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As filed with the Securities and Exchange Commission on January 14, 1999
Registration No. ___________
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 #1505
TORONTO, ONTARIO, CANADA M5G 1Z8
(Address of Principal Executive Offices) (Zip Code)
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1999 STOCK WAGE AND FEE PAYMENT PLAN
(Full title of the Plan)
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BRUCE I. LEWIS
Chief Executive Officer
The Tracker Corporation of America
180 Dundas Street West, Suite #1505
Toronto, Ontario, Canada M5G 1Z8
(Name and address of agent for service)
(416) 593-2604
(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
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Offering Price per Aggregate Offering Amount of
Title of Securities to be Amount to be Share(1) Price Registration Fee(1)
Registered Registered
Common Stock,
<S> <C> <C> <C> <C>
$.001 par value 13,175,996 $.1215 $1,600,883.50 $445.05
</TABLE>
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 Aura (Pvt.) Ltd. 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, 1998.
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, 1998.
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
- ----------
(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 January 11, 1999, as
reported by the National Quotation Bureau, Inc.
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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 56,600,000
shares of capital stock, comprised of 50,000,000 shares of Common Stock, $0.001
par value per share, 100,000 shares of Class B Common Stock, $0.00000007 par
value per share, and 6,500,000 shares of Preferred Stock, $0.001 par value per
share.
COMMON STOCK
As of January 4, 1999, there were 28,743,553 shares of Common Stock
outstanding, held of record by approximately 450 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 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 shares of any class or series of
Preferred Stock that the Registrant may designate and issue in the future.
CLASS B VOTING COMMON STOCK
As of January 4, 1999, there were no shares of Class B Voting Common
Stock, par value $.00000007 outstanding. 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 rights, preferences and privileges of any future holders of
Class B Voting Common Stock may be subject to, and 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.
PREFERRED STOCK
The Registrant has an authorized class of 6,500,000 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
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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 Class B Voting Common 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.
CONVERTIBLE SENIOR PREFERRED STOCK
As of January 4, 1999, there were no shares outstanding of any class or
series of Preferred Stock. On December 18, 1998, the Board of Directors
authorized the issuance of a series of up to 6,500,000 shares of Preferred Stock
designated as Convertible Senior Preferred Stock. The Convertible Senior
Preferred Stock will not be redeemable. Holders of Convertible Senior Preferred
Stock will receive (i) voting rights pari passu with holders of Common Stock;
(ii) semi-annual dividends payable in cash out of funds legally available for
such purpose at the rate of 7.5% per annum; (iii) in the event of any
liquidation, dissolution or winding up of the Registrant, a preference entitling
the holder 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, $0.50 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; and (iv) the right to convert shares of the Convertible Senior
Preferred Stock into Common Stock at any time at the option of the holder on a
one-for-one basis. Outstanding shares of the Convertible Senior Preferred Stock
will convert automatically into Common Stock within five years of issuance if
the Common Stock is listed for trading on either the New York Stock Exchange,
the American Stock Exchange (including Emerging Markets), the Nasdaq National
Market System or any other exchange acceptable to the Registrant.
1999 WAGE STOCK AND FEE PAYMENT PLAN
Simultaneously with the filing of this registration statement with the
Securities and Exchange Commission, the Company is filing an additional
registration statement on Form S-8 for its 1999 Stock Wage and Fee Payment Plan.
Under this plan, the Company has issued or will issue an additional 13,175,996
shares to certain of its employees, consultants and advisors.
INCENTIVE STOCK OPTIONS
On January 4, 1999, the Company issued incentive stock options to Bruce
I. Lewis and Jay S. Stulberg pursuant to its 1994 Stock Incentive Plan. The
options entitle Messrs. Lewis and Stulberg to each purchase 2,488,578 shares of
Common Stock at the price $0.07 per share (the
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"Option Price"). The Option Price is 110% of the fair market value of the Shares
based upon the average closing price of the Shares in the over-the-counter
market for December 1998, rounded to the nearest whole cent. The options are
subject to sequential exercise rules providing for one-half of the grant to vest
immediately and the remaining one-half to vest one year from the date of
issuance. The option granted to Mr. Lewis is outstanding for a five-year period.
The option granted to Mr. Stulberg is outstanding for a 10-year period.
COMMON WARRANTS
As of January 4, 1999, 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 January 4, 1999, there was outstanding an option (the "Merchant
Partners Option") to purchase 250,000 shares of Common Stock, subject to
adjustment, held by one holder. Currently, the Merchant Partners Option entitles
the holder to purchase 250,000 shares through July 10, 2001 at an exercise price
of $1.00 per share, subject to adjustment. However, the option 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, 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 January 4, 1999, 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.
CONVERTIBLE DEBENTURES
As of January 4, 1999, the Company had debentures outstanding
convertible into 667,766 shares of Common Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
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
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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 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
Under the Registrant's Certificate of Incorporation, assuming, as of
January 4, 1999, the exercise of (i) incentive stock options to purchase
4,977,156 shares of Common Stock granted to Messrs. Lewis and Stulberg pursuant
to the 1994 Stock Incentive Plan, (ii) the issuance of 13,175,996 shares under
the 1999 Wage Stock and Fee Payment Plan, (iii) the currently exercisable
warrants to purchase 750,000 shares of Common Stock held by two holders, (iv)
the currently exercisable options to purchase 40,000 shares of Common Stock, (v)
667,766 shares reserved for issuance under the Company's currently convertible
Convertible Debentures, (vi) 200,000 shares reserved for issuance under the Toda
Option and (vii) 250,000 shares reserved for issuance under the Merchant
Partners Option, there are 20,060,917 shares of Common Stock available for
future issuance generally without stockholder approval.
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
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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.
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
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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.
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SPECIAL MEETINGS OF STOCKHOLDERS
The Certificate of Incorporation provides that special meetings of
stockholders may be called only by (i) the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board), or (ii) the Chairman
or the Deputy Chairman of the Board of Directors or the President, or (iii) a
stockholder who owns 20% or more of the issued and outstanding Common Stock (a
"20% Stockholder"). Special meetings may not be called by stockholders other
than 20% Stockholders. This provision will make it more difficult for
stockholders other than 20% Stockholders to take action opposed by the Board of
Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate of Incorporation
provides that any action required to be taken or which may be taken by holders
of Common Stock must be effected at a duly called annual or special meeting of
such holders, or by the unanimous written consent of such stockholders. These
provisions may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by the
persons set forth above. The provisions of the Certificate of Incorporation
prohibiting stockholder action by written consent unless the same is unanimous
would prevent the holders of a majority of the voting power of 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.
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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.
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
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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 Corporation, 5899 South State Street, Salt Lake City, Utah
84107.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the issuance of the shares of Common Stock registered
hereunder will be passed upon for the Company by Arkin Merolla LLP, Atlanta,
Georgia, counsel for the Company. Robert D. Arkin, a partner of the firm,
beneficially owns 159,574 shares of the Company's Common Stock.
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 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 rescission 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.
12
<PAGE> 13
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
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 Arkin Merolla LLP
10.42 1999 Stock Wage and Fee Payment Plan dated December 18, 1998.
13
<PAGE> 14
23.1 Consent of Hirsch Silberstein & Subelsky, P.C.
23.2 Consent of Arkin Merolla LLP (included in Exhibit 5.1)
24.1 Power of Attorney
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.
14
<PAGE> 15
(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.
- -------------------
** Incorporated by reference from the Registrant's registration statement on
Form S-1 (No. 33-99686 and amendments thereto)
15
<PAGE> 16
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 January 13,
1999.
THE TRACKER CORPORATION OF AMERICA
BY: /s/ Bruce I. Lewis
BRUCE I. LEWIS
CHIEF EXECUTIVE OFFICER AND DIRECTOR
16
<PAGE> 17
EXHIBIT NUMBER EXHIBIT
-------------- -------
5.1 Opinion of Arkin Merolla LLP
10.42 1999 Stock Wage and Fee Payment Plan dated
December 18, 1998
23.1 Consent of Hirsch Silberstein & Subelsky, P.C.
23.2 Consent of Arkin Merolla LLP (included in Exhibit 5.1)
24.1 Power of Attorney
27 Financial Data Statement
99.1 Reoffer Prospectus
<PAGE> 1
OPINION & CONSENT OF ARKIN MEROLLA LLP
EXHIBIT 5.1
[ARKIN MEROLLA LLP LETTERHEAD]
January 13, 1999
The Tracker Corporation of America
180 Dundas Street West
Suite 1505
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 6,932,644 shares (the "Shares") of the Company's Common
Stock, par value $.001 per share, to be issued under the Company's 1999 Aura
(Pvt.) Ltd. 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 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. Robert D. Arkin, a partner in the law firm, beneficially owns
159,574 shares of the Company's Common Stock.
<PAGE> 2
We are qualified to practice law only in the State of Georgia 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 preceding 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,
ARKIN MEROLLA LLP
2
<PAGE> 1
EXHIBIT 10.42
1999 STOCK WAGE AND FEE PAYMENT PLAN
THIS PLAN is adopted as of this 18th day of December, 1998, for the
benefit of certain employees and directors of The Tracker Corporation of America
a Delaware corporation (the "Company").
Introduction
A. The Company wishes to preserve its operating capital and reduce its
monthly cash needs.
B. The Company wishes to retain and motivate eligible employees and
directors, and to provide them with incentives and rewards more
directly linked to the profitability of the Company's business and
increases in stockholder value.
C. The Company believes its best interests will be served by issuing
shares of the Company's $0.001 par value common stock (the "Common
Stock"), where possible, in lieu of otherwise payable wage payments or
fees.
Agreement
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual benefits to the Company and eligible employees and directors who so
elect, to be derived from their employment or directorship by the Company, the
parties hereby agree as follows:
1. 1998 Calendar Year.
1.1. Any full-time employee and non-employee (outside) director who deferred
all or part of his or her wage payments or fees due from the Company
during the period from January 1, 1998 to December 31, 1998 (the "1998
Calendar Year") is eligible to participate in the Plan.
1.2. Any eligible full-time employee or director may elect to receive his or
her compensation for the 1998 Calendar Year in the form of shares of
Common Stock issuable under the Plan (the "Shares"), in lieu of cash,
based upon the "Stock Price." For purposes hereof, "Stock Price" means
the average quoted closing bid for each business day in December 1998
during which the Common Stock traded on the over the counter market.
1.3. Eligible full-time employees or directors electing to receive Common
Stock in lieu of cash compensation should complete and submit to the
Company the election form attached hereto as EXHIBIT A to denote those
months during the 1998 Calendar Year for which he or she desires that
Common Stock be issued. The election is binding.
<PAGE> 2
1.4. Participating employees or directors will receive that number of Shares
equal to his or her compensation (not including discretionary bonuses,
overtime, and other extra payments) for those months during Calendar
Year 1998 denoted on the election form.
2. 1999 Calendar Year.
2.1. Full Election.
2.1.1. Any full-time employee and non-employee (outside) director who intends
to defer all or part of his or her wage payments or fees due from the
Company during the period from January 1, 1999 to December 31, 1999
(the "1999 Calendar Year") is eligible to participate in the Plan.
2.1.2. Any eligible full-time employee or director may elect to receive all of
his or her compensation for the 1999 Calendar Year in the form of
Shares of Common Stock, in lieu of cash, based upon the Stock Price.
Employees or directors so electing to receive Common Stock in lieu of
1999 cash compensation (not including discretionary bonuses, overtime,
and other extra payments) should complete and submit to the Company the
election form attached hereto as EXHIBIT B. The election is binding.
2.1.3. Participating employees or directors will receive that number of Shares
equal to his or her 1999 compensation.
2.1.4. If an electing employee or director terminates service before the end
of the 1999 Calendar Year, he or she will return to the Company the
portion of Shares (or their then cash-value) that corresponds to the
remainder of the 1999 Calendar Year. However, in the case of an
employee who is laid off or otherwise terminated by the Company (other
than for cause) before the end of the 1999 Calendar Year, he or she
will not be obligated to return such Shares or cash value.
2.2. Partial Election.
2.2.1. Eligible employees or directors who do not make the election described
at Section 2.1 may elect to receive compensation for months the Company
may designate during the 1999 Calendar Year (the "Designated Months")
as follows: As cash ("Option A"); as 50% discounted stock ("Option B");
or as Stock at market value, with a guaranteed three times future value
("Option C").
2.2.2. Any eligible employee or director may elect, by completing and
submitting the election form attached hereto as EXHIBIT C, to receive
his or her compensation for the Designated Months in any combination of
Options A, B or C. The election is binding with respect to compensation
for the Designated Months.
2.2.3. Before the beginning of each calendar month in the period January 1,
1999 through December 31, 1999, the Company will notify each eligible
employee or director selecting
2
<PAGE> 3
Option B or C on an election form whether the month will be a
Designated Month. If it is, then the affected employee or director will
receive his or her compensation for the Designated Month in the manner
set forth in the election form.
2.2.4. An employee or director who elects Option B will receive on the first
business day of each Designated Month (or shortly thereafter) a number
of Shares equal to his or her compensation (not including discretionary
bonuses, overtime, and other extra payments) for the month, divided by
one-half of the "Month's Price." The "Month's Price" means the average
quoted closing bid for the last five business days of the preceding
month.
2.2.5. An employee or director who elects Option C will receive on the first
business day of each Designated Month (or shortly thereafter) a number
of Shares equal to his or her compensation (not including discretionary
bonuses, overtime, and other extra payments) for the month, divided by
the Month's Price.
2.2.6. If an employee or director who elects Option B or Option C terminates
service before the end of the Designated Month for which the Shares are
allocated, he or she will return to the Company the portion of Shares
(or their then cash value) that corresponds to the remainder of the
Designated Month. However, in the case of an employee who is laid off
or otherwise terminated by the Company (other than for cause) before
the end of the Designated Month, he or she will not be obligated to
return such Shares or cash value.
2.2.7. If an electing employee or director does not dispose of any Option C
Shares for 30 months after the Shares are allocated and remains an
employee or director of the Company for such period, then the Company
will make a payment to the employee or director equal to the excess, if
any, of the following equation: (i) Three-times the amount of cash
compensation that the employee or director elected to receive in the
form of Option C Shares for all the Designated Months (or for such
shorter period if an employee was laid off or otherwise terminated by
the Company (other than for cause) before December 31, 2001) (the
"Guaranty Price"), minus (ii) the product of (A) the average quoted bid
price for the five business days before the conclusion of the 30-month
period (the "30 Month Price"), multiplied by (B) the number of Option C
Shares. (However, an employee or director an employee who is laid off
or otherwise terminated by the Company (other than for cause) before
the end of the 30-month period is nonetheless entitled to receive the
payment specified in the first sentence of this section.) The Company
has the option to pay the excess in the form of cash, additional stock,
or both. In the alternative, the Company may purchase the Option C
Shares for the Guaranty Price.
3. Form S-8 Registration.
3.1. The Company will register 13,175,996 Shares for the Plan on Form S-8.
Upon the effectiveness of the Form S-8 registration statement, the
Shares issued under the plan will be freely tradable. Shares issued to
participants may be authorized but unissued Shares or treasury shares.
3
<PAGE> 4
3.2. If for any reason the number of remaining authorized, but unissued,
Shares under the Plan is less than the number of Shares that eligible
employees and directors would otherwise be entitled to receive, each
eligible employee or director who elected to receive Shares under
Option B or Option C (an "Electing Participant") shall receive the
following number of Option B or Option C Shares: (A/B) x C, where A is
the number of remaining authorized but unissued Shares under the Plan;
B is the total number of Shares (Option B and Option C) which the
Electing Participant would otherwise be entitled to receive, and C is
the number or Option B or Option C Shares that the Electing Participant
would otherwise be entitled to receive.
4. Fees and Commissions. No fees, commissions or other charges will be
paid by the electing participants in connection with the grants of
Shares to such persons under the Plan.
5. Taxes. No later than the dates of which the value of any Shares granted
pursuant to this Plan first becomes includible in the gross income of
an electing participant for US federal income tax purposes, he or she
will pay to the Company, or make arrangements satisfactory to the
Company, regarding payment of, any federal, state or local taxes of any
kind required by law to be withheld with respect to the Shares. The
obligations of the Company under this Agreement shall be conditioned
upon such payment or arrangements, and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to any electing participant.
6. Securities Laws. Any future sale of any Shares granted pursuant to this
Plan will be regulated by the Securities Act of 1933 Act, as amended,
and any applicable state or provincial law, rule or regulation. The
transfer of any such Shares by an electing participant will be
permitted only if the request for transfer is accompanied by evidence
satisfactory to the Company and its counsel that such transfer will not
result in a violation of any applicable federal, state or provincial
law, rule or regulation.
7. Market Risk. The risk of an increase in the market price of the Shares
shall be borne solely by the Company. The risk of a decrease in the
market price of the Shares shall be borne solely by the electing
participants.
8. Conflicting Agreements. In the event of any conflict or inconsistency
between the terms of this Agreement and the employment or directorship
agreements of the electing participants, the terms of this Agreement
shall prevail.
9. Governing Law. The terms of this Agreement shall be governed by Georgia
law, without regard to its conflicts of law principles.
4
<PAGE> 5
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
11. Entire Agreement. This Agreement, together with the election form
completed by an electing participant, constitutes the entire agreement
between the Company and the electing participant.
12. Amendments. This Agreement shall not be altered, amended or modified
except by written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the undersigned, being duly authorized, hereby
executes this Agreement on behalf of the Company as of the date first above
written.
THE TRACKER CORPORATION OF AMERICA
By:
Bruce I. Lewis
Its: Chief Executive Officer
5
<PAGE> 6
EXHIBIT A
ELECTION UNDER 1999 STOCK WAGE AND FEE PAYMENT PLAN
This election is made by the undersigned eligible employee or director under the
1999 Stock Wage and Fee Payment Plan adopted by The Tracker Corporation of
America, a Delaware corporation. Capitalized terms not otherwise defined herein
have the meaning ascribed in the Plan.
1. The undersigned hereby elects to receive his or her compensation (not
including discretionary bonuses, overtime, and other extra payments)
for each of the months of the 1998 Calendar Year denoted below in the
form of Common Stock:
__________ January 1998
__________ February 1998
__________ March 1998
__________ April 1998
__________ May 1998
__________ June 1998
__________ July 1998
__________ August 1998
__________ September 1998
__________ October 1998
__________ November 1998
__________ December 1998
2. The undersigned has read the Plan and the prospectus for the Shares to
be issued pursuant to the Plan, and, for and in consideration of the
benefits to be derived from the undersigned by this election, hereby
agrees to be bound by all of the terms and conditions, and agreements
in the Plan, which is hereby incorporated by reference.
ACKNOWLEDGED AND AGREED:
Signature:___________________________
Name:________________________________
January ____, 1999
<PAGE> 7
EXHIBIT B
ELECTION UNDER 1999 STOCK WAGE AND FEE PAYMENT PLAN
This election is made by the undersigned eligible employee or director under the
1999 Stock Wage and Fee Payment Plan adopted by The Tracker Corporation of
America, a Delaware corporation. Capitalized terms not otherwise defined herein
have the meaning ascribed in the Plan.
1. The undersigned hereby elects to receive his or her compensation (not
including discretionary bonuses, overtime, and other extra payments)
for each of the months of the 1999 Calendar Year denoted below in the
form of Common Stock:
__________ January 1999
__________ February 1999
__________ March 1999
__________ April 1999
__________ May 1999
__________ June 1999
__________ July 1999
__________ August 1999
__________ September 1999
__________ October 1999
__________ November 1999
__________ December 1999
2. The undersigned has read the Plan and the prospectus for the Shares to
be issued pursuant to the Plan, and, for and in consideration of the
benefits to be derived from the undersigned by this election, hereby
agrees to be bound by all of the terms and conditions, and agreements
in the Plan, which is hereby incorporated by reference.
ACKNOWLEDGED AND AGREED:
Signature:___________________________
Name:________________________________
January ____, 1999
<PAGE> 8
EXHIBIT C
ELECTION UNDER 1999 STOCK WAGE AND FEE PAYMENT PLAN
This election is made by the undersigned eligible employee or director under the
1999 Stock Wage and Fee Payment Plan adopted by The Tracker Corporation of
America, a Delaware corporation. Capitalized terms not otherwise defined herein
have the meaning ascribed in the Plan.
1. The undersigned hereby elects to receive his or her compensation (not
including discretionary bonuses, overtime, and other extra payments) in
the following forms during each Designated Month of the 1999 Calendar
Year denoted below in the form of Common Stock:
Percentage Options
_________% Option A - Cash
_________% Option B - 50% Discounted Stock
_________% Option C - Stock at market value,
with guaranteed three times future
value
Total _________%
2. The undersigned has read the Plan and the prospectus for the Shares to
be issued pursuant to the Plan, and, for and in consideration of the
benefits to be derived from the undersigned by this election, hereby
agrees to be bound by all of the terms and conditions, and agreements
in the Plan, which is hereby incorporated by reference.
ACKNOWLEDGED AND AGREED:
Signature:___________________________
Name:________________________________
January ____, 1999
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of the Tracker Corporation of America on Form S-8 of our report dated
September 18, 1998, appearing in the Annual Report on Form 10-K of The Tracker
Corporation of America for the year ended March 31, 1998. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ Hirsch Silberstein & Subelsky, P.C.
Hirsch Silberstein & Subelsky, P.C
Detroit, Michigan
January 13, 1999
<PAGE> 1
EXHIBIT 24.1
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
Bruce I. Lewis and Jay S. Stulberg, 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.
SIGNATURE TITLE DATE
- -------------------------- -------------------------------------------------
/s/ Bruce I. Lewis Chief Executive Officer January 9, 1999
Bruce I. Lewis (Principal Executive Officer),
Director
/s/ Jay S. Stulberg President, Chief Operating January 9, 1999
Jay S. Stulberg Officer, Chief Financial
Officer (Principal Financial
Officer and Principal
Accounting Officer),
Secretary, Director
/s/ David G. R. Butler Director January 9, 1999
David G. R. Butler
Carl J. Corcoran Director January 9, 1999
/s/ H. Joseph Greenberg Director January 9, 1999
H. Joseph Greenberg
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,187,699
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,476,814
<CURRENT-LIABILITIES> 3,275,560
<BONDS> 0
0
0
<COMMON> 19,718
<OTHER-SE> (2,231,309)
<TOTAL-LIABILITY-AND-EQUITY> 1,476,814
<SALES> 51,551
<TOTAL-REVENUES> 51,551
<CGS> 20,660
<TOTAL-COSTS> 20,660
<OTHER-EXPENSES> 183,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,590
<INCOME-PRETAX> (90,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,517)
<DISCONTINUED> 62,050
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90,467)
<EPS-PRIMARY> (.004)
<EPS-DILUTED> (.004)
</TABLE>
<PAGE> 1
REOFFER PROSPECTUS
EXHIBIT 99.1
PROSPECTUS
THE TRACKER CORPORATION OF AMERICA
13,175,996 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
All 13,175,996 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 Aura (Pvt.)
Ltd., 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 January 11,
1999, the high and low bid prices of the Common Stock were $0.1575 per share and
$0.12 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 January 14, 1999.
i
<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, 1998.
2. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since March 31, 1998.
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.
ii
<PAGE> 3
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 Bruce
I. Lewis, Chief Executive Officer, The Tracker Corporation of America, 180
Dundas Street West, Suite #1505, Toronto, Ontario Canada M5G 1Z8, telephone
(416) 593-2604.
iii
<PAGE> 4
TABLE OF CONTENTS
Risk Factors...................................................................1
The Company....................................................................7
Use of Proceeds...............................................................15
Selling Securityholder........................................................15
Plan of Distribution..........................................................16
Description of Securities.....................................................16
Directors' Liability..........................................................19
Section 203 of the Delaware General Corporation Law...........................21
Anti-Takeover Effects of Provisions of the Certificate of Incorporation
and Bylaws...................................................................22
Transfer Agent and Registrar..................................................26
Indemnification of Directors and Officers.....................................28
Legal Matters.................................................................29
Experts.......................................................................29
iv
<PAGE> 5
RISK FACTORS
The Company, persons acting on behalf of the Company, underwriters or
analysts, from time to time, may make, in writing or orally, "forward-looking
statements" as defined under the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). The recitation of the risk factors which appears below is
included in part, to the extent applicable, for the purpose of qualifying for
the "safe harbor" provisions of the 1995 Act and is intended to be a readily
available written document that describes factors which could cause actual
results to differ materially from those which might be projected, forecast,
estimated or budgeted by the Company in such forward-looking statements. These
factors are in addition to any other cautionary statements, written or oral,
which may be made or referred to in connection with any such forward-looking
statements.
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.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock will experience immediate and substantial
dilution of the pro forma net tangible book value of the shares of Common Stock.
If the Company issues additional equity securities or convertible debt
securities in the future, purchasers of Common Stock may experience further
dilution in the pro forma net tangible book value per share of their shares.
This is especially true if the Company sells equity securities at discounts or
debt securities with high interest rates or discounted conversion rates.
SUBSTANTIAL COMPETITION
The Company competes with a large number of competitors offering
similar services, many of which have substantially greater financial, technical,
marketing, and management resources than the Company. The Company cannot offer
any assurance it will be able to compete effectively against competitors.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The success of the Company is dependent in large part upon the ability
of the Company to attract and retain key management and operating personnel. The
Company depends particularly on the efforts and skills of Bruce I. Lewis and Jay
S. Stulberg. The loss, incapacity, or unavailability of either of these
individuals could adversely affect the Company's operations. In addition, it may
be necessary for the Company to attract and retain additional individuals to
support the growth of its business or to replace key personnel in the event of
the termination of their employment with the Company. Qualified individuals are
in high demand and are often subject to competing offers. There can be no
assurance that the Company will be able to attract
<PAGE> 6
and retain the qualified personnel needed for its business. The inability to
hire additional personnel as needed would likely have a material adverse effect
on the Company's business and prospects.
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of Common Stock after this
Offering, or the perception that such a sale could occur, could adversely affect
prevailing market prices for the shares. In addition, any such sales or
perception of such sales could make it more difficult for the Company to sell
equity securities or equity-related securities in the future at a time and price
that the Company deems appropriate.
LIMITED MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
The Company'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 (the "Penny Stock
Rules") promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). 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 Securities and Exchange 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
6
<PAGE> 7
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,
following expiration of the Rule 144 holding period and conversion of the Common
Stock into Common Stock, to sell the Common Stock in the over-the-counter
market.
CONCENTRATION OF OWNERSHIP; EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's directors, officers, principal stockholders and their
affiliates will continue to beneficially own approximately 40% of the Company's
Common Stock immediately following this Offering, assuming the full exercise of
currently exercisable options and warrants, and the conversion of outstanding
convertible debentures. 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 Common Stock
and impede the ability of stockholders to replace management even if factors
warrant such a change.
COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS
No regulatory authority, Federal or state, has reviewed the terms of
this Offering, and, accordingly, they must assess the adequacy of disclosure and
the fairness of the terms of this Offering on their own or in conjunction with
their personal advisors.
UNCERTAINTY OF MARKET ACCEPTANCE
The Company's future success is entirely dependent upon the successful
development, commercialization and market acceptance of the Tracker(TM) System,
the complete efficacy of which has not yet been demonstrated. The Company's
initial marketing efforts, which focused primarily on consumer applications for
The Tracker(TM) System, were not successful. Penetrating other markets that will
respond more favorably to the Company's products and services will present
marketing and financial challenges for the Company. There can be no assurance
that the Company will gain a significant level of commercial acceptance of its
products and services in other markets.
7
<PAGE> 8
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; EXPECTATION OF FUTURE LOSSES
The Company has generated only modest revenue and has sustained significant
operating losses each year since its inception. During the 12-month period ended
March 31, 1998, the Company incurred a net loss of $90,467 from continuing
operations (net of a $62,050 gain from discontinued operations) and, at the end
of such period, had an accumulated deficit of $17,001,283. The Company expects
to continue to incur losses through at least March 31, 2000. From the date of
inception (May 6, 1993) through March 31, 1998, the Company had realized
revenues of only $306,722 (net of realized revenues from discontinued operations
of $10,800,893). The report of the independent accountants covering the
Company's financial statements for the year ended March 31, 1998 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. The Company may never generate substantial operating revenue or
achieve profitability. The Company's ability to generate revenue from operations
and achieve profitability is dependent upon successful commercialization of the
Tracker(TM) System and the Company's successful transition from a development
stage company to a fully operating company.
EARLY STAGE OF COMPANY
As noted above, the Company is a development stage company and has
generated only modest sales. The Company's operations and resulting cash flows
are subject to all of the risks inherent in an emerging business enterprise. To
achieve significant revenues and profitable operations on a continuing basis,
the Company must successfully market, sell its products and services and operate
its business. There can be no assurance that the Company will be able to do so.
In addition, although the Company has been generating ongoing revenues since
December 31, 1995, there can be no assurance that sales made by the Company will
be at volumes and prices sufficient for the Company to achieve profitable
operations.
CREDITOR CLAIMS
The Company is attempting to negotiate agreements with its major
creditors in which the Company settles approximately $650,000 in unsecured
claims for not more than 30 cents on the dollar (i.e., approximately $200,000)
or enters into installment payment arrangements providing for the full payment
of such claims over a four-year term. If the Company is unable to conclude
settlements on this basis, the Company will consider liquidating the claims of
its creditors (to the extent permitted) by filing for bankruptcy protection and
adopting a plan of reorganization under Chapter 11 of the U.S. bankruptcy laws.
8
<PAGE> 9
RISK OF TECHNOLOGICAL OBSOLESCENCE
There can be no assurance that the Company's competitors and potential
competitors will not succeed in developing or marketing technologies and
products that will be more accepted in the marketplace than the proposed
Tracker(TM) System or that would render the Company's technology obsolete or
noncompetitive. Most of the Company's competitors and potential competitors have
substantially greater capital resources, research and development staffs and
facilities than the Company. In addition, most of the Company's competitors and
potential competitors have substantially greater experience than the Company in
research and new product development and manufacturing and marketing personal
property marking and monitoring systems, identification devices and scanning and
retrieval systems.
SOURCES OF SUPPLY; LACK OF FORMAL AGREEMENTS WITH SUPPLIERS
The Company's ability to market, sell and operate The Tracker(TM)
System depends in part on its ability to procure necessary goods and services.
Although the Company has preliminary understandings or agreements with
suppliers, these tend to be informal, may be difficult to enforce, and may be
subject to termination. 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 goods and
services on terms favorable to the Company could prevent or delay the
development, marketing, sale, operation and effectiveness of The Tracker(TM)
System and could have a material adverse effect on the Company's business,
operating results and financial condition. There also can be no assurance that
the Company will be able to achieve and maintain product quality and reliability
when producing the Tracker(TM) System in the quantities required for commercial
operations or within a period that will permit the Company to introduce its
products in a timely fashion, or that the Company will be able to assemble and
manufacture its products at an acceptable cost.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend in part on its ability to obtain
patent protection for its proposed products and processes, to preserve its trade
secrets and to operate without infringing 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. 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 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 systems competitive with the Company's system. One patent
infringement claim has been filed against the Company, however, the Company,
along with Symbol Technologies, Inc. ("Symbol"), is the
9
<PAGE> 10
subject of a lawsuit filed in the United States District Court for the District
of Delaware by Datastrip (IOM) Limited ("Datastrip"). Datastrip alleges that the
Company is infringing on Datastrip's U.S. Patent No. 4,782,221, relating to
certain data-encoding technology allegedly developed by Datastrip and that
Symbol is inducing infringement of the patent. The complaint seeks injunctive
relief and unspecified damages. The Company and Symbol believe, based on advice
of Symbol's counsel, that they have no liability to Datastrip and that the claim
is frivolous and without merit. Symbol, the supplier of automated card readers
to the Company, has agreed to vigorously defend itself and the Company against
Datastrip's claim. Symbol, however, has not agreed to indemnify the Company from
any losses that may result from this claim. There can be no assurance, 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.
The Company also relies upon unpatented trade secrets, and no assurance
can be given that others will not independently develop or otherwise acquire
unpatented technologies substantially equivalent to those of the Company. In
addition, even if the patent for which the Company has applied are ultimately
issued, other parties may hold or receive patents that contain claims covering
the Tracker(TM) System and which may delay or prevent the sale of the
Tracker(TM) System or require licenses resulting in the payment of fees or
royalties by the Company in order for the Company to carry on its business.
There can be no assurance that needed or potentially useful licenses will be
available in the future on acceptable terms or at all.
An adverse determination in any litigation, including any litigation
commenced by the holder of the patent referred to above, could subject the
Company to significant liabilities to third parties, require the Company to seek
licenses from or pay royalties to third parties or prevent the Company from
manufacturing, selling or using its proposed products, any of which could have a
material adverse effect on the Company's business and prospects.
ABILITY OF THE COMPANY TO OPERATE A LARGE INFORMATION SYSTEMS DATABASE; NO
EXPERIENCE OF EXISTING PERSONNEL CONCERNING OPERATING OR MAINTAINING A LARGE
DATABASE
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. 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 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.
10
<PAGE> 11
MANAGEMENT OF FUTURE GROWTH
If the Company is successful in marketing, selling and operating The
Tracker(TM) System, its resulting growth will place a strain on the Company's
management, operational and financial resources. The Company's ability to
achieve profitable operations and to manage future growth will depend upon the
Company's ability to implement appropriate 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.
FUTURE CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE AVAILABLE
The Company will require additional funds in order to successfully
market and sell its products and services and operate its business. 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 products and 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 borrowings or 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. Insufficient funds may require the
Company to delay, scale back or eliminate some or all of its programs designed
to facilitate the commercial introduction of the Tracker(TM) System or prevent
such commercial introduction altogether.
THE COMPANY
CORPORATE HISTORY
The Company developed, markets and sells and operates a personal
property marking and monitoring system (the "Tracker(TM) System"). The
Tracker(TM) System utilizes advanced bar code and laser scanning technology to
create an identification device which interfaces with a computer database and
scanning network (the "Technology"). The Company's Website is located at
www.tracker.com.
The current business of the Company originated in July 1994 through a
reorganization (the "Reorganization") in which the Company acquired all of the
issued and outstanding voting shares of The Tracker Corporation, an Ontario,
Canada corporation ("Tracker Canada"), in exchange for approximately 90% of the
total voting shares of the Company as of that date. The Company's predecessor
was incorporated as a Utah corporation in 1986, and changed its state of
incorporation to Nevada in 1992 and Delaware in 1994 through change in domicile
mergers. Concurrent with the effective date of the reorganization, the Company
changed its fiscal year-end from December 31 to March 31.
11
<PAGE> 12
BACKGROUND
Tracker Canada, which originated the Company's present line of
business, was incorporated in May 1993 and, until February 1998, was an
operating subsidiary of Tracker U.S. Tracker Canada supported the development,
marketing and sale of the Tracker(TM) System. The subsidiary's functions
included personnel recruitment and management, advanced bar code and laser
scanning technology research and development (including proprietary software
development), key supplier relationships, business and marketing planning, and
Canadian and U.S. patent and trademark protection.
Until 1995, the operations of Tracker Canada generated the Company's
sole source of revenue. During the fiscal year ended March 31, 1996, the
Company, through Tracker U.S., introduced a credit card registration service
marketed by independent telemarketing firms as an additional line of business.
Subsequently, cash sales increased from $382,632 for the 1995-96 fiscal year to
$7,977,881 for the fiscal year ended March 31, 1997. The increase in cash sales
(and the corresponding increase in recorded revenues) for the 1996-97 fiscal
year was due primarily to the increase in sales from the Company's credit card
registration service.
FTC LAWSUIT; BOARD OF DIRECTORS AND OFFICER RESIGNATIONS
In September 1997, the U.S. Federal Trade Commission (the "FTC") filed
a lawsuit against the Company in the U.S. District Court, Northern District of
Georgia, Atlanta Division. The complaint alleged that the Company's credit card
registration service had violated Section 5 of the Federal Trade Commission Act
and the FTC Trade Regulator Telemarketing Sales Rule in telemarketing credit
card protection services in the United States. The FTC obtained a temporary
restraining order ("TRO") halting the further sale of credit card registration
services and an injunction freezing the Company's assets. Upon completing an
internal investigation, the Company elected to discontinue credit card
registration service operations.
Following commencement of the lawsuit, four members of the Company's
five-member Board of Directors, including all of its non-employee outside
directors, tendered their resignations. Subsequently, the Company's Chief
Financial Officer resigned as an executive officer, leaving Bruce I. Lewis, the
Company's Chief Executive Officer, as the Company's sole Director and executive
officer.
The Company settled the FTC lawsuit on July 28, 1998. Pursuant to the
settlement, the U.S. District Court entered a Stipulated Final Judgment and
Order for Injunction that, among other things, permanently barred the Company
and Mr. Lewis from engaging directly or indirectly, in the business of credit
card registration or promotion.
12
<PAGE> 13
TRACKER CANADA BANKRUPTCY; CESSATION OF OPERATIONS
The FTC lawsuit and the cessation of the credit card registration
service had a negative effect on the financial condition of the Company and
Tracker Canada. On January 27, 1998, Tracker Canada filed a notice with the
Ontario Courts declaring its insolvency and seeking the appointment of a
bankruptcy trustee to liquidate its assets and dissolve the corporation. The
liquidation and dissolution occurred in February 1998.
GLOBAL TRACKER
On February 10, 1998, the Global Tracker Corporation ("Global
Tracker"), a newly formed Ontario, Canada corporation, acquired substantially
all of Tracker Canada's assets at arm's length in a bankruptcy proceeding.
Shortly thereafter, Global Tracker entered into an agreement in principle with
the Company which permitted the Company to use personnel retained by Global
Tracker and assets formerly owned or leased by Tracker Canada to continue the
business formerly conducted by Tracker Canada. As a result of this arrangement,
Tracker U.S. continued on a limited basis the business formerly operated by
Tracker Canada without a complete cessation of operations.
Since February 26, 1998, Global Tracker has expended approximately
$400,000 to support the Company's business operations. Bruce I. Lewis, the
Company's Chief Executive Operator, has personally loaned Global Tracker
approximately $300,000 in operating capital. Jay S. Stulberg, Global Tracker's
sole shareholder, officer and director, has been elected as the Company's
President, Chief Operating Officer, Chief Financial Officer, Secretary and
Director.
On July 30, 1998, the Company entered into a License Agreement with
Global Tracker. The License Agreement grants the Company an exclusive worldwide
license to commercially exploit the technology formerly owned by, and benefit
from any copyrights or patents and applications therefor formerly held by,
Tracker Canada. The license is for a renewable seven-year term and provides for
payment of a 12% royalty on gross revenues commencing in the second year of the
license.
Contemporaneously, Global Tracker agreed in principle to enter into a
General Consulting Agreement and an Equipment Rental Agreement with TCA
Management, Inc. ("TCA"), a wholly-owned subsidiary of the Company. Under the
proposed General Consulting Agreement, TCA provides management services,
research and development and customer support. Under the proposed Equipment
Rental Agreement, TCA rents office equipment, including computers, local area
network, telephone system, copier, fax and furniture which it makes available to
the Company.
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THE PRODUCT
THE TRACKER(TM) SYSTEM
The Tracker(TM) System consists of an identification device and a
relational database that, depending upon the application of the product, works
in tandem with a scanning network and a recovery system.
Identification Device
The identification device consists of a label displaying a serial
number that is resistant to partial destruction or defacement. The label, which
attaches to an article by adhesive, thermal transfer (onto metal, plastic or
nylon textile) or laser etching, contains specially encoded insignia in advanced
two dimensional redundant bar code form (PDF 417 symbology). The PDF 417
symbology permits multiple repetitions of the alphanumeric number within the
advanced bar code. Partial destruction or defacement of the insignia does not
impair the ability of the laser scanners utilized by the Company to read the
label and communicate the information to the Company's database.
Relational Database
The relational database is a depository maintained by the Company that
indexes correlating identification information and other data entries to codes
identified with the corresponding identification device. Although the Company
makes substantial efforts to protect data, avoid human error and ensure system
security, privacy and integrity, no system is foolproof. Any material loss of
information or security breach could damage the credibility of the Company and
have an adverse effect on the Company's business, operating results and
financial condition.
Scanning Network
The Company is developing a network consisting of a series of PDF
417-capable scanners. The laser scanner reads the serial number displayed on the
identification device and transmits that information to the Company's relational
database. The Company intends to locate the scanners located at key points of
recovery in major North American metropolitan areas such as police stations.
Scanners are also utilized with the Company's inventory control and asset
management systems.
As of June 30, 1998, the Company had placed scanners in 39 police
stations and other sites in Canada and 25 sites in the United States, as
compared to 39 placements in Canada and 29 in the United States as of June 30,
1997. Previously, the Company entered into letters of intent that have since
expired which would have permitted it to install scanners linked to the
Company's network in more than 125 police and sheriff locations throughout the
United States.
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Recovery System
The recovery system is the method, after the scanner reads the
identification device and transfers the data via modem to the central database,
by which the Company notifies a user of an item's location and arranges for its
retrieval.
As of September 30, 1998, utilization of The Tracker(TM) System had
resulted in over 400 successful recoveries. While these recoveries demonstrate
the effectiveness of the system, to date the system has not generated sufficient
sales volume.
STRATEGIC FOCUS
The Company introduced The Tracker(TM) System to a limited test market
in Toronto, Canada in October 1994 and began expanding service throughout
Canada. The Company also began testing potential markets for The Tracker(TM)
System in the United States and offering the service through diverse marketing
channels such as joint promotional partners, selected retailers, telemarketers
and network referral marketers.
MARKETS
Prior to Tracker Canada's bankruptcy, the Company's marketing efforts
focused primarily on the consumer market for personal property identification
and recovery. Although the Company believes the system has significant
commercial potential, the marketing efforts undertaken by the Company to date
have failed, have not been fully realized, or have met with only limited market
acceptance.
Initially, the Company developed a personal property security kit that
it currently markets directly through its WebSite. The personal property
recovery kit includes 24 possession labels, eight clothing labels and ten
assorted shoe, key, luggage, and pet tags. The initial purchase is packaged as a
membership service term, typically between one to three years. In addition to
the personal property kit, the Company also markets the system indirectly as a
value-added service offered by third parties.
While management has conceived of many other potential applications for
The Tracker(TM) System, the Company's past experience and present financial
circumstances dictate a more narrowly focused strategy directed at the business
market, rather than the consumer market. For the business market, the Company
has developed applications for inventory control, fixed asset management and
point of manufacture.
Applications
Inventory Control. The Company believes that The Tracker(TM) System
provides an efficient method for tracking inventory and accessing related
information. On July 1, 1998, the Company signed a two-year agreement with
Warrantech Additive, Inc. ("Warrantech"), a wholly-owned subsidiary of
Warrantech Automotive, Inc., to provide personal property
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<PAGE> 16
identification labels and global recovery services to automobile dealers
participating in Warrantech's vehicle service contract business. Through the
labels, the Company will provide immediate access to vehicle service information
contained in the Company's relational database.
Fixed Asset Management. The Company also believes that The Tracker(TM)
System can provide an efficient method for tracking and managing fixed assets.
Currently, the Company is negotiating with Sony Corporation ("Sony") to provide
fixed asset management services by linking labels affixed to certain of Sony's
physical assets to information contained in the Company's relational database
and recovery network to the Company's worldwide 24 hour recovery network.
Although the Company would promote utilization of The Tracker(TM) System for
fixed asset management by reference to the agreement it hopes to complete with
Sony, the Company can provide no assurances that it will successfully conclude
such an agreement.
Point of Manufacture. Manufacturers of products, such as computer
chips, bicycles, power tools, electronic equipment, cameras and auto parts, can
use The Tracker(TM) System by laser etching or otherwise applying a serial
number containing specially coded insignia directly onto or into products during
the manufacturing process. The Company believes that the coded insignia adds
value to a product by increasing the likelihood of recovery in the event of loss
or theft and provides an additional tool for combating retail and warranty
fraud. The Company anticipates that if such contracts are procured, the
manufacturers will absorb the cost of laser etching either directly or
indirectly (i.e. in the unit price charged to the manufacturers by the Company).
Currently, however, the Company does not have a contract with any manufacturer
to laser etch or otherwise apply coded insignia at the point of manufacture.
Niches
The Company's long-term strategy is to introduce applications of The
Tracker(TM) System in select market niches and establish the system as a
dominant brand-name therein. Currently, management is identifying market niches
it believes will prove most responsive to the Company's initiatives. Among the
niches the Company is considering are an international pet registry lost and
found, a key return service and a bike registration program. In addition, the
Company intends to market The Tracker(TM) System as an inventory control and
fixed asset management program to Fortune 1000 companies.
MARKETING AND DISTRIBUTION
The Company is approaching the marketing and distribution of The
Tracker(TM) System in several ways.
Alliances, Sponsorships and Promotional Programs
The Company hopes to establish credibility and confidence in the
marketplace by, among other things, affiliations, alliances, sponsorships, and
promotional programs with well recognized, stable and reputable organizations.
Second, the Company is beginning to establish promotional programs with
manufacturers of consumer specialty products that have a high
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<PAGE> 17
potential for loss. In May 1997, the Company entered into an agreement with
Schwinn Cycling & Fitness Inc. ("Schwinn"), a United States manufacturer of
quality bicycles and accessories. In July 1998, Schwinn placed an additional
order for 35,000 Tracker labels to be combined with bicycle locks Schwinn is
manufacturing in Taiwan. Third, the Company intends to approach affinity groups,
such as charities and police benevolent societies, to market Tracker labels as
promotional incentives. Fourth, the Company intends to explore the feasibility
to establishing an international pet registry marketed through veterinarians,
animal shelters and humane societies.
Previously the Company also entered into agreements with Samsonite
Canada, Inc. to affix Tracker tags to its merchandise at the Company's expense
as a promotion, and with Sony of Canada, Inc. to resell the Company's tags
through retail stores in Canada. To date, neither program has been successful.
While the Company is in current discussions with Samsonite, the Sony of Canada
agreement has been terminated.
The Company also entered into agreements with Liberty Health, a
division of Liberty Insurance Company, to provide its travel insurance customers
with the added protection of The Tracker (TM) System, and with Merchant Partners
Limited Partnership to introduce The Tracker(TM) System with certain retailers,
including Montgomery Ward and ValuVision. To date, the Company has yielded no
material benefit from either agreements.
Direct Marketing
The Company also intends to build on its success in procuring contracts
with Warrantech and Sony Corporation through direct marketing of The Tracker(TM)
System as an inventory and asset management program for Fortune 1000 companies.
Recently, the Company retained a marketing executive as a full-time employee to
spearhead this initiative.
KEY SUPPLIERS
The Company's ability to market and sell The Tracker(TM) System depends
in part on its ability to procure necessary equipment, supplies and services.
These agreements or understandings tend to be informal, may be difficult to
enforce, and may be subject to termination. Accordingly, there can be no
assurance that equipment, supplies or services will be available when needed by
the Company or on terms favorable to the Company. Any unavailability of such
equipment, supplies or services on terms favorable to the Company could prevent
or delay the development, marketing, sale, operation and effectiveness of the
Company's products and could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company procures scanning equipment from Symbol Technologies, Inc.
("Symbol"). Symbol's PDF 417 is an advanced two-dimensional stacked symbology.
In 1992, Symbol introduced the PDF 1000 laser scanner, the first laser scanner
to read two-dimensional bar code. The PDF 1000 laser scanner scans 30 times
faster than conventional scanners, decodes in a rastering pattern across and
down the PDF 417 symbol, reads both PDF 417 (two-dimensional codes) and linear
bar codes (one-dimensional codes), and is able to read poorly
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<PAGE> 18
printed or damaged codes that have been defaced up to 60%. The Company has a
preliminary understanding with Symbol whereby, subject to certain minimum annual
purchase requirements, the Company was granted the exclusive right to use, for
personal property identification and recovery purposes, Symbol's PDF 1000 laser
scanners in Canada, the United States and Europe. Pursuant to its original
understanding with Symbol, the Company was required to purchase specified
numbers and dollar amounts of laser scanners during each of calendar years 1994
through 1997 in order to maintain its exclusive right. The Company did not meet
its minimum commitment level for any of these years. If the Company is unable to
continue its relationship with Symbol, the Company believes that comparable
scanning equipment will be available from other sources. However, there can be
no assurance that the Company will be able to procure scanning equipment form
Symbol or another manufacturer after such time.
COMPETITION
Although the Company believes that The Tracker(TM) System differs
significantly from those offered by other firms, the Company faces competition
from alternative personal property identification methods, such as tracking by
serial number or by the personal property owner's imprinted name and address or
from conventional forms of insurance that reimburse consumers for lost items.
Most of these firms have substantially greater financial, technical, marketing
and management resources than the Company. The Company does not believe that any
single company commands significant market share. The successful introduction of
such services by this or any other competitors, or the introduction by
competitors of ineffective systems that damage the credibility of the Company's
industry as a whole, may have a material adverse effect on the Company's
business, operating results and financial condition. Moreover, 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. There can be no
assurance that the Company will be able to compete successfully.
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 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 an international patent application pursuant to
the Patent Cooperation Treaty for The Tracker(TM) System. There can be no
assurance, however, that this will mature into an issued patent or that any
patent 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.
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<PAGE> 19
The Company does not believe that its products and other confidential
and proprietary rights infringe upon the proprietary rights of third parties.
One patent infringement claim has been filed against the Company, however. In
addition, there can be no assurance 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.
The Company has no registered trademarks or service marks, nor any
active trademark or service mark applications pending with the U.S. Patent and
Trademark Office or with other regulatory authorities.
The Company's principal executive offices are located at 180 Dundas
Street West, Suite 1505, Toronto, Ontario, Canada, M5G 1Z8, and its telephone
number is (416) 593-2604.
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 January 4, 1999 (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
and from a stockholder report from the Company's transfer agent dated January
13, 1999 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. 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
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.
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<PAGE> 20
SHARES OF COMMON STOCK TO BE OFFERED HEREBY
<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO SHARES TO BE OWNERSHIP PERCENTAGE
NAME AND POSITION THE OFFERING OFFERED AFTER THE OFFERING OF CLASS
- ----------------- ------------------ ------------ ------------------ ----------
<S> <C> <C> <C> <C>
Bruce I. Lewis 2,000,000 10,933,039 0(2) 5.3%(3)
Chief Executive Officer(1)
Leandro Gutierrez 27,000 27,000 0 0%
John Andrews 29,000 25,000 4,000 >1%
Chris Creed 25,000 25,000 0 0%
Snezana Cenic-Ciric 25,000 25,000 0 0%
Denis Obert 25,000 25,000 0 0%
Robert Pence 25,000 25,000 0 0%
Donna Skinner 25,000 25,000 0 0%
Wolfgang Kyser 100,000 50,000 50,000
Robert D. Arkin 159,574 159,574 0 0%
John Lewis 500,000 500,000 0 0%
</TABLE>
PLAN OF DISTRIBUTION
- ----------
(1) All Selling Securityholders are non-executive employees of the Company
unless otherwise noted in the table above.
(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 Securityholder will actually sell any, or all, of such shares.
(3) Percentage ownership is based on 43,919,549 shares of Common Stock
outstanding, including 28,743,553 shares of Common Stock issued and outstanding
as of January 4, 1999, 13,175,996 shares of Common Stock issued or to be issued
pursuant to the Company's 1999 Stock Wage and Fee Payment Plan, and 2,000,000
shares of Common Stock issued pursuant to the Company's 1999 Aura (Pvt.) Ltd.
Stock Payment Plan.
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<PAGE> 21
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
At the annual meeting of stockholders on December 18, 1998, the
stockholders approved a proposal to amend the Certificate of Incorporation to
(a) increase (i) the number of authorized shares of Common Stock from 40,000,000
shares to 50,000,000 Shares, and (ii) the number of authorized shares of
Preferred Stock from 500,000 shares to 6,500,000 shares, and (b) to decrease the
number of authorized shares of Class B Voting Stock from 10,000,000 shares to
100,000 shares. The Board of Directors of the Company is permitted to designate
series of Preferred Stock having such terms and conditions as the Board may
determine.
COMMON STOCK
As of January 4, 1999, there were 28,743,553 shares of Common Stock
outstanding, held of record by approximately 450 stockholders.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders and are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, subject to the
dividend preferences of the Preferred Stock, if any. Upon the liquidation,
dissolution, or winding up of the affairs of the Company, whether voluntary or
involuntary, the holders of Common Stock are entitled to share ratably in all
assets of the Company available for distribution after payment of all
liabilities and liquidation preferences of the Preferred Stock, if any. Holders
of Common Stock have no preemptive rights, no cumulative voting rights and no
rights to convert their Common Stock into any other securities.
CLASS B VOTING COMMON STOCK
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As of January 4, 1999, there were no shares of Class B Voting Common
Stock, par value $.00000007 outstanding. 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 rights, preferences and privileges of any future holders of
Class B Voting Common Stock may be subject to, and 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.
PREFERRED STOCK
The Registrant has an authorized class of 6,500,000 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
Class B Voting Common 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.
CONVERTIBLE SENIOR PREFERRED STOCK
As of January 4, 1999, there were no shares outstanding of any class or
series of Preferred Stock. On December 18, 1998, the Board of Directors
authorized the issuance of a series of up to 6,500,000 shares of Preferred Stock
designated as Convertible Senior Preferred Stock. The Convertible Senior
Preferred Stock will not be redeemable. Holders of Convertible Senior Preferred
Stock will receive (i) voting rights pari passu with holders of Common Stock;
(ii) semi-annual dividends payable in cash out of funds legally available for
such purpose at the rate of 7.5% per annum; (iii) in the event of any
liquidation, dissolution or winding up of the Registrant, a preference entitling
the holder 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, $0.50 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; and (iv) the right to convert shares of the Convertible Senior
Preferred Stock into Common Stock at any time at the option of the holder on a
one-for-one basis. Outstanding shares of the Convertible Senior Preferred Stock
will convert automatically into Common Stock within five years of issuance if
the Common Stock is listed for trading on either the New York Stock Exchange,
the American Stock Exchange (including
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<PAGE> 23
Emerging Markets), the Nasdaq National Market System or any other exchange
acceptable to the Registrant.
1999 WAGE STOCK AND FEE PAYMENT PLAN
Simultaneously with the filing of this registration statement with the
Securities and Exchange Commission, the Company is filing an additional
registration statement on Form S-8 for its 1999 Stock Wage and Fee Payment Plan.
Under this plan, the Company has issued or will issue an additional 13,175,996
shares to certain of its employees, consultants and advisors.
INCENTIVE STOCK OPTIONS
On January 4, 1999, the Company issued incentive stock options to Bruce
I. Lewis and Jay S. Stulberg pursuant to its 1994 Stock Incentive Plan. The
options entitle Messrs. Lewis and Stulberg to each purchase 2,488,578 shares of
Common Stock at the price $0.07 per share (the "Option Price"). The Option Price
is 110% of the fair market value of the Shares based upon the average closing
price of the Shares in the over-the-counter market for December 1998, rounded to
the nearest whole cent. The options are subject to sequential exercise rules
providing for one-half of the grant to vest immediately and the remaining
one-half to vest one year from the date of issuance. The option granted to Mr.
Lewis is outstanding for a five-year period. The option granted to Mr.
Stulberg is outstanding for a 10-year period.
COMMON WARRANTS
As of January 4, 1999, 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 January 4, 1999, there was outstanding an option (the "Merchant
Partners Option") to purchase 250,000 shares of Common Stock, subject to
adjustment, held by one holder. Currently, the Merchant Partners Option entitles
the holder to purchase 250,000 shares through July 10, 2001 at an exercise price
of $1.00 per share, subject to adjustment. However, the option 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, 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.
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<PAGE> 24
TODA WARRANT
As of January 4, 1999, 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.
CONVERTIBLE DEBENTURES
As of January 4, 1999, the Company had debentures outstanding
convertible into 667,766 shares of Common Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
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 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
Under the Registrant's Certificate of Incorporation, assuming, as of
January 4, 1999, the exercise of (i) incentive stock options to purchase
4,977,156 shares of Common Stock granted to Messrs. Lewis and Stulberg pursuant
to the 1994 Stock Incentive Plan, (ii) the issuance of 13,175,996 shares under
the 1999 Wage Stock and Fee Payment Plan, (iii) the currently exercisable
warrants to purchase 750,000 shares of Common Stock held by two holders, (iv)
the currently exercisable options to purchase 40,000 shares of Common Stock, (v)
667,766 shares reserved for issuance under the Company's currently convertible
Convertible Debentures, (vi) 200,000 shares reserved for issuance under the Toda
Option and (vii) 250,000 shares reserved for issuance under the Merchant
Partners Option, there are 20,060,917 shares of Common Stock available for
future issuance generally without stockholder approval.
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
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<PAGE> 25
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.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Tracker U.S.
pursuant to the foregoing provisions, Tracker U.S. has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of Tracker U.S. for which
indemnification is being sought, nor is Tracker U.S. aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Tracker U.S. is subject to Section 203 of the DGCL ("Section 203"),
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a "Business Combination" (defined as a variety of transactions,
including mergers, as set forth below) with an "Interested Stockholder" (defined
as a person with 15% or more of a corporation's outstanding voting stock) for
three years following the date such person became an Interested Stockholder
Unless: (i) before such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction in which the Interested Stockholder became an Interested
Stockholder; (ii) upon consummation of the transaction that resulted in the
Interested Stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially whether
shares subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or following the date on which such person became an Interested
Stockholder, the Business Combination is (x) approved by the board of directors
of the corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of the holders of at least 66-2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
Section 203 defines a Business Combination to include: (i) any merger
or consolidation with an Interested Stockholder or any affiliate or associate
thereof; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets having an aggregate market value equal to 10% or more of
the aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
a corporation; (iii) any transaction which results in the issuance or transfer
by the corporation or by certain subsidiaries thereof of any stock of the
corporation or such subsidiaries to the Interested Stockholder, except (x)
pursuant to the exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the corporation or any subsidiary
which were outstanding prior to the time the stockholder became an Interested
Stockholder or (y) pursuant to a transaction which effects a pro rata
distribution to all stockholders of the corporation; (iv) any transaction
involving the corporation or certain subsidiaries thereof that has the effect of
increasing the proportionate share of the stock of any class or series, or
securities convertible into the stock of any class or series, of the corporation
or any such subsidiary which is owned directly
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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
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.
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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 1999 annual
meeting of stockholders, approximately one-third (1/3) will continue to serve
until the 2000 annual meeting of stockholders, and approximately one-third (1/3)
will continue to serve until the 2001 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 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.
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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.
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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 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)
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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
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 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
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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 rescission 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.
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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 issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Arkin Merolla LLP, Atlanta,
Georgia, counsel for the Company. Robert D. Arkin, a partner of the firm,
beneficially owns 159,574 shares of the Company's Common Stock.
EXPERTS
The financial statements and financial statement schedules of the
Company at and as of March 31, 1998 appearing in the Company's Annual Report on
Form 10-K, incorporated herein by reference and made a part hereof, have been
audited by Hirsch Silberstein & Subelsky, P.C., independent certified public
accountants, as indicated in its report with respect thereto, and is included
herein in reliance upon the authority of said firm as experts in giving said
reports.
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