SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
Amendment No. 1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 30, 1997
Date of Report (date of earliest event reported)
BOATRACS, INC.
(Exact Name of Registrant as Specified in its Charter)
California 0-11038 33-0644381
(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
6440 Lusk Boulevard, Suite D201
San Diego, California 92121
(Address of Principal Executive Offices
Including Zip Code)
(619) 587-1981
(Registrant's Telephone Number,
Including Area Code)
(Former Name or Former Address if Changed
Since Last Report)
The undersigned Registrant hereby amends its Current Report on
Form 8-K by the addition of financial statements and exhibits as
follows:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
(DELOITTE & TOUCHE LLP LETTERHEAD)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of MED Associates, Inc.:
We have audited the accompanying balance sheet of MED Associates,
Inc. (the "Company") as of October 31, 1997, and the related
statements of operations, stockholders' equity and cash flows for
the ten month period then ended. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
October 31, 1997, and the results of its operations and cash
flows for the ten month period ended October 31, 1997 in
conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
February 22, 1998
<PAGE>
MED ASSOCIATES, INC.
BALANCE SHEET
OCTOBER 31, 1997
ASSETS
CURRENT ASSETS:
Cash $ 5,958
Accounts receivable - net 184,211
_______
Total current assets 190,169
PROPERTY, net of depreciation 54,522
_______
TOTAL $ 244,691
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 138,802
Capital lease payable 4,442
_______
Total current liabilities 143,244
_______
Total liabilities 143,244
_______
STOCKHOLDERS' EQUITY:
Common stock, no par value; 5,000 authorized; 5,000
shares issued and outstanding 5,000
Retained earnings 96,447
_______
Total stockholders' equity 101,447
_______
TOTAL $ 244,691
=======
See notes to financial statements.
<PAGE>
MED ASSOCIATES, INC.
STATEMENT OF OPERATIONS
TEN MONTH PERIOD ENDED OCTOBER 31, 1997
REVENUES:
Contract revenues $ 713,893
Reimbursement revenues 163,416
_______
Total revenues
877,309
_______
COSTS AND EXPENSES:
Contractor services 537,549
Payroll expenses 144,496
Computer hardware and software 49,125
Occupancy, office and administrative expenses 34,984
Depreciation 9,051
Travel 8,429
Supplies 8,157
Advertising and selling expenses 4,022
Other 2,556
Total costs and expenses 798,369
_______
NET INCOME FROM OPERATIONS $ 78,940
=======
See notes to financial statements.
<PAGE>
MED ASSOCIATES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
TEN MONTH PERIOD ENDED OCTOBER 31, 1997
Retained
Shares Amount Earnings Total
BALANCE, JANUARY 1, 1997 5,000 $5,000 $95,551 $100,551
Net income from operations 78,940 78,940
Dividends paid (78,044) (78,044)
_____ _____ ______ ______
BALANCE, OCTOBER 31, 1997 5,000 $5,000 $96,447 $101,447
See notes to financial statements.
<PAGE>
MED ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
TEN MONTH PERIOD ENDED OCTOBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 78,940
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,051
Provision for losses on accounts receivable 1,037
Change in assets and liabilities:
Increase in accounts receivable (126,636)
Increase in accounts payable 111,782
_______
Net cash provided by operating activities 74,174
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (34,220)
_______
Cash used in investing activities (34,220)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (78,044)
_______
Cash used in financing activities (78,044)
NET DECREASE IN CASH 38,090
_______
CASH AT JANUARY 1, 1997 44,048
_______
CASH AT OCTOBER 31, 1997 $ 5,958
=======
See notes to financial statements.
<PAGE>
MED ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
TEN MONTH PERIOD ENDED OCTOBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - MED Associates, Inc. (the "Company")
was incorporated as an S-Corp. in the State of Mississippi on
April 5, 1996. The Company designs, builds, installs and
services onboard information systems to the marine industry.
The Company's methods and proprietary development tools
enable the Company to use off-the-shelf databases to custom
design computer software applications for use in
communications through satellites to and from onboard marine-
based computer systems.
Sale of Assets to Boatracs, Inc. - On November 1, 1997, the
Company sold all of its physical assets along with certain
accounts receivable and current liabilities totalling $75,000
to Boatracs, Inc. of San Diego, California. The assets were
sold for an amount in excess of their net book value.
Boatracs, Inc. is a customer of the Company who provides
messaging and data services to the marine industry. The sale
was made for $500,000 cash, and restricted common stock of
Boatracs, Inc. valued at $420,000 at date of purchase. The
stock is subject to a repurchase option which expires
November 1, 2000.
Property - Property is stated at cost and consists primarily
of computer equipment. Depreciation is provided under a
straight-line over the estimated useful lives of the assets
(generally 3-5 years).
Revenue Recognition - Revenue from the design and
installation of systems is recognized at the time the system
is installed and accepted by the customer. Reimbursed
revenues represent computer parts purchased and resold to
customers at no markup, and are recognized at the time of
shipment or installation.
Significant Customers - Major customers individually
accounted for approximately 50%, 13% and 13% of sales for the
ten month period. Accounts receivable from these customers
aggregated $170,207 at October 31, 1997. The Company has not
historically experienced losses on its accounts receivable.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. BALANCE SHEET DETAILS
Accounts receivable $185,248
Less allowance for doubtful accounts 1,037
_______
$184,211
========
Property- at cost: $ 67,352
Computers and equipment 12,830
______
$54,522
=======
Depreciation expense was $9,051 for the ten month period
ended October 31, 1997.
Retained earnings $174,491
Less dividends paid to stockholders 78,044
______
$96,447
=======
3. LEASES
Facility Leases - The Company leases its facility under a non-
cancelable operating lease which expires December 31, 1997.
Rent expense was approximately $6,000 for the ten month
period ended October 31, 1997.
Capital Lease - Included in property at October 31, 1997 is
computer equipment acquired under a capital lease totalling
$8,550. The lease expires May 20, 1998, at which time title
to the computer equipment transfers to the Company.
4. INCOME TAXES
The Company has elected S corporation status for Federal
income tax purposes. As such, taxable income or loss through
October 31, 1997 was attributed to the two stockholders of
the Company.
* * * * * *
(b) Pro Forma Financial Information.
See Form 10-KSB to be filed with the Securities
and Exchange Commission on March 31, 1998
(c) Exhibits.
2.2 First Amendment to Asset Purchase Agreement dated
as of November 1, 1997 by and among Boatracs, Inc., MED
Associates, Inc., Charles J. Drobny, Jr. and Pamela M.
Drobny.
2.3 Employment Agreement between Boatracs, Inc. and Charles
Drobny effective November 1, 1997, and Option Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this amendment to be
signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 30, 1998 Boatracs, Inc.
By: /s/ Jon Gilbert
Jon Gilbert
President and Chief
Executive Officer
Exhibit 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment To Asset Purchase Agreement
("Amendment") is entered into effective as of November 1, 1997,
among BOATRACS, INC., a California corporation ("Purchaser"), MED
ASSOCIATES, INC., a Mississippi corporation (the "Company"),
CHARLES J. DROBNY, JR., an individual ("CD"), and PAMELA M.
DROBNY, an individual ("PD") (CD and PD, collectively, "Drobny"),
who agree to amend that certain Asset Purchase Agreement dated as
of November 1, 1997 among them (the "Agreement") as follows:
1. Recital.
By this Amendment,
Purchaser, the Company and Drobny intend to amend certain
provisions of the Agreement to more accurately reflect the
agreement of the parties. Capitalized terms used in this
Amendment, and not defined in this Amendment, shall have the
meaning set forth in the Agreement.
2. Deferred Contingent Payment.
Paragraph 4.3(c) of the Agreement is hereby deleted in its
entirety and replaced with the following new paragraph:
"(c) Issuance to the Company, subject to the
option set forth below, of Three Hundred Thousand
(300,000) shares of common stock of Purchaser (the
"Issued Stock"). The certificates representing the
Issued Stock shall contain the following legend and
shall be physically held by Purchaser and not released
to the Company or Drobny until the time for the exercise
of such option has expired:
`THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AN OPTION TO PURCHASE BY
BOATRACS, INC. ON TERMS SET FORTH IN THAT
CERTAIN ASSET PURCHASE AGREEMENT DATED AS OF
NOVEMBER 1, 1997, AS AMENDED.
THESE SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, HAVE BEEN TAKEN
FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO THE DISTRIBUTION THEREOF, AND NEITHER
SUCH SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD, TRANSFERRED, ASSIGNED OR PLEDGED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES, OR
BOATRACS, INC. RECEIVES AN OPINION OF
COUNSEL, THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR PLEDGE IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.'"
3. Option To Purchase.
Paragraph 4.3.1 of the Agreement is hereby deleted in its
entirety and replaced with the following new paragraph:
"4.3.1. The Company hereby grants to Purchaser the
option to purchase all of the Issued Stock if Net
Income From Operations (as defined below) for the
calendar year ended December 31, 1998 is less than
Three Hundred Thousand Dollars ($300,000), then
Purchaser shall have the option to purchase one share
of the Issued Stock for each dollar by which Net Income
From Operations for the calendar year ended December
31, 1998 is less than Three Hundred Thousand Dollars
($300,000). The purchase price pursuant to such option
shall be $0.001 per share of the Issued Stock. Such
option shall be binding upon both Company and Drobny,
and their successors and assigns. Until the time for
the exercise of such option has expired, neither
Company nor Drobny may assign or transfer any rights or
interests in or to the Issued Stock. Purchaser may
exercise such option by giving Drobny or the Company
written notice on or before the date which is 12 months
after the Closing Date. As an example of the number of
shares of Issued Stock Purchaser is entitled to
purchase pursuant to this paragraph, if Net Income From
Operations for the year ended December 31, 1998 is
$200,000, then Purchaser would be entitled to purchase,
and the Company would be obligated to sell to
Purchaser, 100,000 shares of the Issued Stock."
4. Additional Corrections. Paragraph 4.4 of the Agreement
is hereby deleted in its entirety and replaced with the following
new paragraph:
"4.4. The purchase price for the Assets shall be
allocated as set forth on Schedule 4.4 and all tax
returns filed by the parties shall be consistent with
such allocation. Schedule 4.4 shall be subject to the
review and approval of Purchaser's auditors within a
reasonable time after the Closing. The Company and
Purchaser shall each prepare IRS Form 8594 in
accordance with such allocation and consistent with one
another and in accordance with applicable law and
regulations. Such Forms shall be delivered to one
another for review prior to filing with the IRS."
Paragraph 5.25 of the Agreement is hereby deleted in its entirety
and replaced with the following new paragraph:
"5.25 The Company (a) has a preexisting business
relationship with Purchaser, or by reason of its
business or financial experience, is capable of
evaluating the risks and merits of an investment in the
Issued Stock and of protecting its own interests in
connection with the investment; (b) has received and
reviewed all information it considers necessary or
appropriate for deciding whether to accept the Issued
Stock as a portion of the purchase price for the
Assets; (c) has had an opportunity to ask questions and
receive answers from the Purchaser and its officers,
directors, and employees regarding the business,
financial affairs, and other aspects of the Purchaser
and has further had the opportunity to obtain all
information which it deems necessary to evaluate the
investment and to verify the accuracy of information
otherwise provided it; and (d) is acquiring the Issued
Stock for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the
Securities Act."
5. Amendment.
The Agreement shall remain in full force and effect and, except
as expressly amended by this Amendment, unmodified.
6. Waiver.
Any party may waive compliance by another with any of the
provisions of this Amendment. No waiver of any provisions shall
be construed as a waiver of any other provision. Any waiver must
be in writing.
7. Miscellaneous.
The headings contained in this Amendment are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Amendment. This Amendment may
be executed in several counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the
same instrument. This Amendment shall be governed in all
respects, including validity, interpretation and effect, by the
laws of the State of California, applicable to contracts made and
to be performed in California. This Amendment shall be binding
upon and inure to the benefit of the successors and assigns of
the parties hereto. The obligations of Drobny under this
Amendment shall be the joint and several obligations of CD and
PD.
BOATRACS, INC., a California
corporation
By: /s/ JON GILBERT
Jon Gilbert, Chief
Executive Officer and
President
MED ASSOCIATES, INC., a Mississippi
corporation
By: /s/ CHARLES J. DROBNY, JR.
Charles J. Drobny, Jr.,
Chief Executive Officer
/s/ CHARLES J. DROBNY, JR.
/s/ PAMELA M. DROBNY
Exhibit 2.3
EMPLOYMENT AGREEMENT
This Agreement is executed effective November 1, 1997 (the
"Effective Date") between BOATRACS, INC., a California
corporation (the "Company"), having an address for notices at
6440 Lusk Blvd., Suite D-201, San Diego, California 92121-2758
and CHARLES J. DROBNY, JR., ("Drobny"), having an address for
notices at 2457 Summerwood Drive, Gulfport, MS 39507, who agree
as follows:
1. Hiring. The Company hereby hires Drobny as, and Drobny
hereby agrees to act as Vice President of Application
Development. The Company and Drobny intend to enter into an
employer-employee relationship, subject to the terms of this
Agreement, based upon Drobny's ability to design and build
integrated information and communication systems in the marine
industry and other related technical skills and further upon
Drobny's ability to expand and develop the Company's ability to
offer its customers integrated marine information systems.
2. Duties. Drobny shall faithfully and diligently perform
the duties described on attached Exhibit A and the following
described duties on a full-time basis: (a) Devoting Drobny's
entire productive time, ability and attention to the business of
the Company; and (b) Performing such other duties as the Chief
Executive Officer and President of the Company (the "CEO"), shall
from time to time specify that are consistent with the duties
normally performed by an employee in Drobny's position.
3. Base Compensation.
3.1. Drobny's total compensation ("Base Compensation")
under this Agreement, prorated for any partial year, shall be
$150,000.00 per year commencing on the Effective Date and ending
on the second anniversary of the Effective Date (the "First
Half"), and $180,000.00 per year commencing on the expiration of
the First Half and continuing until the fourth anniversary of the
term of this Agreement (the "Second Half"). The Base
Compensation shall be payable biweekly in arrears from the
Effective Date, in accordance with and at the same times as the
Company's ordinary payroll procedures.
3.2. During the First Half, Drobny may, at his
election, receive up to $30,000.00 per year of Base Compensation
in the form of shares of the Company's common stock (the
"Stock"). During the Second Half, Drobny may, at his election,
receive up to $60,000.00 per year of Base Compensation in the
form of Stock. Drobny may exercise such option, with respect to
any particular semi-annual period (defined as January 1-June 30
and July 1-December 31), by written notice to the Company on or
before 5 days before the beginning of such semi-annual period
(such exercise, an "Election"). Such notice will specify that
portion of his Base Compensation for the upcoming semi-annual
period that Drobny elects to receive in the form of Stock. The
value of Stock for purposes of this Paragraph shall be determined
as follows:
(i) If the Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the
over-the-counter market, the fair market value shall be the
average mean between the highest bid and lowest asked prices (or,
if such information is available, the closing selling prices) of
one share of the Stock in the over-the-counter market, as such
prices are reported by the National Association of Securities
Dealers through its NASDAQ system or any successor system, on the
first three trading days of the semi-annual period to which the
Election relates. If there are no reported bid and asked prices
(or closing selling prices) for the Stock on any of the dates in
question, then the average mean between the highest bid price and
lowest asked prices (or the closing selling price) on the last
three preceding dates for which such quotations exist shall be
determinative of fair market value.
(ii) If the Stock is at the time listed or
admitted to trading on any stock exchange, then the fair market
value shall be the average closing selling price of one share of
Stock on the first three trading days of the semi-annual period
to which the Election relates, on the stock exchange determined
by the Company, in its reasonable discretion, to be the primary
market for the Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Stock on such exchange on the dates in question,
then the fair market value shall be the average closing selling
prices on the exchange on the last three preceding dates for
which such quotations exist.
4. Benefits. Drobny shall be entitled to the following
benefits during the term of this Agreement:
4.1. Vacation benefits generally available to other
executives of the Company of comparable seniority and rank,
accrued over the course of each year in accordance with the
Company's policy.
4.2. Reimbursement for reasonable expenses incurred in
the proper performance of Drobny's duties under this Agreement
and in accordance and consistent with the Company's policy.
4.3. Inclusion in the Company's medical plan for the
Company's other employees.
4.4. All benefits generally available to other
employees of the Company, including without limitation profit
sharing benefits generally made available to other employees of
Drobny's rank and seniority.
4.5. Reasonable moving expenses in the event the
Company requires Drobny to relocate his residence outside
Gulfport, Mississippi.
5. Term. The term of this Agreement shall be four (4)
years, commencing on the Effective Date and ending on the fourth
anniversary of the Effective Date, unless terminated earlier in
accordance with the terms hereof.
6. Termination. At any time that Good Cause (as defined
below) exists or has arisen, the Company may, at its election,
terminate this Agreement upon 3 days written notice. In the
event of such Good Cause termination, Drobny may, at his
election, appeal such termination to the Board of Directors of
the Company, whose determination shall be final and binding. For
purposes of this Agreement, "Good Cause" shall mean the existence
or occurrence of any of the following:
6.1. Any neglect or breach of duty by Drobny, or any
failure by Drobny to perform, to the reasonable satisfaction of
the CEO, such duties as may be delegated to Drobny by the Company
from time to time.
6.2. If Drobny is convicted of a felony or files for
any protection under the federal bankruptcy laws (or any such
proceeding is filed against Drobny and is not dismissed within
90 days of such filing).
6.3. If Drobny commits theft, larceny, embezzlement,
fraud, any acts of dishonesty, illegality, moral turpitude or
gross mismanagement, as determined in good faith by the CEO,
whose determination shall be final and binding.
6.4. If Drobny breaches any obligation set forth in
Paragraphs 8, 9, 10 or 11 or materially and repeatedly breaches
any other provision of this Agreement.
6.5. If Drobny breaches any term of that certain Asset
Purchase Agreement dated November 17, 1997 among MED Associates,
Inc., Drobny, Pamela M. Drobny, and the Company.
6.6. The death of Drobny.
6.7. If Drobny becomes materially disabled to such an
extent that Drobny is precluded from performing the duties set
forth in this Agreement for a period of three (3) months or more
within any twelve (12) month period. Disability shall not be
proper grounds for termination in the event that such disability
arises from injuries received by Drobny while traveling in the
scope of his employment.
6.8. If Drobny fails to adhere to any Company policy
or any future policy of Company.
7. Representations and Warranties. Drobny hereby
represents and warrants that as of the date of execution of this
Agreement: (i) this Agreement will not cause or require Drobny to
breach any obligation to, or agreement or confidence with, any
other person; (ii) except as disclosed in writing by Drobny to
the Company prior to the execution of this Agreement, Drobny is
not representing, or otherwise affiliated in any capacity with,
any other lines of products, manufacturers, vendors or customers
of the Company; and (iii) Drobny has not been induced to enter
into this Agreement by any promise or representation other than
as expressly set forth in this Agreement. In addition, in
connection with Drobny's election to receive a portion of the
Base Compensation in the form of Stock, Drobny hereby represents
and warrants that the following factual statements are true and
accurate as of the Effective Date and will be true and accurate
as of the date of any Election by Drobny: (a) Drobny has a
preexisting business relationship with the Company, or by reason
of its business or financial experience, is capable of evaluating
the risks and merits of an investment in the Stock and of
protecting its own interests in connection with the investment;
(b) Drobny has received and reviewed all information it considers
necessary or appropriate for deciding whether to accept the
Stock; (c) has had an opportunity to ask questions and receive
answers from the Company and its officers, directors, and
employees regarding the business, financial affairs, and other
aspects of the Company and has further had the opportunity to
obtain all information which it deems necessary to evaluate the
investment and to verify the accuracy of information otherwise
provided it; and (d) is acquiring the Stock for his own account
and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
8. Confidentiality. Drobny hereby acknowledges that the
Company has made (or may make) available to Drobny certain
customer lists, product design information, performance standards
and other confidential and/or proprietary information of the
Company or licensed to the Company, including without limitation
trade secrets, copyrighted materials and/or financial information
of the Company (or any of its Affiliates, as defined in Paragraph
10 below) including without limitation financial statements,
reports and data (collectively, the "Confidential Material").
Except as essential to Drobny's obligations under this Agreement,
neither Drobny nor any agent, employee, officer, or independent
contractor of or retained by Drobny shall make any disclosure of
this Agreement, the terms of this Agreement, or any of the
Confidential Material. Except as essential to Drobny's
obligations under this Agreement, neither Drobny nor any agent,
employee, officer, or independent contractor of or retained by
Drobny shall make any duplication or other copy of any of the
Confidential Material. Immediately upon request from the
Company, Drobny shall return to the Company all Confidential
Material. Drobny shall notify each person to whom any disclosure
is made that such disclosure is made in confidence, that the
Confidential Material shall be kept in confidence by such person,
and that such person shall be bound by the provisions of this
Paragraph.
9. Proprietary Information. For purposes of this
Agreement, "Proprietary Information" shall mean any information,
observation, data, written material, record, document, computer
program, software, firmware, invention, discovery, improvement,
development, tool, machine, apparatus, appliance, design,
promotional idea, customer list, practice, process, formula,
method, technique, trade secret, product and/or research related
to the actual or anticipated research, marketing strategies,
pricing information, business records, development, products,
organization, business or finances of the Company (or any of its
Affiliates). All right, title and interest of every kind and
nature whatsoever in and to the Proprietary Information made,
discussed, developed, secured, obtained or learned by Drobny
during the term of this Agreement, or the 60-day period
immediately following termination of this Agreement, shall be the
sole and exclusive property of the Company for any purposes or
uses whatsoever, and shall be disclosed promptly by Drobny to the
Company. The covenants set forth in the preceding sentence shall
apply regardless of whether any Proprietary Information is made,
discovered, developed, secured, obtained or learned (a) solely or
jointly with others, (b) during the usual hours of work or
otherwise, (c) at the request and upon the suggestion of the
Company or otherwise, or (d) with the Company's materials, tools,
instruments or on the Company's premises or otherwise. All
Proprietary Information developed, created, invented, devised,
conceived or discovered by Drobny that are subject to copyright
protection are explicitly considered by Drobny and the Company to
be works made for hire to the extent permitted by law. Drobny
hereby assigns to the Company all of Drobny's right, title and
interest in and to the Proprietary Information. Drobny hereby
forever fully releases and discharges the Company, any Affiliates
of the Company and their respective officers, directors and
employees, from and against any and all claims, demands, damages,
liabilities, costs and expenses of Drobny arising out of, or
relating to, any Proprietary Information. Drobny shall execute
any documents and take any action the Company may deem necessary
or appropriate to effectuate the provisions of this Agreement,
including without limitation assisting the Company in obtaining
and/or maintaining patents, copyrights or similar rights to any
Proprietary Information assigned to the Company, if the Company,
in its sole discretion, requests such assistance. Drobny shall
comply with any reasonable rules established from time to time by
the Company for the protection of the confidentiality of any
Proprietary Information. Drobny irrevocably appoints the CEO to
act as Drobny's agent and attorney-in-fact to perform all acts
necessary to obtain and/or maintain patents, copyrights and
similar rights to any Proprietary Information assigned by Drobny
to the Company under this Agreement if (a) Drobny refuses to
perform those acts, or (b) is unavailable, within the meaning of
any applicable laws. Drobny acknowledges that the grant of the
foregoing power of attorney is coupled with an interest and shall
survive the death or disability of Drobny. Drobny shall promptly
disclose to the Company, in confidence (a) all Proprietary
Information that Drobny creates during the term of this
Agreement, and (b) all patent applications filed by Drobny within
one year after termination of this Agreement. Any application
for a patent, copyright registration or similar right filed by
Drobny within one year after termination of this Agreement shall
be presumed to relate to Proprietary Information created by
Drobny during the term of this Agreement, unless Drobny can prove
otherwise. Nothing contained in this Agreement shall be
construed to preclude the Company from exercising all of its
rights and privileges as sole and exclusive owner of all of the
Proprietary Information owned by or assigned to the Company under
this Agreement. The Company, in exercising such rights and
privileges with respect to any particular item of Proprietary
Information, may decide not to file any patent application or any
copyright registration on such Proprietary Information, may
decide to maintain such Proprietary Information as secret and
confidential, or may decide to abandon such Proprietary
Information or dedicate it to the public. Drobny shall have no
authority to exercise any rights or privileges with respect to
the Proprietary Information owned by or assigned to the Company
under this Agreement. This Agreement does not apply to any
Proprietary Information that qualifies fully under the provisions
of California Labor Code Section 2870 or any similar or successor
statute.
10. Competition. Drobny acknowledges that this Agreement is
being entered in connection with the purchase by the Company of
substantially all of the assets of a corporation with respect to
which Drobny and his spouse are the sole shareholders. To the
extent permitted by applicable law, during the period of time set
forth in Paragraph 10.5 below:
10.1. Drobny shall not, directly or indirectly, engage
or invest in, own, manage, operate, finance, control, or
participate in the ownership, management, operation, or control
of, be employed by, associated with, or in any manner connected
with, or render services or advice to, any business whose
products or activities compete in whole or in part with the
products or business of the Company within the world.
10.2. Drobny shall not undertake any employment or
activity competitive with the Company's business, including
without limitation the inducement or solicitation of the
Company's customers, if the duties or work of, in connection with
or related to such competitive employment or activity would or
might cause Drobny to reveal or use any Confidential Material or
Proprietary Information. The restriction set forth in this
Paragraph 10.2 shall not be limited to a particular geographical
area.
10.3. Drobny shall not, directly or indirectly, either
for himself or any other person, (A) induce or attempt to induce
any employee of the Company or any Affiliate (as defined below)
to leave the employ of such company, (B) in any way interfere
with the relationship between the Company or any Affiliate and
any employee of such company, (C) employ, or otherwise engage as
an employee, independent contractor, or otherwise, any employee
of the Company or any Affiliate, or (D) induce or attempt to
induce any customer, supplier, licensee, or business relation of
the Company or any Affiliate to cease doing business with such
company, or in any way interfere with the relationship between
any customer, supplier, licensee, or business relation of such
company.
10.4. Drobny shall not, directly or indirectly, either
for himself or any other person, solicit the business of any
person known to Drobny to be a customer of the Company or any
Affiliate, whether or not Drobny had business or personal contact
with such person, unless Drobny's solicitation of such person is
done in connection with a business that is not competitive with
that of the Company or any Affiliate.
10.5. The duration of the covenants set forth in this
Paragraph 10 shall be the entire term of Drobny's employment with
the Company plus a period of two years after the termination of
such employment. Drobny agrees that this covenant is reasonable
with respect to its duration, geographical area, and scope.
Notwithstanding such restriction, Drobny may purchase or
otherwise acquire up to (but not more than) three percent (3%) of
any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such
securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934.
In the event of a breach by Drobny of any covenant set forth
in this Paragraph 10, the term of such covenant will be extended
by the period of the duration of such breach, provided, however,
that such extension shall be limited to two years. In addition
to the Company's right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain
any breach or threatened breach or otherwise to specifically
enforce the provisions of this Paragraph, Drobny agrees that
money damages alone would be inadequate to compensate the Company
and would be an inadequate remedy for such breach. If a court of
competent jurisdiction holds that the obligations of Drobny
pursuant to this Paragraph 10 are unenforceable due to the
duration, geographical area or scope of this covenant, then such
duration, geographical area or scope of this covenant shall be
reduced to the least degree necessary to render this covenant
enforceable. For purposes of this Agreement, "Affiliate" shall
mean any partner, employee, director, shareholder, officer of
Company or any person or entity controlled by, controlling, or
under common control with, directly or indirectly, the Company.
Drobny shall be released from his obligations under this
Paragraph 10 upon the occurrence of either of the following
events: (a) the material breach by the Company under this
Agreement adjudicated as such by a court of competent
jurisdiction, or (b) Jon Gilbert and Michael Silverman's
termination of their involvement with the Company.
11. Business Opportunities. During the term of this
Agreement, if Drobny (or any agent, employee, officer or
independent contractor of or retained by Drobny) becomes aware
of, or develops, creates, invests, devises, conceives or
discovers, any project, investment, venture, business or other
opportunity (any of the preceding, an "Opportunity") that is
similar to, competitive with, related to or in the same field as
the Company or any Affiliate, or any project, investment,
venture, or business of the Company or any Affiliate, then Drobny
shall so notify the Company immediately in writing of such
Opportunity and shall use Drobny's good-faith efforts to cause
the Company to have the opportunity to invest in, participate in
or otherwise become affiliated with such Opportunity.
12. Survival. The representations, warranties and
covenants of Drobny in this Agreement shall survive any
termination of this Agreement.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
14. Further Assurances. Each party to this Agreement shall
execute all instruments and documents and take all actions as may
be reasonably required to effectuate this Agreement.
15. Venue and Jurisdiction. For purposes of venue and
jurisdiction, this Agreement shall be deemed made and to be
performed in the City of San Diego, California.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all
of which together shall constitute one document.
17. Time of Essence. Time and strict and punctual
performance are of the essence with respect to each provision of
this Agreement.
18. Attorney's Fees. In the event any litigation,
arbitration, mediation, or other proceeding ("Proceeding") is
initiated by any party(ies) against any other party(ies) to
enforce, interpret or otherwise obtain judicial or quasi-judicial
relief in connection with this Agreement, the prevailing
party(ies) in such Proceeding shall be entitled to recover from
the unsuccessful party(ies) all costs, expenses, and actual
attorney's fees relating to or arising out of (d) such Proceeding
(whether or not such Proceeding proceeds to judgment), and
(e) any post-judgment or post-award proceeding including without
limitation one to enforce any judgment or award resulting from
any such Proceeding. Any such judgment or award shall contain a
specific provision for the recovery of all such subsequently
incurred costs, expenses, and actual attorney's fees.
19. Modification. This Agreement may be modified only by a
contract in writing executed by the party(ies) to this Agreement
against whom enforcement of such modification is sought.
20. Headings. The headings of the Paragraphs of this
Agreement have been included only for convenience, and shall not
be deemed in any manner to modify or limit any of the provisions
of this Agreement, or be used in any manner in the interpretation
of this Agreement.
21. Prior Understandings. This Agreement contains the
entire agreement between the parties to this Agreement with
respect to the subject matter of this Agreement, is intended as a
final expression of such parties' agreement with respect to such
terms as are included in this Agreement, is intended as a
complete and exclusive statement of the terms of such agreement,
and supersedes all negotiations, stipulations, understandings,
agreements, representations and warranties, if any, with respect
to such subject matter, which precede or accompany the execution
of this Agreement.
22. Interpretation. Whenever the context so requires in
this Agreement, all words used in the singular shall be construed
to have been used in the plural (and vice versa), each gender
shall be construed to include any other genders, and the word
"person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an
estate or any other entity.
23. Partial Invalidity. Each provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by
law. If any provision of this Agreement or the application of
such provision to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected by such invalidity or
unenforceability, unless such provision or such application of
such provision is essential to this Agreement.
24. Notices. All notices or other communications required
or permitted to be given to a party to this Agreement shall be in
writing and shall be personally delivered, sent by certified
mail, postage prepaid, return receipt requested, or sent by an
overnight express courier service that provides written
confirmation of delivery, to such party at its address as set
forth above in the introductory Paragraph of this Agreement.
Each such notice or other communication shall be deemed given,
delivered and received upon its actual receipt, except that if it
is sent by mail in accordance with this Paragraph, then it shall
be deemed given, delivered and received three days after the date
such notice or other communication is deposited with the United
States Postal Service in accordance with this Paragraph. Any
party to this Agreement may give a notice of a change of its
address to the other party(ies) to this Agreement.
25. Drafting Ambiguities. Each party to this Agreement has
reviewed and revised this Agreement. Each party to this
Agreement has had the opportunity to have such party's legal
counsel review and revise this Agreement. The rule of
construction that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of
this Agreement or of any amendments or exhibits to this
Agreement.
BOATRACS, INC., a California corporation
By: /s/ JON GILBERT
Jon Gilbert, Chief Executive Officer
and President
/s/ CHARLES J. DROBNY, JR.
<PAGE>
OPTION AGREEMENT
This Option Agreement ("Amendment") is entered into
effective as of November 1, 1997, among BOATRACS, INC., a
California corporation (the "Company"), and CHARLES J. DROBNY,
JR., an individual ("Drobny"), who agree to between them (the
"Agreement") as follows:
1. Stock of the Company. Drobny and the Company agree that
if, at any time prior to November 1, 2001, (i) Drobny materially
breaches the Agreement and such breach is not cured within 10
days after written notice of such breach, or (ii) Drobny
voluntarily terminates his employment with the Company (other
than on account of death or material disability), then the
Company shall have the option to purchase all of the 300,000
shares of common stock of the Company issued to Drobny and/or Med
Associates, Inc. ("Med") pursuant to that certain Asset Purchase
Agreement dated as of November 1, 1997, as amended. The purchase
price for such shares shall be $.001 per share. Until the time
for the exercise of such option has expired, neither Drobny nor
Med may assign or transfer any rights or interests in or to such
shares. The Company may exercise such option by giving Drobny or
Med written notice on or before May 1, 2001.
2. Miscellaneous.
The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may
be executed in several counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the
same instrument. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the
laws of the State of California, applicable to contracts made and
to be performed in California. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of
the parties hereto.
BOATRACS, INC., a California
corporation
By: /s/ JON GILBERT
Jon Gilbert, Chief Executive
Officer and President
/s/ CHARLES J. DROBNY, JR.
CHARLES J. DROBNY, JR.
With respect to the option to
purchase the shares set forth
above:
MED ASSOCIATES, INC., a Mississippi
corporation
By: /s/ CHARLES J. DROBNY, JR.
Charles J. Drobny, Jr.,
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 5,958
<SECURITIES> 0
<RECEIVABLES> 185,248
<ALLOWANCES> 1,037
<INVENTORY> 0
<CURRENT-ASSETS> 190,169
<PP&E> 67,352
<DEPRECIATION> 12,830
<TOTAL-ASSETS> 244,691
<CURRENT-LIABILITIES> 143,244
<BONDS> 0
<COMMON> 5,000
0
0
<OTHER-SE> 96,447
<TOTAL-LIABILITY-AND-EQUITY> 244,691
<SALES> 877,309
<TOTAL-REVENUES> 877,309
<CGS> 0
<TOTAL-COSTS> 798,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 78,940
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,940
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
