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As filed with the Securities and Exchange Commission on October 23, 1996
Registration No. ___________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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The Tracker Corporation of America
(Exact name of registrant as specified in its character)
DELAWARE 86-0767918
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
180 DUNDAS STREET WEST, SUITE #1502
TORONTO, ONTARIO, CANADA M5G 1Z8
(Address of Principal Executive Offices) (Zip Code)
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1996 WILLIAM MARCHES STOCK PAYMENT PLAN
(Full title of the Plan)
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MARK J. GERTZBEIN
Executive Vice President
The Tracker Corporation of America
180 Dundas Street West, Suite #1502
Toronto, Ontario, Canada M5G 1Z8
(Name and address of agent for service)
(416) 595-6222
(Telephone number, including area code, of agent for service)
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Approximate date of commencement of proposed sales pursuant to the Plan: From
time to time after this Registration Statement becomes effective
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered per Share(1) Price Fee(1)
- ---------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, 1,200,000 $0.26 $312,000 $107.59
$.001 par value
</TABLE>
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(1) Computed pursuant to Rules 457(h)(1) and 457(c) for the purpose of
calculation of the registration fee on the basis of the average of the bid
and asked price of a share of the Registrant's Common Stock on October 15,
1996 as reported by the National Quotation Bureau, Inc.
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PART I. INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The document(s) containing the information specified in Items 1 and 2
of Part I of Form S-8 will be sent or given to William Marches as specified in
Rule 428(b)(1) and, in accordance with the instructions to Part I, are not filed
with the Commission as part of this Registration Statement.
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by the Registrant with the
Securities and Exchange Commission are incorporated herein by reference and made
a part hereof:
1. The Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996.
2. All other reports filed by the Registrant pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 since March 31, 1996.
All documents subsequently filed by the Registrant pursuant to sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES
The authorized capitalization of the Registrant 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 shareholders. 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 the Registrant, 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 the Registrant 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 the
Registrant may designate and issue in the future.
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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.
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 the
Registrant 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 the Registrant, the Registrant 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 the Registrant Upon the exchange of a holder's Tracker
Canada Exchangeable Preference Shares for Common Stock of the Registrant, a
corresponding number of the shares of the Voting Stock will be returned to the
Registrant The rights, preferences and privileges of holders of Voting Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any class or series of Preferred Stock that the Registrant 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 Registrant Common
Stock. In addition, holders of Exchangeable Preference Shares are entitled to
exchange such shares with the Registrant for shares of the Registrant 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 Registrant Common Stock. The exchange of
Exchangeable Preference Shares for Common Stock is a taxable event.
The Registrant has deposited shares of Voting Stock in trust with
Montreal Trust under an arrangement that entitles each holder of Exchangeable
Preference Shares (other than the Registrant and Tracker Canada) to vote at
meetings of stockholders of the Registrant on the basis of one vote in the
Registrant 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 the
Registrant on each share of the Common Stock of the Registrant Tracker Canada
must, within five business days following the declaration of a dividend by the
Registrant, declare a dividend on the Exchangeable Preference Shares in such
amount. The Registrant 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 Registrant Common Stock. In addition, the
Registrant 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. The Registrant has never paid any cash dividends on its Common Stock and
does not intend to pay any cash
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dividends in the foreseeable future. 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 Registrant 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 Registrant 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 the Registrant available for distribution to
the holders of the Registrant Common Stock on such date divided by (b) the sum
of (i) the number of shares of the Registrant 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 the Registrant equal to the product of the number
of Exchangeable Preference Shares registered in the name of such holder by the
applicable exchange rate. The Registrant has agreed 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, the Registrant 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 the Registrant for which such holder is then
entitled to exchange such shares.
PREFERRED STOCK
The Registrant 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 the Registrant, 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 the Registrant
As of June 25, 1996, the only Preferred Stock outstanding was 100
shares of the Registrant's $1,000.00 6% Cumulative Convertible Preferred Stock
(the "Convertible Preferred Stock") and 250 shares of the Registrant'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
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annual rate of $60.00 per share; or, (ii) at the sole option of the Registrant,
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
Registrant, the holders of the Convertible Preferred Stock are entitled to
receive, prior to any distribution of any of the assets or funds of the
Registrant to the holders of the Common Stock or any other shares of stock of
the Registrant 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 Registrant.
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 Registrant 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 Registrant'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
Registrant or the date such holder's conversion notice is received by the
Registrant; 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 the period commencing on July 12, 1995 and ending on
the first date after July 12, 1996 on which the Common Stock can be purchased at
a legally marginable price under applicable laws, rules and regulations. 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,
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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.
CONVERTIBLE DEBENTURES
As of June 25, 1996, the Registrant 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 December 1, 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
the Registrant
In addition, as of June 25, 1996, the Registrant 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 December 1, 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 the Registrant. 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 the Registrant'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 the Registrant by means of a merger, tender offer, proxy contest or
otherwise, and thereby to protect the continuity
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of the Registrant's management. Such additional shares could also be used to
dilute the stock ownership of persons seeking to obtain control of the
Registrant
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Registrant 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.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BYLAWS
Certain provisions of the Certificate of Incorporation and the Bylaws
of the Registrant 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 the Registrant, 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.
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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
the Registrant, even though such an attempt might be beneficial to the
Registrant 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 the Registrant 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 the Registrant 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 the Registrant, even though
such an attempt might be beneficial to the Registrant 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 the Registrant and remove a
majority of the Board of Directors, the classification of the Board of Directors
could 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.
9
<PAGE> 10
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 the Registrant
from using the written consent procedure available under the DGCL to take
stockholder action without giving all the stockholders of the Registrant
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 the Registrant To be timely, this notice must be received at the
principal executive offices of the Registrant 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 the Registrant 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 the Registrant 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 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. The Registrant 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.
10
<PAGE> 11
The term "Interested Stockholder" for purposes of the fair price
provision means any person (other than, among others, the Registrant or any
employee stock ownership plan of the Registrant 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 the Registrant 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 the Registrant
shall have authority to issue, (ii) the management of the business and the
conduct of the affairs of the Registrant, (iii) any proposed compromise or
arrangement between the Registrant 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 the Registrant
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 the Registrant's Common Stock is
Atlas Stock Transfer located in Salt Lake City, Utah.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by the Delaware General Corporation Law (the "DGCL"), the
Certificate of Incorporation of the Registrant provides that no director of the
Registrant shall be personally liable to the registrant 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 the Registrant
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
11
<PAGE> 12
respect of certain unlawful dividend payments or stock purchases, or (iv) for
any transaction from which the director derived an improper benefit. The effect
of this provision is to eliminate the rights of the Registrant and its
stockholders (through stockholders' derivative suits on behalf of the
Registrant) 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
the Registrant 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 the Registrant or any stockholder to seek
non-monetary relief such as an injunction or recission in the event of a breach
of a director's duty of care.
The Certificate of Incorporation of the Registrant requires the
Registrant to indemnify its directors and officers against expenses and certain
other liabilities arising out of their conduct on behalf of the Registrant to
the maximum extent and under all circumstances provided by law. In addition, the
Bylaws of the Registrant provide more particularly that directors and officers
of the Registrant 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 the Registrant, 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 the Registrant. Indemnification by the Registrant 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 the Registrant, 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 the Registrant, except as regards a person adjudged to be
liable to the Registrant, 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 the Registrant.
The Registrant has entered into substantially identical indemnification
agreements with each of its directors. The Registrant has agreed, to the full
extent permitted by the DGCL, as amended from time to time, to indemnify 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 unthreatened
action, suit or proceeding whether civil, criminal, administrative or
investigative by reason that he was a director, officer, employee or agent of
the Registrant or any of its affiliates, or because the Registrant has a right
to judgment in its favor because of his position with the Registrant. 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 the
Registrant. 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 the
Registrant pursuant to the foregoing provisions, the Registrant 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 the Registrant for which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable
ITEM 8. EXHIBITS
Exhibit
12
<PAGE> 13
Number
4.1** 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
4.2** Bylaws
5.1 Opinion of Fennemore Craig, a Professional Corporation.
10.1 Consulting Agreement dated October 22, 1996 between Registrant and
William Marches.
24.1 Consent of Price Waterhouse LLP
24.2 Consent of Fennemore Craig, a Professional Corporation (included in
Exhibit 5.1)
25.1 Power of Attorney (see page 15 of this Registration Statement)
99.1 Reoffer Prospectus
ITEM 9. UNDERTAKINGS
The 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. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective 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;
Provided, however, that paragraphs 1(i) and 1(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purposes 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 that time shall be deemed to be the initial bona
fide offering thereof.
- -----------------------
** Incorporated by reference from the Registrant's registration statement on
Form S-1 (No. 33-99686 and amendments thereto)
13
<PAGE> 14
(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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 the 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 its is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada on October 23,
1996.
THE TRACKER CORPORATION OF
AMERICA
BY: /s/ I. Bruce Lewis
-------------------------------
I. BRUCE LEWIS
PRESIDENT, CHIEF
EXECUTIVE OFFICER AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears on this Form S-8 Registration Statement hereby constitutes and appoints
I. Bruce Lewis and Mark J. Gertzbein, or either of them, with full power to act
without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (unless revoked in writing) to sign any or all
amendments (including post-effective amendments thereto) to this Form S-8
Registration Statement to which this power of attorney is attached, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ I. Bruce Lewis PRESIDENT AND CHIEF OCTOBER 23, 1996
- --------------------------- EXECUTIVE OFFICER,
I. BRUCE LEWIS DIRECTOR (PRINCIPAL
EXECUTIVE OFFICER)
/s/ Mark J. Gertzbein EXECUTIVE VICE PRESIDENT, OCTOBER 23, 1996
- --------------------------- SECRETARY, TREASURER,
MARK J. GERTZBEIN CHIEF FINANCIAL OFFICER
AND DIRECTOR (PRINCIPAL
FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING
OFFICER)
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
/s/ Wolfgang H. Kyser
- ------------------------
WOLFGANG H. KYSER DIRECTOR OCTOBER 23, 1996
/s/ Charles J. Coronella
- ------------------------
CHARLES J. CORONELLA DIRECTOR OCTOBER 23, 1996
/s/ Ed J. Korhonen
- ------------------------
ED J. KORHONEN DIRECTOR OCTOBER 23, 1996
/s/ Quincy A.S. McKean III
- ------------------------
QUINCY A. S. MCKEAN III DIRECTOR OCTOBER 23, 1996
/s/ Leonard Yakobovits
- ------------------------
LEONARD YAKOBOVITS DIRECTOR OCTOBER 23, 1996
</TABLE>
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- ------------
<S> <C> <C>
5.1 Opinion of Fennemore Craig, a Professional Corporation ______
10.1 Consulting Agreement dated October 22, 1996 between
Registrant and William Marches
24.1 Consent of Price Waterhouse LLP ______
24.2 Consent of Fennemore Craig, a Professional Corporation N/A
(included in Exhibit 5.1)
25.1 Power of Attorney (see page 13
of this Registration Statement) N/A
99.1 Reoffer Prospectus ______
</TABLE>
17
<PAGE> 1
EXHIBIT 5.1
[FENNEMORE CRAIG LETTERHEAD]
October 22, 1996
The Tracker Corporation of America
180 Dundas Street West
26th Floor
Toronto, Ontario, Canada M5G 1Z8
Re: The Tracker Corporation of America Registration Statement on
Form S-8
Gentlemen:
We have acted as special counsel to The Tracker Corporation of America,
a Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-8 (the "Registration Statement"), to be filed by the
Company with the Securities and Exchange Commission (the "Commission"). The
Registration Statement relates to the registration under the Securities Act of
1933, as amended (the "Act"), of 1,200,000 shares (the "Shares") of the
Company's Common Stock, par value $.001 per share, to be issued under the
Company's 1996 William Marches Stock Wage Plan (the "Plan").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Plan, (ii)
the Certificate of Incorporation and the Bylaws of the Company, (iii) certain
resolutions of the Board of Directors of the Company relating to the Plan, (iv)
the form of Registration Statement proposed to be filed with the Commission,
and such other documents as we have deemed necessary or appropriate as a basis
for the opinions set forth below. In such examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As
<PAGE> 2
October 22, 1996
Page 2
to any facts material to this opinion, which we did not independently establish
or verify, we have relied upon statements and representations of officers and
other representatives of the Company and others.
Based upon and subject to the foregoing and the limitations set forth
below, we are of the opinion that the Shares have been duly authorized and,
after the Registration Statement becomes effective and when the Shares are
issued and sold in accordance with the Plan and the Form S-8 prospectus to be
delivered to the Plan participants, the Shares will be duly issued, fully paid
and nonassessable.
We are qualified to practice law only in the State of Arizona and we do
not purport to express any opinion herein concerning any law other than the
Delaware General Corporation law. With respect to such law, our opinions are as
to what the law is or, in circumstances where the status of the law is
uncertain, what the law might reasonably be expected to be at the date hereof,
and we assume no obligation to revise or supplement this opinion due to any
change in the law by legislative action, judicial decision or otherwise. We do
not render any opinion with respect to any matters than those expressly set
forth in the immediately preceeding paragraph. Without limiting the generality
of the immediately preceding sentence, we express no opinion as to the
applicability or effect of any securities or Blue Sky laws of any state.
This opinion is furnished to you solely for your benefit in connection
with the filing of the Registration Statement and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
prior written consent. Notwithstanding the foregoing, we hereby consent to the
filing of this opinion with the Commission as Exhibit 5.1 to the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.
Very truly yours,
FENNEMORE CRAIG,
a Professional Corporation
<PAGE> 1
EXHIBIT 10.1
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made effective this 22nd day
of October, 1996, between William Marches, with offices at 824 Moraga Drive,
Bel-Air, California 90049 ("Consultant") and The Tracker Corporation of America,
with its principal place of business at 180 Dundas Street West, Suite 1502,
Toronto, Ontario, Canada M5G 1Z8 ("Client").
RECITALS
WHEREAS, Client desires to retain Consultant to provide advice and to consult
with Client's management concerning its growth strategy, its financial public
relations communication obligation, and provide advice on future capital
structure.
WHEREAS, Client desires to retain Consultant to perform these services for the
period as specified below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
1. ENGAGEMENT OF CONSULTANT
Client hereby retains Consultant in the following areas:
A. To assist in enhancing Client's financial public relations
communication;
B. To provide advice and expertise to further Clients growth;
C. To provide advice and expertise to Client regarding future
capital structure including introduction to potential merger and
acquisition candidates and strategic partners.
D. To assist Client in attaining a SmallCap Nasdaq listing
All of the foregoing services collectively are referred to herein as
the "Consulting Services." Consultant accepts Client's engagement and
agrees to perform the consulting service set forth in this section 1.
Consultant acknowledges receipt of Amendment Four to Client's
Registration Statement filed October 18, 1996 (SEC File No. 33-99686)
(the "Registration Statement").
1
<PAGE> 2
2. COMPENSATION
(a) Client shall pay Consultant one hundred thousand (100,000) shares
of Client's Common Stock; and
(b) Client shall pay Consultant by allowing Consultant to purchase
options to buy Client's Common Stock. The right to buy said options shall be
deemed as the consideration for which Consultant shall perform the Consulting
Services. Consultant is fully aware and understands that the value of
Consultant's compensation as defined by the Agreement is variable and may be
altered by natural market forces of Client's stock and that such an agreement is
acceptable to Consultant. Consultant shall have the following options available
to him:
Consultant shall be accorded the indivisible sequential options to
purchase a total of Nine Hundred Thousand (900,000) shares of the Common Stock
of the Client for the price of the par value of the stock ($0.001) per share
payable in cash upon exercise by wire transfer of funds when the Closing Quoted
Bid Price and the Specified Minimum Number of Business Days at the Bid are met
as follows:
<TABLE>
<CAPTION>
No. of Days from date
Number of Common Shares Closing Quoted Bid of signing of
Available to purchase Price ("Bid") of Specified Minimum Agreement before
at par value ($.001) Client's Common No. of Business Option Expires
Option per share Stock Days at Bid ("Expiration Period")
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 100,000 $0.50 5 days 120 days
- -----------------------------------------------------------------------------------------------------
2 100,000 $0.75 5 days 120 days
- -----------------------------------------------------------------------------------------------------
3 100,000 $1.00 5 days 120 days
- -----------------------------------------------------------------------------------------------------
4 100,000 $1.50 5 days 1 year
- -----------------------------------------------------------------------------------------------------
5 100,000 $1.75 5 days 1 year
- -----------------------------------------------------------------------------------------------------
6 100,000 $2.00 5 days 1 year
- -----------------------------------------------------------------------------------------------------
7 100,000 $2.25 5 days 1 year
- -----------------------------------------------------------------------------------------------------
8 100,000 $2.50 5 days 1 year
- -----------------------------------------------------------------------------------------------------
9 100,000 $2.75 5 days 1 year
- -----------------------------------------------------------------------------------------------------
</TABLE>
Options must be exercised in sequential order (i.e. option 1 before option 2,
option 2 before option 3, etc.) otherwise subsequent options expire. Each option
shall expire if not exercised within the Expiration Period specified above.
Consultant shall not be allowed to exercise any fractional amount of option.
Upon notice of impending delivery of the certified funds to exercise Options on
any or all of the seven indivisible options, Client shall cause to be issued
shares in amounts commensurate with the number of shares so exercised and shall
simultaneously exchange stock for certified funds at Client's office.
2
<PAGE> 3
(c) The Client shall use its best efforts to register all Common Stock
and Options payable to Consultant under this Agreement pursuant to a Regulation
S-8 filing with the Securities and Exchange Commission, on a timely basis.
3. TERM OF AGREEMENT, EXTENSIONS AND RENEWALS.
This Consulting Agreement and Consultant's obligation to continue
providing Consulting Services, as defined herein, shall remain in full force and
effect for one (1) year from the date of signing this Agreement. Client shall
retain the exclusive right to determine in its judgment whether any extension or
renewal shall be granted to Consultant.
4. TERMINATION OF AGREEMENT BY THE CLIENT.
Despite anything to the contrary contained in this Agreement hereunder,
Client may terminate this Agreement and Consultant's consulting arrangement if
any of the following events occur.
(a) Client can terminate this Agreement any time subsequent to ninety
(90) days from date of this Agreement, for any reason, upon fifteen
(15) days written notice to Consultant. However, once the Bid price of
Client's Common Stock is two dollars ($2.00) or above for five (5)
business days then this Agreement cannot be terminated except for cause
as noted in 4(b)
(b) Client can terminate this Agreement if in the judgment of a third
party, disinterested and duly appointed Mediator, Consultant's actions
or conduct would make it unreasonable to require Client to retain
Consultant. Said Mediator shall have been elected by mutual agreement
of both Client and Consultant. such acts include, but are not limited
to, dishonesty, illegal activities, activities harmful to the
reputation of the Client, and/or activities which create civil or
criminal liability for the Client.
5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
In consideration for the Client entering into this Agreement,
Consultant agrees that the following items used in the Client's business are
secret, confidential, unique, and valuable, were developed by Client at great
cost and over a long period of time, and disclosure of any of the items to
anyone other than Client's officers, agents, or authorized employees will cause
Client irreparable injury.
A. Non public financial information, accounting information, plans of
operation, possible mergers or acquisitions prior to the public
announcement;
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B. Customer lists, call lists, and other confidential customer data;
C. Memoranda, notes, records concerning the technical processes conducted
by Client:
D. Sketches, plans, drawings and other confidential research and
development data.
Neither party shall disclose or otherwise reveal to any third party
without the express written consent of the other party the specific terms or
existence of this Agreement, except where required by law.
6. DUE DILIGENCE
Client shall supply and deliver to Consultant information relating to
its business, as may be reasonably requested by Consultant, to enable Consultant
to make such investigation of Client and its business prospects. Client shall
also make available to Consultant names, addresses, and telephone numbers as
Consultant may need to verify or substantiate any such information provided.
7. BEST EFFORTS BASIS.
Consultant agrees that he will at all times faithfully and to the best
of his experience, ability and talents, perform all the duties that may be
required of and from Consultant pursuant to the terms of this Agreement.
Consultant does not guarantee that his efforts will have any impact on Client's
business or that any subsequent financial improvement will result from
Consultant's efforts.
8. CLIENT'S RIGHT TO APPROVE CONSULTANT'S ACTIONS.
Client expressly retains the right to approve, in its sole discretion,
each and every transaction entered into by Consultant that involves Client as a
party. Consultant and Client mutually agree that Consultant is not authorized to
enter into agreements on behalf of Client.
9. EXPENSE.
Client shall pay Consultant $10,000 per month payable in the Common
Stock of the Client for administrative expenses on the fifth business day of the
month succeeding the performance of Consultant's services.. The amount of shares
of Common Stock shall equal $10,000 divided by the average five (5) day Bid
price immediately preceding the 15th day of each month for the term of this
Agreement. Client shall reimburse Consultant for all other pre-approved
expenses.
10. REPRESENTATIONS AND WARRANTIES OF CONSULTANT.
Consultant hereby represents and warrants to Client that:
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A. Prior Experience. Consultant has extensive experience in the areas
of the services he is to perform hereunder and has performed the
services contemplated by this Agreement.
B. Information. No representation or warranty contained herein nor a
statement in any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by Consultant, or in connection
with the transaction contemplated hereby, contains or contained any
untrue statement of material fact.
C. Prior Consent to Marketing Publications. Consultant agrees to
provide Client with a facsimile copy or original transcript of any
publication, writing, sound recording or any other media type
(collectively referred to herein as "Media") created by Consultant or
any agent or assign of Consultant, where such Media is needed to be
used for marketing of Client or Client's business. Consultant shall
obtain Client's approval on the use of any such Media prior to
disseminating Media to any third parties.
11. CONSULTANT IS NOT AN AGENT OR EMPLOYER.
Consultant's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to act as the agent of Client or otherwise represent or bind Client. For
purposes of this Agreement, Consultant is an independent contractor. All final
decisions with respect to acts of Client or its affiliates, whether or not made
pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of Client or such affiliates and Consultant shall
under no circumstances be liable for any expense incurred or loss suffered by
Client as a consequence of such action or decisions.
12. MISCELLANEOUS
A. Authority
The execution and performance of this Agreement has been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of the parties hereto.
B. Amendment
This Agreement may be amended or modified at any time and in any manner
but only by an instrument in writing executed by the parties hereto.
C. Waiver
All the rights and remedies of either party under this Agreement are
cumulative and not exclusive of any other rights and remedies provided by law.
No delay or failure on the
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part of either party in the exercise of any right or remedy arising from a
breach of this Agreement shall operate as a waiver of any subsequent right or
remedy arising from a subsequent breach of this Agreement. The consent of any
party where required hereunder to any act or occurrence shall not be deemed to
be a consent to any other act or occurrence.
D. Assignment
Neither party to this Agreement may not assign any right or obligation
created hereunder without the prior written consent of the other;
E. Notices:
Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, when deposited in the
United States mails for transmittal be certified or registered mail, postage
prepaid or when deposited with a public telegraph company for transmittal or
when sent by facsimile transmission, charges prepared provided that the
communication is addressed:
(i) In the case of Client to: (ii) In the case of Consultant to:
Mark J. Gertzbein William Marches
Executive Vice President & CFO M & M Group, Inc.
180 Dundas Street West, Suite 1502 824 Moraga Drive
Toronto, Ontario, Canada Bel-Air, California, 90049
or to such other person or address designated by the parties to receive notice.
F. Headings and Captions
The headings of paragraphs are included solely for convenience. If a
conflict exists between any heading and the text of this Agreement, the text
shall control.
G. Entire Agreement
This instrument and the exhibits to this instrument contain the entire Agreement
between the parties with respect to the transaction contemplated by the
Agreement. It may be executed in any number of counterparts but the aggregate of
the counterparts together constitute only one and the same instrument.
H. Effect of Partial Invalidity
In the event that any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, but this
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Agreement shall be constructed as if it never contained any such invalid,
illegal or unenforceable provisions.
I. Controlling Law
The validity, interpretation and performance of this Agreement shall be
controlled by and construed under the laws of the State of Arizona.
J. Attorney's Fees.
If any action at law or in equity, including an action for declaratory
relief, is brought to enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover actual attorney's fees from the
other party. The attorney's fees may be ordered by the court in the trial of any
action described in this paragraph or may be enforced in a separate action
brought for determining attorney's fees.
K. Time is of the Essence.
Time is of the essence for each and every provision hereof this
Agreement and of each and every provision of this Agreement.
L. Mutual Cooperation
The parties hereto shall cooperate with each other to achieve the
purpose of this Agreement and shall execute each other and further documents and
take such other and further actions as may be necessary or convenient to effect
the transactions described herein.
M. Further Actions.
At any time and from time to time, each party agrees, at its or their
expense, to take actions and to execute and deliver documents as may be
reasonably necessary to effectuate the purposes of this Agreement.
N. Indemnification.
(a) The Client shall indemnify and hold harmless the Consultant, from
and against any and all losses, claims, liabilities, expenses and damages, joint
or several (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action suit or proceeding or any claim asserted) to which it, or any of them
may become subject under the Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on (i) any untrue
statement or alleged untrue statement of any material fact contained in (A) any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement or supplement to the Registration Statement or the
Prospectus and (B) any application or
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other document, or any amendment or supplement thereto, executed by the Client
based upon written information furnished by or on behalf of the Client filed in
any jurisdiction in order to qualify the Shares under the securities or Blue Sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application") or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any supplement to the Registration Statement or the Prospectus
or any Application a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided however that such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of the Consultant to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or omission of a material fact contained in such
Preliminary Prospectus that was corrected in the Prospectus (or any amendment or
supplement thereto), unless such failure to deliver the Prospectus (as amended
or supplemented) was the result of noncompliance by the Client with its
agreement to deliver such amended Prospectus to the Consultant. This indemnity
agreement will be in addition to any liability which the Client may otherwise
have. The Client will not, without the prior written consent of the Consultant
(which consent will not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not the Consultant is a party to each claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Consultant from all liability arising out of such
claim, action, suit or proceeding.
(b) The Consultant shall indemnify and hold harmless the Client, and
its directors, officers, associates, affiliates, employees and agents, and each
person, if any, controlling the Client or any of its affiliates, within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "Act") or
Section 20 of the Exchange Act of 1935, as amended (the "Exchange Act"), from
and against any and all losses, claims, liabilities, expenses and damages, joint
or several (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of ,
any action, suit or proceeding or any claim asserted) to which it, or any of
them, may become subject under the Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any statement or
alleged statement made by the Consultant which is not based upon information
furnished to the Consultant by the Company.
(c) A party that proposes to assert the right to be indemnified under
this Section will promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify such indemnifying party
of the commencement of such action, enclosing a copy of all papers served, but
the omission so to notify the indemnifying party will not relieve it from any
liability that is may have to any indemnified party under the foregoing
provisions of this Section unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is
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brought against any indemnified party and it notifies the indemnifying party of
its commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified
party promptly after receiving notice of the commencement of the action from the
indemnified party, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defenses. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses, and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party shall not in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of ore than one separate firm admitted to
practice in such jurisdiction at any one time for such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred.
(d) The Client will not, without the prior written consent of the
Consultant (which consent will not be unreasonably withheld), settle or
compromise or consent tot he entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not the Consultant is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of the Consultant from all liability arising
out of such claim, action, suit, or proceeding. An indemnifying party will not
be liable for any settlement or any action or claim effected without its written
consent (which consent will not be unreasonably withheld).
(e) The Consultant will not, without the prior written consent of the
Client (which consent will not be unreasonably withheld), settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not the Client is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Client from all liability arising out of such
claim, action, suit or proceeding. An indemnifying party will not be liable for
any settlement
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or any action or claim effected without its written consent (which consent will
not be unreasonably withheld).
O. No Third Party Beneficiary.
Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties hereto and their successors, any rights
or remedies under or by reason of this Agreement, unless this Agreement
specifically states such intent.
P. Facsimile Counterparts.
If a party signs this Agreement and transmits an electronic facsimile
of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement. DATED this
22nd day of October, 1996.
Client
The Tracker Corporation of America,
a Delaware corporation
By: /s/ Bruce Lewis
--------------------------
Name: Bruce Lewis
Title: President
Consultant
/s/ William Marches
- -----------------------------
Name: William Marches
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EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-8 of our report dated
May 28, 1996, appearing on page 56 of The Tracker Corporation of America's
Annual Report on Form 10-K for the year ended March 31, 1996.
/s/ PRICE WATERHOUSE LLP
- -----------------------------
PRICE WATERHOUSE LLP
Phoenix, Arizona
October 23, 1996
<PAGE> 1
EXHIBIT 99.1
PROSPECTUS
THE TRACKER CORPORATION OF AMERICA
1,200,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
--------------------
All 1,200,000 shares of the Common Stock, $0.001 par value per share,
may be offered for sale from time to time by and for the account of William
Marches, a stockholder of The Tracker Corporation of America (the "Selling
Securityholder") or by pledges, donees, transferees or other successors in
interest of such Selling Securityholder. See "Selling Securityholder." Such
sales may be made in the over-the-counter market or otherwise, at prices and at
terms then prevailing, at prices related to the then current market price or in
negotiated transactions. See "Plan of Distribution."
The Tracker Corporation of America (the "Company" or "Tracker US") will
not receive any of the proceeds of the sale of the Common Stock offered hereby.
All expenses relating to the distribution of the Common Stock are to be borne by
the Company, other than selling commissions and fees and expenses of counsel and
other representatives of the Selling Securityholder. The Company's Common Stock
is traded in the over-the-counter market under the symbol "TRKR." On October 15,
1996, the high and low bid prices of the Common Stock were $0.24 per share and
$0.031 per share, respectively.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
No person is authorized to give any information or to make any
representations 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. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of these securities in any state to any
person to whom it is unlawful to make such offer or solicitation in such state.
Neither the delivery of this Prospectus nor any sales made hereunder shall,
under any circumstances, create an implication that there has been no change in
the affairs of the Company since the date hereof.
--------------------
The date of this Prospectus is October 23, 1996.
<PAGE> 2
AVAILABLE INFORMATION
The Company 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"). Such reports, proxy statements and other
information 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 Regional Offices of the Commission at Seven 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 material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Company is an
electronic filer and the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding electronic filers.
The Company will furnish its stockholders with annual reports
containing audited financial statements.
The Company has filed with the Commission a registration statement on
Form S-8 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at the address set
forth in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference and shall be deemed to be a part hereof.
1. The Company's Annual Report on Form 10-K for the year ended March
31, 1996.
2. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since March 31, 1996.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of the
Registration Statement of which this Prospectus is a part and prior to the
filing of a post-effective amendment which indicates that all securities offered
thereby have been sold or which deregisters all such securities then remaining
unsold, shall be deemed to be incorporated in the Registration Statement by
reference and to be a part thereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of all of the documents referred to above
which have been or may be incorporated by reference in this Prospectus (other
than certain exhibits to such documents). Requests should be directed to Mark J.
Gertzbein, Corporate Secretary, The Tracker Corporation of America, 180 Dundas
Street West, Suite #1502, Toronto, Ontario Canada M5G 1Z8, telephone (416)
595-6222.
TABLE OF CONTENTS
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Risk Factors....................................................3
The Company....................................................13
Use of Proceeds................................................15
Selling Securityholder.........................................15
Plan of Distribution...........................................16
Description of Securities......................................17
Indemnification of Directors and Officers......................28
Legal Matters..................................................29
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; INDEPENDENT ACCOUNTANTS'
CONCERN ABOUT THE COMPANY'S 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 three month period ended June 30,
1996, the Company incurred a net loss of $1,262,712 and, at the end of such
period, had an accumulated deficit of $14,465,450. During the fiscal year ended
March 31, 1996, the Company incurred a net loss of $6,090,730. The Company
expects to continue to incur losses through at least March 31, 1997. From the
date of inception (May 6, 1993) through June 30, 1996, the Company had realized
revenues of only $182,581. The report of independent accountants covering the
Company's financial statements for the year ended March 31, 1996 expresses
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 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."
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. Accordingly, there can be no assurance that the Company will gain
acceptance of its system by the public.
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
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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.
LACK OF FORMAL AGREEMENTS WITH MANUFACTURERS TO APPLY THE COMPANY'S CODING AT
THE SOURCE OF MANUFACTURE
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. Currently, the Company does not have a contract with any
manufacturers to laser etch the Company's coding or to directly apply the
Company's coding at the source of manufacture using any other method. There can
be no assurance that the Company will be able to successfully expand its service
in this fashion.
REMOVAL OF THE IDENTIFICATION LABELS
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). Although 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, there
can be no assurance that the Company's labels will not be removed. Any failure
of the labels to adhere properly could damage the credibility of the Company's
personal property identification and recovery service and could have a material
adverse effect on the Company's business, operating results and financial
condition.
ABILITY OF THE COMPANY TO ESTABLISH AND LOCATE SCANNERS
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. The average cost to the Company to install scanning equipment
is $2,500 per installation. As of September 30, 1996, the Company had installed
40 scanners in Canada. Additionally, as of September 30, 1996, the Company has
letters of intent from more than 125 police, sheriff and other locations
throughout the United States to accept the Company's scanners but had installed
only 17 scanners in the United States pursuant to those letters of intent. There
can be no assurance, however, that these letters of intent will result in
additional placed scanners or that the Company will be able to continue to
establish strategic or centrally located scanners throughout a wide geographic
area. Any failure to place additional scanners could damage the credibility of
the Company's personal property identification and recovery service and could
have a material adverse effect on the Company's business, operating results and
financial condition.
ABILITY OF THE COMPANY TO OPERATE A LARGE INFORMATION SYSTEMS DATABASE; NO
EXPERIENCE OF EXISTING PERSONNEL CONCERNING OPERATING OR MAINTAINING A LARGE
DATABASE
After a member's lost item has been found and scanned, the labels are
linked electronically to a central computer database maintained and operated by
the Company, which contains membership information that permits the Company to
identify the member who owns a retrieved article. Although the Company does not
expect to encounter any difficulty in operating or maintaining a large database,
the Company's existing personnel have not previously operated or maintained any
other large database and therefore their experience is limited. 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.
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.
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DEPENDENCE ON THIRD PARTY MARKETING COMPANIES
The Company is dependent to some extent on the marketing efforts of
third party marketing companies. For example, with respect to the Company's
personal property identification and recovery service, 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
specific 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. With respect to the Company's card registration
service, the Company has entered into an independent contractor agreement with
Datatrack, Inc. ("Datatrack") pursuant to which Datatrack conducts telemarketing
efforts for the Company in the United States. 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.
Although the Company believes that its relationships with Tracker Referral and
Datatrack are on good terms, there can be no assurance that these relationships
will continue on such terms. Any failure on the part of the Company to continue
marketing its products through Tracker Referral and Datatrack could have a
materially adverse effect on the Company's business, financial condition and
results of operations.
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 or that the terms
of any such offerings will be favorable to the Company. 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. This is especially true if the Company sells equity securities at
discounts or debt securities with high interest rates or discounted conversion
rates. For example the Company has issued 350 shares of Convertible Preferred
Stock with a conversion price equal to 33% less than the average of the
published OTC Bulletin Board closing bid prices for the Company's Common Stock
for the five 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 (however, the conversion price shall in no event be less than
$0.15). The total amount to be raised under the Convertible Preferred Stock has
been set at $1,375,000. See "DESCRIPTION OF SECURITIES -- Preferred Stock."
1996 STOCK WAGE AND FEE PAYMENT PLAN; ABILITY OF FULL-TIME EMPLOYEES AND OUTSIDE
DIRECTORS TO RECEIVE TRADABLE COMMON STOCK AT 50% OF MARKET VALUE
The Board of Directors recently approved a 1996 Stock Wage and Fee
Payment Plan for the period October 1, 1996 through January 31, 1997 (the "1996
Wage Plan"), under which stock may be granted to certain full-time employees and
outside directors in lieu of all or part of their cash compensation. As an
incentive for employees and outside directors to accept stock as wages instead
of cash, the number of shares granted to some participants in lieu of cash is
based on a price per share of less than fair market value. For example,
participants may elect to receive stock at a rate equal to 50% of its fair
market value in lieu of cash compensation. The Company filed on October 16,
1996, a registration statement on Form S-8 concerning the shares to be issued
under the 1996 Wage Plan. The 1996 Wage Plan may have the effect of depressing
the market value of the Company's
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<PAGE> 6
Common Stock and making it more difficult for the Company to raise additional
equity financing under terms satisfactory to the Company.
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. For example, the Company has obtained an informal
agreement with Symbol, the manufacturer of the laser scanners, to maintain the
Company's exclusive right to use the laser scanners in connection with a
personal property recovery service if the Company purchases 830 scanners during
the 1996 calendar year. As of September 30, 1996, the Company had purchased 17
scanners during the 1996 calendar year. As a result, the Company is materially
behind in terms of reaching its goal of purchasing 830 scanners during that
period from Symbol. 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. Additionally, the Company's requirements to date under
these understandings or agreements have been low in volume. Although the Company
anticipates that its suppliers will be able to meet its future needs, there can
be no assurance that the Company's suppliers will be able to meet such needs in
periods, if any, of increased volume. 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.
LACK OF PUBLIC ACCEPTANCE OF THE COMPANY'S SERVICE
In light of the limited revenues received by the Company to date, the
reliance on services rendered by other providers, and more traditional methods
of personal property recovery or replacement, there can be no assurance that the
Company will gain a significant level of acceptance by the public of its
service.
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 Company also may face competition from alternative personal
property identification methods such as tracking property by serial number or
by the property owner's imprinted name and address or from conventional forms
of insurance that reimburse consumers for lost items. Such insurance typically
also provides reimbursement for items that are destroyed by fire, flood or acts
of God. Further, conventional insurance has high market acceptance and
conventional insurance companies typically have substantial resources to market
their products effectively and aggressively. Although the Company's personal
property identification and recovery service differs from
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<PAGE> 7
conventional insurance in that its objective is to return its members' personal
possessions, there can be no assurance that the Company will be able to compete
effectively with conventional insurance providers.
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 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 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.
LIMITED MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
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<PAGE> 8
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. Additionally, stocks traded
on the OTC Bulletin Board generally have limited brokerage and news coverage.
Thus, the market price of the Common Stock may not reflect the value of the
Company. 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, 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.
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<PAGE> 9
("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. 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.
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 period commencing on July 12,
1995 and ending on the first date after July 12, 1996 on which the Common Stock
can be purchased at a legally marginable price. See "DESCRIPTION OF SECURITIES -
Common 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.
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. 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
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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.
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.
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SUMMARY TABLE OF OUTSTANDING OPTIONS,
WARRANTS AND CONVERTIBLE DEBENTURES*
<TABLE>
<CAPTION>
EXERCISE/CONVERSION PRICE EXERCISE/CONVERSION PERIOD NUMBER AND TYPE OF
SHARES EXERCISABLE/
CONVERTIBLE INTO
<S> <C> <C> <C>
Common Warrants $5.00 per share Commencing on July 12, 1995 and 750,000 shares of Common Stock
ending on the first date after
July 12, 1996 on which the
Common Stock can be purchased at
a legally marginable price
CRG Option $2.00 per share Exercisable thru November 19, 1996 100,000 shares of Common Stock
$2.40 per share Exercisable thru November 19, 1997 100,000 shares of Common Stock
$2.60 per share Exercisable thru November 19, 1998 100,000 shares of Common Stock
$2.80 per share Exercisable thru November 19, 2000 100,000 shares of Common Stock
$3.00 per share Exercisable thru November 19, 2000 100,000 shares of Common Stock
Merchant Tranche I: $0.50 per share Exercisable in three tranches with Tranche I: 200,000 Shares of
Partners Option Tranche II: $0.75 per share certain preconditions and various Common Stock
Tranche III: $1.00 per expiration dates, the last of which Tranche II: 450,000 Shares of
share is July 10, 2001. Common Stock
(subject to adjustment) Tranche III: 250,000 Shares of
Common Stock
TODA Warrant $0.40 per share (subject May 30, 2001 200,000 shares of Common Stock
to adjustment)
First Series $0.4375/share October 1, 1995 through December 1, 960,002 shares of Common Stock
Convertible 1996
Debentures
Second Series Various conversion rates, October 1, 1995 through December 1, 728,957 shares of Common Stock
Convertible the weighted average of 1996
Debentures which is $1.00143 per share
Saturn Option Fair market value on the Terminates upon the closing date of Number of shares, which, when
exercise date the Company's first public combined with currently held
offering, or on March 14, 1999, shares, would provide Saturn with
whichever occurs first 25% ownership of the Company's
issued and outstanding voting
equity
1994 Stock $7.95 per share July 12, 1994 through July 12, 2004 33,333 shares of Common Stock
Incentive Plan (with certain exceptions)
Options
$1.81 per share July 12, 1994 through July 12, 2004 10,000 shares of Common Stock
(with certain expections)
</TABLE>
* This table is summary in nature and the information contained herein is
current as of June 30, 1996. See "DESCRIPTION OF SECURITIES" for a
detailed discussion of the outstanding options, warrants and
convertible debentures.
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
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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.
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.
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.
The Company does not engage in any hedging contracts because it
receives the majority of its cash flow in United States dollars.
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.
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.
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 be found to be in compliance with
existing regulations as a result of, among other things, misconduct by
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<PAGE> 13
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.
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.
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 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 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 (the "IACP"). The Company has
agreed to pay the IACP a royalty fee for such 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 "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 control. There can be no assurance that the Company
will be successful in its attempt to secure financing on terms acceptable to the
Company, or at all.
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
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<PAGE> 14
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 system that will make the identification process
easy;
* 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;
* provide basic Tracker one-year service for typical retail price
of $39.95;
* 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. Currently,
however, the Company does not have a contract with any manufacturers to laser
etch the Company's coding or to directly apply the Company's coding at the
source of manufacture using any other method. The Company anticipates that if
such contracts are procured the manufacturers will absorb the cost of the laser
etching either directly or indirectly (i.e., in the unit price charged to the
manufacturers by the Company). 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. The Company offers members
of this program the benefit and convenience of card registration. With one phone
call, a member can (a) cancel all his lost or stolen cards (whether they be
debit cards, gas cards, automated bank teller cards, department store cards or
credit cards), (b) request replacement cards, (c) request a change of address
for all his cards, (d) receive $15,000 in travel insurance on common carrier,
(e) receive $2,000 in AD&D insurance, (f) receive $500 in airline discounts and
(g) be covered on fraudulent charges up to $10,000. 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 "RISK FACTORS - Competition."
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<PAGE> 15
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.
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
Because the Common Stock offered hereby will be offered by or for the
account of the Selling Securityholder, the Company will not receive any of the
proceeds from the sale of shares of Common Stock offered hereby. All expenses
relating to the distribution of the Common Stock are to be borne by the Company,
other than selling commissions and fees and expenses of counsel and other
representatives of the Selling Securityholder.
SELLING SECURITYHOLDER
The following table lists the Selling Securityholder and provides
certain information with respect to the shares of Common Stock owned by the
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 a Selling Securityholder questionnaire and from the Company's records
with respect to Tracker Canada Exchangeable Preference Shares 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
Securityholder 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 Tracker
Canada Exchangeable Preference Shares for shares of Tracker U.S. Common Stock,
the conversion of any and all of 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, the Selling Securityholder has not had any position, office
or other material relationship with Tracker U.S. or its affiliates or
predecessors within
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<PAGE> 16
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 SHARES OF COMMON SHARES OF COMMON PERCENTAGE OF CLASS
NAME AND POSITION (1) STOCK OWNED STOCK TO BE OFFERED STOCK OWNED AFTER THE OWNED AFTER THE OFFERING
PRIOR TO THE HEREBY OFFERING (2) (2) (3)
OFFERING
- ------------------------------ ------------------ ----------------------- ----------------------- ==========================
<CAPTION>
<S> <C> <C> <C> <C>
William Marches 0 1,200,000 0 *
- ------------------------------ ------------------ ----------------------- ----------------------- ==========================
</TABLE>
* Less than 1%
(1) The Selling Securityholder is a Consultant of the Company.
(2) Assumes that the Selling Securityholder will actually sell all
shares of Common Stock offered by this Prospectus. There can be no
assurance, however, that the Selling Stockholder will actually sell
any, or all, of such shares.
(3) Percentage ownership is based on 18,521,647 shares of Common Stock
outstanding, including 10,711,885 shares of Common Stock issued and
outstanding as of June 25, 1996, 1,400,000 shares of Common Stock to be
issued and outstanding after June 25, 1996 but before the date of this
Prospectus pursuant to the Company's 1996 Stock Wage and Fee Payment
Plan, 1,200,000 shares of Common Stock which may be issued pursuant to
the Company's 1996 William Marches Stock Payment Plan and 5,209,762
Exchangeable Preference Shares of Tracker Canada issued and outstanding
as of June 25, 1996. Because (i) holders of Exchangeable Preference
Shares, through contractual agreement, have voting, dividend and
liquidation reghts that parallel those of the Company's Common Stock,
(ii) the Exchangeable Preference Shares are currently exchangeable for
shares of the Company's Common Stock on a one-for-one basis and will be
automatically exchanged for shares of the Company's Common Stock on a
one-for-one basis on July 12, 2002 if not exchanged prior to then, the
Exchangeable Preference Shares and the Company's Common Stock are
treated, except as otherwise noted, as a single class of Common Stock
in this Prospectus.
PLAN OF DISTRIBUTION
The Common Stock may be offered by the Selling Securityholder from time
to time on the over-the-counter market or otherwise, at prices and at terms then
prevailing, at prices related to the then current market price or in negotiated
transactions. The shares may be sold by one or more of the following: (a) a
block trade in which the broker or dealer so engaged will attempt to sell the
shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
and (c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers. The amount of Common Stock to be offered and sold hereunder
by the Selling Securityholder if the Selling Securityholder is deemed an
"affiliate" of the Company, and any other person or group of persons with whom
he is acting in concert for the purpose of selling securities of the Company may
not exceed, during any three month period, the greater of 1% of the outstanding
Common Stock of the Company or the average weekly reported trading volume of the
Common Stock during the four calendar weeks preceding the sale. Brokers or
dealers will receive commissions or discounts from the Selling Securityholder in
amounts to be negotiated by the Selling Securityholder.
DESCRIPTION OF SECURITIES
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<PAGE> 17
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.
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. The
rights, preferences and privileges of holders of Voting Stock are subject to,
and may be 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. The
exchange of Exchangeable Preference Shares for Common Stock is a taxable event.
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<PAGE> 18
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.
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 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.
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
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<PAGE> 19
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 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
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<PAGE> 20
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 the period commencing on July 12, 1995 and ending on
the first date after July 12, 1996 on which the Common Stock can be purchased at
a legally marginable price under applicable laws, rules and regulations. 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,
Montogomery 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.
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 December 1, 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 December 1, 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
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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 8,567,518 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 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.
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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.
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.
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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 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
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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.
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
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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 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
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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 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
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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.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by the Delaware General Corporation Law (the "DGCL"), the
Certificate of Incorporation of the Registrant provides that no director of the
Registrant shall be personally liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
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liability (i) for any breach of the director's duty of loyalty to the Registrant
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 benefit. The effect of
this provision is to eliminate the rights of the Registrant and its stockholders
(through stockholders' derivative suits on behalf of the Registrant) 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 the Registrant 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 the Registrant or any stockholder to seek non-monetary relief such as
an injunction or recission in the event of a breach of a director's duty of
care.
The Certificate of Incorporation of the Registrant requires the
Registrant to indemnify its directors and officers against expenses and certain
other liabilities arising out of their conduct on behalf of the Registrant to
the maximum extent and under all circumstances provided by law. In addition, the
Bylaws of the Registrant provide more particularly that directors and officers
of the Registrant 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 the Registrant, 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 the Registrant. Indemnification by the Registrant 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 the Registrant, 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 the Registrant, except as regards a person adjudged to be
liable to the Registrant, 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 the Registrant.
The Registrant has entered into substantially identical indemnification
agreements with each of its directors. The Registrant has agreed, to the full
extent permitted by the DGCL, as amended from time to time, to indemnify 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 unthreatened
action, suit or proceeding whether civil, criminal, administrative or
investigative by reason that he was a director, officer, employee or agent of
the Registrant or any of its affiliates, or because the Registrant has a right
to judgment in its favor because of his position with the Registrant. 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 the
Registrant. 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 the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy an is therefore unenforceable.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant for which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
LEGAL MATTERS
The validity of the issance of the shares of Common Stock offered hereby will be
passed upon for the Company by Fennemore Craig, a Professional Corporation,
Phoenix, Arizona.
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