to the Trustee (a) a copy of such notice, (b) a
statement that such holder is entitled to instruct the Trustee as to the
exercise of the voting rights pertaining to a specified number of Shares at such
meeting or, pursuant to Section 6.06 hereof, to attend such meeting of
stockholders and to personally vote such Shares, which number shall
<PAGE> 75
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be equal to the number of whole Tracker U.S. Common Shares for which the Tracker
Exchangeable Preference Shares held of record by such holder at the close of
business on a specified record date (which shall be the record date established
by Tracker U.S. Common Shares for purposes of determining stockholders entitled
to vote at such meeting) are exchangeable on such record date, (c) a brief
statement as to the manner in which such instructions may be given, including an
express indication that instructions may be given to the Trustee to give (i) a
proxy to such holder to vote personally such Shares as to which such holder is
entitled to instruct the Trustee, or (ii) a proxy to a designated agent or other
representative of the board of directors of Tracker U.S. and (d) a form of
direction whereby the holders of such Tracker Exchangeable Preference Shares may
so direct and instruct the Trustee.
6.04 Tracker U.S. shall forward promptly to the Trustee copies of
all proxy materials, information statements, reports and other written
communications which are distributed to holders of Tracker U.S. Shares in
sufficient quantities for the Trustee to forward the same to each Beneficiary.
The Trustee shall make available for inspection by any Beneficiary at its
principal corporate trust office in Toronto, any and all proxy or information
statements, reports or other communications received from Tracker U.S. which are
(a) both (i) received by the Trustee as the holder of the Shares and (ii)
publicly made available by Tracker U.S. to the holders of Tracker U.S. Common
Shares, or (b) specifically directed to the Beneficiaries. The Trustee shall
also promptly mail to each Beneficiary, at the expense of Tracker U.S., copies
of such materials received by the Trustee from Tracker U.S. The Trustee is
hereby authorized but shall not be required, to send other and additional
notices to the Beneficiaries.
6.05 Tracker shall (a) prior to any annual meeting of stockholders
of Tracker U.S., or (b) forthwith upon (i) any calling by Tracker U.S. of any
special meeting of its stockholders, or (ii) any request made at any time by the
Trustee in writing, prepare or cause to be prepared a list (each such list from
time to time prepared is herein called a "List") of the holders of Tracker
Exchangeable Preference Shares arranged in alphabetical order and showing the
number of (x) the Shares that each such holder is entitled to instruct the
Trustee as to the exercise of the voting rights pertaining thereto, and (y) the
Tracker Exchangeable Preference Shares held by each such shareholder, in each
such case at the close of business on the date specified by the Trustee in such
request or, in the case of a List prepared in connection with a meeting of
stockholders of Tracker U.S., at the close of business on the record date
established by Tracker U.S. for such meeting, which List shall be delivered to
the Trustee within 2 business days after receipt by Tracker of such request or
the record date for such meeting, as the case may be.
6.06 (a) Any person named in a List prepared in connection with any
meeting of stockholders of Tracker U.S. shall be entitled (i) to instruct the
Trustee in the manner described in Section 6.03 hereof with respect to the
exercise of the voting rights pertaining to, or (ii) to attend such meeting and
personally to exercise thereat, as the proxy of the Trustee, the voting rights
pertaining to a number of Shares equal to the number of whole shares of Tracker
U.S. Common Shares for which the Tracker Exchangeable Preference Shares shown
opposite
<PAGE> 76
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his name on the List are exchangeable, except, in each case, to the extent that
such person has transferred (whether by the exercise of his right of exchange or
otherwise) the ownership of any such Tracker Exchangeable Preference Shares
after the close of business on the record date for such meeting.
(b) Any bona fide transferee of Tracker Exchangeable
Preference Shares after the close of business on such record date shall be
entitled to instruct the Trustee with respect to the exercise of the voting
rights of the Shares pertaining to such Tracker Exchangeable Preference Shares
or to attend such meeting of stockholders of Tracker U.S. and to personally
exercise such voting rights if, not later than 10 business days prior to such
meeting of stockholders of Tracker U.S., such transferee delivers written notice
to the Trustee of his intention to so instruct the Trustee or to so attend and
vote and, within 5 business days of such meeting, (i) produces for inspection by
the Trustee at its principal corporate trust office in Toronto, Ontario property
endorsed share certificates for such Tracker Exchangeable Preference Shares, or
(ii) otherwise establishes to the satisfaction of the Trustee that he is the
bona fide owner of such shares.
6.07 The Trustee, if so instructed in writing by a Beneficiary,
shall attend the meeting of stockholders of Tracker U.S. at which the
Beneficiary is entitled to vote and vote the appropriate number of Shares in
accordance with such instructions; provided, however, that such written
instructions are received by the Trustee not later than 2 business days prior to
the date of such meeting.
6.08 The Trustee shall cause to attend each meeting of stockholders
of Tracker U.S. a representative who is empowered by it to sign and deliver on
behalf of the Trustee proxies which permit Beneficiaries to exercise the number
of votes which they are respectively entitled to exercise at such meeting. Such
representative shall sign and deliver to any Beneficiary a proxy to vote
personally the Shares as to which such Beneficiary is entitled to instruct the
Trustee, if such Beneficiary has either (i) not previously given the Trustee
instruction pursuant to Section 6.02 in respect of such meetings, or (ii)
desires to revoke any such previous instructions; and (iii) revokes such
previous instructions and requests such representative to give such proxy.
6.09 Any distribution of written materials by the Trustee pursuant
to this Agreement shall be delivered in person or sent by mail to each
Beneficiary at his address as shown on the books of Tracker. Tracker covenants
and agrees to provide or cause to be provided to the Trustee for this purpose,
without charge or other expense, (i) current lists of the registered holders of
Tracker Exchangeable Preference Shares and (ii) upon the request of the Trustee,
mailIng labels, in order to enable the Trustee to carry out its duties under
this Agreement.
6.10 If conflicting claims or demands are made or asserted with
respect to any interest of any Beneficiary in any Shares, or if there should be
any disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Beneficiary in any Shares
resulting in conflicting claims or demands being made in connection
<PAGE> 77
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with such interest, then the Trustee shall be entitled, at its sole election, to
refuse to recognize or to comply with any such claim or demand. In so refusing,
the Trustee may elect not to exercise any voting rights with respect to the
Shares subject to such conflicting claims or demands or not to make a payment or
distribution, if any, in respect of such Shares and, in so doing, the Trustee
shall not be or become liable to any person on account of such election or its
failure or refusal to comply with any such conflicting claims or demands. The
Trustee shall be entitled to continue to refrain from acting and to refuse to
act until (a) the rights of all adverse claimants with respect to the Shares
subject to such conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction or (b) all differences with
respect to the Shares subject to such conflicting claims or demands have been
adjusted and conclusively settled by valid written agreement binding on all such
adverse claimants, and the Trustee shall have been furnished with an executed
copy of such agreement. H the Trustee shall elect to recognize any claim or
comply with any demand made by any such adverse claimant, it may in its
discretion require such claimant to furnish such surety bond or other security
satisfactory to the Trustee as it shall deem appropriate to fully indemnity it
as between all conflicting claims or demands.
6.11 Notwithstanding the fact that the Shares, by their terms, are
not entitled to participate in any dividends of Tracker U.S., in the event that
the Trustee shall receive any cash distribution by Tracker U.S. on account of
any Shares then held by the Trustee pursuant to this Agreement, the Trustee
shall distribute the amount so received to the Beneficiaries entitled thereto,
in proportion to the number of Tracker Exchangeable Preference Shares then held
by them respectively; provided, however, that if Tracker U.S. or the Trustee
shall be required to withhold and does withhold from any such cash distribution
in respect of any Shares an amount on account of taxes, the amount distributed
to the Beneficiaries shall be reduced accordingly. The Trustee shall not be
called upon to make any payments in respect of cash distributions out of its own
funds but shall merely be required to transmit to the Beneficiaries entitled
thereto any funds which the Trustee may be entitled to receive in respect of the
Shares less the taxes referred to above. The Trustee shall have no obligation to
determine if the proper amount of cash distribution has been declared or paid to
it by Tracker U.S. or whether the proper amount of taxes has been paid or
withheld by Tracker U.S. with respect to any such cash distribution
6.12 All of the rights of a holder of Tracker Exchangeable
Preference Shares as the beneficial owner of a corresponding number of Shares,
including the right to instruct the Trustee with respect to the voting of such
Shares, shall be deemed to be surrendered and shall cease immediately upon the
delivery by such holder to the Trustee of the certificate or certificates
representing such Tracker Exchangeable Preference Shares and a request for
exchange thereof, as specified in Section 7.03 hereof.
7. EXCHANGE PRIVILEGES
7.01 Subject to the terms and conditions hereinafter set forth, the
holders from time to time of Tracker Exchangeable Preference Shares shall have
the right to exchange such
<PAGE> 78
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shares through the Trustee for Tracker U.S. Common Shares at the then applicable
Exchange Rate and Tracker U.S. shall so exchange such shares.
7.02 As used herein, the term "Exchange Rate" shall mean the rate
at which Tracker Exchangeable Preference Shares are exchangeable for Tracker
U.S. Common Shares, which rate, subject to adjustment from time to time in
accordance with Article 8 hereof, shall be one (1) Tracker U.S. Common Share in
exchange for each Tracker Exchangeable Preference Share.
7.03 A holder from time to time of Tracker Exchangeable Preference
Shares shall be entitled to require the Trustee to exchange at any time, or from
time to time
(a) on or after the earlier of either (i) one (1) year following
the Effective Date, or (ii) such day as shall be designated by
the board of directors of Tracker; and
(b) on or before the date (the "Expiry Date") which is five (5)
years following the Effective Date,
all or any of the Tracker Exchangeable Preference Shares registered in the name
of such holder on the books of Tracker for Tracker U.S. Common Shares, upon
delivery to the Trustee, in person or by certified or registered mall, at
__________________________________ or at such other address or addresses as the
Trustee may from time to time designate by written notice to the holders of
Tracker Exchangeable Preference Shares, of the certificate or certificates
representing the Tracker Exchangeable Preference Shares which the bolder desires
to exchange for Tracker U.S. Common Shares, duly endorsed in blank and
accompanied by such instruments of transfer, in form satisfactory to Tracker
U.S. and the Trustee, as they may require, together with (a) a notice in writing
stating that such election to exchange has been made and specifying the number
of shares of Tracker Exchangeable Preference Shares as to which such election is
made and (i) the name or names in which the certificate or certificates
representing the Tracker U.S. Common Shares issuable upon such exchange are to
be issued, and (ii) if such election to exchange covers less than all of the
Tracker Exchangeable Preference Shares represented by the certificate or
certificates so delivered to the Trustee, the name or names in which the
certificate or certificates representing the remaining Tracker Exchangeable
Preference Shares are to be issued, and (b) payment of the stock transfer tax
(if any) payable pursuant to Section 7.06 of this Agreement. Failure by any
holder of Tracker Exchangeable Preference Shares to exercise such rights of
exchange on or before the Expiry Date with respect to all of such holder's
Tracker Exchangeable Preference Shares shall result in a deemed exercise of this
election relating to all Tracker Exchangeable Preference Shares then held by
such holder as at the Expiry Date.
7.04 As promptly as practicable after receipt of such stock
certificates and notice (and payment of taxes, if any), the Trustee shall notify
Tracker U.S. (and Tracker, in the case of any partial exercise of the election
to exchange) of its receipt of the same and Tracker U.S. shall cause to be
issued and delivered to the Trustee, for delivery to the holder making
<PAGE> 79
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such election to exchange (a) a certificate or certificates for the number of
Tracker U.S. Common Shares issuable upon such exchange, and (b) in the case of
any partial exercise of the election to exchange, Tracker shall cause to be
issued and delivered to the Trustee for delivery to the holder making such
partial exercise, a certificate or certificates representing the Tracker
Exchangeable Preference Shares as to which such election has not been made;
provided, however, that no such issuance and delivery shall be made unless and
until the holder requesting the same shall have paid to the Trustee for the
benefit of Tracker U.S. or Tracker, as appropriate, the amount of any stock
transfer tax payable pursuant to Section 7.06 of this Agreement, or shall have
established to the satisfaction of Tracker U.S. and Tracker that such tax, if
any, has been paid. Upon the exercise of the election to exchange as provided in
Section 7.03 hereof, the holder of the Tracker Exchangeable Preference Shares
covered thereby shall be deemed to have transferred to Tracker U.S. all of his
right, title and interest therein and in the related Shares. Tracker U.S. may at
any time thereafter require the Trustee to transfer such Shares to it.
7.05 The registered bolder of any Tracker Exchangeable Preference
Shares on the record date for any dividend payable on such share shall be
entitled to such dividend notwithstanding the fact that such shares shall have
been exchanged for Tracker U.S. Common Shares after such record date and before
the payment date of such dividend. Subject to the foregoing, upon the exchange
of any Tracker Exchangeable Preference Share there shall be no adjustment by
Tracker, by Tracker U.S. or by any holder of Tracker Exchangeable Preference
Shares on account of any dividends on any Tracker Exchangeable Preference Share
so exchanged.
7.06 Upon any exchange of Tracker Exchangeable Preference Shares,
the stock certificate or certificates representing the Tracker U.S. Common
Shares exchangeable therefor and, in the case of any partial exercise of the
election to exchange, the certificate or certificates representing the Tracker
Exchangeable Preference Shares as to which such election has not been made,
shall be issued in the name of the holder of the Tracker Exchangeable Preference
Shares exchanged or in such name or names as such holder may direct in writing
in the notice referred to in Section 7.03 hereof, without charge to the holder
of the Tracker Exchangeable Preference Shares so exchanged, provided, however,
that such holder shall pay, and neither Tracker U.S. nor Tracker nor the Trustee
shall be required to pay, any documentary, stamp or other transfer taxes that
may be payable in respect of any transfer taxes that may be payable in respect
of any transfer involved in the issuance and delivery of such shares to a person
other than such holder.
7.07 The right of a holder of Tracker Exchangeable Preference
Shares to exchange the same with Tracker U.S. for Tracker U.S. Common Shares
shall be deemed to have been exercised and the holder of the Tracker
Exchangeable Preference Shares to be exchanged (or any person or persons in
whose name or names such holder of Tracker Exchangeable Preference Shares shall
have directed a certificate or certificates representing Tracker U.S. Common
Shares be issued as provided in Section 7.03 hereof) shall be deemed to have
become a holder of Tracker U.S. Common Shares for all purposes, on the date or
dates of receipt by the Trustee of the certificate or certificates representing
the Tracker Exchangeable Preference
<PAGE> 80
-15-
Shares to be exchanged, accompanied by the notice in writing referred to in
Section 7.03 hereof and payment of the applicable stock transfer tax (if any)
referred to in Section 7.06 hereof, notwithstanding any delay in the delivery of
the certificate or certificates representing the Tracker U.S. Common Shares for
which such Tracker Exchangeable Preference Shares have been exchanged.
7.08 Tracker U.S. shall not be required to issue fractional shares
in satisfaction of the exchange rights herein provided but in lieu thereof may,
at its option, in respect of any fractional interest resulting from any exercise
of exchange rights, either pay a cash adjustment or issue or cause to be issued
non-voting and non-dividend-bearing scrip certificates, in such form as may be
approved by the board of directors of Tracker U.S., which scrip certificates
shall, subject to the conditions thereof, entitle the holder thereof to receive
a certificate for a full Tracker U.S. Common Share by exchanging scrip
certificates aggregating a full Tracker U.S. Common Share. The amount of any
cash adjustment paid on account of a fractional interest in a Tracker U.S.
Common Share shall equal the same fraction of the last round lot sale price (or
average of the bid and asked prices if there were no sales) per Tracker U.S.
Common Share on the business day next preceding the date of the particular
exercise of exchange rights for (or the second preceding business day if the
Tracker U.S. Common Shares were quoted on such day but not on the next preceding
business day), on that one of the stock exchanges or other securities markets on
which said shares were being most actively traded. When scrip certificates are
issued and such scrip certificates may contain provisions to the effect that,
after the expiration of one year from their date of issuance, Tracker U.S. may
sell or cause to be sold all the shares then represented by unsurrendered scrip
certificates and the sole rights of the holders of the scrip certificates after
such sale shall be, against surrender of their scrip certificates, to receive
payment of their proportionate amount of the net proceeds of such sale, together
with their proportionate amount of any dividends theretofore paid on such
shares, less taxes and costs of sale. Such scrip certificates shall not confer
on the holders thereof any rights as a stockholder of Tracker U.S. H in the
opinion of the board of directors of Tracker U.S., a sufficient market for
Tracker U.S. Common Shares does not exist to make the above determination, the
board of directors shall determine the amount of such cash adjustment and so
advise the Trustee.
7.09 Tracker U.S. covenants that, subject to subsection 7.03(1), if
any Tracker U.S. Common Shares required to be reserved for the purposes of
issuance upon exercise of the exchange right appertaining to the Tracker
Exchangeable Preference Shares hereunder require registration with or approval
of any governmental authority under any U.S. federal or state law, or any
Canadian federal or provincial law, or listing on any national securities
exchange, before such shares may be issued upon exercise of such exchange right,
Tracker U.S. will in good faith and as expeditiously as possible endeavor to
cause such shares to be duly registered, or approved or listed on the relevant
national securities exchange, as the case may be, and, in such event, Tracker
U.S. is authorized to suspend for a maximum of 90 consecutive days the right !o
exchange Tracker Exchangeable Preference Shares for Tracker U.S. Common Shares,
during which period Tracker shall endeavor to obtain such registration approval
or listing.
<PAGE> 81
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8. ADJUSTMENT OF EXCHANGE RATE
8.01 The Exchange Rate in effect at any date shall be subject to
adjustment from time to time as hereinafter provided. H Tracker U.S. shall (i)
subdivide the outstanding Tracker U.S. Common Shares into a greater number of
shares, (ii) reduce, combine or consolidate the outstanding Tracker U.S. Common
Shares into a smaller number of shares, or (iii) issue additional Tracker U.S.
common Shares by way of a stock dividend, the Exchange Rate in effect on the
effective date of such subdivision or reduction, combination or consolidation or
on the record date for issue of Tracker U.S. Common Shares by way of a stock
dividend, as the case may be, shall, in the case of the events referred to in
(i) and (iii) above, be increased in proportion to the increase in the number of
outstanding Tracker U.S. Common Shares resulting from such subdivision or such
dividend, or, in the case of (ii) above, shall be decreased in proportion to the
decrease in the number of outstanding Tracker U.S. Common Shares resulting from
such reduction, combination or consolidation; such adjustment shall be made
successively whenever any event referred to in this subsection 8.01(a) shall
occur.
8.02 If Section 8.01 shall require that an adjustment shall become
effective immediately after a record date for an event referred to herein,
Tracker U.S. may defer until the occurrence of such event issuing to the holder
of any Tracker Exchangeable Preference Shares exchanged after such record dated
and before the fence of such event, any additional Tracker U.S. Common Shares
issuable by reason of the adjustment required by such event in addition to the
Tracker U.S. Common Shares issuable upon such exchange before giving effect to
such adjustment.
8.03 In the case of any reclassification of, or other change in,
the outstanding Tracker U.S. Common Shares, other than a subdivision or
reduction, combination or consolidation, the Exchange Rate and the class or
classes of shares for which a Tracker Exchangeable Preference Share may be
exchanged shall be adjusted in such manner as the Board of Directors of Tracker
U.S. shall determine to be appropriate on a basis consistent with this Article
8.
8.04 Upon the occurrence of an Event of Merger (as hereinafter
defined), the Exchange Rate and the right to exchange Tracker Exchangeable
Preference Shares shall be adjusted in such a manner that each holder of Tracker
Exchangeable Preference Shares shall be entitled to receive, on and after the
occurrence of such Event of Merger, upon the exchange of his Tracker
Exchangeable Preference Shares, the property or securities that he would have
received upon the effectiveness of the Event of Merger if he had exchanged his
Tracker Exchangeable Preference Shares for Tracker U.S. Common Shares
immediately prior to the effectiveness of the Event of Merger. No other change
in the Exchange Rate or exchange right shall be made following an Event of
Merger in respect of that Event of Merger; provided, however, that this
provision shall similarly apply to successive Events of Merger. Tracker U.S.
shall cause the successor or survivor corporation in any such Event of Merger to
expressly assume in writing for the benefit of the holders of Tracker
Exchangeable Preference Shares the obligation of Tracker U.S. to exchange
Tracker Exchangeable Preference Shares as set forth
<PAGE> 82
-17-
herein. As used herein, "Event of Merger" means any merger or consolidation
involving Tracker U.S. where Tracker U.S. is not the successor or surviving
corporation or any share exchange involving Tracker U.S. where Tracker U.S.
Common Shares are acquired.
8.05 No adjustment in the Exchange Rate shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such rate; provided, however, that any adjustments which by reason of
this Section 8.05 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
8.06 If any question shall at any time arise with respect to the
amount of adjustments in the Exchange Rate or with respect to the amount of any
cash payment made in lieu of issuing a fractional share, such question shall be
conclusively determined by the independent auditors of Tracker U.S.
8.07 Forthwith after the occurrence of any adjustment in the
Exchange Rate pursuant to this Article 8, Tracker U.S. shall file with the
Trustee a certificate and given written notice to the holders of Tracker
Exchangeable Preference Shares of the Exchange Rate following such adjustment.
8.08 If Tracker U.S. intends to fix a record date for any event
referred to in subsection 8.01 hereof (other than the subdivision or
consolidation of the outstanding Tracker U.S. Common Shares), Tracker U.S.
shall, at least thirty (30) days prior to such record date, notify the Trustee
and the Beneficiaries of such intention by written notice setting forth the
particulars thereof to the extent that such particulars have been determined at
the time of giving such notice.
9. COMPENSATION
Tracker U.S. and Tracker jointly and severally agree to pay the Trustee
reasonable compensation for all of the services rendered by it hereunder and
shall reimburse the Trustee for all expenses (including taxes) and
disbursements, including the cost and expense of any suit or litigation of any
character, including any proceedings before any governmental agency, reasonably
incurred by the Trustee in connection with its duties under this Agreement, but
excluding expenses and disbursements paid, incurred or suffered by the Trustee
in any suit or litigation in which the Trustee is determined to have acted in
bad faith or with gross negligence or wilful misconduct. Tracker U.S. shall bear
all costs (other than stock transfer taxes payable by holders of Tracker
Exchangeable Preference Shares pursuant to Section 7.06 of this Agreement) in
connection with the transfer of any Shares, Tracker U.S. Common Shares or
Tracker Exchangeable Preference Shares or other interests or securities required
to be transferred to or by the Trustee hereunder, as well as all costs of any
distribution of Tracker U.S. Common Shares hereunder.
10. INDEMNIFICATION
<PAGE> 83
-18-
Tracker U.S. and Tracker jointly and severally agree to indemnify and
hold harmless the Trustee, and each director, officer and agent thereof, against
all claims, losses damages, costs, penalties, fines and expenses (including
reasonable expenses of Trustee's legal counsel) which, without negligence,
wilful misconduct or bad faith on the part of the Trustee, may be paid, incurred
or suffered by the Trustee by reason of or as a result of the Trustee's
acceptance or administration of the Trust or by reason of or as a result of Its
compliance with its duties set forth herein or with any written or oral
instructions delivered to the Trustee pursuant hereto. In no case shall Tracker
U.S. or Tracker be liable under this indemnity with respect to any claim against
the Trustee unless Tracker U.S. and Tracker shall be notified by the Trustee, by
letter or by cable or telex confirmed by letter of the written assertion of a
claim against the Trustee or of any action commenced against the Trustee,
promptly after the Trustee shall have received any such written assertion of a
claim or shall have been serviced with a summons or other first legal process
giving information as to the nature and basis of the claim. Tracker U.S. and
Tracker shall be entitled to participate at their own expense in the defense,
and if Tracker U.S. or Tracker so elect at any time after receipt of such
notice, either of them may assume the defense of any suit brought to enforce any
such claim. In the event that Tracker U.S. or Tracker assumes the defense of any
suit, neither Tracker U.S. nor Tracker shall be liable for the fees and expenses
of any additional counsel thereafter retained by the Trustee.
11. RESIGNATION AND REMOVAL; SUCCESSOR TRUSTEE
11.01 The Trustee, or any trustee hereafter appointed, may at any
time resign by giving written notice thereof to Tracker U.S. and Tracker,
specifying the date on which its desired resignations shall become effective,
provided that such notice shall never be given less than one (1) month prior to
such desired effective date unless Tracker U.S. and Tracker otherwise agree.
Such resignation shall take effect upon the earlier of (a) the stated effective
date of such resignation or (b) the date of the appointment of a successor
trustee and the acceptance of such appointment by the successor trustee. Upon
receiving such notice of resignation, Tracker U.S. and Tracker shall promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which shall be delivered to the resigning trustee and one copy of the successor
trustee.
11.02 The Trustee, or any trustee hereafter appointed, may be
removed at any time by written instrument, executed by Tracker U.S. and Tracker,
in duplicate, one copy of which shall be delivered to the trustee so removed and
one copy to the successor trustee.
11.03 Any successor trustee appointed as provided hereunder shall
execute, acknowledge and deliver to Tracker U.S. and Tracker and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with ~e effect as if originally named
as trustee herein; provided, however, that on the written request of Tracker
U.S. or Tracker or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions
<PAGE> 84
-19-
of this Agreement, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the trustee so ceasing to act.
Upon the request of any such successor trustee, Tracker U.S., Tracker and such
predecessor Trustee shall execute any and all instruments in writing for more
fully and certainly vesting and in confirming to such successor trustee all such
rights and powers.
11.04 Upon acceptance of appointment by a successor trustee as
provided herein, Tracker U.S. and Tracker shall cause to be mailed notice of the
succession of such trustee hereunder to the holders of Tracker Exchangeable
Preference Shares. Tracker U.S. or Tracker shall fail to cause such notice to be
mailed within ten days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of
Tracker U.S. and Tracker.
12. DISTRIBUTION OF SHARES UPON TERMINATION OF TRUST
12.01 Upon the termination of the Trust, as provided in Section
13.01 of this Agreement, the Trustee shall make a distribution of the Shares and
any monies in the Trust Estate in the manner hereinafter provided. The Trustee
shaD promptly send written notice of termination of the Trust and the manner of
distribution of the Shares and any monies from the Trust Estate to the then
holders of Tracker Exchangeable Preference Shares and shaD cause the same to be
published once a week for two successive weeks in a recognized newspaper of
national distribution in each of Canada and the United States.
12.02 The Trustee shall distribute to each holder to Tracker
Exchangeable Preference Shares recorded on the books of Tracker on the date the
Trust is terminated a certificate representing the number of whole shares
(rounded down) of Tracker U.S. Voting Stock which is the product obtained by
multiplying the number of Tracker Exchangeable Preference Shares held by such
holder on such date by the Exchange Rate. Such Tracker U.S. Voting Stock shall
be transferred to, and registered in the name of, the respective holders of
record of the Tracker Exchangeable Preference Shares as their names shall appear
on the books of Tracker. The remaining Shares in excess of the number necessary
to effect the distribution as aforesaid shall be sold forthwith by the Trustee
to Tracker U.S. at the price specified in Section 4.13 hereof (adjusted as
provided in the next succeeding sentence) and the proceeds thereof shall be
distributed by the Trustee to the then holders of Tracker Exchangeable
Preference Shares. The amount to be paid by Tracker U.S. to the Trustee upon
such sale shall be adjusted upward so that all fractions of a cent to which the
holders of Tracker Exchangeable Preference Shares would be entitled upon such
distribution of proceeds, but for the operation of this sentence, shall be
rounded upward to the nearest whole cent.
13. TERMINATION
13.01 Termination of last The Trust created by this Agreement shall
continue until the earliest to occur of the following events:
<PAGE> 85
-20-
(a) no Tracker Exchangeable Preference Shares are outstanding; or
(b) Tracker U.S. elects in writing to terminate the Trust and such
termination is approved by Special Resolution and thereafter
Tracker U.S. has given 90 days written notice of the
termination date to the holders of each class of Tracker
shares (other than Tracker Common Shares) entitled by the
Ontario Business Corporations Act as that time to vote in
respect of a change in the rights, privileges, restrictions or
conditions of the Tracker Exchangeable Preference Shares; or
(c) twenty-one (21) years after the death of the last survivor of
the descendants of His Late Majesty King George VI of the
United Kingdom of Great Britain and Northern Ireland living on
the date of the creation of the Trust.
13.02 TERMINATION OF AGREEMENT. This Agreement, including the rights
granted hereunder to the holders from time to time, of Tracker Exchangeable
Preference Shares to exchange such shares for Tracker U.S. Common Shares, and
the undertaking of Tracker U.S. contained in Article 14 of this Agreement, shall
survive any termination of the Trust created by this Agreement and shaD continue
until (a) Tracker U.S. elects in writing to terminate this Agreement, and either
(i) no Tracker Exchangeable Preference Shares, no Warrants or
other securities of Tracker convertible into Tracker
Exchangeable Preference Shares and no option to acquire
Tracker Exchangeable Preference Shares is outstanding; or
(ii) such termination is approved by Special Resolution and
thereafter Tracker U.S. has given 90 days written notice of
the termination date to the holders of each class of Tracker
shares entitled by the Ontario Business Corporations Act at
that time to vote in respect of a change in the rights,
privileges, restrictions or conditions of the Tracker
Exchangeable Preference Shares;
provided, however, that the provisions of Articles 9, 10, and 12 of this
Agreement shall survive any such termination of this Agreement.
14. AGREEMENT CONCERNING DIVIDENDS ON TRACKER U.S. COMMON SHARES
Tracker U.S. hereby agrees for the benefit of the holders, from time to
time, of Tracker Exchangeable Preference Shares not to declare and pay any cash
dividends on the Tracker U.S. Common Shares unless it shaD also cause Tracker to
declare and pay a corresponding cash dividend on the Tracker Exchangeable
Preference Shares, payable at the
<PAGE> 86
-21-
same time and in the same manner as such dividends declared on the Tracker U.S.
Common Shares.
15. MISCELLANEOUS
15.01 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.02 VALIDITY OF PROVISIONS. If any provision of this Agreement is
held to be invalid or unenforceable by any judgment or order of a court or
tribunal of competent jurisdiction, the remainder of this Agreement shall not be
affected by such judgment, and the Agreement shall be carried out as nearly as
possible in accordance with its original terms and conditions.
15.03 AMENDMENT, MODIFICATION, ETC.
(a) The terms, conditions and provisions of this Agreement,
including the rights granted hereunder to the holders, from
time to time, of Tracker Exchangeable Preference Shares to
exchange such shares for Tracker U.S. Common Shares, may be
amended or modified at any time by the parties hereto subject
to the prior approval of such amendment or modification by
Special Resolution.
(b) Notwithstanding the provisions of paragraph (a) of this
Section 15.03, the parties hereto may, at any time and from
time to time, without approval by Special Resolution or the
consent of any of the Beneficiaries, amend or modify this
Agreement to cure any ambiguity or to correct or supplement
any provision contained herein or in any amendment hereto
which may be defective or inconsistent with any other
provision contained herein or therein, or to make such other
provisions in regard to matters or questions arising under
this Agreement, as shall not adversely affect the interests of
the Beneficiaries.
(c) No amendment to or modification or waiver of any of the
provisions of this Agreement shall be effective unless made in
writing and signed by all of the parties hereto.
15.04 SPECIAL RESOLUTIONS. Tracker, at the request of Tracker U.S.
shall call a meeting for the purpose of considering any proposed Special
Resolution. Any such meeting shall be called and held in accordance with the
by-laws of Tracker and all applicable laws.
15.05 PARTIES. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and to
the benefit of the
<PAGE> 87
-22-
Beneficiaries. Except as specifically set forth in this Agreement, nothing in
this Agreement is intended to confer upon any other person any rights or
remedies under or by reason of this Agreement.
15.06 NOTICES. All notices, requests, demands or other
communications hereunder shall be given or made in writing and shall be
delivered personally or sent by certified or registered first class mail,
postage prepaid, to the other party or parties to whom they are directed at the
address set forth below, or to such other person or at such other address as any
party may designate in writing to the others.
To Tracker U.S.:
______________________________
______________________________
______________________________
Attention:
To Tracker:
______________________________
______________________________
______________________________
Attention:
To the Trustee:
______________________________
______________________________
______________________________
Attention:
Notices shall be deemed to have been received upon the earlier of actual
delivery thereof or five (5) calendar days after the date of postmark.
15.07 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
15.08 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the Province of Ontario.
<PAGE> 88
-23-
15.09 LANGUAGE. The parties have required the Agreement to be drawn
up solely in English. Les parties ont exigee que cette convention soit redigee
seulement en anglais.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
THE TRACKER CORPORATION
By:______________________________
Name:
Title:
ULTRA CAPITAL CORP.
By:______________________________
Name:
Title:
MONTREAL TRUST COMPANY
By:______________________________
Name:
Title:
<PAGE> 89
EXHIBIT E
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT is entered into as of the ____ day of July,
1994, by and between Ultra Capital Corp., a Nevada corporation (hereinafter
called "Ultra Capital"), and The Tracker Corporation, a corporation organized
and existing under the Canada Business Corporations Act (hereinafter called
"Tracker (Canada)"), based on the following:
WHEREAS pursuant to proposed articles of arrangement dated July ____,
1994 (the "Articles of Arrangement") Tracker (Canada) is to amend its Articles
to provide for a change and redesignation of the common shares of Tracker
(Canada) into a new class of shares designated as Exchangeable Preference Shares
(the "Exchangeable Preference Shares") to take effect July ____, 1994 (the
"Closing Date");
WHEREAS the Exchangeable Preference Shares will be exchangeable, during
the period between the first anniversary of the Closing Date and the fifth
anniversary of the Closing Date (the "Exchange Period"), with Ultra Capital for
shares of common stock of Ultra Capital (the "Common Shares") on a 1 for 1 basis
(as adjusted);
WHEREAS the Exchangeable Preference Shares are entitled to cumulative
dividends payable at the same time as and in an amount equal to the Canadian
dollar equivalent of the dividends declared on the Ultra Capital Common Shares
in preference to and priority over the shares of Tracker (Canada) common stock
(all of which are to be owned by Ultra Capital), but after payment of dividends
payable on other issued and outstanding shares of preferred stock of Tracker
(Canada);
AND WHEREAS pursuant to Section 3.02(b) of the Reorganization Agreement
entered into as of May 26, 1994, between Tracker (Canada) and Ultra Capital (the
"Reorganization Agreement"), Ultra Capital has undertaken to provide, prior to
the Closing Date, a guarantee to the holders, from time to time, of Exchangeable
Preference Shares whereby Ultra Capital will ensure that Tracker (Canada) will
have such funds as are necessary to enable Tracker (Canada) to declare and pay
dividends on the Exchangeable Preference Shares and to satisfy its obligations
in respect of payments to the holders of Exchangeable Preference Shares upon the
liquidation or winding up of Tracker (Canada), all in accordance with the terms
of the Exchangeable Preference Shares.
NOW, THEREFORE, the parties hereto in consideration of the aforesaid
Plan of Arrangement and the mutual covenants and agreements herein contained
agree as follows:
1. So long as any Exchangeable Preference Share is outstanding,
Ultra Capital agrees, for the benefit of the holders of
Exchangeable Preference Shares, to
1
<PAGE> 90
provide or cause to be provided to Tracker (Canada) such funds
(the "Funds") as may be necessary to ensure that Tracker
(Canada) will be in a financial position to permit the
(a) lawful and timely declaration and the due and
punctual payment of all dividends payable on the
Exchangeable Preference Shares in accordance with the
rights, privileges, restrictions and conditions
attaching to such shares (collectively, the "Share
Conditions"); and
(b) the lawful and timely distribution and due and
punctual payment or satisfaction of all amounts
payable to the holders of Exchangeable Preference
Shares upon a liquidation, dissolution or winding-up
of Tracker (Canada) as described in the Share
Conditions; PROVIDED, HOWEVER, that the obligation of
Ultra Capital to provide Funds to Tracker (Canada)
for the purpose of making such a distribution shall
be satisfied in full if upon the liquidation,
dissolution or winding-up of Tracker (Canada), Ultra
Capital issues to each of the holders of Exchangeable
Preference Shares the number of Common Shares to
which such holder is entitled at the time of such
liquidation, dissolution or winding-up of Tracker
(Canada) pursuant to the Share Conditions.
2. Subject to the requirement that Tracker (Canada) must have
sufficient resources to enable it lawfully to declare and pay
accrued dividends on the Exchangeable Preference Shares, the
Funds shall be provided as a contribution to the capital
surplus of Tracker (Canada).
3. In consideration of Ultra Capital providing or causing to be
provided to Tracker (Canada) the Funds, Tracker (Canada)
agrees to deposit the Funds in a separate account for the
benefit of holders from time to time of the Exchangeable
Preference Shares and agrees to use these Funds exclusively
for the purpose of the payment of dividends on or the
liquidation value of the Exchangeable Preference Shares.
4. Without prejudice to the rights of Tracker (Canada) arising
under this Agreement, should Ultra Capital fail to provide
Tracker (Canada) with Funds as required by Clause 1, any
registered holder of an Exchangeable Preference Share shall be
entitled to instigate all proceedings necessary to enforce the
performance of the obligations of Ultra Capital under this
Agreement.
2
<PAGE> 91
5. This Agreement may be amended or terminated by an agreement in
writing executed by Tracker (Canada) and Ultra Capital and
approved by a resolution passed by not less than two-thirds of
the votes cast by the holders of each class of shares in the
capital of Tracker (Canada) (other than Tracker (Canada)
Common Shares) entitled by the Ontario Business Corporations
Act at that time to vote in respect of a change in the rights,
privileges, restrictions, or conditions of the Exchangeable
Preference Shares.
6. All notices, requests, demands or other communications under
this Agreement shall be given or made in writing and shall be
delivered personally or sent by certified or registered first
class mail, postage prepaid, to the other party to whom they
are directed at the address set forth below, or to such other
person or at such other address as either party may designate
in writing to the other.
To Ultra Capital: 8555 E. Voltarie
Scottsdale, Arizona 85260
Attention: Jeff W. Holmes, President
To Tracker (Canada): The Tracker Corporation
180 Dundas Street West
26th Floor
Toronto, Ontario, Canada
M5G 1Z8
Attention: Gregg C. Johnson, Executive
Vice President
To: Holders of Tracker (Canada)
Exchangeable Preference
Shares:
at their addresses recorded in
the books of Tracker (Canada).
Notices shall be deemed to have been given and received upon the
earlier of (a) actual receipt thereof, or (b) five (5) calendar days
after the date of postmark.
7. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
3
<PAGE> 92
8. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the
laws of Canada applicable in that Province, except for the
internal operations of Ultra Capital which shall be governed
by the laws of the state of Delaware or Nevada, as the case
may be.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ULTRA CAPITAL CORP.,
a Nevada corporation
By:_______________________________________
THE TRACKER CORPORATION,
a corporation organized and existing under
the Canada Business Corporations Act
By:_______________________________________
4
<PAGE> 93
AMENDMENT NUMBER ONE
TO
REORGANIZATION AGREEMENT
This Amendment Number One to Reorganization Agreement (the "Amendment")
is made as of June 16, 1994, between The Tracker Corporation, a corporation
organized under the laws of the Province of Ontario ("Tracker (Canada)") and
Ultra Capital Corp., a Nevada corporation ("Ultra Capital"), Jeff W. Holmes and
R.Kirk Blosch (collectively, the "Ultra Shareholders").
PREMISES
Tracker (Canada), Ultra Capital and the Ultra Capital Shareholders are
parties to that certain Reorganization Agreement (the "Agreement") dated as of
May 26, 1994 pursuant to which Ultra Capital and Tracker (Canada) agreed to
reorganize upon the terms and conditions set forth therein.
Each of Tracker (Canada), Ultra Capital and the Ultra Capital
Shareholders wish to amend the Agreement in the manner set forth herein.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived from this Amendment, it is hereby agreed
as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Agreement.
2. Section 3.01(b)(i) of the Agreement is hereby deleted in its
entirety and the following is substituted therefor:
(i) authorize and approve a recapitalization pursuant to
which the issued and outstanding shares of the Ultra Capital Common
Stock will be forward split on that basis which will result in the
holders of record of the Ultra Capital Common Stock immediately prior
to the Closing Date collectively holding 10% of the voting rights of
Ultra Capital immediately after the Closing and the holders of record
of the Tracker (Canada) Common Shares immediately prior to the Closing
Date (including the holders who acquire the unissued but reserved
shares listed on Exhibit A prior to the Closing) collectively holding
90% of the voting rights of Ultra Capital immediately after the
Closing.
3. Section 3.08(e) of the Agreement is hereby deleted in its
entirety and the following is substituted therefor:
<PAGE> 94
This Agreement may be terminated by either of Tracker (Canada)
or Ultra Capital at any time prior to the Closing should ten percent or
more of the shareholders of Tracker (Canada) notify it of their intent
to dissent to the Articles of Arrangement and Plan of Arrangement.
4. Indemnification. The indemnification provided by the parties
pursuant to the provisions of Section 7.08 of the Agreement shall be modified
and limited as follows:
(a) The indemnity given by the Ultra Capital Shareholders
to the Tracker Indemnified Parties as provided in Section 7.08(b) of the
Agreement shall not extend to any Loss arising from or in connection with (i)
any information about or in respect of Tracker (Canada) and Tracker (Canada)'s
business contained in the proxy materials disseminated in connection with the
special shareholder meeting of Ultra Capital, including, without limitation,
biographical information regarding nominees for the board of directors of Ultra
Capital, and (ii) the proposals to be submitted to the shareholders of Ultra
Capital pursuant to Section 4.01(b), (c) and (d) of the Agreement and any
information about or in respect of such proposals contained in the proxy
materials.
(b) The indemnity of Tracker (Canada) given to the Ultra
Indemnified Parties as provided in Section 7.08(c) of the Agreement shall not
extend to any Loss arising from or in connection with any information about or
in respect of Ultra Capital and Ultra Capital's business contained in the proxy
materials disseminated in connection with the special shareholder meeting of
Ultra Capital.
5. Prevailing Document. The parties intend that this Amendment
modify the Agreement and in the event of any ambiguity or conflict arising
between the terms of this Amendment and the terms of the Agreement, the terms of
this Amendment shall prevail and in the event of any ambiguity or conflict
arising between the terms of this Amendment and the terms of any other
agreements or instruments to be executed in connection with the transactions
contemplated in the Agreement, the terms of such other agreements or instruments
shall prevail.
6. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
7. Survival of Agreement. Except as amended by this Amendment,
the Agreement shall remain in full force and effect in accordance with its
terms.
2
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
ULTRA CAPITAL CORP., a Nevada
corporation
ATTEST:
/s/ R. Kirk Blosch By /s/ Jeff W. Holmes
- ---------------------------- ----------------------------------
Duly Authorized Officer Jeff W. Holmes, President and Director
and
By /s/ R. Kirk Blosch
----------------------------------
R. Kirk Blosch, Secretary/Treasurer
and Director
THE TRACKER CORPORATION, an
Ontario corporation
ATTEST:
/s/ Mark J. Gertzbein By /s/ Gregg C. Johnson
- ---------------------------- ----------------------------------
Duly Authorized Officer Gregg C. Johnson, Executive
Vice President
and
By /s/ Mark J. Gertzbein
----------------------------------
Mark J. Gertzbein, Chief
Financial Officer
Ultra Capital Shareholders, in their personal
capacities
/s/ Jeff W. Holmes
------------------------------------
Jeff W. Holmes
/s/ R. Kirk Blosch
------------------------------------
R. Kirk Blosch
3
<PAGE> 96
AMENDMENT NUMBER TWO
TO
REORGANIZATION AGREEMENT
This Amendment Number Two to Reorganization Agreement ("Amendment Two")
is made effective as of June 24, 1994, between The Tracker Corporation, a
corporation organized under the laws of the Province of Ontario ("Tracker
(Canada)") and Ultra Capital Corp., a Nevada corporation ("Ultra Capital"), Jeff
W. Holmes and R. Kirk Blosch (collectively, the "Ultra Shareholders").
PREMISES
Tracker (Canada), Ultra Capital and the Ultra Capital Shareholders are
parties to that certain Reorganization Agreement dated as of May 26, 1994, as
amended by that certain Amendment Number One to Reorganization Agreement dated
as of June 16, 1994 (the "Agreement") pursuant to which Ultra Capital and
Tracker (Canada) agreed to reorganize upon the terms and conditions set forth
therein.
Each of Tracker (Canada), Ultra Capital and the Ultra Capital
Shareholders wish to amend the Agreement in the manner set forth herein.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived from this Amendment Two, it is hereby
agreed as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Agreement.
2. Section 3.03(c) of the Agreement is hereby deleted in its
entirety and the following is substituted therefor:
(c) Exchange Period; Redemption of Ultra Voting Stock;
Automatic Conversion. Commencing on and after the first anniversary of
the Closing Date and continuing through the eighth anniversary of the
Closing Date (the "Exchange Period"), Ultra Capital agrees that the
holders of the Exchangeable Shares shall be entitled to exchange, in
accordance with the terms and conditions of the Exchange Trust, each
Exchangeable Share held by such shareholder for one share of the Ultra
Capital Common Stock reserved pursuant to Section 3.03(a) or as
adjusted in accordance with the terms of the Exchange Trust.
<PAGE> 97
3. Prevailing Document. The parties intend that this Amendment
Two modify the Agreement and in the event of any ambiguity or conflict arising
between the terms of this Amendment Two and the terms of the Agreement the terms
of this Amendment Two shall prevail and in the event of any ambiguity or
conflict arising between the terms of this Amendment Two and the terms of any
other agreements or instruments to be executed in connection with the
transactions contemplated in the Agreement the terms of such other agreements or
instruments shall prevail.
4. Counterparts. This Amendment Two may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
5. Survival of Agreement. Except as amended by this Amendment
Two, the Agreement shall remain in full force and effect in accordance with its
terms.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
ULTRA CAPITAL CORP., a Nevada
corporation
ATTEST:
/s/ R. Kirk Blosch By /s/ Jeff W. Holmes
- ---------------------------- ----------------------------------
Duly Authorized Officer Jeff W. Holmes, President and Director
and
By /s/ R. Kirk Blosch
----------------------------------
R. Kirk Blosch, Secretary/Treasurer
and Director
THE TRACKER CORPORATION, an
Ontario corporation
ATTEST:
/s/ Mark J. Gertzbein By /s/ Gregg C. Johnson
- ---------------------------- ----------------------------------
Duly Authorized Officer Gregg C. Johnson, Executive
Vice President
and
By /s/ Mark J. Gertzbein
----------------------------------
Mark J. Gertzbein, Chief
Financial Officer
Ultra Capital Shareholders, in their personal
capacities
/s/ Jeff W. Holmes
------------------------------------
Jeff W. Holmes
/s/ R. Kirk Blosch
------------------------------------
R. Kirk Blosch
3
<PAGE> 99
AMENDMENT NUMBER THREE
TO
REORGANIZATION AGREEMENT
This Amendment Number Three to Reorganization Agreement ("Amendment
Three") is made effective as of June 30, 1994, between The Tracker Corporation,
a corporation organized under the laws of the Province of Ontario ("Tracker
(Canada)") and Ultra Capital Corp., a Nevada corporation ("Ultra Capital"), Jeff
W. Holmes and R. Kirk Blosch (collectively, the "Ultra Shareholders").
PREMISES
Tracker (Canada), Ultra Capital and the Ultra Capital Shareholders are
parties to that certain Reorganization Agreement dated as of May 26, 1994, as
amended by that certain Amendment Number One to Reorganization Agreement dated
as of June 16, 1994 and by that certain Amendment Number Two to Reorganization
Agreement dated as of June 24, 1994 (the "Agreement") pursuant to which Ultra
Capital and Tracker (Canada) agreed to reorganize upon the terms and conditions
set forth therein.
Each of Tracker (Canada), Ultra Capital and the Ultra Capital
Shareholders wish to amend the Agreement in the manner set forth herein.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived from this Amendment Three, it is hereby
agreed as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Agreement.
2. Section 5.10 of the Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Financial Condition of Tracker (Canada); Manual Listing. Prior
to Closing, Tracker (Canada) shall have total assets with a value of not less
than U.S.$ 2,000,000 and net assets (total assets minus total liabilities) of
not less than U.S.$ 1,800,000. Tracker (Canada) shall provide Ultra Capital with
evidence satisfactory to Ultra Capital that such requirements have been
satisfied.
3. Prevailing Document. The parties intend that this Amendment
Three modify the Agreement and in the event of any ambiguity or conflict arising
between the terms of this Amendment Three and the terms of the Agreement the
terms of this Amendment Three shall prevail and in the event of any ambiguity or
conflict arising between the terms of this
<PAGE> 100
Amendment Three and the terms of any other agreements or instruments to be
executed in connection with the transactions contemplated in the Agreement the
terms of such other agreements or instruments shall prevail.
4. Counterparts. This Amendment Three may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
5. Survival of Agreement. Except as amended by this Amendment
Three, the Agreement shall remain in full force and effect in accordance with
its terms.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
ULTRA CAPITAL CORP., a Nevada
corporation
ATTEST:
/s/ R. Kirk Blosch By /s/ Jeff W. Holmes
- ---------------------------- ----------------------------------
Duly Authorized Officer Jeff W. Holmes, President and Director
and
By /s/ R. Kirk Blosch
----------------------------------
R. Kirk Blosch, Secretary/Treasurer
and Director
THE TRACKER CORPORATION, an
Ontario corporation
ATTEST:
/s/ Mark J. Gertzbein By /s/ Gregg C. Johnson
- ---------------------------- ----------------------------------
Duly Authorized Officer Gregg C. Johnson, Executive
Vice President
and
By /s/ Mark J. Gertzbein
----------------------------------
Mark J. Gertzbein, Chief
Financial Officer
Ultra Capital Shareholders, in their personal
capacities
/s/ Jeff W. Holmes
------------------------------------
Jeff W. Holmes
/s/ R. Kirk Blosch
------------------------------------
R. Kirk Blosch
3
<PAGE> 102
EXTENSION OF CLOSING
Pursuant to Section 3.08(d) of that certain Reorganization Agreement
dated May 26, 1994, as amended by Amendment Number One to Reorganization
Agreement dated June 16, 1994, by and among The Tracker Corporation, a
corporation organized under the laws of the Province of Ontario, Ultra Capital
Corp., a Nevada corporation, Jeff W. Holmes and R. Kirk Blosch, (the
"Agreement"), the undersigned hereby agree to extend the June 24, 1993 deadline
for Closing (as defined in Section 3.06 of the Agreement) to a date which is not
later than seven (7) days following the issuance of the final order by the
Ontario Court of Justice (General Division).
Except as amended by this Extension of Closing, the Agreement shall
remain in full force and effect in accordance with its terms.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 103
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
ULTRA CAPITAL CORP., a Nevada
corporation
ATTEST:
By /s/ Jeff W. Holmes
- ---------------------------- ----------------------------------
Duly Authorized Officer Jeff W. Holmes, President and Director
and
By
----------------------------------
R. Kirk Blosch, Secretary/Treasurer
and Director
THE TRACKER CORPORATION, an
Ontario corporation
ATTEST:
/s/ Gregg C. Johnson By /s/ Gregg C. Johnson
- ---------------------------- ----------------------------------
Duly Authorized Officer Gregg C. Johnson, Executive
Vice President
and
By /s/ Mark J. Gertzbein
----------------------------------
Mark J. Gertzbein, Chief
Financial Officer
Ultra Capital Shareholders, in their personal
capacities
/s/ Jeff W. Holmes
------------------------------------
Jeff W. Holmes
------------------------------------
R. Kirk Blosch
<PAGE> 104
[LETTERHEAD OF THE TRACKER CORPORATION]
July 11, 1994
Mr. Jeff W. Holmes, President
Ultra Capital Corp.
8555 East Voltaire
Scottsdale, Arizona 85260
Re: Modification of Reorganization Agreement
Dear Jeff:
This letter confirms our mutual agreement to modify the terms of the
recapitalization of Ultra Capital Corp. required under that certain
Reorganization Agreement, dated May 26, 1994, entered into by and among The
Tracker Corporation, a corporation organized under the laws of the Province of
Ontario ("Tracker"), and Ultra Capital Corp., a Nevada corporation ("Ultra"),
Jeff W. Holmes and R. Kirk Blosch, as amended, to provide that Ultra Capital
Corp. will cause the issued and outstanding shares of Ultra common stock to be
forward split on a 1.32-for-1 basis, so that the number of such shares
immediately prior to the closing is increased to approximately 739,259.
The parties acknowledge and confirm that as a result of this
modification immediately after the closing the holders of record of the Ultra
common stock collectively may hold more or less than 10% of the voting rights of
Ultra and the holders of record of Tracker common shares may collectively hold
more or less than 90% of the voting rights of Ultra. The parties further
acknowledge and confirm that any sales by Tracker under the Tier I private
placement of its Exchangeable Preference shares completed after the Effective
Date of the Reorganization Agreement shall in no way affect the ratio of the
forward split of the Ultra common stock or result in any other anti-dilution
adjustment in favor of the current Ultra shareholders.
<PAGE> 105
Board of Directors
Ultra Capital Corp.
July 11, 1994
Page 2
If this letter correctly sets forth your understanding of our mutual
agreement, please sign the acknowledgment below on both copies of this letter
and return both copies of this letter in the return envelope provided.
Your very truly,
THE TRACKER CORPORATION
/s/ Gregg C. Johnson
--------------------
Gregg C. Johnson
Executive Vice President
ACKNOWLEDGED AND AGREED:
ULTRA CAPITAL CORP.
By: /s/ Jeff W. Holmes
-----------------------------
Jeff W. Holmes
President
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
THE TRACKER CORPORATION OF AMERICA
The undersigned incorporator hereby adopts this Certificate of
Incorporation of The Tracker Corporation of America as set forth below:
FIRST: The name of the Corporation is The Tracker Corporation of
America (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle 19805. The name of its registered agent at that address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"DGCL").
FOURTH:
1. The total number of shares which the Corporation shall have
authority to issue is 40,500,000 shares, consisting of (a) 20,000,000 shares of
common stock, par value $0.001 per share (the "Common Stock"), (b) 20,000,000
shares of Class B voting common stock, no par value (the "Class B Voting Stock")
and (c) 500,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").
2. The Class B Voting Stock shall have the powers, rights,
qualifications, limitations and restrictions set forth herein. Except as
required by law, the holder of each share of Class B Voting Stock shall be
entitled to vote on all matters. Each share of Class B Voting Stock shall
entitle the holder thereof to one vote. Except as required by law, the holders
of shares of the Class B Voting Stock and the Common Stock shall vote together
as a single class on all matters. The Class B Voting Stock shall be redeemable
by the Corporation at any time, and from time to time, for $0.0001. In the event
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, holders of each share of the Class B Voting Stock
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to stockholders, whether such assets are capital,
surplus, or earnings, an amount up to $0.0001 per share, which liquidation right
shall be payable to the holders of the Class B Voting Stock only after the
payment of the par value of the Common Stock and the par value of the Preferred
Stock shall have been made to the holders thereof, or funds necessary for such
payment shall have been set aside by the Corporation in trust for the account of
such holders so as to be available for such payment. If upon any liquidation,
dissolution or winding up of the Corporation, the assets permitted to be
distributed to the holders of the Class B Voting Stock under the foregoing
sentence shall be insufficient to permit payment to such stockholders of the
full liquidation amount aforesaid, then all of the assets of the Corporation
available for
1
<PAGE> 2
distribution to such holders under such sentence shall be distributed to such
holders pro rata, so that each holder receives that portion of the assets
available for distribution as the number of shares of the Class B Voting Stock
held by such holder bears to the total number of shares of the Class B Voting
Stock then outstanding. After the payment of $0.0001 per share to the holders of
the Class B Voting Stock shall have been made in full to such holders, or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of such holders so as to be available for such payment, any
assets remaining available for distribution shall be distributed to the holders
of the Common Stock and the Preferred Stock, in accordance with the respective
rights, preferences and privileges thereof, and no further distribution shall be
made to the holders of shares of the Class B Voting Stock.
3. The Board of Directors of the Corporation (the "Board of
Directors") is authorized, subject to any limitations prescribed by law, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences, and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereon. The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the certificate or certificates
establishing the series of Preferred Stock.
FIFTH: The name and mailing address of the incorporator are as follows:
Gregg C. Johnson
6045 West King's Avenue
Scottsdale, Arizona 85306
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation.
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
the Board of Directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The Board of Directors shall have concurrent power
with the stockholders to make, alter, amend, change, add to or repeal the Bylaws
of the Corporation.
2
<PAGE> 3
(c) The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors consisting of not less
than three nor more than eleven directors, the exact number of directors to be
determined from time to time by resolution adopted by the affirmative vote of a
majority of the directors then in office. The directors shall be divided into
three classes, designated Class I, Class II, and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. At each annual meeting of
stockholders beginning in 1995, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term, with the
term of the initial Class I directors terminating as of the 1995 annual meeting,
the term of the initial Class II directors terminating as of the 1996 meeting,
and with the term of the initial Class III directors terminating as of the 1997
meeting. If the number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, but in no case shall a decrease in the
number of directors shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors that results from an increase in the
number of directors may be filled by a majority of the Board of Directors then
in office, provided that a quorum is present, and any other vacancy occurring in
the Board of Directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director of any class elected to fill a vacancy resulting from an increase in
the number of directors in such class shall hold office for a term that shall
coincide with the remaining term of that class. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the
same remaining term as that of his predecessor.
(d) Directors of the Corporation may be removed by
stockholders of the Corporation with or without cause by the affirmative vote of
not less than two-thirds (2/3) of the votes entitled to be cast by the holders
of all the then outstanding shares of Voting Stock (as defined in Article VIII
herein).
(e) No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification with respect
to acts or omissions occurring prior to such repeal or modification.
3
<PAGE> 4
(f) In addition to the powers and authority hereinbefore
or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
DGCL, this Certificate of Incorporation, and any Bylaws adopted by the
stockholders; provided, however, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such Bylaws had not been adopted.
(g) The initial directors of the Corporation and their
respective addresses are as follows:
<TABLE>
<CAPTION>
Director
Name Address Class
- ---- ------- -----
<S> <C> <C>
I. Bruce Lewis 44 The Bridal Path III
Toronto, Ontario, Canada M2L 1C8
Gregg C. Johnson 6045 West King's Avenue III
Scottsdale, Arizona 85306
Mark J. Gertzbein 124 McGillivray Ave. III
Toronto, Ontario Canada M5M 2Y6
Quincy A.S. McKean III 40 West 67th Street II
New York, New York 10023
Wolfgang H. Kyser I
E.V. O'Malley Jr. 6809 North 18th Street II
Phoenix, Arizona 85016
Charles J. Coronella 4521 E. Via Los Caballos II
Phoenix, Arizona 85028
</TABLE>
(h) Elections of directors need not be by written ballot
unless required by the Bylaws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or
4
<PAGE> 5
stockholder thereof or on the application of any receiver or receivers appointed
for the Corporation under the provisions of Section 291 of the DGCL or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of the DGCL, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
seventy-five percent (75%) in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
EIGHTH: Any Business Combination (as hereinafter defined) with an
Interested Stockholder (as hereinafter defined) shall be subject to the
following requirements:
(a) In addition to any affirmative vote required by law
or this Certificate of Incorporation or the Bylaws of the Corporation, and
except as otherwise expressly provided in paragraph (b) of this Article EIGHTH,
a Business Combination involving an Interested Stockholder or any Affiliate or
Associate (as hereinafter defined) of any Interested Stockholder or any person
who thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than two-thirds (2/3) of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder. Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(b) The provisions of paragraph (a) of this Article
EIGHTH shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote, if any, as is
required by law or by any other provision of this Certificate of Incorporation
or the Bylaws of the Corporation, or any agreement with any national securities
exchange, if all of the conditions specified in either of the following
Paragraphs 1 or 2 are met or, in the case of a Business Combination not
involving the payment of consideration to the holders of the Corporation's
outstanding Capital Stock (as hereinafter defined), if the conditions specified
in both Paragraphs 1 and 2 are met:
1. The Business Combination shall have been
approved, either specifically or as a transaction which is within an approved
category of transactions, by a majority (whether such approval is made prior to
or subsequent to the acquisition of, or announcement of or public disclosure of
the intention to acquire, beneficial ownership of the
5
<PAGE> 6
Voting Stock that caused the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have
been met:
A. The aggregate amount of cash and
the Fair Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration other than cash to be
received per share by holders of Common Stock in such Business Combination shall
be at least equal to the highest amount determined under clauses (i) and (ii)
below:
(i) (if applicable) the
highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for
any share of Common Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common Stock (x) within the
two-year period immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (y) in the
transaction in which it became an Interested Stockholder, whichever is higher,
in either case as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock; and
(ii) the Fair Market Value per
share of Common Stock on the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder (the "Determination
Date"), whichever is higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common Stock.
B. The aggregate amount of cash and
the Fair Market Value, as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of shares of any class or series of outstanding Capital Stock, other
than Common Stock, shall be at least equal to the highest amount determined
under clauses (i) and (ii) below:
(i) (if applicable) the
highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for
any share of such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares of
such class or series of Capital Stock (x) within the two-year period immediately
prior to the Announcement Date or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock; and
(ii) the Fair Market value per
share of such class or series of Capital Stock on the Announcement Date or on
the Determination Date, whichever is higher,
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<PAGE> 7
as adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock.
The provisions of this Paragraph (b)2.B shall be
required to be met with respect to every class or series of outstanding Capital
Stock, whether or not the Interested Stockholder has previously acquired
beneficial ownership of any shares of a particular class or series of Capital
Stock.
C. The consideration to be received by
holders of a particular class or series of outstanding Capital Stock shall be in
cash or in the same form as previously has been paid by or on behalf of the
Interested Stockholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of Capital Stock varies
as to form, the form of consideration for such class or series of Capital Stock
shall be either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock previously
acquired by the Interested Stockholder.
D. After the Determination Date and
prior to the consummation of such Business Combination: (i) except as approved
by a majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors; (iii) there shall have been an increase in the
annual rate of dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing Directors; and (iv)
such Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would not result in
any increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
E. After the Determination Date, such
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder of the Corporation), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
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<PAGE> 8
F. A proxy or information statement
describing the proposed Business Combination and complying with the requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Act") (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a prominent
place, any statement as to the advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of them, may choose to make
and, if deemed advisable by a majority of the Continuing Directors, the opinion
of an investment banking firm selected by a majority of the Continuing Directors
as to the fairness (or not) of the terms of the Business Combination from a
financial point of view to the holders of the outstanding shares of Capital
Stock other than the Interested Stockholder and its Affiliates or Associates,
such investment banking firm to be paid a reasonable fee for its services by the
Corporation.
G. Such Interested Stockholder shall
not have made any major change in the Corporation's business or equity capital
structure without the approval of a majority of the Continuing Directors.
(c) For the purposes of this Article EIGHTH:
1. The term "Business Combination" shall mean:
A. any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other corporation (whether or not itself an Interested
Stockholder) which is or after such merger or consolidation would be an
Affiliate or Associate of an Interested Stockholder; or
B. any sale, lease, exchange,
mortgage, pledge, transfer or other disposition or security arrangement,
investment, loan, advance, guarantee, agreement to purchase, agreement to pay,
extension of credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder involving any assets or securities or commitments of the
Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder which, together with all other such
arrangements (including all contemplated future events) has an aggregate Fair
Market Value and/or involves aggregate commitments of $3,000,000 or more or
constitutes more than ten percent (10%) of the book value of the total assets
(in the case of transactions involving assets or commitments other than Capital
Stock) or ten percent (10%) of the stockholders' equity (in the case of
transactions in Capital Stock) of the entity in question (the "Substantial
Part"), as reflected in the most recent fiscal year end consolidated balance
sheet of such entity existing at the time the stockholders of the Corporation
would be required to approve or authorize the
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Business Combination involving the assets, securities, obligations and/or
commitments constituting any Substantial Part; or
C. the adoption of any plan or
proposal for the liquidation or dissolution of the Corporation or for any
amendment to this Certificate of Incorporation or the Bylaws proposed by or on
behalf of an Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
D. any reclassification of securities
(including any reverse stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
E. any agreement, contract or other
arrangement providing for any one or more of the actions specified in the
foregoing clauses A to D.
2. The term "Capital Stock" shall mean all
capital stock of the Corporation authorized to be issued from time to time under
Article FOURTH of this Certificate of Incorporation.
3. The term "person" shall mean any individual,
firm, corporation or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
4. The term "Interested Stockholder" shall mean
any person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of, or fiduciary with respect to,
any such plan when acting in such capacity) who (a) is or has announced or
publicly disclosed a plan or intention to become the beneficial owner of Voting
Stock representing ten percent (10%) or more of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the Corporation and at any time within the two-year
period immediately prior to the date in question, was the beneficial owner of
Voting Stock representing ten percent (10%) or more of the votes entitled to be
cast by the holders of all the then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of
any Capital Stock (a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
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<PAGE> 10
(b) which such person or any of its Affiliates or Associates has, directly or
indirectly, (i) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to
any agreement, arrangement or understanding; or (c) which is beneficially owned,
directly or indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of Capital
Stock. For the purposes of determining whether a person is an Interested
Stockholder pursuant to Paragraph 4 of this Section (c), the number of shares of
Capital Stock deemed to be out standing shall include shares deemed beneficially
owned by such person through application of this Paragraph 5, but shall not
include any other shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
6. The terms "Affiliate" and "Associates" shall
have the respective meanings ascribed to such terms in Rule 12b-2 under the Act
as in effect on the date that this Certificate of Incorporation is accepted for
filing by the Delaware Secretary of State (the term "registrant" in said Rule
12b-2 meaning in this case, the Corporation).
7. The term "Subsidiary" means any company of
which a majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 4 of this Section (c), the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means (i) any
member of the Board of Directors on the date of the filing of this Certificate
of Incorporation with the Secretary of State of the State of Delaware and (ii)
any member of the Board of Directors who thereafter becomes a member of the
Board of Directors while such person is a member of the Board of Directors, who
is not an Affiliate or Associate or representative of the Interested Stockholder
and was a member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and (iii) a successor of a
Continuing Director while such successor is a member of the Board of Directors,
who is not an Affiliate or Associate or representative of the Interested
Stockholder and is recommended or elected to succeed the Continuing Director by
a majority of Continuing Directors.
9. The term "Fair Market Value" means (a) in
the case of cash, the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Act on which
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<PAGE> 11
such stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any similar system then
in use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by a majority of the
Continuing Directors in good faith; and (c) in the case of property other than
cash or stock, the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
10. In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than cash to be
received," as used in Paragraphs 2.A and 2.B of Section (b), of this Article
EIGHTH shall include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such shares.
11. The term "Voting Stock" means stock of any
class or series entitled to vote generally in the election of directors.
(d) A majority of the Continuing Directors shall have the
power and duty to determine for the purposes of this Article EIGHTH on the basis
of information known to them after reasonable inquiry, (1) whether a person is
an Interested Stockholder, (2) the number of shares of Capital Stock or other
securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the proposed action is with, or
proposed by, or on behalf of, an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, (5) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $3,000,000 or
more and (6) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such determination made
in good faith shall be binding and conclusive on all parties.
(e) Nothing contained in this Article EIGHTH shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
(f) The fact that any Business Combination complies with
the provisions of Section (b) of this Article EIGHTH shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination or
recommend its adoption or approval to the stockholders of the Corporation, nor
shall such compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations of or
actions and responses taken with respect to such Business Combination.
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(g) For the purposes of this Article EIGHTH, a Business
Combination or any proposal to amend, repeal or adopt any provision of this
Certificate of Incorporation inconsistent with this Article EIGHTH
(collectively, the "Proposed Action") is presumed to have been proposed by, or
on behalf of, an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder or a person who thereafter would become such if (1) after
the Interested Stockholder became such, the Proposed Action is proposed
following the election of any director of the Corporation who, with respect to
such Interested Stockholder, would not qualify to serve as a Continuing Director
or (2) such Interested Stockholder, Affiliate, Associate or person votes for or
consents to the adoption of any such Proposed Action, unless as to such
Interested Stockholder, Affiliate, Associate or person, a majority of the
Continuing Directors makes a good faith determination that such Proposed Action
is not proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person, based on information known to them after reasonable
inquiry.
(h) Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of the holders of not less than two-thirds
(2/3) of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock, voting together as a single class, excluding
Voting Stock beneficially owned by such Interested Stockholder, shall be
required to amend or repeal, or adopt any provisions inconsistent with, this
Article EIGHTH; provided, however, that this Section (h) shall not apply to, and
such two-thirds (2/3) vote shall not be required for, any amendment, repeal or
adoption unanimously recommended by the Board of Directors if all of such
directors are persons who would be eligible to serve as Continuing Directors
within the meaning of Section (c), Paragraph 8 of this Article EIGHTH.
NINTH: Any action required or permitted to be taken by the stockholders
of the Corporation may be effected either at an annual or special meeting of
stockholders of the Corporation or by unanimous written consent of the
stockholders. Except for action taken by unanimous written consent of the
stockholders, no action may be taken by the stockholders by written consent.
Special meetings of stockholders may be called only by the Chairman of the
Board, if there be one, the President, the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board of Directors for adoption) or by
the owner or owners, at the time of such call for a special meeting, of twenty
percent (20%) or more of the issued and outstanding common stock of the
Corporation. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called
shall be given not less than ten (10) (unless a longer period is required by
law) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting.
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TENTH: The Corporation has the power to indemnify, and to purchase and
maintain insurance for, its directors, officers, trustees, employees and other
persons and agents, and (without limiting the generality of the foregoing) shall
indemnify its directors and officers against all liability, damage and expense
arising from or in connection with service for, employment by, or other
affiliation with the Corporation or other firms or entities to the maximum
extent and under all circumstances permitted by law.
ELEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation or in the
Bylaws of the Corporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject to this
reservation, provided, however, that subject to the powers and rights provided
for herein with respect to Preferred Stock issued by the Corporation, if any,
but notwithstanding anything else contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least two-thirds
(2/3) of the combined voting power of all of the Voting Stock, voting together
as a single class, shall be required to alter, amend, rescind or repeal (i)
Article FOURTH, Article SIXTH, Article SEVENTH, Article EIGHTH, Article NINTH,
Article TENTH, or this Article ELEVENTH, or to adopt any provision inconsistent
therewith and (ii) Sections 3 and 8 of Article II, Section 1 of Article III and
Article VIII of the Bylaws of the Corporation or to adopt any provision
inconsistent therewith.
IN WITNESS WHEREOF, the undersigned incorporator has caused this
Certificate of Incorporation to be duly executed in accordance with the Delaware
General Corporation Law.
EXECUTED AND ACKNOWLEDGED this 1st day of July, 1994.
/s/ Gregg C. Johnson
------------------------------
Gregg C. Johnson, Incorporator
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CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF INCORPORATION
OF
THE TRACKER CORPORATION OF AMERICA
(pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware)
I, the undersigned, being a duly authorized officer of The Tracker
Corporation of America, do hereby certify that the Certificate of Incorporation
filed on July 1, 1994 contained an inaccurate record.
ARTICLE FOURTH provided that
1. The total number of shares which the Corporation shall have
authority to issue is 40,500,000 shares, consisting of (a) 20,000,000 shares of
common stock, par value $0.001 per share (the "Common Stock"), (b) 20,000,000
shares of Class B voting common stock, no par value (the "Class B Voting Stock")
and (c) 500,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").
ARTICLE FOURTH should read as follows:
1. The total number of shares which the Corporation shall have
authority to issue is 40,500,000 shares, consisting of (a) 20,000,000 shares of
common stock, par value $0.001 per share (the "Common Stock"), (b) 20,000,000
shares of Class B voting common stock, par value $0.00000007 per share (the
"Class B Voting Stock") and (c) 500,000 shares of preferred stock, par value
$0.001 per share (the "Preferred Stock").
I have duly executed this Certificate of Correction of Certificate of
Incorporation this 27th day of March, 1995.
/s/ Mark J. Gertzbein
---------------------
Mark J. Gertzbein,
Secretary
<PAGE> 15
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Tracker Corporation of America, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, hereby amends its Certificate of Incorporation, as corrected, as set
forth below:
1. Article FOURTH, Paragraph 1 is hereby amended by deleting the
paragraph in its entirety and inserting the following therefor:
1. The total number of shares which the Corporation
shall have authority to issue is 50,500,000 shares, consisting of (a)
30,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock"), (b) 20,000,000 shares of Class B voting common stock,
par value $0.00000007 per share (the "Class B Voting Stock") and (c)
500,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").
2. The above amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
3. Except as expressly set forth above, all other terms and
conditions of the Certificate of Incorporation, as corrected, remain in full
force and effect.
IN WITNESS WHEREOF, The Tracker Corporation of America has caused this
Certificate of Amendment to the Certificate of Incorporation to be duly executed
in its corporate name this 1st day of November, 1995.
THE TRACKER CORPORATION OF AMERICA
By: /s/ Mark J. Gertzbein
-------------------------------
Its: Secretary
------------------------------
<PAGE> 16
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
$1,000.00 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
THE TRACKER CORPORATION OF AMERICA
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:
We, I. Bruce Lewis and Mark J. Gertzbein, the President and Secretary,
respectively, of The Tracker Corporation of America, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, do
hereby certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
April 19, 1996 adopted the following resolution creating a series of shares of
Preferred Stock designated as $1,000.00 6% Cumulative Convertible Preferred
Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock, par
value $0.001 per share, of the Corporation, to be designated "$1,000.00 6%
Cumulative Convertible Preferred Stock," initially consisting of 600 shares and
to the extent that the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of the
$1,000.00 6% Cumulative Convertible Preferred Stock are not stated and expressed
in the Certificate of Incorporation, does hereby fix and herein state and
express such designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions thereof, as follows
(all terms used but not defined herein which are defined in the Certificate of
Incorporation shall be deemed to have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be
designated as "$1,000.00 6% Cumulative Convertible Preferred Stock", par value
$0.001 per share, and the number of shares initially constituting such series
shall be 600.
Section 2. Dividends.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of $1,000.00 6% Cumulative Convertible Preferred Stock
with respect to dividends, the holders of shares of $1,000.00 6% Cumulative
Convertible Preferred Stock shall be entitled to receive when, as and if
declared by the Board of Directors: (i) quarterly dividends payable in cash out
of funds legally available for
A-1
<PAGE> 17
such purpose on the last day of July 1996 and October 1996 (each such date being
referred to herein as a "Quarterly Dividend Payment Date") at an annual rate of
$60.00 per share of $1,000.00 6% Cumulative Convertible Preferred Stock; or,
(ii) at the sole option of the Corporation, quarterly dividends payable on each
Quarterly Dividend Payment Date in additional shares of $1,000.00 6% Cumulative
Convertible Preferred Stock at an annual rate of 0.06 additional shares per
share of $1,000.00 6% Cumulative Convertible Preferred Stock then outstanding.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of $1,000.00 6% Cumulative Convertible Preferred Stock from
the Quarterly Dividend Payment Date preceding the date of issue of such shares
of $1,000.00 6% Cumulative Convertible Preferred Stock, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of $1,000.00 6% Cumulative Convertible Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Dividends shall cease
to accrue after the October 1996 Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
$1,000.00 6% Cumulative Convertible Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of $1,000.00 6% Cumulative Convertible
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. No Voting Rights. Except as otherwise provided herein or by
law, the holders of shares of $1,000.00 6% Cumulative Convertible Preferred
Stock shall have no voting rights.
Section 4. Reacquired Shares. Any shares of $1,000.00 6% Cumulative
Convertible Preferred Stock converted into Common Stock pursuant to Section 8 or
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 5. Liquidation, Dissolution or Winding Up.
(A) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the $1,000.00 6% Cumulative Convertible Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
funds of the Corporation to the holders of the Common Stock or any other shares
of stock of the Corporation ranking as to such a distribution junior to the
A-2
<PAGE> 18
$1,000.00 6% Cumulative Convertible Preferred Stock by reason of their ownership
thereof, an amount equal to $1,000.00 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus an amount
equal to any accrued but unpaid dividends thereon to the date fixed for payment
of such distribution. If upon the occurrence of any such event the assets and
funds then distributed among the holders of the $1,000.00 6% Cumulative
Convertible Preferred Stock and any other shares of stock of the Corporation
ranking as to any such distribution on a parity with the $1,000.00 6% Cumulative
Convertible Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the $1,000.00 6% Cumulative Convertible Preferred
Stock and such other shares of stock of the Corporation ranking as to any such
distribution on a parity with the $1,000.00 6% Cumulative Convertible Preferred
Stock in proportion to the full respective preferential amounts to which they
are entitled.
(B) Upon payment of the full preferential amounts
described in Subsection (A) of this Section 5, the holders of the $1,000.00 6%
Cumulative Convertible Preferred Stock shall be entitled to no further
participation in any distribution of assets by the Corporation.
(C) For purposes of this Section 5, (i) any acquisition
of the Corporation by means of merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary, or (ii) a sale of all or substantially all of the assets of
the Corporation shall not be treated as a liquidation, dissolution or winding up
of the Corporation.
(D) Whenever the distribution provided for in this
Section 5 shall be paid in securities or property other than cash, the value of
such distribution shall be the fair market value of such securities or other
property as determined in good faith by the Board of Directors of the
Corporation.
Section 6. No Redemption. The shares of $1,000.00 6% Cumulative
Convertible Preferred Stock shall not be redeemable.
Section 7. Ranking. The $1,000.00 6% Cumulative Convertible Preferred
Stock shall rank junior to any and all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 8. Conversion.
(A) Each share of $1,000.00 6% Cumulative Convertible
Preferred Stock shall be convertible, at the option of the holder thereof and
without the payment of any additional consideration, at any time after the date
of issuance of such share, at the office of the Corporation, into such number of
fully paid and nonassessable shares of the Common Stock of the Corporation as is
determined by dividing $1,000.00 plus the amount of any accrued but unpaid
dividends through the date such holder's Conversion Notice (as hereafter
defined) is received by the Corporation by the Conversion Price (as hereafter
defined). The "Conversion
A-3
<PAGE> 19
Price" shall be equal to that amount which is 33% less than the average of the
published OTC Bulletin Board closing bid prices for the Corporation's Common
Stock for the five (5) Trading Days (as hereafter defined) preceding, at the
election of the holder of the $1,000.00 6% Cumulative Convertible Preferred
Stock, the date such holder's subscription to purchase the $1,000.00 6%
Cumulative Convertible Preferred Stock was accepted by the Corporation or the
date such holder's Conversion Notice is received by the Corporation; provided,
however, that the Conversion Price shall in no event be less than $0.15. The
term "Trading Days" shall mean days for which the OTC Bulletin Board publishes
closing bid prices.
(B) Before any holder of $1,000.00 6% Cumulative
Convertible Preferred Stock shall be entitled to convert the same into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation and shall give written
notice (the "Conversion Notice") to the Corporation: (i) that he elects to
convert the same; (ii) of whether he elects to have the Conversion Price
calculated on the basis of the five (5) Trading Days preceding the date such
holder's subscription to purchase the $1,000.00 6% Cumulative Convertible
Preferred Stock was accepted by the Corporation or on the basis of the five (5)
Trading Days preceding the date his Conversion Notice is received by the
Corporation; (iii) of the name or names in which he wishes the certificate or
certificates representing shares of Common Stock to be issued; and (iv) of the
address or addresses to which the certificate or certificates representing
shares of Common Stock should be delivered. The Corporation shall, as soon as
practicable after receiving a properly completed Conversion Notice and a
certificate or certificates representing shares of $1,000.00 6% Cumulative
Convertible Preferred Stock, cause its transfer agent to issue and deliver the
certificate or certificates representing shares of Common Stock in accordance
with the instructions in the Conversion Notice. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date the
Corporation receives the properly completed Conversion Notice and the
certificate or certificates representing the $1,000.00 6% Cumulative Convertible
Preferred Stock, and the person or persons specified to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(C) If the number of shares of Common Stock outstanding
at any time after the date of issuance of the $1,000.00 6% Cumulative
Convertible Preferred Stock is increased by a stock dividend or a split of the
outstanding shares of Common Stock, then, following the record date of such
stock dividend or split, the Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on conversion of the
$1,000.00 6% Cumulative Convertible Preferred Stock shall be increased in
proportion to such increase in the outstanding shares of Common Stock.
(D) If the number of shares of Common Stock outstanding
at any time after the date of issuance of the $1,000.00 6% Cumulative
Convertible Preferred Stock is decreased by a combination or reclassification of
the outstanding shares of Common Stock, then, following the record date of such
combination or reclassification, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
the $1,000.00 6% Cumulative Convertible Preferred Stock shall be decreased in
proportion to such decrease in the outstanding shares of Common Stock.
A-4
<PAGE> 20
Section 9. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the $1,000.00 6%
Cumulative Convertible Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority or more of the outstanding
shares of $1,000.00 6% Cumulative Convertible Preferred Stock, voting separately
as a class.
Section 10. Fractional Shares. $1,000.00 6% Cumulative Convertible
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to receive dividends
and to have the benefit of all other rights of holders of $1,000.00 6%
Cumulative Convertible Preferred Stock.
Section 11. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the $1,000.00 6% Cumulative Convertible Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding shares of the
$1,000.00 6% Cumulative Convertible Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the $1,000.00 6%
Cumulative Convertible Preferred Stock, the Corporation will take such corporate
action, subject to the approval of the Corporation's shareholders if such
approval is required, as may in the opinion of the Corporation's legal counsel
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
FURTHER RESOLVED, that the President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are hereby authorized
and directed to prepare and file a Certificate of Designation of Rights,
Preferences and Privileges in accordance with the foregoing resolution and the
provisions of Delaware law and to take such actions as they deem necessary or
appropriate to carry out the intent of the foregoing resolution."
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 19th day
of April, 1996.
/s/ I. Bruce Lewis
-------------------------
I. BRUCE LEWIS, President
ATTEST:
/s/ Mark J. Gertzbein
- ----------------------------
MARK J. GERTZBEIN, Secretary
A-5
<PAGE> 21
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES B $1,000.00 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
THE TRACKER CORPORATION OF AMERICA
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:
We, I. Bruce Lewis and Mark J. Gertzbein, the President and Secretary,
respectively, of The Tracker Corporation of America, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, do
hereby certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
May 29, 1996 adopted the following resolution creating a series of shares of
Preferred Stock designated as Series B Series B $1,000.00 6% Cumulative
Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock, par
value $0.001 per share, of the Corporation, to be designated "Series B $1,000.00
6% Cumulative Convertible Preferred Stock," initially consisting of 775 shares
and to the extent that the designations, powers, preferences and relative and
other special rights and the qualifications, limitations and restrictions of the
Series B $1,000.00 6% Cumulative Convertible Preferred Stock are not stated and
expressed in the Certificate of Incorporation, does hereby fix and herein state
and express such designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions thereof, as
follows (all terms used but not defined herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B $1,000.00 6% Cumulative Convertible Preferred Stock",
par value $0.001 per share, and the number of shares initially constituting such
series shall be 775.
Section 2. Dividends.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series B $1,000.00 6% Cumulative Convertible Preferred
Stock with respect to dividends, the holders of shares of Series B $1,000.00 6%
Cumulative Convertible Preferred Stock shall be entitled to receive when, as
A-1
<PAGE> 22
and if declared by the Board of Directors: (i) quarterly dividends payable in
cash out of funds legally available for such purpose on the last day of August
1996 and November 1996 (each such date being referred to herein as a "Quarterly
Dividend Payment Date") at an annual rate of $60.00 per share of Series B
$1,000.00 6% Cumulative Convertible Preferred Stock; or, (ii) at the sole option
of the Corporation, quarterly dividends payable on each Quarterly Dividend
Payment Date in additional shares of Series B $1,000.00 6% Cumulative
Convertible Preferred Stock at an annual rate of 0.06 additional shares per
share of Series B $1,000.00 6% Cumulative Convertible Preferred Stock then
outstanding.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B $1,000.00 6% Cumulative Convertible Preferred
Stock from the Quarterly Dividend Payment Date preceding the date of issue of
such shares of Series B $1,000.00 6% Cumulative Convertible Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B $1,000.00 6% Cumulative
Convertible Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Dividends shall cease to accrue after the November 1996 Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series B $1,000.00 6% Cumulative Convertible Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series B $1,000.00 6% Cumulative Convertible Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 30 days prior to the date fixed for the payment thereof.
Section 3. No Voting Rights. Except as otherwise provided herein or by
law, the holders of shares of Series B $1,000.00 6% Cumulative Convertible
Preferred Stock shall have no voting rights.
Section 4. Reacquired Shares. Any shares of Series B $1,000.00 6%
Cumulative Convertible Preferred Stock converted into Common Stock pursuant to
Section 8 or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 5. Liquidation, Dissolution or Winding Up.
(A) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series B $1,000.00 6% Cumulative Convertible Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or funds of the Corporation to the holders of the Common
A-2
<PAGE> 23
Stock or any other shares of stock of the Corporation ranking as to such a
distribution junior to the Series B $1,000.00 6% Cumulative Convertible
Preferred Stock by reason of their ownership thereof, an amount equal to
$1,000.00 per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus an amount equal to any accrued but unpaid
dividends thereon to the date fixed for payment of such distribution. If upon
the occurrence of any such event the assets and funds then distributed among the
holders of the Series B $1,000.00 6% Cumulative Convertible Preferred Stock and
any other shares of stock of the Corporation ranking as to any such distribution
on a parity with the Series B $1,000.00 6% Cumulative Convertible Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B $1,000.00 6% Cumulative Convertible Preferred
Stock and such other shares of stock of the Corporation ranking as to any such
distribution on a parity with the Series B Series B $1,000.00 6% Cumulative
Convertible Preferred Stock in proportion to the full respective preferential
amounts to which they are entitled.
(B) Upon payment of the full preferential amounts
described in Subsection (A) of this Section 5, the holders of the Series B
$1,000.00 6% Cumulative Convertible Preferred Stock shall be entitled to no
further participation in any distribution of assets by the Corporation.
(C) For purposes of this Section 5, (i) any acquisition
of the Corporation by means of merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary, or (ii) a sale of all or substantially all of the assets of
the Corporation shall not be treated as a liquidation, dissolution or winding up
of the Corporation.
(D) Whenever the distribution provided for in this
Section 5 shall be paid in securities or property other than cash, the value of
such distribution shall be the fair market value of such securities or other
property as determined in good faith by the Board of Directors of the
Corporation.
Section 6. No Redemption. The shares of Series B $1,000.00 6%
Cumulative Convertible Preferred Stock shall not be redeemable.
Section 7. Ranking. The Series B $1,000.00 6% Cumulative Convertible
Preferred Stock shall rank junior to any and all other series of the
Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
Section 8. Conversion.
(A) Each share of Series B $1,000.00 6% Cumulative
Convertible Preferred Stock shall be convertible, at the option of the holder
thereof and without the payment of any additional consideration, at any time
after the date of issuance of such share, at the office of the Corporation, into
such number of fully paid and nonassessable shares of the Common Stock of the
Corporation as is determined by dividing $1,000.00 plus the amount of any
accrued but
A-3
<PAGE> 24
unpaid dividends through the date such holder's Conversion Notice (as hereafter
defined) is received by the Corporation by the Conversion Price (as hereafter
defined). The "Conversion Price" shall be equal to that amount which is 33% less
than the average of the published OTC Bulletin Board closing bid prices for the
Corporation's Common Stock for the five (5) Trading Days (as hereafter defined)
preceding, at the election of the holder of the Series B $1,000.00 6% Cumulative
Convertible Preferred Stock, the date such holder's subscription to purchase the
Series B $1,000.00 6% Cumulative Convertible Preferred Stock was accepted by the
Corporation or the date such holder's Conversion Notice is received by the
Corporation; provided, however, that the Conversion Price shall in no event be
less than $0.15. The term "Trading Days" shall mean days for which the OTC
Bulletin Board publishes closing bid prices.
(B) Before any holder of Series B $1,000.00 6% Cumulative
Convertible Preferred Stock shall be entitled to convert the same into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation and shall give written
notice (the "Conversion Notice") to the Corporation: (i) that he elects to
convert the same; (ii) of whether he elects to have the Conversion Price
calculated on the basis of the five (5) Trading Days preceding the date such
holder's subscription to purchase the Series B $1,000.00 6% Cumulative
Convertible Preferred Stock was accepted by the Corporation or on the basis of
the five (5) Trading Days preceding the date his Conversion Notice is received
by the Corporation; (iii) of the name or names in which he wishes the
certificate or certificates representing shares of Common Stock to be issued;
and (iv) of the address or addresses to which the certificate or certificates
representing shares of Common Stock should be delivered. The Corporation shall,
as soon as practicable after receiving a properly completed Conversion Notice
and a certificate or certificates representing shares of Series B $1,000.00 6%
Cumulative Convertible Preferred Stock, cause its transfer agent to issue and
deliver the certificate or certificates representing shares of Common Stock in
accordance with the instructions in the Conversion Notice. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date the Corporation receives the properly completed Conversion Notice and the
certificate or certificates representing the Series B $1,000.00 6% Cumulative
Convertible Preferred Stock, and the person or persons specified to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(C) If the number of shares of Common Stock outstanding
at any time after the date of issuance of the Series B $1,000.00 6% Cumulative
Convertible Preferred Stock is increased by a stock dividend or a split of the
outstanding shares of Common Stock, then, following the record date of such
stock dividend or split, the Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on conversion of the
Series B $1,000.00 6% Cumulative Convertible Preferred Stock shall be increased
in proportion to such increase in the outstanding shares of Common Stock.
(D) If the number of shares of Common Stock outstanding
at any time after the date of issuance of the Series B $1,000.00 6% Cumulative
Convertible Preferred Stock is decreased by a combination or reclassification of
the outstanding shares of Common Stock, then, following the record date of such
combination or reclassification, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
A-4
<PAGE> 25
of the Series B $1,000.00 6% Cumulative Convertible Preferred Stock shall be
decreased in proportion to such decrease in the outstanding shares of Common
Stock.
Section 9. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series B
$1,000.00 6% Cumulative Convertible Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the outstanding shares of Series B $1,000.00 6% Cumulative Convertible Preferred
Stock, voting separately as a class.
Section 10. Fractional Shares. Series B $1,000.00 6% Cumulative
Convertible Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to receive
dividends and to have the benefit of all other rights of holders of Series B
$1,000.00 6% Cumulative Convertible Preferred Stock.
Section 11. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series B $1,000.00 6% Cumulative Convertible
Preferred Stock such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all then outstanding shares of
the Series B $1,000.00 6% Cumulative Convertible Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
B $1,000.00 6% Cumulative Convertible Preferred Stock, the Corporation will take
such corporate action, subject to the approval of the Corporation's shareholders
if such approval is required, as may in the opinion of the Corporation's legal
counsel be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 5th day
of June, 1996.
/s/ I. Bruce Lewis
-------------------------
I. BRUCE LEWIS, President
ATTEST:
/s/ Mark J. Gertzbein
- ----------------------------
MARK J. GERTZBEIN, Secretary
A-5
<PAGE> 1
EXHIBIT 10.18
[LETTERHEAD OF THE TRACKER CORPORATION]
October 5, 1993 SENT BY FACSIMILE
Tomo Razmiloivic
Sales & Services
Symbol Technologies
116 Wilbur Place
Bohemia, New York 11716
U.S.A.
Dear Sir:
Thank you for your letter of September 30, 1993.
By this letter, we accept the terms offered to us to become the exclusive
distributor as set out in your September 30th letter.
We look forward to a warm and cordial working arrangement with Symbol to our
mutual benefit.
Yours very truly,
THE TRACKER CORPORATION
/s/
- -------------------------------
Don S. Baker
Vice President, General Counsel
DSB*sj
<PAGE> 2
[LETTERHEAD OF SYMBOL TECHNOLOGIES]
September 30, 1993
Mr. Bruce Lewis
The Tracker Corporation
180 Dundas Street West
26th Floor
Toronto, Ontario
Canada M5G 1Z8
Dear Bruce:
In reference to our discussions on August 26 and Donald Baker's letter of
September 16, I am pleased to confirm the following:
Symbol Technologies would grant a Distributor agreement to Tracker Corporation
regarding Symbol's PDF 1000 laser scanner for specific identification systems
for identifying consumer items utilizing PDF equipment to aid in the recovery of
lost or stolen possessions using PDF bar code scanning technology application
usage in Canada, the U.S. and Europe, excluding Japan and the Far East. Symbol
Technologies will not appoint any other distributor for PDF 1000 laser scanners
for this identification system for identifying consumer items utilizing PDF
equipment to aid in the recovery of lost or stolen possessions using PDF bar
code scanning technology specific application area under the following
conditions.
1994 minimum volume sales of PDF 1000 laser scanners from Tracker
Corporation of 1500 units and $3M.
1995 minimum volume sales of 3000 PDF 1000 laser scanner units and $6M.
1996 minimum volume sales of 5000 PDF 1000 laser scanner units and
$10M.
Tracker agrees to purchase all relevant PDF equipment for use in the field from
Symbol.
If any of the above minimum annual volume commitments is not achieved by the end
of the calendar year, Symbol Technologies has rights to appoint at any time an
additional PDF 1000 laser scanner distributor in Canada and the U.S. for this
particular application.
I look forward to working with Tracker Corporation and you personally.
Yours sincerely,
/s/
- ---------------------------
Tomo Razmilovic
Senior Vice President
Worldwide Sales & Services
TR:jk
<PAGE> 3
[LETTERHEAD OF THE TRACKER CORPORATION]
November 23, 1995
Mr. Peter Nind
President
SYMBOL TECHNOLOGIES CANADA, INC.
2540 Matheson Boulevard East
Mississauga, Ontario L4W 4Z2
Dear Peter:
Further to our meeting and negotiations of today, I would like to take this
opportunity to confirm our most recent progress.
1) Our U.S.A. launch is now underway with our Angie Dickinson commercials
test marketed in Los Angeles, Salt Lake City, Traverse City, Michigan,
Orlando Florida and Burlington, Vermont.
2) Angie Dickinson as you know is our worldwide spokeswoman and is
America's most famous police woman.
3) In October 1995, we were awarded the International Association of
Police Chiefs (I.A.C.P.) worldwide endorsements. We are the only
company they endorse. Our systems which include one of your scanners
eventually will be installed in the more than 14,000 police departments
worldwide.
4) As you know, we have signed an agreement with a Japanese trading
company to institute the Tracker insignia at point of manufacture.
In lieu of a purchase order, and in order to prepare your manufacturing
schedules, I would like to confirm the following:
- - We have examined your proposal of November 21, addressed to Ed
Korhonen, with respect to the substitution of the LS-4800 in place of
the PDF-1000 scanner, and feel it will be an attractive alternative to
our current offering.
- - As discussed with you, the specific configuration required by Tracker
would be packages of the following:
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION U.S. LIST PRICE
- ------------------- ---------------
<S> <C> <C>
Scanner LS-4804-1000A $ 1,695.00
64K-North America
or LS--4804-1000B $ 1,695.00
64K-International
50-14000-008 $ 35.00
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Power Supply North America
or 50-14000-09 $ 35.00
International
Cables 25-13523-01 $ 75.00
TOTAL $ 1,805.00
Less 50% discount $ 903.00
Net price to Tracker $ 902.00
</TABLE>
Tracker's requirement for the 1996 calendar year will be 830 units. Our forecast
at this time will require scheduling as follows:
Q1/96 30 packages
Q2/96 100 packages
Q3/96 300 packages
Q4/96 400 packages
Payment terms will be:
Net 30 days from date of shipment
FOB either Symbol Mississauga or Symbol Bohemia
Provincial state, and any other applicable taxes extra
Warranty for one year from date of shipment
We look forward to a very successful business partnership in 1996.
Yours truly,
THE TRACKER CORPORATION
/s/
- -----------------
Bruce Lewis
Chairman & C.E.O.
<PAGE> 5
[LETTERHEAD OF SYMBOL TECHNOLOGIES CANADA, INC.]
November 27, 1995
Mr. Bruce Lewis
Chairman & CEO
The Tracker Corporation
180 Dundas Street West
Suite 1502
Toronto, Ontario
M5G 1Z8
Dear Bruce:
SUBJECT: REGISTRATION STATEMENT FOR SEC
Bruce, we have reviewed the document provided by you with respect to the Form S1
Registration Statement. We have no concerns in connection with the description
of Tracker Corporation and Symbol's relationship at this time.
I'd like to take the opportunity to sincerely thank you for your commitment for
1996 as covered in your letter of November 23rd. I believe we both agree this
will be a minimum commitment, and the actual requirement will number in the
thousands of units.
I look forward to continuing our business relationship.
Your truly,
SYMBOL TECHNOLOGIES CANADA, INC.
/s/
- -------------------
Peter J. Nind
President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 28, 1996, relating
to the consolidated financial statements of The Tracker Corporation of America,
which appears in such Prospectus. We also consent to the application of such
report to the Financial Statement Schedule for the year ended March 31, 1996
listed under Item 16(b) of this Registration Statement when such schedule is
read in conjunction with the financial statements referred to in our report. The
audits referred to in such report also included these schedules. We also consent
to the references to us under the headings "Experts," "Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Summary Consolidated Financial Data" or "Selected Consolidated
Financial Data".
/s/ PRICE WATERHOUSE LLP
Phoenix, Arizona
July 12, 1996
