BOATRACS, INC.
6440 Lusk Boulevard, Suite D-201
San Diego, California, 92121
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON MAY 11, 1998
The Annual Meeting of the Shareholders ("Annual Meeting") of
BOATRACS, Inc., a California corporation (the "Company"), will be
held at QUALCOMM, Inc., 6455 Lusk Boulevard, San Diego,
California 92121 on May 11, 1998, at 2:00 p.m. for the following
purposes:
1. To elect seven directors of the Company, all of whom
shall serve until the 1999 Annual Meeting of Shareholders (and
until the election and qualification of their successors);
2. To consider and act upon a proposal to ratify and
approve an amendment to the BOATRACS, Inc. 1996 Stock Option Plan
increasing the number of available shares to 2,000,000; and
3. To consider and act upon any other matters which may
properly come before the Annual Meeting and any adjournment
thereof.
The Board of Directors has fixed the close of business on
March 23, 1998, as the record date for the determination of the
holders of Common Stock entitled to notice of and to vote at the
Annual Meeting.
All shareholders are cordially invited to attend the Annual
Meeting in person. Regardless of whether you plan to attend the
Annual Meeting, please sign and date the enclosed Proxy and
return it as promptly as possible in the enclosed pre-addressed
and postage paid envelope. The prompt return of Proxies will
ensure a quorum and save the Company expense of further
solicitation. Any shareholder returning the enclosed Proxy may
revoke it prior to its exercise by voting in person at the Annual
Meeting or by filing with the Secretary of the Company a written
revocation or duly executed Proxy bearing a later date.
By Order of the Board of Directors,
Michael Silverman
Chairman
San Diego, California
April 2, 1998
BOATRACS, INC.
6440 Lusk Boulevard, Suite D201
San Diego, California 92121
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1998
I. PROXIES
This Proxy Statement is furnished in connection with the
solicitation of Proxies by or on behalf of the Board of Directors
("Board") of BOATRACS, Inc., a California corporation (the
"Company"), for use at the Company's 1998 Annual Meeting of
Shareholders to be held on May 11, 1998, at QUALCOMM, Inc., 6455
Lusk Boulevard, San Diego, California 92121 at 2:00 p.m., and at
any and all adjournments thereof (the "Annual Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting
of Shareholders.
Any Shareholder may revoke his or her proxy by delivering written
notice of revocation to the Secretary of the Company at its
principal office, 6440 Lusk Boulevard, Suite D201, San Diego,
California 92121, by a delivery of proxy bearing a later date, or
by attendance at the Annual Meeting and voting in person.
This Proxy Statement and the Annual Report of the Company for the
year ended December 31, 1997, will be mailed on or about April 2,
1998, to each shareholder of record as of the close of business
on March 23, 1998.
The solicitation of proxies is being made only by use of the
mails. The cost of preparing, assembling and mailing these proxy
materials will be paid by the Company. Following the mailing of
this Proxy Statement, Directors, officers and regular employees
of the Company may solicit proxies by mail, telephone, telegraph
or personal interview. Such persons will receive no additional
compensation for such services. Brokerage houses and other
nominees, fiduciaries and custodians nominally holding shares of
the Company's common stock of record will be requested to forward
proxy soliciting material to the beneficial owners of the shares,
and will be reimbursed by the Company for their reasonable out-of
pocket expenses incurred in forwarding these materials.
When your proxy is returned properly signed, the shares
represented will be voted in accordance with your directions.
Where specific choices are not indicated, proxies will be voted
in favor of the seven persons nominated to be directors in
Proposal One and in favor of Proposal Two. If a proxy or ballot
indicates that a shareholder or nominee abstains from voting or
that shares are not to be voted on a particular proposal, the
shares will not be counted as having been voted on that proposal,
and those shares will not be reflected in the final tally of the
votes cast with regard to that proposal, although such shares
will be counted as in attendance at the Annual Meeting for
purposes of determining a quorum. Additionally, broker non-votes
are not counted as votes cast on any matter to which they relate.
The presence at the Annual Meeting in person or by proxy of the
holders of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum
for the transaction of business.
Holders of Common Stock are entitled to one vote per share on all
matters brought before the Annual Meeting and to cumulate votes
for the election of directors. A shareholder may not cumulate
votes unless the shareholder has announced at the Annual Meeting
the intention to do so before the voting has begun, but if any
shareholder makes such an announcement, all shareholders may
cumulate votes. Cumulative voting rights entitle a shareholder to
give one nominee as many votes as are equal to the number of
directors to be elected, multiplied by the number of shares owned
by the shareholder, or to distribute his or her votes as the
shareholder sees fit among two or more nominees on the same
principle, up to the total number of nominees to be elected. The
seven nominees for director receiving the highest number of votes
at the Annual Meeting from the holders of Common Stock will be
elected.
An affirmative vote of a majority of the shares represented and
voting at the Annual Meeting is required for approval of Proposal
Two.
Directors and officers beneficially own approximately 60% of the
outstanding shares of Common Stock. The directors and officers
have indicated that they intend to vote for each of the nominees
for director and in favor of Proposal Two. Therefore, in the
absence of cumulative voting, the election of each nominee as a
director is assured. Further, the approval of Proposal Two is
assured.
II. Voting Securities and Principal Holders
The Company had 15,841,377 shares of Common Stock, no par value
(the "Common Stock"), outstanding as of March 23, 1998. Holders
of record of shares of the Common Stock at the close of business
on March 23, 1998, will be entitled to notice of and to vote at
the Annual Meeting and will be entitled to one vote for each such
share.
Set forth below is certain information concerning the ownership
of the Company's Common Stock as of March 23, 1998, by (i) all
persons known to the Company to be beneficial owners of more than
5% of the outstanding Common Stock, (ii) each director of the
Company, (iii) each executive officer of the Company, and (iv)
all executive officers and directors of the Company as a group.
Except as otherwise indicated, and subject to applicable
community property and similar laws, the persons named have sole
voting and investment power with respect to the securities owned
by them.
Name and Address Number of Shares Percent of
of Shareholder(1) Beneficially Owned Outstanding Shares
QUALCOMM Incorporated 1,112,265 7%
6455 Lusk Boulevard
San Diego, CA 92121
Michael Silverman 3,954,317 25
Jon Gilbert 3,836,800 (2) 24
Annette Friskopp 447,931 3
Giles Bateman 669,825 4
Luis Maizel 104,921(3) *
Mitchell Lynn 127,500(4) *
Julius Trump 90,000(5) *
Daniel Negroni 15,000 *
Charles Drobny, Jr. 308,000(6) 2
Curt McLeland 0 *
All Directors and Executive
Officers as a group
(10 persons)(7) 9,554,294 60%
_____________________
(1) The address for all directors and executive officers is
6440 Lusk Boulevard, Suite D-201 San Diego, California, 92121.
(2) Includes 236,800 shares held in a Family Trust of which Mr.
Gilbert is a trustee.
(3) Includes 83,600 shares held by the Maizel Family Trust of
which Mr. Maizel is a trustee and 15,321 shares held in a
Retirement Plan for which Mr. Maizel is a trustee.
(4) Includes 30,000 shares held in trust for children which Mr.
Lynn disclaims beneficial ownership of. The number also includes
50,000 options issued under a Non-Circumvention Agreement dated
January 9, 1996 at $1.50 per share.
(5) Represents shares indirectly owned by a Trust of which Mr.
Trump or members of his family may become beneficial owners.
Mr. Trump disclaims beneficial ownership of such shares.
(6) 300,000 of the shares represent restricted stock
granted under an agreement. These shares are subject to
repurchase under certain conditions.
(7) Includes shares issuable upon the exercise of options
within sixty days of March 23, 1997, as follows: Ms.
Friskopp, 70,000 shares; Mr. Bateman, 6,000 shares and Mr.
Maizel, 6,000 shares.
* Less than 1%
III. Election Of Directors
The persons named below have been nominated by management for
election as directors of the Company to serve until the 1999
Annual Meeting of Shareholders or until their respective
successors are duly elected and qualify.
Unless otherwise instructed, the enclosed proxy will be voted for
election of the nominees listed below, except that the persons
designated as proxies reserve full discretion to cast their votes
for another person recommended by management in the unanticipated
event that any nominee is unable to or declines to serve.
Name of Nominee Age Position with the Company
Michael Silverman 53 Chairman, Director
Jon Gilbert 54 Chief Executive Officer,
President, Director
Annette Friskopp 34 Director
Giles Bateman 53 Director
Luis Maizel 47 Director
Mitchell Lynn 49 Director
Julius Trump 54 Director
Mr. Silverman formed BOATRACS, Inc in 1990 ("Old BOATRACS") and
served as its Chairman, Chief Executive Officer, President and a
director of that company from its inception until the merger of
Old BOATRACS with the Company (the "Merger") on January 12, 1995,
at which time he assumed the same positions with the Company.
Mr. Silverman served the Company as President and Chief Executive
Officer from the date of the Merger until October, 1997. Mr.
Silverman is a Chartered Accountant (South Africa) and received a
Master of Business Administration degree from Stanford
University.
Mr. Gilbert joined the Company as its President, Chief Executive
Officer and director in October, 1997. Mr. Gilbert was with
Maintenance Warehouse the previous 12 years and held several
executive positions, including the title of Chief Executive
Officer. Mr. Gilbert earned a Bachelor of Science Degree from
UCLA. In addition to being a Certified Public Accountant, he
holds a Masters in Accounting Degree.
Ms. Friskopp joined Old BOATRACS in 1991 as Senior Vice President
of Production, Development and Operations and assumed her present
positions with the Company following the Merger. She became a
director of the Company at the Merger. Prior to joining Old
BOATRACS, Ms. Friskopp attended Harvard Business School where
she earned a Master of Business Administration. Ms. Friskopp
holds a Bachelor of Science degree in Accounting with emphasis on
International Business from the University of Nebraska and she
has credits from other universities for her studies in Europe and
Asia. She is a Certified Public Accountant and previously worked
in the audit division of Price Waterhouse.
Mr. Bateman was elected a director of Old BOATRACS in 1994 and
became a director of the Company upon the Merger. Since 1991, Mr.
Bateman has served as a director of Comp USA, a superstore
computer retailer, and has served as that company's chairman
since 1993. Mr. Bateman was a co-founder of The Price Company
and served as chief financial officer and a director of that
company from 1976 to 1991 and as vice chairman from 1986 to 1991.
Mr. Bateman holds a Bachelor of Arts Degree from Oxford
University, England, in Jurisprudence and a Master of Business
Administration from Harvard Business School.
Mr. Maizel became a director of the Company in October, 1995. For
more than the past five years, Mr. Maizel has been president of
LM Advisors, LM Capital Management, money management firms and a
board member of several financial and commercial corporations in
the U.S. and Mexico. He was born and raised in Mexico City,
holds a Bachelor of Science Degree in Mechanical Electrical
Engineering, an Master of Science in Industrial Engineering from
the National University of Mexico and an Master of Business
Administration from Harvard Business School where he also was a
faculty member.
Mr. Lynn became a director of the Company in June, 1997. He is
also President and Managing Director of Combined Resources
International, a manufacturer of picture frames and other items.
Mr. Lynn was President of The Price Company, a San Diego based
warehouse club retailer from 1990-1993 and later senior executive
vice president of Price/Costco until he resigned in 1994. He is
a California Certified Public Accountant and holds Bachelor of
Arts Degree in Economics and a Master of Business Administration
from UCLA.
Mr. Trump became a director of the Company in June, 1997. He has
served as Chairman or Co-Chairman of The Trump Group (a private
investment group) for more than 5 years. In addition, Mr. Trump
served as Chairman of the Board and Chief Executive Officer of
CSK Auto Corporation (a retailer of automotive parts and
accessories) for more than 5 years prior to his resignation in
January, 1997, and continues to serve as a director of CSK Auto
Corporation.
There are no family relationship between any of the Company's
directors and officers. There are no arrangements or
understandings between any director or executive officer and any
other person pursuant to which any person has been elected or
nominated as a director or executive officer. All directors and
executive officers serve for a term of one year until the next
Annual Meeting of Shareholders.
During the year ended December 31, 1997, the Board held four
meetings where all directors were present except Ms. Friskopp who
missed two meetings and Mr. Maizel and Mr. Trump who each missed
one meeting. The Company presently has a Compensation Committee
of the Board consisting of Giles Bateman, Michael Silverman, and
Mitchell Lynn. The Compensation Committee's primary function is
to establish compensation for employees and effect promotions.
The Audit Committee, consisting of Mitchell Lynn, Giles Bateman
and Norman Kane, advises the Board as to the selection of the
Company's independent accountants. A decision to replace Dr.
Kane on the Audit Committee has not been made. During 1997, the
Compensation Committee met three times and the Audit Committee
did not meet, although audit issues were discussed by the
committee at a regular Board meeting.
Executive Officers
In addition to those listed above, the following individuals are
also Executive Officers:
Name Age Position with the Company
Daniel W. Negroni, Esq. 32 Vice President,
Business Development and
Domestic Sales
Charles J. Drobny, Jr. 47 Vice President,
Application Development
Curt V. McLeland 34 Chief Financial
Officer
Mr. Negroni joined the Company in October, 1997 as Vice President
of Business Development and Domestic Sales. Prior to joining the
Company, Mr. Negroni was with Seltzer Caplan Wilkins & McMahon
where he focused on
business transactional law within the high technology industry.
From 1993 to 1995, he held the position of Vice President, Sales
and Marketing, at Dearan Imports. Mr. Negroni holds a Bachelor
of Science in Business Administration from Boston University and
a Juris Doctorate degree from Georgetown University Law Center in
Washington, D.C.
Mr. Drobny joined the Company in December, 1997 as Vice
President - Application Development when the Company purchased
MED Associates Inc. Mr. Drobny started MED as Management
Engineering Design in September, 1993. Prior to 1993, Mr. Drobny
was Vice President and General Manager of Genesis Systems in Bay
St. Louis, a manufacturer of marine information systems.
Mr. McLeland joined the Company in March, 1998 as Chief Financial
Officer. Prior to joining the Company Mr. McLeland held the
position as Chief Financial Officer at a San Diego internet
service provider. From 1994 to 1996 Mr. McLeland held the
position as Chief Financial Officer at RJR Horizons,Inc., a San
Diego company which owns multiple software training franchises.
From 1990 to 1993 Mr. McLeland was in the audit department of
KPMG Peat Marwick, San Diego. He holds a Bachelor of Science in
Accounting from San Diego State University.
IV. Executive Compensation
Executive Compensation
The following table sets forth for the years indicated certain
compensation of the Company's Chairman and the persons occupying
the office of Chief Executive Officer and the Company's executive
officers of the Company who actually earned or who were paid on a
basis of more than $100,000 in salary and bonuses in such years.
SUMMARY COMPENSATION TABLE
No. of shares
Annual Compensation underlying
Principal Position Year Salary Bonus Options
Michael Silverman 1997 $103,291(1) $0
Chairman, Director 1996 $100,000 $0
1995 $100,000 $0
Jon Gilbert 1997 $26,154(2) $0
President, Chief Executive
Officer, Director
Annette Friskopp 1997 $130,769 $49,350
Executive Vice 1996 $124,961 $31,950 250,000
President, Director 1995 $107,654 $31,800
Daniel Negroni 1997 $19,885 (2) $0 100,000
Vice President,
Business Development and
Domestic Sales
Charles Drobny, Jr. 1997 $25,000(3) $0
Vice President,
Applications Development
________________
(1) Mr. Silverman was the president and chief executive officer
of the Company until October, 1997. He currently serves as
Chairman of the Board at an annual salary of $120,000.
(2) Mr. Gilbert and Mr. Negroni joined the Company during
October, 1997. Mr. Gilbert's annual salary is
$120,000 and Mr. Negroni's annual salary is $110,000.
(3) Mr. Drobny became Vice President effective November 1, 1998
through an acquisiton of his company, MED Associates, Inc. Mr.
Drobny's annual salary is $150,000.
The Company entered into an employment agreement with Michael
Silverman, effective January 1, 1995. Under the agreement, Mr.
Silverman's annual base compensation was $100,000 subject to
increases in the Board's discretion. Mr. Silverman's base
compensation is currently $120,000 annually. The employment
agreement automatically renews for successive one-year periods
unless terminated, and is terminable by the Company at any time
for good cause as defined in the agreement.
In connection with the Restricted Stock Purchase Agreement
between the Company and Jon Gilbert described below under
"Certain Transactions", in the event that the Board of Directors
terminates the employment of Mr. Gilbert without cause, Mr.
Gilbert may require the Company to repurchase up to 2,416,665
shares of Common Stock for a price equal to the outstanding
principal and interest due under the Promissory Note entered into
in connection with the transaction.
In connection with the Company's purchase of MED Associates, Inc.
("MED") in November, 1997, the Company entered into a four-year
employment agreement with Charles J. Drobny, Jr., MED's founder.
Under the terms of the employment agreement, Mr. Drobny will be
paid base compensation of $150,000 for two years commencing
November 1, 1997 and $180,000 for the following two years. Mr.
Drobny may receive, at his election, up to $30,000 per year in
the form of shares of the Company's Common Stock for the first
two years, and up to $60,000 per year in the form of shares for
the second two years.
The Company has entered into an Addendum to Stock
Issuance/Employment Agreement effective January 21, 1991, and
amended July 1995, whereby Annette Friskopp's salary from April
to December, 1995 was $108,000 and after December, 1995 increased
to $120,000 per annum. In addition, beginning January, 1995, she
became entitled to a bonus for each unit sold to an end user. In
addition, the Agreement granted Ms. Friskopp an option to acquire
100,000 additional shares of capital stock, which has been
treated as being a grant pursuant to the Company's 1996 Stock
Option Plan at a price equal to the fair market value of such
shares on the date of grant. In December, 1996 Ms. Friskopp was
awarded an option to purchase 150,000 shares of the Company's
common stock at an exercise price of $1.125 per share. The
options will vest 20% annually over five years. The agreement
was terminated on December 31, 1997.
The following table sets forth the information concerning
individual grants of stock options and appreciation rights during
the last fiscal year to the Company's chief executive officer and
the executive officers of the Company who earned more than
$100,000 last year.
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants) Percent Of
Number of Total Options
Securities Granted
Underlying To Employees Exercise Or Expiration
Options In Fiscal Year Base Price
Name Granted (#) ($/Share)
Michael Silverman ----- ----- -----
Jon Gilbert ----- ----- -----
Annette Friskopp ----- ----- -----
Daniel Negroni 100,000 85% $1.25 2004
Charles Drobny, Jr. ----- ----- -----
The following table sets forth the information concerning each
exercise of stock options during the last fiscal year by each of
Company's chief executive officer and the executive officers of
the Company who earned more than $100,000 last year, and the
fiscal year value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number Of
Securities Value Of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options Options
On Value At FY-End (#) At FY-End($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
Michael Silverman ----- ----- ----- -----
Jon Gilbert ----- ----- ----- -----
Annette Friskopp -0- N/A 50,000/200,000 $68,125/272,500
Daniel Negroni ----- ----- 0/100,000 $0/118,750
Charles Drobny, Jr. ----- ----- ----- -----
Compensation Committee Interlock and Insider Participation
During fiscal year 1997, Michael Silverman, an officer of the
Company, participated in Board deliberations concerning executive
officer compensation.
Director Compensation
Non-employee directors of the Company receive $500 for each Board
meeting they attend. Directors are reimbursed for certain
expenses in connection with attendance at Board and committee
meetings. Non-employee directors participate in the 1996 Stock
Option Plan. Non-employee directors Messrs. Bateman, Kane and
Maizel have received 10,000 options at an exercise price of $1.00
each and 10,000 shares at an exercise price of $1.25. Mr. Lynn
and Mr. Trump received 10,000 options at an exercise price of
$1.19.
Compliance with Section 16(a) of the Securities Exchange Act of
1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who
beneficially own more than 10% of the Company's stock, to file
initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission. Executive officers,
directors and greater than 10% beneficial owners are required by
applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished
to the Company and information involving securities transactions
of which the Company is aware, the Company believes that during
the fiscal year ending December 31, 1997, all Section 16(a)
filing requirements applicable to its executive officers,
directors and greater than 10% beneficial shareholders were
complied with.
V. Certain Transactions
The Company has a number of contractual relationships with
QUALCOMM, Incorporated, which owns 1,112,265 shares (7%) of the
outstanding Common Stock.
The Company entered into a License Agreement and Distribution
Agreement dated June 13, 1990, which grants the Company certain
exclusive rights to distribute QUALCOMM's OmniTRACS System for
marine applications in the coastal waters of the United States
and the Atlantic and Pacific Oceans. This agreement has been
amended from time to time. The agreement has an initial term of
five years and three five-year extensions. The Company exercised
its first extension in 1995, which will continue until 2000.
The Company also entered into a License Agreement with QUALCOMM
in March, 1995, which requires QUALCOMM to pay to the Company a
per copy royalty for certain interface software developed and
owned by the Company as an enhancement to the OmniTRACS System.
The License Agreement terminates upon termination of the License
and Distribution Agreement.
In March, 1997, the Company's wholly owned subsidiary Boatracs
(Europe) B.V. signed a five year Sub-Service Provider Agreement
with ALCATEL QUALCOMM, a French joint venture company of the
ALCATEL Group and QUALCOMM. The agreement appoints Boatracs
(Europe) B.V. to be the maritime distributor of the OmniTRACS
system in certain European countries under a similar basis that
BOATRACS operates in the United States.
During 1995, the Company entered into a note receivable agreement
with Michael Silverman, then the Company's President and Chief
Executive Office, under which the Company agreed to advance up to
$369,230. Advances were secured by an agreed upon offset to Mr.
Silverman's deferred compensation. The advances bore interest at
5.5% and were due on demand. Mr. Silverman's deferred
compensation and the note were fully repaid on December 31, 1997,
in accordance with the note receivable agreement.
In October, 1997, the Company entered into a Restricted Stock
Purchase Agreement with Jon Gilbert, the Company's current
President and Chief Executive Officer, and a related Promissory
Note and Pledge Agreement. Under the Restricted Stock Purchase
Agreement, Mr. Gilbert purchased 2,900,000 shares of Common Stock
for $2,320,000 ($.80 per share). Mr. Gilbert paid $389,085 in
cash and the remaining $l,930,915 by a promissory note bearing
interest at a rate of 5.77%. The promissory note is secured by
2,416,665 of the purchased shares. The note is payable in four
semi-annual installments of $420,241, with all remaining
principal and accrued interest due April 15, 2000. See also
under "Executive Compensation."
Effective November 1, 1997, the Company purchased certain assets
and liabilities of MED Associates, Inc. ("MED") for $500,000
cash, and 300,000 shares of Common Stock. The stock payment is
subject to an option in favor of the Company exercisable if MED
does not achieve a certain target earnings level for the 1998
fiscal year whereby the Company may repurchase for a nominal
price one share of such stock for every dollar by which MED
earnings fall short of the target. Charles J. Drobny, Jr., MED's
founder, became Vice President of Applications Development of the
Company.
VI. Approval of Amendment to 1996 Stock Option Plan
The Board has approved an amendment to the 1996 Stock Option Plan
("Plan") to increase the shares authorized under the Plan to
2,000,000 shares of Common Stock. Prior to this amendment there
were 1,000,000 shares authorized under the Plan. A summary of
the Plan follows, but shareholders should read the entire Plan
attached to this Proxy Statement as Appendix I for a full
understanding of the Plan.
Options and Shares
Shares purchased upon exercise of options granted under the Plan
may be composed of authorized and unissued shares. If an option
granted under the Plan expires or is otherwise terminated prior
to exercise, the shares subject to that option will become
available for future grants under the Plan. The total number of
shares subject to outstanding options under the Plan or under any
other stock option or similar plan may not exceed 30% of the
total number of shares of Common Stock outstanding on the date of
the grant of any option under the Plan.
Administration
The Plan is administered by the Board of Directors or by a
committee designated by the Board consisting of at least two
directors who are not also employees of the Company (the
"Committee"). The Committee currently consists of Giles Bateman
and Mitchell Lynn. The structure of the Committee may be changed
as necessary to comply with any future changes in tax or
securities laws or regulations. For convenience, the following
summary refers to the Committee as the administering body under
the Plan, although the Plan may be administered by the Board as a
whole. The Committee has authority consistent with the
provisions of the Plan to establish the terms of the stock
options granted, to establish rules and regulations appropriate
for Plan administration and to interpret and make determinations
under the Plan.
Stock Options and Participation
Options issued under the Plan may be either incentive stock
options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or non-qualified
stock options ("Non-Qualified Options"). The differences between
these options are discussed below. Persons who receive options
pursuant to the Plan are referred to as either "optionees" or
"grantees."
The Committee may grant Non-Qualified Options to any person who
has or has agreed to have any of the following relationships
("Relationships") with the Company or any of its subsidiaries:
officer, employee, consultant, adviser, independent contractor or
agent. The Committee may grant Incentive Options to any officer
or other employee of the Company or any of its subsidiaries. The
amendment of the Plan will most likely benefit the current
executive officers and directors of the Company; however, because
of the discretionary nature of the Plan, the Company cannot at
this time determine the amount of benefit to any particular
executive officer or director or to all executive officers and
directors as a group.
Options granted under the Plan will generally expire 7 years
after the grant date. Options may terminate prior to their
expiration date if the Relationship between the optionee and the
Company terminates prior to the expiration date (see below).
Incentive Options issued to persons who own more than 10% of the
outstanding Common Stock of the Company on the date of the grant
will expire 5 years after the grant date.
Incentive Options granted under the Plan will be exercisable as
follows: 20% percent of the shares subject to the option ("option
shares") may be purchased beginning on the first anniversary
after the grant and an additional 20% of the shares will become
available for purchase after each successive one year
anniversary. Accordingly, all option shares will be available
for purchase (to the extent not previously purchased) on the
fifth anniversary of the grant date. Non-qualified options will
be exercisable over a 5 year period as determined by the
Committee, but they will be exercisable at a minimum rate of 20%
of the option shares per year. Once an option is exercisable, an
optionee may exercise all or any part of the option which is then
exercisable.
The exercise price of Incentive Options must be at least 100% of
the fair market value of the Common Stock on the grant date, or
at least 110% of the fair market value in the case of Incentive
Options granted to a person who owns more than 10% of the
outstanding Common Stock. The purchase price for shares subject
to a Non-Qualified Option must be at least 85% of the fair market
value of the Common Stock on the grant date. A grantee exercising
an option must pay the exercise price plus withholding tax due at
the time of exercise. This amount may be paid in cash or in
shares of the Common Stock valued at the then current fair market
value of such shares, or a combination of both. The Committee
may in its discretion allow other forms of payment.
Options granted under the Plan may not be transferred or assigned
except upon the death of the optionee, by will or by the laws of
descent. Upon the termination of an optionee's Relationship with
the Company by reason other than death or disability, his or her
options will automatically terminate 30 days from the date the
Relationship terminates. During this 30-day period, the optionee
may exercise his or her options to the extent the options were
exercisable on the date of termination of the Relationship. The
optionee will also be entitled to exercise a percentage of the
options that are not yet exercisable as determined by a formula
based on the length of service during each period that the
options become exercisable.
Unless the Committee expressly determines otherwise, any options
granted to a person whose relationship with the Company
terminates because of death or disability will terminate six
months after the date of death or disability. (If an option
would have expired before six months after death or disability,
it will terminate on its natural expiration date.) The options
will be exercisable during the 6-month period to the extent they
were exercisable on the date of death or disability. The
optionee will also be entitled to exercise a percentage of the
options that are not yet exercisable as determined by a formula
based on the length of service during each period that the
options become exercisable. If the Relationship is terminated by
death, the option may be exercised by the heir or devisee of the
optionee.
These and other terms and conditions of the options will be
reflected in an agreement entered into between the Company and
the optionee at the time an option is granted to the optionee.
Term and Amendment
The Plan became effective December 7, 1995 and will terminate
February 8, 2004 or when all shares available under the Plan have
been distributed. The Board of Directors may modify or
discontinue the Plan at any time, but no modification may
adversely affect any outstanding grant unless the recipient of
that grant gives written consent. Amendments which (i) materially
increase the benefits accruing to participants under the Plan,
(ii) increase the number of shares of Common Stock which may be
issued under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan,
will require shareholder approval unless such changes are
required to comply with federal or state securities laws.
Adjustments
The number of shares available under the Plan and the number and
the exercise price of shares underlying outstanding options will
be adjusted appropriately in the event of a merger,
reorganization, reclassification, stock split, stock dividend or
other similar transaction which affects all shares of Common
Stock.
If the Company dissolves, sells all of its assets or mergers with
another company where the Company is not the surviving company,
the Plan and each outstanding option will terminate. In that
event, the surviving or acquiring company may at its option issue
to the optionees under the Plan comparable replacement options to
purchase common stock in the surviving or acquiring company. If
the surviving or acquiring company does not issue replacement
options, all options then outstanding under the Plan will become
fully exercisable immediately before the effective date of the
transaction, even if those options would not have otherwise been
fully exercisable as of the date of the transaction.
Certain Federal Income Tax Consequences
The following is a summary of the federal income tax consequences
to both the grantee and the Company of options granted under the
Plan. Because tax laws vary in their applicability to different
individuals, and because they are subject to change at any time,
the Company urges persons granted options under the Plan to seek
advice from their own tax advisers concerning the options.
Incentive Options. The Company believes that Incentive Options
granted under the Plan will qualify as incentive stock options
under Section 422 of the Code. The following summarizes the
principal federal income tax aspects of Incentive Options.
In general, an optionee does not recognize income at the time an
Incentive Option is granted or at the time it is exercised. If
the optionee does not sell or otherwise dispose of the shares
received upon exercise of an Incentive Option either within two
years from the grant date or one year from the exercise date, the
optionee will recognize long- term or medium-term capital gain or
loss when the optionee disposes of the shares. The gain or loss
will be measured by the difference between the exercise price and
the sale price of the shares.
If the optionee sells or disposes of shares acquired upon
exercise of an Incentive Option before the expiration of either
of the one-year or two-year holding periods described above (a
"disqualifying disposition"), the difference between the exercise
price and the fair market value of the shares at the time of
exercise will be taxable as ordinary income in the year the
shares were sold. The optionee will also recognize a capital
gain or loss representing the difference between the sale price
of the shares and the option exercise price. In most situations,
a disqualifying disposition of the shares acquired upon exercise
causes part of the profit realized upon sale to be taxed as
ordinary income rather than as capital gain. For most taxpayers,
this means a higher tax rate and a loss of the ability to offset
some of the gain against other capital losses.
If an optionee elects to pay part or all of the exercise price
through a tender of the Common Stock acquired on exercise, this
will cause a disqualifying disposition of the shares actually
tendered to pay the exercise price.
The Company will not be allowed a deduction for federal income
tax purposes at the time of the grant or exercise of an Incentive
Option. To the extent any optionee recognizes ordinary income as
a result of a disqualifying disposition, the Company will
generally be entitled to an offsetting deduction of the amount
recognized by the employee as ordinary income.
Non-Qualified Options. An optionee does not recognize income at
the time a Non-Qualified Option is granted. An optionee will
recognize ordinary income at the time he or she exercises a Non-
Qualified Option. The income recognized will be equal to the
difference between the exercise price and the fair market value
of the shares on the exercise date.
The Company generally will be entitled to an offsetting federal
income tax deduction in the year an optionee recognizes ordinary
income from the exercise of a Non-Qualified Option.
When an optionee sells Common Stock acquired by exercise of a Non-
Qualified Option, he or she will recognize a capital gain or loss
equal to the difference between the sale price of the stock and
the option exercise price. Assuming the shares were held as a
capital asset, the gain or loss will be long-term, medium-term or
short- term depending on how long the shares were held.
The Company will in most cases have a legal obligation to
withhold for taxes due upon the exercise of a Non-Qualified
Option by an employee of the Company. Where withholding
obligations apply, the Company will require the optionee to pay
such amounts on exercise, or the Company may at its option offset
the withholding amount against salary or other payments due to
the optionee.
Vote Required
Approval of the amendment to the Plan requires the affirmative
vote of the holders of at least a majority of the outstanding
shares of Common Stock which are present or represented by proxy
at the Annual Meeting.
Board Recommendation
Because each of the directors may receive options under the Plan
if the shareholders approve the amendment to the Plan, the Board
has a conflict of interest in connection with the Plan amendment.
Nonetheless, the Board believes that adoption of the amendment to
the Plan will help the Company attract and retain qualified
individuals to serve as employees, consultants and directors of
the Company. The Board also believes the amendment will give the
Board and the Compensation Committee additional flexibility to
structure compensation packages to better align the financial
interests of the Company's directors, officers and employees with
those of the Company's shareholders. Accordingly, the Board
unanimously recommends a vote FOR the approval of the amendment
to the Plan.
VII. Date for Submission of Shareholder Proposals
For 1999 Annual Meeting
Any proposal relating to a proper subject which a shareholder may
intend to present for action at the 1999 Annual Meeting of
Shareholders and which such shareholder may wish to have included
in the Company's proxy materials for such meeting must, in
accordance with the provisions of Rule 14a-8 promulgated under
the Securities Exchange Act of 1934, be received in proper form
by the Company at its principal executive office not later than
December 1, 1998. It is suggested that any such proposal be
submitted by certified mail, return receipt requested.
VIII. Other Business
Management is not aware of any matters to come before the Annual
Meeting other than those stated in this Proxy Statement. However,
inasmuch as matters of which management is not now aware may come
before the Annual Meeting or any adjournment thereof, the proxies
confer discretionary authority with respect to acting thereon,
and the persons named in such proxies intend to vote, act, and
consent in accordance with their best judgment with respect
thereto. Upon receipt of such proxies (in the form enclosed and
properly signed) in time for voting, the shares represented
thereby will be voted as indicated thereon and in this Proxy
Statement.
By Order of the Board of Directors,
MICHAEL SILVERMAN
Chairman of the Board
San Diego, California
April 2, 1998
APPENDIX I
Dated: February 8, 1996
BOATRACS, INC.
1996 STOCK OPTION PLAN
(as amended March 20, 1998)
1. Purposes of the Plan.
The Boatracs, Inc. 1996 Stock Option Plan (the "Plan") is
intended to promote the interests of Boatracs, Inc., a California
corporation (the "Company"), by providing a method whereby
(i) employees of the Company (or its parent or subsidiary
corporations) responsible for the management, growth and
financial success of the Company (or its parent or subsidiary
corporations), and (ii) non-employees who provide valuable
services to the Company (or its parent or subsidiary
corporations), as determined by the Plan Administrator, may be
offered incentives and rewards which will encourage them to
acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company and continue to render
services to the Company (or its parent or subsidiary
corporations).
2. Administration of the Plan.
(a) The Plan shall be administered by the Company's Board of
Directors (the "Board") or, to the extent provided by the
Board, a committee (the "Committee") appointed by the Board,
which shall consist of not less than two non-employee directors
(as such term is defined in Rule 16b-3, or any successor rule,
under the Securities Exchange Act of 1934), who shall serve at
the pleasure of the Board; provided, however, that the Plan may
be administered by the Board. For purposes of the Plan, the term
"Plan Administrator" shall mean the Board, or if the Board
delegates responsibility for any matter to the Committee. The
Board may alter the Plan administration so that the Plan
administration is structured to comply with the rules governing a
discretionary plan under Rule 16b-3.
(b) Subject to the provisions of the Plan, the Plan
Administrator shall have full power and authority to select the
Optionees (as defined in Section 3) to be granted the options
under the Plan, and to determine (i) whether each granted option
is to be an incentive stock option ("Incentive Stock Option")
which satisfies the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code") or
a non-statutory Stock Option not intended to meet such
requirements, (ii) the number of shares to be subject to such
option; (iii) the exercise prices of such shares, (iv) the terms
of exercise, (v) the expiration dates and (vi) all other terms
and conditions upon which such option may be exercised. The Plan
Administrator shall have the full power and authority (subject to
the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper
administration of the Plan and to make such determinations under,
and issue such interpretations of, the Plan and any outstanding
option as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who
have an interest in the Plan or any outstanding option. No
person acting under this subsection shall be held liable for any
action or determination made in good faith with respect to the
Plan or any option granted under the Plan.
(c) The Company shall indemnify and hold harmless each
Committee member and each director of the Company, and the estate
and heirs of such Committee member or director, against all
claims, liabilities, expenses, penalties, damages or other
pecuniary losses, including legal fees, which such Committee
member or director, his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in
connection with the Plan, to the extent that insurance, if any,
does not cover the payment of such items.
3. Eligibility for Option Grants.
The persons eligible to receive option grants pursuant to the
Plan ("Optionees") are as follows:
(a) Employees of the Company (or its parent or subsidiary
corporations) who render services which contribute to the success
and growth of the Company (or its parent or subsidiary
corporations) or which may reasonably be anticipated to
contribute to the future success and growth of the Company (or
its parent or subsidiary corporations); and
(b) Non-employees who provide valuable services to the Company
(or its parent or subsidiary corporations).
4. Stock Subject to the Plan.
(a) The stock issuable under the Plan shall be shares of the
Company's authorized but unissued or reacquired common stock (the
"Common Stock"). The aggregate number of shares which may be
issued under the Plan shall not exceed 2,000,000 shares of Common
Stock. The total number of shares issuable under the Plan shall
be subject to adjustment from time to time in accordance with the
provisions of this Section 4.
(b) Should an option be terminated for any reason without being
exercised or surrendered in whole or in part, the shares subject
to the portion of the option not so exercised or
surrendered shall be available for subsequent option grants under
the Plan.
(c) In the event that the outstanding shares of Common Stock
issuable under the Plan as a class are increased or decreased, or
changed into or exchanged for a different number or kind of
shares or securities, as a result of any Corporate Transactions
(as defined in Section 7), stock splits, stock dividends, or
the like affecting the outstanding Common Stock as a class,
then appropriate adjustments shall be made to the aggregate
number of shares issuable under the Plan and to the number of
shares and price per share of the Common Stock subject to each
outstanding option, in order to prevent the dilution or
enlargement of benefits under such outstanding options.
5. Terms and Conditions of Options.
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Stock Options or
non-statutory Stock Options. Individuals who are not employees
of the Company or its parent or subsidiary corporations may only
be granted non-statutory Stock Options. Each granted option
shall be evidenced by one or more written instruments in a form
approved by the Plan Administrator; provided, however, that each
such instrument shall comply with and incorporate the terms and
conditions specified in this Section 5.
(a) Option Price.
(1) The option price per share (the "Option Price"), (a) with
respect to a non-qualified Stock Option, shall be between
eighty-five percent (85%) and one hundred percent (100%) of the
fair market value of a share of Common Stock on the date of the
option grant, as determined by the Company on a case by case
basis and (b) with respect to an Incentive Stock Option, shall,
subject to subsection (a)(2) below, be one hundred percent (100%)
of the fair market value of a share of Common Stock on the date
of the option grant.
(2) 10% Shareholder. If any Optionee under the Plan is on the
date of grant of an Incentive Stock Option the owner of stock (as
determined under Section 424(d) of the Internal Revenue Code)
possessing ten percent (10%) or more of the total combined voting
power of all classes of stock of the Company or any one of its
parent or subsidiary corporations (a "10% Shareholder"), then the
option price per share acquired pursuant to exercise of an
Incentive Stock Option shall not be less than one hundred and ten
percent (110%) of the fair market value of a share of Common
Stock on the date of the option grant.
(3) The option price shall become immediately due upon exercise
of the option and shall, subject to the provisions of the
instrument evidencing the grant, be payable in one of the
alternative forms specified below:
(i) full payment in cash or cash equivalents; or
(ii) Full payment in shares of Common Stock having a fair market
value on the Exercise Date (as defined below) in an amount equal
to the option price; or
(iii) a combination of shares of Common Stock valued at fair
market value on the Exercise Date and cash or cash equivalents,
equal in the aggregate to the option price; or
(iv) any other form of consideration as the Plan Administrator
may approve.
For purposes of this Section 5(a)(3), the Exercise Date shall be
the first date on which the Company shall have received both
written notice of the exercise of the option and payment of the
option price for the purchased shares of Common Stock.
(4) For all valuation purposes under the Plan, the fair market
value of a share of Common Stock shall be determined in
accordance with the following provisions:
(i) If the Common 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 mean between
the highest bid and lowest asked prices (or, if such information
is available, the closing selling price) of one share of Common
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 date of the option
grant or Exercise Date, as the case may be. If there are no
reported bid and asked prices (or closing selling price) for the
Common Stock on the date in question, then the mean between the
highest bid price and lowest asked price (or the closing selling
price) on the last preceding date for which such quotations exist
shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall
be the closing selling price of one share of Common Stock on the
date in question on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation
exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-
the-counter market, then the fair market value shall be
determined by the Plan Administrator in accordance with Section
260.140.50 of the California Code of Regulations or any successor
rule.
(b) Option Period.
The term of each option shall commence on the date of grant of
the option and shall be seven (7) years, except that if an
Incentive Stock Option is granted to an Optionee who, immediately
before the grant of the Incentive Stock Option, owns stock
representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or its parent
or subsidiary corporations, the exercise period specified in the
option agreement for which the Incentive Stock Option thereunder
is granted, shall not exceed five years from the date of grant.
Subject to other provisions of the Plan, (a) each Incentive Stock
Option shall be exercisable during its term as to twenty percent
(20%) of the Incentive Stock Option shares during the twelve (12)
months beginning on the first anniversary of the date of grant,
and twenty percent (20%) thereafter during each of the four (4)
next successive twelve (12) month periods, and (b) each non-
qualified Stock Option shall be exercisable over a five (5) year
term, as determined by the Company on a case by case basis,
provided, however, that each non-qualified Stock Option shall be
exercisable at a rate of at least twenty percent (20%) per year
over five (5) years from the date the non-qualified Stock Option
is granted. Additionally, if an Optionee shall not in any period
purchase all of the option shares which the Optionee is entitled
to purchase in such period, then the Optionee may purchase all or
any part of such shares subject to this Agreement at any time
after the end of such period and prior to the expiration of the
option.
(c) Effect of Termination.
(1) Subject to the other provisions of the Plan, should an
Optionee cease to be a service provider to the Company ("Service
Provider"), or employee or director, for any reason (including
death or permanent disability as defined in Section 105(d)(4) of
the Internal Revenue Code), then any option or options granted
under the Plan to such Optionee and outstanding on the Cessation
Date (as defined below) shall remain exercisable for a period not
to exceed six (6) months from the date of such cessation of
Service Provider, employee or director, status (the "Cessation
Date"), the specific amount of time to be determined at the time
of granting the option; provided, however, that under no
circumstances shall such options be exercisable after the
expiration date of the option term specified in the instrument
evidencing the option grant. Notwithstanding the foregoing,
such shorter period of exercisability following the Cessation
Date, as determined by the Company at the time of original
grant, shall in no event be less than: (i) six (6)
months in the event that employment termination is due to the
death or disability of the Optionee and (ii) thirty (30) days in
the event that employment termination is due to any other reason.
Each such option shall, during such six (6) month or shorter
period, be exercisable to the extent of the number of shares (if
any) for which the option is exercisable on the Cessation Date
(the "Vested Shares"), and to the extent that on the Cessation
Date the number of shares (if any) for which the option is not
exercisable will become exercisable within the following year,
the Optionee may exercise the option for a percentage of such
shares based on the following fraction: the numerator shall be
the number of days from the last anniversary date of the grant of
the option to the Cessation Date and the denominator shall be the
number of days from the last anniversary date of the grant of the
option to the next anniversary date of the grant of the option.
Upon the expiration of such six (6) month or shorter period or
(if earlier) upon the expiration of the option term, the option
shall terminate and cease to be exercisable.
(2) Notwithstanding subsection (c)(1) above, the Plan
Administrator shall have complete discretion, exercisable either
at the time the option is granted or at the Cessation Date to
provide that options held by such Optionee may be exercised not
only with respect to Vested Shares as of the Cessation Date, but
also with respect to one or more subsequent installments of
shares for which the option would otherwise have become
exercisable had such cessation of Service Provider status not
occurred.
(3) For purposes of the Plan, the Optionee shall be deemed
to be a Service Provider of the Company for so long as the
Optionee renders periodic services to the Company or one or more
of its parent or subsidiary corporations.
(d) No Employment or Service Contract. Nothing in the Plan
shall confer upon the Optionee any right to continue in the
service of the Company (or any parent or subsidiary corporation
of the Company employing or retaining the Optionee) for any
period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining
Optionee) or the Optionee, to terminate the service provider
status of Optionee at any time for any reason or no reason
whatsoever, with or without cause.
(e) Shareholder Rights. An Optionee shall have none of the
rights of a shareholder with respect to any shares covered by the
option until such individual shall have duly exercised the
option and paid the option price.
6. Exercise of Options.
(a) Each Option may be exercised in whole or in part (but not
as to fractional shares) by delivering it for surrender or
endorsement to the Company, attention of the Corporate Secretary,
at the Company's principal office, together with payment of the
Exercise Price and an executed Notice and Agreement of Exercise
in the form prescribed by the Company.
(b) Exercise of each Option is conditioned upon the agreement of
the Optionee to the terms and conditions of this Plan and of
such Option as evidenced by the Optionee's execution and delivery
of a Notice and Agreement of Exercise in a form to be determined
by the Committee in its discretion. Such Notice and Agreement
of Exercise shall set forth the agreement of the Optionee
that: (a) no Option Shares will be sold or otherwise distributed
in violation of the Securities Act of 1933 (the "Securities
Act") or any other applicable federal or state securities
laws, (b) each Option Share certificate may be imprinted
with legends reflecting any applicable federal and state
securities law restrictions and conditions, (c) the Company may
comply with said securities law restrictions and issue "stop
transfer" instructions to its Transfer Agent and Registrar
without liability, (d) each Optionee will timely file all reports
required under federal securities laws, and (e) each Optionee
will report all sales of Option Shares to the Company in writing
on a form prescribed by the Company.
(c) No Option shall be exercisable unless and until any
applicable registration or qualification requirements of federal
and state securities laws, and all other legal requirements, have
been fully complied with. The Company will use reasonable efforts
to maintain the effectiveness of a Registration Statement under
the Securities Act for the issuance of Options and shares
acquired thereunder, but there may be times when no such
Registration Statement will be currently effective. The exercise
of Options may be temporarily suspended without liability to the
Company during times when no such Registration Statement is
currently effective, or during times when, in the reasonable
opinion of the Committee, such suspension is necessary to
preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If any
Option would expire for any reason except the end of its term
during such a suspension, then if exercise of such Option is duly
tendered before its expiration, such Option shall be exercisable
and exercised (unless the attempted exercise is withdrawn) as of
the first day after the end of such suspension. The Company
shall have no obligation to file any Registration Statement
covering resales of Option Shares.
(d) Withholding Taxes. The Company shall have the right at
the time of exercise of any Stock Option to make adequate
provision for any federal, state, local, or foreign taxes which
it believes are or may be required by law to be withheld with
respect to such exercise.
(e) Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the
Common Stock for which one or more options granted to any
Employee under the Plan (or any other option plan of the Company
or its parent or subsidiary corporations) may for the first time
become exercisable as Incentive Stock Options during any one
calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). In the event that Section 422 of the
Internal Revenue Code is amended to alter the limitation set
forth therein so that following such amendment such limitation
shall differ from the $100,000 limitation set forth above, the
dollar limitation of this Section 6(e) shall be automatically
adjusted accordingly. To the extent the Employee holds two or
more such options which become exercisable for the first time in
the same calendar year, the foregoing limitation on the
exercisability thereof as Incentive Stock Options shall be
applied on the basis of the order in which such options are
granted, and any Incentive Stock Options subject to the
limitations of this Section 6(e) shall be treated as non-
qualified Stock Options subject to the applicable terms and
conditions of the Plan.
7. Corporate Transactions.
(a) In the event of any of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose
of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the
Company's outstanding voting stock is transferred to holders
different from those who held the stock immediately prior to such
merger, then each outstanding option which is not to be assumed
by the successor corporation or parent thereof (or to be replaced
with a comparable option to purchase shares of the capital stock
of such successor corporation or parent thereof) automatically
shall be accelerated so that each such option, immediately
prior to the specified effective date for such Corporate
Transaction, shall become fully exercisable with respect to
the total number of shares of Common Stock purchasable under
such option. Any such accelerated options not exercised as of
the consummation of the Corporate Transaction shall
terminate and cease to be exercisable, unless assumed by the
successor corporation or parent thereof (or replaced with a
comparable option to purchase shares of the capital stock of such
successor corporation or parent thereof).
(b) In connection with any Corporate Transaction, the
exercisability of any accelerated options under the Plan as an
Incentive Stock Option shall remain subject to the applicable
dollar limitation of Section 6(e).
(c) The Plan Administrator shall have the right and power at
any time to waive in whole or in part, absolutely or
conditionally, any right of the Company contained in any
instrument or option agreement evidencing any options granted
under the Plan.
(d) The grant of options under the Plan shall in no way affect
the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
8. Amendment of the Plan.
(a) The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects
whatsoever; provided, however, that no such amendment or
modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to options at the time
outstanding under the Plan; and provided further, that the Board
shall not, without the approval of the shareholders of the
Company where required by law.
(b) The provisions of this Plan pertaining to Incentive Stock
Options are intended to comply with all requirements of the
Internal Revenue Code pertaining to qualification of such
incentive stock options as Incentive Stock Options under the
Internal Revenue Code and all provisions of the Plan with respect
thereto shall be construed in a manner consistent therewith.
9. Effective Date and Term of Plan.
(a) The Plan shall become effective when adopted by the Board,
but no option granted under the Plan shall become exercisable
unless and until the Plan shall have been approved by the
shareholders of the Company. If such shareholder approval is not
obtained within twelve (12) months after the date of the
Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and no further options shall be
granted. Subject to such limitation, the Plan Administrator may
grant options under the Plan at any time after the Plan effective
date and before the date fixed herein for termination of the
Plan.
(b) Unless sooner terminated in accordance with the
provisions hereof, the Plan shall terminate upon the earlier of
(i) the expiration of the eight (8) year period measured from the
date of the Board's adoption of the Plan or (ii) the date on
which all shares available for issuance under the Plan shall have
been issued or canceled pursuant to the exercise or surrender of
options granted under the Plan.
10. Regulatory Approvals.
The implementation of the Plan, the granting of any option
under the Plan, and the issuance of Common Stock upon the
exercise or surrender of any such option, shall be subject to the
procurement by the Company of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the
options granted under the Plan and the Common Stock issued
pursuant to the Plan.
11. Requests for Information.
For additional information about the Plan or the Plan
Administrator, please direct all such requests to the Chief
Financial Officer of Boatracs, Inc., 6440 Lusk Boulevard,
Suite D201, San Diego, CA 92121, telephone number (619) 587-1981.
12. Financial Reports.
The Company shall deliver financial and other information
regarding the Company, on an annual or other periodic basis, to
each individual holding an outstanding option under the Plan, to
the extent the Company is required to provide such information
pursuant to Section 260.140.46 (or any successor thereto) of the
Rules of the California Corporations Commissioner.
13. Successors in Interest.
The Company shall not assign or delegate to any other person
this Plan or any rights or obligations under this Plan. Subject
to any restriction on transferability contained in this Plan,
this Plan shall be binding upon and shall inure to the benefit of
the successors-in-interest and assigns of each party to this
Plan. Nothing in this Paragraph shall create any rights
enforceable by any person not a party to this Plan, except for
the rights of the successors-in-interest and assigns of each
party to this Plan, unless such rights are expressly granted in
this Plan to other specifically identified persons.
14. Governing Law.
This Plan shall be construed in accordance with, and governed
by, the laws of the State of California.
15. 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 Plan
the prevailing party(ies) in such Proceeding shall be entitled to
recover from the unsuccessful party(ies) all costs, expenses, and
actual attorney's and expert witness fees relating to or arising
out of (a) such Proceeding (whether or not such Proceeding
proceeds to judgment), and (b) 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 and expert witness fees.
16. Prior Understandings.
This Plan contains the entire agreement between the parties
with respect to the subject matter of the Plan, is intended as a
final expression with respect to such terms as are included in
the Plan, 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 the Plan.
17. Arbitration.
All disputes pertaining to this Plan shall be resolved by the
American Arbitration Association pursuant to its rules in San
Diego, California.
18. Option Non-Transferable; Exceptions
This option shall be neither transferable nor assignable by
Optionee other than by will or by the laws of descent and
distribution and may be exercised, during Optionee's lifetime,
only by Optionee.