<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE TRACKER CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO BE HELD SEPTEMBER 6, 1996
To the Stockholders of The Tracker Corporation of America:
The Annual Meeting of Stockholders of The Tracker Corporation of
America (the "Company") will be held at The Hilton O'Hare, Room 2010, 2nd Floor,
O'Hare International Airport, Chicago, Illinois 60666, on Friday, September 6,
1996 at 4:00 p.m. for the following purposes:
1. To elect two Directors to the Board of Directors;
2. To consider and act upon a proposal to ratify the appointment of
Price Waterhouse LLP as the Company's independent accountants for
the year ending March 31, 1996; and
3. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on July 22, 1996 are
entitled to vote at the meeting and at any adjournment or postponement thereof.
Shares of Common Stock can be voted at the meeting only if the holder is present
or represented by proxy. A list of stockholders entitled to vote at the meeting
will be open for inspection at the Company's corporate headquarters for any
purpose germane to the meeting during ordinary business hours for 10 days prior
to the meeting.
A copy of the Company's Annual Report to Stockholders, which includes
certified financial statements, is enclosed.
By Order of the Board of Directors,
/s/ Mark J. Gertzbein
-----------------------------------
Mark J. Gertzbein
Secretary
Toronto, Canada
July 24, 1996
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS
MEETING. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE.
<PAGE> 3
The Tracker Corporation of America
PROXY STATEMENT FOR THE ANNUAL STOCKHOLDERS' MEETING
TO BE HELD SEPTEMBER 6, 1996
----------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GENERAL INFORMATION............................................................1
ELECTION OF DIRECTORS..........................................................2
Nominees.....................................................................2
Directors, Executive Officers................................................3
Board Meetings and Committees of the Board of Directors......................4
Compensation of Directors....................................................4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ................5
EXECUTIVE COMPENSATION.........................................................8
Summary Compensation.........................................................8
Employment Contracts, Termination of Employment and Change of Control .......9
1995 Stock Wage and Fee Payment Plan........................................10
Proposed 1996 Stock Wage Plan...............................................11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................11
Transactions with Management................................................11
Certain Relationships.......................................................11
Indebtedness of Management..................................................12
Transactions with Promoters.................................................12
Future Transactions with Affiliates.........................................12
Reorganization..............................................................12
Investment by Saturn Investments, Inc.......................................14
Investor Relations Services - Corporate Relations Group.....................16
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS........................16
STOCKHOLDER PROPOSALS.........................................................17
OTHER BUSINESS................................................................17
</TABLE>
<PAGE> 4
Proxy Statement
of
The Tracker Corporation of America
180 Dundas Street West, Suite 1502
Toronto, Ontario, Canada M5G 1Z8
--------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of The Tracker Corporation of America, a Delaware
corporation (the "Company"), of proxies for use at the Annual Meeting of
Stockholders to be held on September 6, 1996 at 4:00 p.m. or at any postponement
or adjournment thereof. The Annual Meeting will be held at The Hilton O'Hare,
Room 2010, 2nd Floor, O'Hare International Airport, Chicago, Illinois 60666.
This Proxy Statement and the accompanying form of proxy are being first
mailed to stockholders on or about July 24, 1996. The stockholder giving the
proxy may revoke it at any time before it is exercised at the meeting by: (i)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; or (ii) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(iii) attending the meeting and voting in person (attendance at the meeting will
not in and of itself constitute revocation of a proxy). Any proxy which is not
revoked will be voted at the Annual Meeting in accordance with the stockholder's
instructions. If a stockholder returns a properly signed and dated proxy card
but does not mark any choices on one or more items, his or her shares will be
voted in accordance with the recommendations of the Board of Directors as to
such items. The proxy card gives authority to the proxies to vote shares in
their discretion on any other matter properly presented at the Annual Meeting.
Proxies will be solicited from the Company's stockholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners. It is possible that directors, officers and regular employees of the
Company may make further solicitation personally or by telephone, telegraph or
mail.
Only holders (the "Stockholders") of (i) the Company's common stock,
par value $0.001 per share (the "Company Common"), and (ii) the Exchangeable
Preference Shares (the "Exchangeable Preference Shares," and together with the
Company Common, the "Common Stock") of The Tracker Corporation ("Tracker
Canada"), a wholly-owned subsidiary of the Company, at the close of business on
July 22, 1996 (the "Record Date"), are entitled to notice of, and to vote at,
the Annual Meeting and any postponement or adjournment thereof. On the Record
Date there were 17,330,800 shares of Common Stock outstanding. Each share of
Common Stock is entitled to one vote on each matter to be considered at the
Annual Meeting. Assuming a quorum exists, an affirmative vote of a majority of
the shares of Common Stock represented and entitled to vote at the Annual
Meeting is required for approval of all items being submitted to the
Stockholders for their consideration. With regard to the election of directors,
votes may be cast in favor of or withheld from each nominee. Votes that are
withheld will have the effect of a negative vote. Abstentions may be specified
on all proposals except the election of directors. Abstentions are included in
the determination of the number of shares represented for a quorum. Abstentions
will have the effect of a negative vote on a proposal. Broker non-votes are not
counted for purposes of determining whether a quorum is present or whether a
proposal has been approved. Proxies will be tabulated by the Company. The
Company shall, in advance of the Annual Meeting, appoint one or more Inspectors
of Election to count all votes and ballots at the Annual Meeting and make a
written report thereof.
A letter from the Company's President and the Company's annual report
on Form 10-K for the year ended March 31, 1996 are being mailed to Stockholders
with this Proxy Statement.
1
<PAGE> 5
ELECTION OF DIRECTORS
NOMINEES
The Board of Directors currently consists of seven members divided
among three classes. Directors are elected by the Stockholders of the Company
for three-year terms and hold office until the annual meeting of Stockholders
for the year in which their respective term expires and until their successors
are elected and qualified. Messrs. Lewis, Gertzbein and Yakobovits will serve
until the 1997 annual meeting, and Messrs. Kyser and Korhonen will serve until
the 1998 annual meeting. The Board of Directors proposes that Charles J.
Coronella and Quincy A. S. McKean III, both of whom are currently serving as
directors, be elected to serve as directors for three-year terms. A brief
description of the business experience of each of Mr. Coronella and Mr. McKean
is set forth below. UNLESS OTHERWISE INSTRUCTED, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY WILL VOTE FOR THE ELECTION OF MR. CORONELLA AND MR. MCKEAN.
Mr. Coronella and Mr. McKean have consented to being named herein and each has
indicated his intention to serve if elected. If for any reason either Mr.
Coronella or Mr. McKean, or both, should become unable to serve as a director,
the accompanying proxy may be voted for the election of a substitute nominee, or
substitute nominees, designated by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- --------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Charles J. Coronella 63 Charles J. Coronella has been a Director of the Company since June
30, 1994. Since 1995, Mr. Coronella has been the Chairman and Chief
Executive Officer of Executive Service Corp. of Arizona. He has been
a Director of Acordia of Arizona since 1993 and has been its Chairman
of the Board since 1996. Acordia of Arizona is a wholly-owned
subsidiary of Acordia, Inc., a New York Stock Exchange listed
company. Mr. Coronella served as President and Chief Executive
Officer of Chase Bank of Arizona from 1991 to 1994. Prior to that,
Mr. Coronella served as a consultant to The Chase Manhattan
Corporation from 1990 to 1991. From 1989 to 1990, Mr. Coronella
was responsible for the management of Chase Manhattan Bank's
United States banking subsidiaries.
Quincy A.S. McKean III 40 Quincy A.S. McKean III has been a Director of the Company since
June 30, 1994. Mr. McKean was a director of Ultra Capital Corp., the
predecessor entity of the Company, from February 1992 to June 1994.
From January 1987 through March 1990, Mr. McKean was employed by
First Fidelity Bank, N.A./First Fidelity Brokers of Newark, New
Jersey, where he managed retail and institutional accounts. From
March 1990 through July 1994, he was a registered representative
with Kidder Peabody & Co. in New York City. Since July 1994, Mr.
McKean has been associated, as a registered representative, with
the New York securities firm of Mercer, Bokert, Buckman and Reid,
Inc.
</TABLE>
2
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors and executive officers of the
Company are as set forth below. Executive officers serve until their successors
have been chosen or until their earlier resignation or removal.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- --------------------------------------------------------------
<S> <C> <C>
I. Bruce Lewis 55 Company: Chief Executive Officer, President and Chairman of the
Board of Directors; Tracker Canada: President, Chief Operating
Officer, Chief Executive Officer and Chairman of the Board of
Directors
Mark J. Gertzbein 41 Company: Executive Vice President, Chief Financial Officer,
Secretary, Treasurer and Deputy Chairman of the Board of
Directors; Tracker Canada: Senior Vice President of Finance,
Chief Financial Officer, Secretary and Director
Ed J. Korhonen 60 Company: Director
Leonard Yakobovits 37 Company: Director
Wolfgang H. Kyser 49 Company: Director
Charles J. Coronella 63 Company: Director
Quincy A.S. McKean III 40 Company: Director
</TABLE>
I. Bruce Lewis has been the Chairman of the Board of Directors and
Chief Executive Officer of the Company since June 30, 1994. Mr. Lewis has also
served the Company as President since August 12, 1995. Mr. Lewis also serves
Tracker Canada as its Chief Executive Officer and Chairman of the Board of
Directors and has so served since May 1993. For the period from 1980 through May
1990, Mr. Lewis was President and a Director of Albert Berg Limited and its
subsidiaries. Albert Berg was petitioned into bankruptcy by its creditors in May
1990. From June, 1988 to August, 1990, he served as President of Cape Breton
Chemical Corporation, a start-up PVC flexible stretch wrap manufacturer. From
May 1990 through May 1993, Mr. Lewis was also a consultant to various companies
in the areas of management and acquisition financing.
Mark J. Gertzbein has been the Deputy Chairman of the Board of
Directors, the Executive Vice President and the Chief Financial Officer,
Secretary and Treasurer of the Company since June 30, 1994. In addition, Mr.
Gertzbein has served as the Senior Vice President of Finance, the Chief
Financial Officer and Secretary of Tracker Canada since his appointment in July
1993 and as a Director of Tracker Canada since May 1993. From August 1984 to
June 1988, he served Albert Berg Limited as Vice President, Finance and
Administration. Albert Berg was petitioned into bankruptcy by its creditors in
May 1990. From June 1988 to August 1990, he served as the Chief Financial
Officer of Cape Breton Chemical Corporation, a start-up PVC flexible stretch
wrap manufacturer. From August 1990 to June 1991, Mr. Gertzbein consulted
various companies on administrative, accounting and tax related issues. From
June 1991 to July 1993, he served as the Corporate Controller for Summit
Cosmetics, Inc., an exclusive warehouse and distributor in the cosmetics and
fragrance industry.
Ed J. Korhonen has been the a Director of the Company since November 1,
1995. He was the President, Chief Operating Officer and a Director of Tracker
Canada from May 1993 through May 1996. Since resigning from his positions with
Tracker Canada in May 1996, Mr. Korhonen has been the Executive Vice President
of Eco Logic International Inc. Mr. Korhonen served Nabisco Brands Limited as
President of Confectionery, Industrial Products and Grocery Divisions from 1977
to 1988 and was President of Maple Leaf Flour Products from 1989 to 1991. He has
subsequently engaged in business consulting with a
3
<PAGE> 7
company, Ed Korhonen Management, he founded in 1991 and was a partner in the
management consulting firm of Sniderman & Wood from January 1992 through May
1993. Mr. Korhonen also consults with Tracker Canada.
Leonard Yakobovits has been a Director of the Company since September
8, 1995. Since 1985 Mr. Yakobovits has been the President of Dezco Holding &
Trading, a North American clear-out specialist and distributor for branded
consumer products. Mr. Yakobovits also consults with Tracker Canada.
Wolfgang H. Kyser has been a Director of Tracker U.S. since June 30,
1994. Since 1986 Mr. Kyser has been a principal and the Chief Executive Officer
of KHB Investments Corporation, which deals with foreign investments in Canada
and the United States. Since 1995, Mr. Kyser has been a principal and the
President of Kyser Pacific Group, which invests in and develops real estate.
From December 1987 through September 1992, he was the sole director of "687292",
an Ontario company which held real estate. In November 1992, "687292" was
petitioned into bankruptcy by its creditors. Mr. Kyser also is a Director of AEG
Sorting Systems, Inc. and Olympia Business Machines Ltd..
BOARD MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
From April 1, 1995 through March 31, 1996, the Board of Directors met
10 times. The Board of Directors has established an Audit and a Compensation
Committee. The Board does not have a Nominating Committee, and the entire Board
is responsible for the size and composition of the Board and for recommending
nominees to serve on the Board.
The Audit Committee, which is comprised of Messrs. Coronella
(Chairman), McKean and Gertzbein, is responsible for: (i) reviewing and
recommending the engagement each year of the Company's independent auditors;
(ii) consulting with the independent auditors on the adequacy of the Company's
internal controls; (iii) reviewing, with the independent auditors, the auditors'
reports on the Company's financial statements; and (iv) taking such other steps
as the Audit Committee deems necessary to carry out the normal functions of an
audit committee. The Audit Committee held 1 meeting in the fiscal year ended
March 31, 1996.
The Compensation Committee, which is comprised of Messrs. Coronella
(Chairman) and McKean, is responsible for: (i) determining the compensation of
the Company's senior officers; (ii) reviewing recommendations by management as
to the compensation of other officers and key personnel; and (iii) reviewing
management's succession program. Further, the Compensation Committee administers
the Company's 1994 Stock Incentive Plan (the "Plan"). The Compensation Committee
held 8 meetings in the fiscal year ended March 31, 1996.
During the fiscal year ended March 31, 1996, all incumbent directors
attended 75% or more of the aggregate of (i) the total number of meetings of the
Board of Directors (held during the period for which such person was a
director), and (ii) the total number of meetings held by all committees on which
such director served (during the periods that such director so served).
COMPENSATION OF DIRECTORS
Non-employee directors are paid $500 for attendance at each meeting of
the Board of Directors or a committee meeting and an annual retainer of $10,000.
On August 16, 1995, the Company issued 41,143 shares of Common Stock to Mr.
Coronella in lieu of $36,000 compensation owed to him for his service as a
director and 31,429 shares of Common Stock to Mr. McKean in lieu of $27,500
compensation owed to him for his service as a director. On September 28, 1995,
the Company issued 26,286 shares of Common Stock
4
<PAGE> 8
to Mr. Kyser in lieu of $23,000 compensation owed to him for his service as a
director. On October 17, 1995, the Company issued 10,000 shares of Common Stock
to Mr. Yakobovits in lieu of $10,000 compensation owed to him for his service as
a director. On May 3, 1996, the Company issued 10,000 shares of Common Stock to
each of Messrs. Coronella and McKean in lieu of $4,500 compensation owed to him
for his service as a director, issued 5,556 shares of Common Stock to Mr. Kyser
in lieu of $2,500 compensation for his service as a director, and issued 8,889
shares of Common Stock to Mr. Yakobovits in lieu of $4,000 for his service as a
director. In addition, non-employee directors are eligible to receive options to
purchase shares of the Company's Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of the Common Stock as of June 25, 1996 by (i) each
person known to the Company to own beneficially more than 5% of the total voting
stock of the Company (i.e., Common Stock and Class B Voting Common Stock), (ii)
the Chief Executive Officer and the other executive officers of the Company
named in the Summary Compensation Table, (iii) each of the Company's directors,
and (iv) all directors and officers of the Company as a group. Except as
otherwise indicated below, to the knowledge of the Company, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock, except to the extent that authority is shared by spouses under
applicable law. The Common Stock and the Class B Voting Common Stock, from which
the holders of Exchangeable Preference Shares acquire their voting rights, are
the only outstanding classes of equity securities of Tracker U.S. As of June 25,
1996, there were 320 record holders of Common Stock and 100 record holders of
Class B Voting Common Stock.
<TABLE>
<CAPTION>
Number of Number of Percentage
Shares of Shares of Total of Total
Common Class B Voting Number Number of
Beneficial Owner Stock Common Stock of Shares Shares(1)
- ---------------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C>
I. Bruce Lewis(2)(3)........... 177,500 3,408,532 3,586,032 14.8%
180 Dundas Street West,
Suite 1502, Toronto,
Ontario, Canada M5G 1Z8
Mark J. Gertzbein(2) .......... 786,278 0 786,278 3.2%
180 Dundas Street West,
Suite 1502, Toronto,
Ontario, Canada M5G 1Z8
Ed J. Korhonen(2) ............. 101,750 142,864 244,614 1.1%
2206 Pineneedle Row,
Mississauga, Ontario,
Canada L5C 1V3
Quincy A.S. McKean III (9)..... 46,082 0 46,082 *
75 West Front Street
Red Bank, New Jersey 07701
Charles J. Coronella (9)....... 54,476 0 54,476 *
4521 East Via Los Caballos
Phoenix, Arizona 85028
Leonard Yakobovits(2).......... 8,889 100 8,989 *
P. O. Box 243, Concord,
Ontario, Canada L4K 1B4
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
Number of Number of Percentage
Shares of Shares of Total of Total
Common Class B Voting Number Number of
Beneficial Owner Stock Common Stock of Shares Shares(1)
- ---------------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C>
Wolfgang H. Kyser(4) (9)......... 35,175 2,858 38,033 *
121 Richmond Street West,
#1000, Toronto, Ontario,
Canada M5H 2K1
Gregg C. Johnson(2)(5) .......... 585,844 28,572 614,416 2.5%
13470 North 85th Place
Scottsdale, Arizona 85260
Saturn Investments, Inc.(2)(6) .. 3,903,797 1,052,564 4,956,361 20.4%
c/o Anthony Bonanno, Esq.
Gibson, Dunn & Crutcher
1050 Connecticut Ave. N.W.
Washington, D.C. 20036-5306
Ismail A. Abudawood(2)(7)........ 4,132,369 1,052,564 5,184,933 21.4%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Ayman I. Abudawood(2)(7)......... 3,903,797 1,073,264 4,977,061 20.5%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Osama I. Abudawood(2)(7)......... 3,903,797 1,125,564 5,029,361 20.7%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Anas I. Abudawood(2)(7).......... 3,903,797 1,067,264 4,971,061 20.5%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
Executive officers and
directors as a group
including those named
above (seven persons)(2)(8)...... 1,210,150 3,003,781 4,213,931 17.4%
</TABLE>
- ------------------
* Less than 1% of the outstanding Common Stock.
(1) Percentage of ownership is based upon 24,257,855 shares of Common Stock
beneficially owned on June 25, 1996, including 10,711,885 shares of Common
Stock, 5,209,762 shares of Class B Voting Common Stock ("Voting Stock"),
currently exercisable warrants for 15,577 Exchangeable Preference Shares,
currently exercisable warrants to purchase 750,000 shares of Common Stock,
currently exercisable options to purchase 9,999 shares of Common Stock,
1,688,959 shares reserved for issuance under the Company's currently
convertible Convertible Debentures (based on the placement of such
debentures through June 25, 1996), which may be converted commencing
October 1, 1995, 3,903,797 shares issuable to Saturn Investments, Inc.
("Saturn") under a currently exercisable option to acquire 25%,
post-exercise issuance, of the outstanding voting equity of the Company,
867,876 shares reserved for issuance to holders of the Company's presently
convertible Convertible Preferred Stock (based on the conversion price in
effect on June 25, 1996), 200,000 shares reserved for issuance under the
TODA Option and 900,000 shares reserved for issuance under the Merchant
Partners Option. The Company believes that the option to purchase the
3,903,797 shares terminates as of the date the registration statement,
filed November 22, 1995, as amended, is declared effective by the
Commission. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Investment by Saturn Investments, Inc."
6
<PAGE> 10
(2) Pursuant to that certain Exchange Agency and Trust Agreement dated July
12, 1994 among the Company, Tracker Canada and Montreal Trust Company
("Trustee"), the Trustee holds, for the benefit of the holders of
Exchangeable Preference Shares, that number of shares of Voting Stock as
are held by the owners of Exchangeable Preference Shares. By contractual
agreement, prior to the exchange of the Exchangeable Preference Shares,
holders of Exchangeable Preference Shares receive their voting rights from
the Voting Stock held by the Trustee.
(3) Includes 1,236,436 Exchangeable Preference Shares over which Mr. Lewis has
voting power pursuant to agreements with Mr. Gertzbein, Mr. Johnson and
Mr. Jonathan Lewis, Mr. Lewis' son.
(4) Includes 2,858 shares of Class B Voting Common Stock held by Kyser
Investment Corporation, a company of which Mr. Kyser is the sole
stockholder.
(5) Includes 28,572 Exchangeable Preference Shares held by the Trustee for the
benefit of Spire Consulting Group, Inc.
(6) Includes 1,052,564 Exchangeable Preference Shares owned by Saturn.
Pursuant to an option agreement dated March 14, 1994, Saturn has the right
to acquire that number of shares of the Company's Common Stock which would
provide Saturn (when combined with shares held by Saturn at the time of
exercise) with 25%, post-exercise issuance, of the outstanding voting
equity of the Company. The purchase price of such shares is their fair
market value. Based on the number of share of the Company's Common Stock
issued and outstanding as of June 25, 1996, Saturn may exercise the option
for 3,903,797 shares of the Company's Common Stock. In addition, Saturn
has a contractual right, which to date it has not exercised, to have one
representative on the Company's Board of Directors, which representative
may be removed only with the written consent of Saturn. Saturn also has
the right to attend Board meetings and to receive certain information
regarding the Company. The Company believes that the option to purchase
the 3,903,797 shares terminates as of the date the registration statement,
filed November 22, 1995, as amended, is declared effective by the
Commission. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Investment by Saturn Investments, Inc."
(7) Includes 1,052,564 Exchangeable Preference Shares owned by Saturn and
3,903,797 shares underlying Saturn's option. Ismail A. Abudawood is the
sole stockholder, and Ayman I. Abudawood, Osama I. Abudawood, and Anas I.
Abudawood are directors of Saturn. The Company believes that the option to
purchase the 3,903,797 shares terminates as of the date the registration
statement, filed November 22, 1995, as amended, is declared effective by
the Commission. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Investment by Saturn Investments, Inc." Accordingly, they may be deemed to
be beneficial owners of such shares.
(8) Includes currently exercisable options to acquire 9,999 shares of Company
Common, 607,858 shares held by individuals who are not executive officers,
directors or nominees over which Mr. Lewis has voting power, and 78,005
shares held by individuals who are not executive officers, directors or
nominees over which Mr. Korhonen, or failing him, Mr. Gertzbein, has
voting power.
(9) Includes currently exercisable options to acquire 3,333 shares of Company
Common.
(10) Includes Convertible Debentures which are currently convertible into
228,572 shares of Tracker Common and which are held by Wafr Holdings N.V.
("Wafr"). Ismail A. Abudawood beneficially owns Wafr. Accordingly, he may
be deemed to be a beneficial owner of the shares issuable pursuant to the
Convertible Debentures.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid in cash or shares or
accrued by the Company to the Chief Executive Officer and to the three other
executive officers (the "Named Executive Officers") for services rendered in all
capacities to the Company during the fiscal year ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Fiscal Annual Restricted
Year Compensation Stock
Name and Principal Position Ended Salary Awards
($) ($)
- --------------------------------------------- ------ ------------ -----------
<S> <C> <C> <C>
I. Bruce Lewis, Chief Executive Officer(1) 1996 175,000 - -
I. Bruce Lewis, Chief Executive Officer(1) 1995 178,350 - -
Mark J. Gertzbein, Chief Financial Officer 1996 175,000 413,437
& Executive Vice President(2)
Mark J. Gertzbein, Chief Financial Officer 1995 178,350 - -
& Executive Vice President(2)
Gregg C. Johnson, President (3) 1996 194,000 413,437
Gregg C. Johnson, President(3) 1995 178,350 - -
Edwin J. Korhonen, President, Tracker Canada(4) 1996 139,000 - -
Edwin J. Korhonen, President, Tracker Canada 1995 142,680 - -
</TABLE>
- ----------------
(1) Through BL Consulting Services, Mr. Lewis contracted with Tracker Canada
for annual compensation in the amount of $178,350. In connection with the
Reorganization, the Company and Mr. Lewis entered into a
stockholder-approved employment agreement which originally provided for
base annual salary in the amount of $440,000. The Company has amended the
employment agreement with Mr. Lewis, and coordinated the consulting
agreement between Tracker Canada and BL Consulting Services, to terminate
the consulting agreement between Tracker Canada and BL Consulting Services
as of the effective date of the employment agreement between the Company
and Mr. Lewis, to provide for a total compensation for the year ended
March 31, 1995 in the amount of $178,350 and to reduce the annual base
salary under the employment agreement between the Company and Mr. Lewis to
$175,000 effective April 1, 1995.
(2) Through MJG Management Accounting Services Ltd., Mr. Gertzbein contracted
with Tracker Canada for annual compensation in the amount of $178,350. In
connection with the Reorganization, the Company and Mr. Gertzbein entered
into a stockholder-approved employment agreement which originally provided
for base annual salary in the amount of $350,000. The Company has amended
the employment agreement with Mr. Gertzbein, and coordinated the
consulting agreement between Tracker Canada and MJG Management Accounting
Services Ltd., to terminate the consulting agreement between Tracker
Canada and MJG Management Accounting Services Ltd. as of the effective
date of the employment agreement between the Company and Mr. Gertzbein, to
provide for a total compensation for the year ended March 31, 1995 in the
amount of $178,350 and to reduce the annual base salary under the
employment agreement between the Company and Mr. Gertzbein to $175,000
effective April 1, 1995. On April 11, 1995, the Compensation Committee
granted Mr. Gertzbein 315,000 shares of restricted stock under the 1994
Plan.
8
<PAGE> 12
(3) Through Spire Consulting Group, Inc., Mr. Johnson contracted with Tracker
Canada for annual compensation in the amount of $178,350. In connection
with the Reorganization, the Company and Mr. Johnson entered into a
stockholder-approved employment agreement which originally provided for
base annual salary in the amount of $350,000. The Company amended the
employment agreement with Mr. Johnson, and coordinated the consulting
agreement between Tracker Canada and Spire Consulting Group, Inc., to
terminate the consulting agreement between Tracker Canada and Spire
Consulting Group, Inc. as of the effective date of the employment
agreement between the Company and Mr. Johnson, to provide for a total
compensation for the year ended March 31, 1995 in the amount of $178,350
and to reduce the annual base salary under the employment agreement
between the Company and Mr. Johnson to $175,000 effective April 1, 1995.
On April 11, 1995, the Compensation Committee granted Mr. Johnson 315,000
shares of restricted stock under the Plan. Mr. Johnson resigned from all
positions with the Company effective August 12, 1995 but continued to act
as a consultant through March 31, 1996. To date, the Company has not paid
any compensation to Mr. Johnson under the Consulting Agreement.
(4) Mr. Korhonen resigned from all positions with Tracker Canada effective as
of May 17, 1996. He continues to serve as a non-employee director of
Tracker U.S. and a consultant to Tracker Canada.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
On June 30, 1994 the Company, in connection with the Reorganization,
entered into stockholder approved employment agreements with Messrs. Lewis,
Gertzbein and Johnson. The agreements originally provided for base salaries at
annual rates equal to $440,000, $350,000 and $350,000, respectively. Effective
July 12, 1995, upon recommendation of the Compensation Committee of the Board of
Directors and with the agreement of each of Messrs. Lewis, Gertzbein and
Johnson, each of these employment agreements was amended to reduce annual base
salaries to $175,000, with a maximum relocation allowance of $25,000 and a
maximum car allowance of $10,000. In addition, each such person is eligible for
discretionary bonuses. Mr. Johnson has subsequently resigned from all positions
with the Company.
Pursuant to his employment agreement, Mr. Gertzbein is entitled to an
annual profit sharing bonus of 1.75% of the Company's consolidated pre-tax
profits in excess of $2,000,000; provided, however, that such bonus shall not
exceed $1,000,000 in any year. The agreement also provides for a one-time cash
bonus equal to one year's base salary upon the successful completion of certain
financing arrangements being pursued by the Company. The agreements for Messrs.
Lewis and Gertzbein have an initial term of three years with one year renewal
terms thereafter, and provide for the payment of a relocation allowance equal to
25% of each such executive's base salary and a car allowance of not more than
7.5% of each such executive's base salary, subject to the caps described above.
Each agreement provides that the executive is entitled to participate in any
stock option, stock purchase, annual bonus, pension, profit sharing, life
insurance and medical benefit plans and such other fringe benefits that may be
applicable to the Company's senior executive employees.
If either Mr. Lewis', or Mr. Gertzbein's, employment is terminated by
the Company for cause (as defined in the executive's employment agreement) or
during the probationary period or by the executive for any reason (other than
for good reason (also as defined)), the executive will be entitled to his
compensation through the date of termination. If, prior to a Change of Control
of the Company, employment is terminated due to the executive's death or
disability by the Company other than for cause or by the executive for good
9
<PAGE> 13
reason, the executive would be entitled to receive all compensation through the
date of termination, plus the continuation of base salary for the greater of one
year or the remainder of the term of the agreement. In addition, the Company
will maintain for Messrs. Lewis and Gertzbein for 12 months, or, if earlier,
through the date the executive obtains alternative employment, such executive's
participation in the employee benefit plans of the Company in which the
executive was eligible to participate immediately before termination, to the
extent permissible under such plans. The executive (or his legal representative)
also will have the right to exercise all vested stock options outstanding at the
termination date in accordance with the plans governing those options. The
Company will use its best efforts to remove the restrictions from any restricted
stock held by the executive at termination. If the executive's employment is
terminated after a Change of Control, either for good reason or without cause,
the executive will receive all the benefits he would have received for such a
termination prior to a Change of Control, and all unvested stock options held by
the executive shall become immediately fully vested. Payments made in
conjunction with a Change of Control are limited to an amount that will not
result in either a loss of the income tax deduction of the Company under
Internal Revenue Code Section 280G or an excise tax under Code Section 4999.
The Company entered into a Consulting Agreement with Gregg C. Johnson,
which took effect upon his resignation as President of the Company on August 12,
1995. The Consulting Agreement provided for (a) a monthly fee of $10,000 until
March 31, 1996, (b) a commission of 10% on funds raised for the Company, (c) a
commission of 5% of net sales, if any, generated by the Company from certain
marketing arrangements up to July 12, 1997, to a maximum of $500,000, (d) a
commission of up to 8% of net sales generated from any other sales arrangement
introduced and negotiated (subject to Company prior approval) by Mr. Johnson, up
to July 12, 1998, (e) release by the Company from his $56,786 (as of August 31,
1995) indebtedness to the Company upon his returning to the Company 2,986 shares
of the Company's Common Stock, and (f) reimbursement of preapproved business
related expenses. To date, the Company has not paid any compensation to Mr.
Johnson under the Consulting Agreement.
1995 STOCK WAGE AND FEE PAYMENT PLAN
The Company's Board of Directors adopted a 1995 Stock Wage and Fee
Payment Agreement (the "Wage Plan") on September 28, 1995. The purpose of the
Wage Plan is to retain and motivate participants in the Wage Plan and to provide
them with incentives and rewards more directly linked to the profitability of
the Company's business and increases in stockholder value.
Six employees and one director of the Company were eligible to, and
elected to, participate in the Plan. Under the Plan, the participants agreed to
receive an aggregate of 770,000 shares of the Company's Common Stock in lieu of
certain wage payments or fees that the participants had earned before October 1,
1995 but had not yet been paid and in lieu of all of their respective wage
payments or fees for the period from October 1, 1995 through September 30, 1996.
The number of shares granted to the participants was based upon a price per
share of Common Stock of $1.00. The participants elected to receive the
following numbers of shares:
<TABLE>
<CAPTION>
Name of Participant Number of Shares Dollar Value
- ------------------- ---------------- ------------
<S> <C> <C>
I. Bruce Lewis 192,400 $192,400
Mark J. Gertzbein 215,100 215,100
Ed J. Korhonen 152,000 152,000
Christopher H. Creed 100,500 100,500
Jonathan B. Lewis 40,000 40,000
Gigi M. Lipton 60,000 60,000
Leonard Yakobovits 10,000 10,000
------- -------
Total 770,000 $770,000
======= ========
</TABLE>
10
<PAGE> 14
No fees, commissions or other charges will be paid by the participants
in connection with the grants of shares to such persons under the Wage Plan. The
Wage Plan may not be altered, amended or modified except by written agreement
signed by the participants, Tracker U.S. and Tracker Canada. As the Wage Plan is
a contract among the participants, Tracker U.S. and Tracker Canada relating to a
designated issuance of shares in lieu of wages or fees and is not an ongoing
employee benefits program pursuant to which grants or awards can be made on an
ongoing basis or pursuant to which plan funds are invested for the benefit of
participants, there is no separate administration of the Wage Plan. The Company
has registered the shares issued under the Wage Plan under the Securities Act of
1933, as amended.
PROPOSED 1996 STOCK WAGE PLAN
The Company is considering adopting a Stock Wage Payment Agreement for
the period October 1, 1996 - September 30, 1997 (the "1996 Wage Plan") under
which stock would be granted to certain employees, including employees who are
Affiliates, in lieu of all or part of their cash compensation. The terms are
still being developed. An important objective is the retention of employees. In
addition, as an incentive for employees to accept stock as wages instead of
cash, the number of shares granted to some participants in lieu of cash may be
based on a price per share of less than fair market value. For others, the
number of shares granted may be based on the fair market value of the stock and,
for those who held all such shares for a set period, the Company would guaranty
that the future value of the stock would be at a premium of the fair market
value at the time of grant (i.e., that the value of the stock would then be
greater than the cash wages that were forgone).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company has entered into employment agreements containing severance
arrangements with certain of its executive officers, which provide for payment
under certain circumstances to each officer of compensation through the
remainder of the terms of the agreements. See "Executive Compensation -
Employment Contracts, Termination of Employment and Change of Control." The
Company's Certificate of Incorporation and By-laws provide for indemnification
of all Directors and officers. In addition, each Director of the Company has
entered into a separate indemnification agreement with the Company.
Upon the inception of Tracker Canada in May 1993, Tracker Canada issued
to certain members of management, in aggregate, 5,089,286 common shares,
including 2,857,143 shares to Mr. Lewis, 628,578 shares to Mr. Gertzbein and
642,858 shares to Mr. Johnson, in consideration for the assignment of rights
with respect to certain inventions and patent application and as inducements for
such persons to join Tracker Canada. Mr. Lewis and Mr. Johnson have subsequently
disposed of a limited number of such shares. As part of the Reorganization, the
Tracker Canada common shares were reclassified into Exchangeable Preference
Shares.
CERTAIN RELATIONSHIPS
Tracker Canada contracted with Messrs. Lewis, Gertzbein and Johnson
through BL Consulting Services, MJG Management Accounting Services Ltd. and
Spire Consulting Group, Inc., respectively. Under these management and
consulting contracts, Tracker Canada agreed to pay each of the foregoing
entities annual compensation of $178,350. The agreements expired as of the
effective date of the employment agreements between the Company and each of
Messrs. Lewis, Gertzbein and Johnson. See "Executive Compensation - Employment
Contracts, Termination of Employment and Change of Control."
11
<PAGE> 15
INDEBTEDNESS OF MANAGEMENT
As of March 31, 1996, Mr. Johnson was indebted to the Company by way of
a loan in the amount of $58,226. The loan is evidenced by a promissory note
bearing interest at an annual rate of 5% and is payable upon demand. See
"EXECUTIVE COMPENSATION - Employment Contracts, Termination of Employment and
Change of Control." As of March 31, 1995 Mr. Lewis was indebted to the Company
by way of a loan in the amount of $138,275. Mr. Lewis repaid the loan in full
prior to the end of the quarter ended June 30, 1995. The Company does not
anticipate making any future loans to related parties.
TRANSACTIONS WITH PROMOTERS
In connection with the Company's private equity placements, placement
commissions amounting to $Nil for the year ended March 31, 1996 and $115,282 for
the year ended March 31, 1995 were paid to the beneficial owners of Stalia
Holdings B.V., an affiliate of Saturn, Mr. Avron Shore, Mr. Jack Stritcharuk and
Mr. Steve Heard, all of whom are or were stockholders, and $371,846 for the
period from inception (May 6, 1993) to March 31, 1994 were paid to Mr. Majid Al-
Refai. Commissions amounting to $85,646 for the year ended March 31, 1996 and
$Nil for the year ended March 31, 1995 were paid to Wheel of Fortune Corp. S.A.,
a stockholder, in connection with the Company's securing holders of the
Convertible Debentures.
FUTURE TRANSACTIONS WITH AFFILIATES
The Company's management believes that the terms of the transactions
described above are no less favorable to the Company than those that could have
been obtained from unaffiliated third parties. Further, all future transactions
between the Company and its executive officers, Directors, employees, 5%
stockholders and affiliates (including for example future loans and any
forgiveness of loans, none of which is contemplated) will be subject to the
approval of a majority of the independent, disinterested members of the Board of
Directors. In addition, such future transactions will be for bona fide business
purposes and will be on terms that are no less favorable to the Company than
those that could be negotiated with unaffiliated parties.
REORGANIZATION
On July 12, 1994, Tracker U.S. (then Ultra Capital Corp., a Nevada
corporation) and Tracker Canada completed the Reorganization contemplated by the
Reorganization Agreement, dated as of May 26, 1994, by and among Tracker U.S.,
Jeff W. Holmes, R. Kirk Blosch and Tracker Canada, as amended (the
"Reorganization Agreement"). The Reorganization resulted in a change in control
of Tracker U.S. Pursuant to the Reorganization Agreement, Tracker U.S. acquired
all the issued and outstanding voting shares of Tracker Canada in exchange for
shares of Tracker U.S.'s capital stock representing, at the time, approximately
90% of the total voting shares of Tracker U.S. As part of the Reorganization,
Tracker U.S. (then Ultra Capital Corp.) changed its domicile from Nevada to
Delaware and changed its corporate name to "The Tracker Corporation of America."
Pursuant to the Reorganization Agreement, Tracker U.S. authorized a new
series of Class B Voting Common Stock ("Voting Stock") having full voting
rights, which were conferred upon the Tracker Canada shareholders as part of the
Reorganization in each case equal to the number of Exchangeable Preference
Shares held by the Tracker Canada shareholder. See "DESCRIPTION OF SECURITIES -
Class B Voting Common Stock." Tracker U.S. delivered 6,235,225 shares of its
newly authorized Voting Stock to Montreal Trust Company of Canada ("Montreal
Trust") to be held pursuant to the terms of an Exchange Agency and Voting Trust
Agreement (the "Exchange Agreement"). The Exchange Agreement permits the Tracker
Canada shareholders to direct the voting of the Voting Stock.
12
<PAGE> 16
The common shares of Tracker Canada, other than the Class A common
shares issued to Tracker U.S., were reclassified into Exchangeable Preference
Shares, a new class of Tracker Canada stock. The Exchangeable Preference Shares
are exchangeable for Reserved Common Shares (as defined below) of Tracker U.S.
on a one-to-one basis commencing July 12, 1995. On July 12, 2002, all of the
Exchangeable Preference Shares then outstanding shall be automatically exchanged
for shares of Tracker U.S. Common Stock. Upon any exchange of Exchangeable
Preference Shares for Common Stock, whether voluntary or automatic, the
Exchangeable Preference Shares will be canceled and a corresponding number of
shares of the Voting Stock will be returned to Tracker U.S.
The holders of the Exchangeable Preference Shares have voting, dividend
and liquidation rights that are in parity with those of the shares of the
Tracker U.S. Common Stock. These parallel rights were created in the following
manner:
a. Tracker U.S. placed 6,235,225 shares of the Voting Stock with
Montreal Trust for the benefit of the holders of the Exchangeable
Preference Shares. The beneficial owners of the Voting Stock
(i.e., the holders of the Exchangeable Preference Shares) have
the right to vote the Voting Stock under procedures set forth in
the Exchange Agreement and collectively controlled approximately
90% of the voting power of Tracker U.S. at the time of the
closing of the Reorganization Agreement. Although the Voting
Stock is redeemable by Tracker U.S., Tracker U.S. has agreed not
to redeem the Voting Stock until such time as the Exchangeable
Preference Shares are exchanged into Reserved Common Shares (as
defined below).
b. Tracker U.S. irrevocably reserved 6,235,225 shares of its
authorized, unissued Common Stock for issuance to holders of
Exchangeable Preference Shares. Under the terms of the
Reorganization Agreement, these shares will be used for the
exchange of the Exchangeable Preference Shares into shares of the
Tracker U.S. Common Stock on a one-to-one basis. These reserved
and unissued shares are referred to herein as the "Reserved
Common Shares."
c. The exchange of the Exchangeable Preference Shares for the
Reserved Common Shares will be accomplished through an exchange
trust created under the Exchange Agreement. Under the Exchange
Agreement, Montreal Trust, as Trustee, has agreed, at any time on
or after July 12, 1995, to (i) exchange with any holder of the
Exchangeable Preference Shares any or all of the Exchangeable
Preference Shares held by such holder for Reserved Common Shares
on a one-to-one basis, and (ii) return to Tracker U.S. a
certificate representing the corresponding number of shares of
Voting Stock.
d. Under the Exchange Agreement, Tracker U.S. has agreed not to
declare and pay any cash dividends on its Common Stock unless it
also causes Tracker Canada to declare and pay cash dividends on
the Exchangeable Preference Shares at the same time and in the
same manner as the dividends paid on the Tracker U.S. Common
Stock. Additionally, under a Guarantee Agreement with Tracker
Canada, Tracker U.S. must provide Tracker Canada with adequate
funds, through a contribution to capital surplus, to pay such
dividends to the holders of the Exchangeable Preference Shares.
The Guarantee Agreement also obligates Tracker U.S. to satisfy
the liquidation value of the Exchangeable Preference Shares in
the event of the liquidation of Tracker Canada. Under the
Guarantee Agreement, the liquidation value per share is
calculated as if Tracker U.S. were liquidated on the same date
and each issued and outstanding Exchangeable Preference Share
were an issued and outstanding share of Tracker U.S. Common
Stock. Tracker U.S. has the option to pay the liquidation value
of the Exchangeable Preference Shares in cash or in Reserved
Common Shares.
13
<PAGE> 17
In the Reorganization Agreement, Tracker U.S. agreed to file a
registration statement relating to the Reserved Common Shares.
At a special meeting of stockholders held June 30, 1994, the
stockholders of Tracker U.S. (then Ultra Capital Corp.) approved the
Reorganization and several corporate proposals, including the change in domicile
from Nevada to Delaware, the change in corporate name, the adoption of the
Delaware certificate of incorporation and bylaws, employment agreements with
senior management and the 1994 Plan.
INVESTMENT BY SATURN INVESTMENTS, INC.
In March 1994, prior to the Reorganization, Tracker Canada received an
investment of CDN $3,350,000 from Stalia Holdings B.V. ("Stalia") for units
consisting of common shares of Tracker Canada and warrants to purchase common
shares of Tracker Canada. In connection with that investment by Stalia, Tracker
Canada on March 14, 1994 entered into a Stock Option Agreement with Stalia (the
"Stalia Option Agreement") and Tracker Canada and certain of its stockholders
entered into a Right of First Refusal, Co-Sale and Voting Agreement with Stalia
(the "Stalia Agreement"). As described below, Stalia has transferred its shares
and its rights under the Stalia Option Agreement and the Stalia Agreement to
Saturn Investments, Inc. ("Saturn"). In the Stalia Option Agreement, Tracker
Canada granted to Stalia the right to purchase an additional amount of common
shares that would provide Stalia (when combined with common shares held by
Stalia at the time of exercise) with ownership of 25% of Tracker Canada's issued
and outstanding voting equity. The purchase price of such shares is their Fair
Market Value. The Option Agreement defines "Fair Market Value" as the price at
which such shares could reasonably be expected to be sold in an arms-length
transaction, occurring on the date on which Stalia proposes to purchase such
shares, for cash to a person not employed by, controlled by, in control of or
under common control with Tracker Canada. Absent evidence of fraud, the
determination of the Board of Directors of Tracker Canada of the Fair Market
Value is final and conclusive. Stalia may exercise the option with respect to
all (but not less than all) of such shares by giving Tracker Canada written
notice of the date on which it intends to so exercise the option, which date
shall be not less than 60 nor more than 120 days following the date of the
written notice. Stalia's option terminates, among other things, upon the earlier
of (a) the closing date of Tracker Canada's first public offering of its equity
securities pursuant to a registration statement filed with the Securities and
Exchange Commission (the "Commission") or (b) March 14, 1999. The Company
believes that the Stalia Option Agreement terminates as of the date the
registration statement, filed November 22, 1995, as amended, is declared
effective by the Commission as the registration statement relates to a public
offering of the Company=s equity securities.
In the Stalia Agreement, Tracker Canada granted to Stalia a right of
first refusal to purchase its pro rata share of all New Securities which Tracker
Canada may from time to time propose to issue and sell. The Stalia Agreement
defines "New Securities" to mean any capital stock, rights to purchase capital
stock, and securities of any type convertible into capital stock; provided,
however, that "New Securities" does not include: (i) securities issued pursuant
to a stock dividend, stock split, combination or other reclassification, (ii)
securities covered by a registration statement declared effective by the
Commission or a final prospectus for which a receipt has been issued by the
relevant securities regulatory authority in each of the Provinces of Canada
where the securities are issued and sold, (iii) certain shares issued pursuant
to the exercise of warrants, and (iv) certain shares issued for a specified
price pursuant to a private placement underwritten by an investment banker. This
right of first refusal could make it more difficult for the Company to raise
additional equity financing under terms satisfactory to the Company.
The Stalia Agreement also provides Stalia with certain rights of
co-sale. Specifically, if any Controlling Shareholder, as defined in the
Agreement, receives an offer to purchase any of the shares owned
14
<PAGE> 18
by the Controlling Shareholder, the Controlling Shareholder must promptly notify
Saturn in writing of the terms and conditions of the purchase offer. Within
thirty days after receiving notice of the purchase offer, Saturn then has the
right to participate in the sale pursuant to the terms and conditions of the
offer. As a result, if Saturn exercise its right, the number of shares that the
Controlling Shareholder is entitled to sell is reduced by up to an amount equal
to Saturn's pro rata share (i.e., the percentage of the total shares owned by
the Controlling Shareholder and Saturn that are owned by Saturn). Saturn does
not have co-sale rights in connection with sales to relatives (or trusts) of the
Controlling Shareholders or sales in a registered public offering. The Stalia
Agreement further provides that in the case of permitted transfers, the
Controlling Shareholder must inform the company and Saturn of the transfer prior
to effecting it and, in the case of a transfer to a relative or trust, the
transferee must furnish to Saturn a written agreement to be bound by the
provisions of the Stalia Agreement. The Stalia Agreement further provides that
any transfers in violation of the Agreement are void.
The Stalia Agreement also provides Stalia with the right (which to date
has not been exercised) to have one representative on Tracker Canada's Board of
Directors, which representative may be removed only with the written consent of
Stalia. Certain controlling shareholders agreed to vote their shares in favor of
the election of Stalia's representative to the Board of Directors. Stalia's
representative may be removed from the Board of Directors only with the written
consent of Stalia. Upon any resignation or removal of Stalia's representative,
certain controlling stockholders of the Company must exercise their best efforts
to replace such director as soon as possible with another nominee of Stalia. In
addition, by separate letter agreement, the Company confirmed that Tracker
Canada agrees to: (a) allow Stalia or a nominee to attend Board meetings; (b)
provide Stalia with copies of all communications regularly made to directors;
(c) use best efforts to elect a nominee of Stalia to the Tracker Canada Board;
(d) provide monthly updates on Tracker Canada=s business and affairs; and (e)
provide Stalia=s counsel with all documentation relating to issues which may
affect Stalia.
The Stalia Agreement further provides, as a protective provision in
favor of Stalia, that, without first obtaining the written consent of Stalia,
certain controlling stockholders must not vote for, and must exercise their best
efforts as significant shareholders to ensure that the Board of Directors does
not approve: (a) the liquidation or dissolution of the Company; (b) the
declaration or payment of any dividends or the making of any distribution out of
the ordinary course of the Company's business to the shareholders of the
Company; (c) the repurchase by the Company of any of its capital stock; or (d)
any material alteration in the rights, preferences, privileges and restrictions
of the common stock or warrants held by Stalia. In addition, certain controlling
shareholders must exercise their best efforts to ensure that such controlling
stockholders and Stalia together at all times control the majority of the voting
rights of the Company to ensure that the voting rights and protective provisions
are complied with.
The Stalia Agreement terminates upon the earlier of (a) the closing
date of the Company's first public offering of its equity securities pursuant to
a registration statement filed with the Commission or pursuant to a final
prospectus for which a receipt has been issued by the relevant securities
regulatory authority in each of the Provinces of Canada where the shares are
offered or sold or (b) March 14, 1999. The Company believes that the Stalia
Agreement terminates as of the date the registration statement, filed November
22, 1995, as amended, is declared effective by the Commission as the
registration statement relates to a public offering of the Company=s equity
securities.
Although the Stalia Option Agreement and the Stalia Agreement
originally were between Tracker Canada and Stalia, Stalia's consent to the
Reorganization was necessary pursuant to the terms of the Stalia Agreement.
Thus, at or about the time of the Reorganization, in connection with obtaining
Stalia's consent to the Reorganization, Tracker U.S., Tracker Canada and certain
controlling shareholders agreed that all obligations under the Stalia Agreement
applicable to Tracker Canada also apply to Tracker U.S., that
15
<PAGE> 19
references to Tracker Canada in the Stalia Agreement shall be deemed to be
references to Tracker U.S. as well, and that references in the Stalia Agreement
to common shares of Tracker Canada shall be deemed to be references to the
common stock of Tracker Canada as well as the Common Stock of Tracker U.S. In
addition, Tracker Canada confirmed to Stalia that none of Stalia's rights under
the Stalia Option Agreement or the Stalia Agreement would be adversely affected
by the Reorganization. Accordingly, all the provisions discussed above apply to
Tracker U.S. as well as Tracker Canada notwithstanding that the original Stalia
Option Agreement and Stalia Agreement were between Stalia and Tracker Canada.
As of January 31, 1996, Stalia transferred its Tracker Canada
Exchangeable Preference Shares to Saturn, an affiliate of Stalia. Stalia also
transferred to Saturn all of Stalia's rights under the Stalia Option Agreement
and the Stalia Agreement.
INVESTOR RELATIONS SERVICES - CORPORATE RELATIONS GROUP
The Company obtains investor relations services from the Corporate
Relations Group ("CRG"), a stockholder of the Company. Pursuant to its
arrangements with CRG, the Company has paid, or caused to be paid, to CRG
$1,316,780 in cash and stock for investor relations services through June 25,
1996. On November 20, 1995, the Company entered into an agreement pursuant to
which CRG agreed to provide services to the Company for a period of one year and
the Company agreed to pay to CRG $570,000 or 326,000 freely tradeable shares of
Common Stock upon execution of the agreement and to issue options to CRG to
purchase shares of Common Stock as follows: 100,000 shares at $2.00 per share
one year from the date of the agreement, 100,000 shares at $2.40 per share two
years from the date of the agreement, 100,000 shares at $2.60 per share three
years from the date of the agreement, 100,000 shares at $2.80 per share five
years from the date of the agreement, and 100,000 shares at $3.00 per share five
years from the date of the agreement. As of the date of this Report, CRG had not
provided any services under the agreement and the Company had not made any
payment to CRG.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee,
has selected Price Waterhouse LLP as independent public accountants to audit the
consolidated financial statements of the Company for the fiscal year ending
March 31, 1997, and to perform other accounting services as requested by the
Company. Price Waterhouse LLP has acted as independent public accountants for
the Company since its appointment effective June 30, 1994.
Representatives of Price Waterhouse LLP are not expected to be present
at the 1996 Annual Stockholders' Meeting, but are expected to be available by
telephone conference in order to make a statement, if they desire to do so, and
to respond to appropriate questions.
Although it is not required to do so, the Board of Directors has
submitted the selection of Price Waterhouse LLP to the Stockholders for
ratification. Unless a contrary choice is specified, proxies will be voted for
ratification of the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 1997.
16
<PAGE> 20
STOCKHOLDER PROPOSALS
The Company welcomes comments or suggestions from its Stockholders. In
the event that a Stockholder desires to have a proposal formally considered at
the 1997 Annual Meeting of Stockholders, and evaluated by the Board for
inclusion in the Proxy Statement for that meeting, the proposal must be received
in writing by the Secretary of the Company at the address set forth on the first
page hereof on or before March 12, 1997.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be
considered or acted upon at the Annual Meeting of Stockholders other than that
for which notice is provided. In the event other business requiring a vote of
Stockholders is properly presented at the meeting, proxies will be voted in
accordance with the judgment on such matters of the person or persons acting as
proxy. If any matter not appropriate for action at the meeting should be
presented, the holders of the proxies will vote against consideration thereof or
action thereon.
By Order of the Board of Directors,
/s/ Mark J. Gertzbein
-----------------------------------
Mark J. Gertzbein
Secretary
Toronto, Canada
July 24, 1996
17
<PAGE> 21
PROXY
THE TRACKER CORPORATION OF AMERICA
180 Dundas Street West, Suite 1502, Toronto, Ontario, Canada M5G 1Z8
This proxy is solicited on behalf of the Board of Directors.
The undersigned appoints I. Bruce Lewis and Mark J. Gertzbein and each
of them, as proxies, each with the power of substitution, and authorizes them to
represent and vote, as designated below, all shares of Common Stock (as defined
in the Proxy Statement in connection with which this proxy is being solicited)
of The Tracker Corporation of America held by the undersigned on July 22, 1996,
at the Annual Meeting of Stockholders to be held on September 6, 1996, and at
any adjournment or postponement of the meeting. In their discretion, the proxies
are authorized to vote such shares upon such other business as may properly come
before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder(s). If no direction is made, this proxy
will be voted FOR each of the listed proposals.
Please mark boxes X in blue or black ink. The Board of Directors recommends a
vote FOR each of the proposals listed below.
1. ELECTION OF DIRECTORS: CHARLES H. CORONELLA, QUINCY A. S. MCKEAN III
/ / FOR the nominees listed above.
/ / Withhold authority to vote for the following nominees:
2. RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
Please sign exactly as name appears in Company
register. When shares are held by joint tenants,
both should sign. When signing as an attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a corporation,
please sign in full corporate name by president or
other authorized officer. If a partnership, please
sign in partnership name by authorized person.
Date _______________________________________, 1996
Signature_________________________________________
Print Name________________________________________
Signature if held jointly_________________________
Print Name________________________________________
(Please mark, sign, date and return this proxy promptly using the enclosed
envelope.)
<PAGE> 22
TO OUR SHAREHOLDERS
On behalf of everyone associated with The Tracker Corporation of America, we
would like to extend a warm welcome to all our shareholders. Many exciting
developments have taken place during the past 12 months. As mentioned last year,
every road we travel is uncharted as we continue to introduce the world's first
global identification and recovery service. Not only have we created a new
company but also have launched a brand new industry. We have had a number of
significant developments which management believes, will position the company
for rapid and substantial future growth.
From inception, we have been building alliances with corporations and law
enforcement agencies to strengthen our existing infrastructure. Over the past 12
months, we have been continuing to develop our infrastructure and fine tune our
marketing efforts towards our prime target; the U.S. marketplace. To date, well
over 150 North American law enforcement and civilian sites have agreed to be
part of Tracker's expanding global recovery network. These recovery sites
include crime prevention agencies such as major police and sheriff departments,
courier companies, airport securities, transit authorities, tourist venues and
major lost and founds. To date, we have registered greater than 18,000
subscribers and our identification and recovery service has been instrumental in
returning over 65 valued possessions to their rightful owners. Last fall, after
a year and one-half scrutiny, Tracker triumphantly obtained the endorsement of
the International Association of Chiefs of Police ("I.A.C.P."). This endorsement
is significant as it not only highlights our commitment to working closely with
law enforcement and crime prevention communities, but provides the Company and
its products and services with the "seal of approval" necessary in helping
capture the purchasing power of the security-conscious consumer. The endorsement
of the I.A.C.P. has resulted in several introductions to state and local law
enforcement which are interested in working with Tracker to sell our product and
services to their communities as fund raising campaigns.
This past year, we have seen the birth of many new marketing and promotional
programs at Tracker, which management believes will be the cornerstone of future
growth. Tracker Referral Network International was created by a separate entity
as Tracker's marketing arm to develop home-based business opportunities selling
Tracker's products and services utilizing the innovative referral-based
marketing concept. Tracker's Card Registration Service was created to provide
the traditional service of card registry with the added benefit of an
identification and recovery service. This segment is currently expanding via
three independent telemarketing programs. With the signing of an option
agreement with Merchant Partners LP, (whose principals are Montgomery Ward & Co.
and ValueVision International, Inc.), we will work closely with the principals
to help identify and foster corporate development opportunities with their
subsidiaries in the retail and direct marketing arenas. Our Child I.D. program
has recently expanded to an "outreach" program providing needy families with our
<PAGE> 23
2
Child I.D. kits paid for by local businesses and communities. Our agreements
with Sony of Canada and with Samsonite Canada not only provide awareness
of our products and services but allow us the means to make inroads to major
corporations. As an example, Samsonite USA is currently reviewing a program
utilizing the Tracker service. Negotiations are currently underway with
these and many other companies and there are several programs in the works.
Tracker continues to be committed to providing companies with the world's
premier identification and recovery service which offers them the opportunity
to add value to their products and/or services. Tracker's service can add value
to manufacturer's products through the laser etching of Tracker's ensignia at
the point of manufacture. With this process, distribution, ownership and
warranty information can become an intrinsic part of a manufacturers' product.
From factory to point of sale, their products can be linked to Tracker's
worldwide identification and recovery service, giving them a competitive edge.
Management believes that the stage is being set for a very successful 1997,
both in terms of expanding into new markets and financial results.
Once again, we would like to thank our shareholders for their confidence and
continuing support of the "Tracker" dream.
Sincerely,
THE TRACKER CORPORATION OF AMERICA
Bruce Lewis
Chairman and President
and CEO
Toronto, Canada
July 24, 1996
