Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among:
Boatracs, Inc.,
a California corporation;
Boatracs Acquisition, Inc., a California corporation;
Enerdyne Technologies, Inc.,
a California corporation; and
the Shareholders of Enerdyne Technologies, Inc.
named herein
Dated as of July 7, 1998
TABLE OF CONTENTS
Page
EXHIBIT A CERTAIN DEFINITIONS X-0
XXXXXXX X XXXXXX XXXXXXXXX X-0
EXHIBIT C SCHEDULE OF SHAREHOLDERS C-1
EXHIBIT D FORM OF SENIOR NOTE D-1
EXHIBIT E FORM OF SUBORDINATED NOTE E-1
EXHIBIT F FORM OF REGISTRATION AGREEMENT F-1
EXHIBIT G FORM OF WARRANT AGREEMENT G-1
EXHIBIT H ENERDYNE DISCLOSURE SCHEDULE H-1
EXHIBIT I OPINION OF COUNSEL TO ENERDYNE I-1
EXHIBIT J FORM OF EMPLOYMENT AGREEMENT J-1
EXHIBIT K FORM OF NONCOMPETITION AGREEMENT K-1
SECTION 1 The Merger 2
1.1 Closing 2
1.2 The Merger 2
1.3 Effective Time; Closing 2
1.4 Effect of the Merger 2
1.5 Articles of Incorporation; Bylaws 2
1.6 Officers and Directors 3
1.7 Effect on Capital Stock 3
1.8 Merger Consideration 3
1.9 Surrender of Certificates; Delivery of Merger
Consideration 4
1.10 Tax Consequences 4
1.11 Taking of Necessary Action; Further Action 4
SECTION 2 Representations and Warranties of Enerdyne and
the Shareholders 6
2.1 Organization 6
2.2 Capitalization 6
2.3 Power, Authority and Validity 6
2.4 Financial Statements 7
2.5 Tax Matters 8
2.6 Enerdyne Projections 9
2.7 Absence of Certain Changes or Events 9
2.8 Title and Related Matters 11
2.9 Proprietary Rights and Warranty Claims 12
2.10 Employee Benefit Plans 13
2.11 Bank Accounts 19
2.12 Contracts 19
2.13 Orders, Commitments and Returns 21
2.14 Compliance With Law 21
2.15 Labor Matters 21
2.16 Trade Regulation 22
2.17 Insider Transactions 22
2.18 Employees, Independent Contractors and Consultants 22
2.19 Insurance 23
2.20 Litigation 23
2.21 Section 341(f)(2) 23
2.22 Subsidiaries 23
2.23 Compliance with Environmental Requirements 23
2.24 Corporate Documents 24
2.25 No Brokers 24
2.26 Disclosure 24
2.27 Material Consents 24
2.28 Cash Balance; Payment of Certain Expenses 24
SECTION 3 Representations and Warranties of the
Shareholders 24
3.1 Ownership of Enerdyne Securities 24
3.2 Boatracs Securities 25
SECTION 4 Representations and Warranties of Boatracs and
Merger Sub 25
4.1 Organization and Good Standing 25
4.2 Capitalization 25
4.3 Power, Authorization and Validity 26
4.4 No Violation of Existing Agreements 26
4.5 Litigation 26
4.6 SEC Filings 26
4.7 Financial Statements 27
4.8 Enerdyne Securities 27
SECTION 5 Items to be Delivered by Boatracs or Merger Sub
at the Closing 27
5.1 Boatracs Authorizations 27
5.2 Merger Sub Authorizations 27
SECTION 6 Documents to be Delivered by Enerdyne or the
Shareholders at Closing. 28
6.1 Authorizations. 28
6.2 Opinion of Enerdyne's Counsel 28
6.3 Resignations of Enerdyne's Directors and Officers 28
6.4 Employment Agreements 28
6.5 Noncompetition Agreements 28
SECTION 7 Indemnification And Related Matters 28
7.1 Indemnification by Enerdyne and the Shareholders 28
7.2 Indemnification by Boatracs 28
7.3 Expiration of Representations, Warranties and
Covenants 28
7.4 Threshold Amount 29
7.5 Maximum Liability of the Shareholders 29
7.6 Sole Recourse of Boatracs 29
7.7 No Contribution 30
7.8 No Implied Representations 30
7.9 Indemnification Claims. 30
7.10 Defense of Third Party Actions 31
7.11 Subrogation 32
7.12 Exclusivity. 32
SECTION 8 Termination of Agreements 32
8.1 Stock Ownership Agreement 32
8.2 Termination of Employment Agreements 32
SECTION 9 Covenants Following Closing. 33
9.1 Enerdyne of Europe 33
9.2 S-8 Registration Statement 33
9.3 Board Visitation Rights 33
9.4 Key Man Life Insurance 33
SECTION 10 Miscellaneous 34
10.1 Governing Laws 34
10.2 Binding upon Successors and Assigns 34
10.3 Severability 34
10.4 Entire Agreement 34
10.5 Counterparts 34
10.6 Expenses 34
10.7 Amendment and Waivers 34
10.8 Survival of Agreements 35
10.9 No Waiver 35
10.10 Attorneys' Fees 35
10.11 Notices 35
10.12 Construction of Agreement 36
10.13 No Joint Venture 36
10.14 Pronouns 36
10.15 Further Assurances 36
10.16 Absence of Third Party Beneficiary Rights 36
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is entered into as of July 7, 1998, by and among Boatracs, Inc.,
a California corporation ("Boatracs"), Boatracs Acquisition,
Inc., a California corporation ("Merger Sub"), Enerdyne
Technologies, Inc., a California corporation ("Enerdyne") and
Xxxxx X. Xxxxx ("Xxxxx") and Xxxxx Xxxxxxxx ("Xxxxxxxx")
(collectively, the "Shareholders"). Certain other capitalized
terms used in this Agreement are defined in Exhibit A attached
hereto.
RECITALS
A. The Shareholders own all outstanding shares of capital stock
of Enerdyne (the "Enerdyne Securities").
B. Under the terms and subject to the conditions of this
Agreement, Boatracs, Merger Sub, the Shareholders and Enerdyne
intend to enter into a business combination transaction such that
Enerdyne merges with and into a wholly-owned subsidiary of
Boatracs ("Merger Sub").
C. The Boards of Directors of Enerdyne and Boatracs (i) have
determined that the Merger (as defined in Section 1.1) is
consistent with, and in furtherance of, their respective
long-term business strategies and fair to, and in the best
interest of, their respective stockholders and (ii) have approved
this Agreement, the Merger and the other transactions
contemplated by this Agreement.
D. The Board of Directors of Merger Sub has approved this
Agreement, the Merger and the other transactions contemplated by
this Agreement.
E. The parties intend, by executing this Agreement to adopt a
plan of reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended.
F. The parties hereto desire to set forth certain
representations, warranties and covenants made by each to the
other as an inducement to the consummation of the transactions
contemplated hereby.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in
and for the consideration and mutual covenants set forth herein,
and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. SECTION 1 The Merger.
1.1 Closing. The closing (the "Closing") of the Merger of
Enerdyne with and into Merger Sub (the "Merger") shall take place
at the office of Boatracs' counsel, Xxxx Xxxx Xxxx & Freidenrich,
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx,
concurrently with the execution of this Agreement (the "Closing
Date"). As between the parties hereto, risk of loss and the
benefits of ownership of the consideration shall be transferred
as of the Closing, notwithstanding any delay in completing the
ministerial act of filing the Agreement of Merger as contemplated
in Section 1.3.
1.2 The Merger. At the Effective Time (as defined below) and
subject to and upon the terms and conditions of this Agreement
and the applicable provisions of California General Corporation
Law ("California Law"), Enerdyne shall be merged with and into
Merger Sub (the "Merger"), the separate corporate existence of
Enerdyne shall cease and Merger Sub shall continue as the
surviving corporation but with the legal name "Enerdyne
Technologies, Inc." Merger Sub as the surviving corporation
after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.3 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be
completed by filing an Agreement of Merger with the Secretary of
State of the State of California in accordance with the relevant
provisions of California Law in the form attached hereto as
Exhibit B (the "Agreement of Merger") (the time of such filing
being the "Effective Time," which shall be as soon as practicable
on or after the Closing Date.
1.4 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be provided in this Agreement and the applicable
provisions of California Law. Not limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of Enerdyne
and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Enerdyne and Merger Sub shall
become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving
Corporation except that the name of Merger Sub in such Articles
of Incorporation shall be amended to "Enerdyne Technologies,
Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be, at the Effective Time, the Bylaws
of the Surviving Corporation until thereafter amended.
1.6 Officers and Directors. The officers of the Merger Sub
immediately prior to the Effective Time shall be the officers of
the Surviving Corporation as of the Effective Time. The
directors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation as of the
Effective Time.
1.7 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub,
Enerdyne or the holders of any of the securities described below;
each share of common stock ("Common Shares") and each share of
preferred stock ("Preferred Shares") of Enerdyne issued and
outstanding immediately prior to the Effective Time will be
automatically converted into the right to receive a pro rata
portion of the Merger Consideration (as defined in Section 1.8
below) in accordance with the Schedule of Shareholders set forth
on Exhibit C attached hereto (the "Schedule").
1.8 Merger Consideration. The merger consideration ("Merger
Consideration") payable by Boatracs at Closing shall be as
follows:
(a) An aggregate cash payment of One Million Nine Hundred
Fifty-Three Thousand Eight Hundred Dollars ($1,953,800) shall be
payable to the Shareholders in accordance with the Schedule. The
parties acknowledge that the Five Hundred Thousand Dollar
($500,000) deposit previously made by Boatracs into an escrow
shall be returned to Boatracs.
(b) One or more Senior Promissory Notes in the form attached
hereto as Exhibit D (the "Senior Notes") with an aggregate
principal balance of Seven Million Eight Hundred Fifteen Thousand
Two Hundred Dollars ($7,815,200) issued to the Shareholders in
accordance with the Schedule.
(c) One or more Subordinated Promissory Notes in the form
attached hereto as Exhibit E (the "Subordinated Notes" and
collectively with the Senior Notes, the "Notes") with an
aggregate principal balance of One Million Nine Hundred Fifty-
Three Thousand Eight Hundred Dollars ($1,953,800) issued to the
Shareholders in accordance with the Schedule.
(d) An aggregate stock payment of Two Million Nine Hundred
Thirty Thousand Seven Hundred (2,930,700) shares of Common Stock
of Boatracs shall be payable to the Shareholders in accordance
with the Schedule. The certificates for these shares shall bear
a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND ARE "RESTRICTED SECURITIES" AS
DEFINED IN RULE 144 PROMULGATED UNDER THE
ACT. THE SECURITIES MAY NOT BE SOLD OR
OFFERED FOR SALE OR OTHERWISE DISTRIBUTED
EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT OR (ii) IN COMPLIANCE WITH RULE 144,
OR (iii) PURSUANT TO AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, THAT
SUCH REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
The legend set forth above shall be removed (by
delivery of a substitute certificate without such legend), and
Boatracs shall so instruct its transfer agent (i) if a
registration statement respecting the sale of shares has been
declared effective under the Act and the shares of Boatracs
Common Stock have been sold pursuant to such registration
statement or (ii) if the Shareholders deliver to Boatracs
(A) satisfactory written evidence that the shares have been sold
in compliance with Rule 144 (in which case the substitute
certificate will be issued in the name of the transferee), and
(B) an opinion of counsel to Boatracs, in form and substance
reasonably satisfactory to Boatracs, to the effect that the
public sale of the shares by the holder thereof is no longer
subject to Rule 144. In conjunction with the issuance of the
foregoing shares, Boatracs and the Shareholders shall execute a
Registration Agreement in the form attached hereto as Exhibit F.
(e) One or more warrants ("Warrants") to purchase an aggregate
of Four Hundred Eighty-Eight Thousand Four Hundred Fifty
(488,450) shares of Common Stock of Boatracs in the form of
Exhibit G attached hereto shall be issuable to the Shareholders
in accordance with the Schedule. As set forth more fully in
Exhibit G, the Warrants will not be exercisable until six months
after the Closing and will expire four years after the Closing.
1.9 Surrender of Certificates; Delivery of Merger Consideration.
At the Closing (a) the Shareholders shall deliver to Boatracs the
certificates representing the Enerdyne Securities (the
"Certificates"), and (b) Boatracs shall deliver to the
Shareholders the Merger Consideration due at Closing in
accordance with the Schedule.
1.10 Tax Consequences. It is intended by each of the
parties hereto that the Merger shall constitute a reorganization
within the meaning of Section 368 of the Code, and each of the
parties hereto will use its commercially reasonable efforts to
cause the Merger to be treated as such a reorganization. The
parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations. Each party shall seek the
advice of such party's counsel or financial advisor regarding the
ability of the Merger to qualify as such a reorganization.
1.11 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession
to all assets, property, rights, privileges, powers and
franchises of Enerdyne and Merger Sub, the Shareholders and
officers and directors of Enerdyne and Merger Sub will, at
Boatracs' expense, take all such lawful and necessary action.
Boatracs shall cause Merger Sub to perform all of its obligations
relating to this Agreement and the transactions contemplated
thereby.
2. SECTION 2 Representations and Warranties of Enerdyne and the
Shareholders. Except as otherwise set forth in the "Enerdyne
Disclosure Schedule" attached hereto as Exhibit H, Enerdyne and
the Shareholders jointly and severally represent and warrant to
Boatracs and Merger Sub as set forth below.
2.1 Organization. Enerdyne is a corporation duly organized,
validly existing and in good standing under the laws of the State
of California and has corporate power and authority to carry on
its business as it is now being conducted and as it is proposed
to be conducted. Enerdyne is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the
nature of its business or properties makes such qualification or
licensing necessary, except where the failure to qualify would
not be material to Enerdyne's business. The Enerdyne Disclosure
Schedule contains a true and complete list of the locations of
offices or facilities of Enerdyne and a true and complete list of
all states in which Enerdyne maintains any employees. The
Enerdyne Disclosure Schedule contains a true and complete list of
all states in which Enerdyne is duly qualified to transact
business as a foreign corporation. True and complete copies of
Enerdyne's articles of incorporation and bylaws, as in effect on
the date hereof and as to be in effect immediately prior to the
Closing, have been provided to Boatracs or its representatives.
2.2 Capitalization.
(a) The authorized capital stock of Enerdyne as of the date of
this Agreement consists of: (i) One Million (1,000,000) Common
Shares and (ii) Ten Thousand (10,000) Preferred Shares. As of
the date of this Agreement, Twenty Thousand (20,000) Common
Shares and Ten Thousand (10,000) Preferred Shares of Enerdyne
stock are issued and outstanding and held of record by the
Shareholders as set forth and identified in the shareholder list
attached to the Enerdyne Disclosure Schedule.
(b) All of the outstanding shares of Enerdyne Securities have
been duly authorized and validly issued, fully paid and are
nonassessable. All outstanding Enerdyne Securities were issued
in compliance with applicable securities laws. Except as set
forth in this Section 2.2, Enerdyne does not have any other
shares of its capital stock issued or outstanding and does not
have any other outstanding subscriptions, options, warrants,
rights or other agreements or commitments obligating Enerdyne to
issue shares of its capital stock or other securities.
2.3 Power, Authority and Validity. Enerdyne has the corporate
power and authority to enter into this Agreement and the other
Transaction Documents to which it is a party and to carry out its
obligations hereunder and thereunder. Each Shareholder has full
power and authority to enter into this Agreement and the other
Transaction Documents to which such Shareholder is a party and to
carry out his or her obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Transaction
Documents to which Enerdyne is a party and the consummation of
the transactions contemplated herein and therein have been duly
authorized by the board of directors of Enerdyne, and no other
corporate proceedings are necessary to authorize this Agreement
and the other Transaction Documents. Enerdyne is not subject to
or obligated under any charter, bylaw or contract provision or
any license, franchise or permit, or subject to any order or
decree, which would be breached or violated by or in conflict
with its executing and carrying out this Agreement and the
transactions contemplated herein and under the Transaction
Documents. No consent of any person who is a party to a contract
which is material to Enerdyne's business, nor consent of any
governmental body, is required to be obtained on the part of
Enerdyne or the Shareholders to permit the transactions
contemplated herein and to continue the business activities of
Enerdyne as previously conducted by Enerdyne. This Agreement
constitutes, and the other Transaction Documents to which
Enerdyne and/or each Shareholder is a party when executed and
delivered by Enerdyne and/or such Shareholder, as the case may
be, shall constitute, valid and binding obligations of Enerdyne
and/or such Shareholder enforceable in accordance with their
respective terms.
2.4 Financial Statements.
(a) Boatracs has received copies of Enerdyne's unaudited
balance sheet as of March 31, 1998 and statements of operations and
shareholders' equity for the nine-month period then ended
(collectively, the "Enerdyne Interim Financials") and the audited
balance sheet as of June 30, 1997 and statements of operations
and shareholder's equity for the one-year period then-ended
(collectively, the "Enerdyne Financial Statements").
(b) The Enerdyne Financial Statements are complete and in
accordance with the books and records of Enerdyne and present
fairly in all material respects the financial position of
Enerdyne as of their historical dates. The Enerdyne Financial
Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except as set forth in
any audit opinion delivered with the Enerdyne Financial
Statements and except as to year-end adjustments, which are not
expected to be material) applied on a basis consistent with prior
periods. Except and to the extent reflected or reserved against
in the balance sheets specified above (including the notes
thereto), Enerdyne does not have, as of the dates of such balance
sheets, any liabilities or obligations (absolute or contingent)
of a nature required to be or customarily reflected in a balance
sheet (or the notes thereto) prepared in accordance with GAAP.
The reserves, if any, reflected on the Enerdyne Financial
Statements are adequate in light of the contingencies with
respect to which they are made. The statements of operations,
shareholder's equity and cash flow are complete and in accordance
with the books and records of Enerdyne and present fairly the
results of operations, equity transactions and changes of
Enerdyne for the periods indicated.
(c) Enerdyne has no debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and
whether due or to become due, that is not reflected or reserved
against in the Enerdyne Interim Financials, except for those
(i) that may have been incurred after Xxxxx 00, 0000, (xx) that
are not required by GAAP to be included in a balance sheet or the
notes thereto (except that Enerdyne has not established any
reserves with respect to the costs and fees associated with this
Agreement and the transactions contemplated herein), or
(iii) that would not individually or in the aggregate have a
Material Adverse Effect. All debts, liabilities, and obligations
incurred after the date of the Enerdyne Financial Statements were
incurred in the ordinary course of business, and are usual and
normal in amount, both individually and in the aggregate.
(d) The Enerdyne Disclosure Schedule sets forth an accurate and
complete breakdown and aging of all accounts receivable, notes
receivable, and other receivables of Enerdyne as of March 31,
1998. Except as set forth on the Enerdyne Disclosure Schedule
all existing accounts receivable of Enerdyne (including those
accounts receivable reflected on the Enerdyne Interim Financials
that have not yet been collected and those accounts receivable
that have arisen since March 31, 1998 that have not yet been
collected) (i) represent valid obligations of customers of
Enerdyne arising from bona fide transactions entered into in the
ordinary course of business and (ii) are current and, to the
knowledge of Enerdyne, no facts or circumstances exist which
would provide any such customer with any counterclaim or setoff.
(e) The inventories of materials and supplies shown on the
Enerdyne Interim Financials consist of items of a quality and
quantity usable and salable in the ordinary course of business
except for obsolete and slow-moving items and items below
standard quality, all of which have been written down to net
realizable market value or have been provided for by adequate
reserves. All such items of inventory are currently the property
of Enerdyne, except for sales made in the ordinary course of
business since March 31, 1998; and for each of these sales either
the purchaser has made full payment or the purchaser's liability
to make payment is reflected in the books of Enerdyne. No items
included in such inventories have been pledged as collateral or
are held by Enerdyne on consignment from others. The inventories
shown on all balance sheets included in the Enerdyne Interim
Financials and the Enerdyne Financial Statements are based on
quantities determined by physical count or measurement and are
valued at the lower of cost (determined on an average cost basis)
or market value and on a basis consistent with that of prior
years.
2.5 Tax Matters.
(a) Enerdyne has fully and timely, properly and accurately
filed all tax returns and reports required to be filed by it, including
all federal, foreign, state and local tax returns and estimates
for all years and periods (and portions thereof) for which any
such returns, reports or estimates were due. All such returns,
reports and estimates were prepared in the manner required by
applicable law in all material respects. All income, sales, use,
occupation, property or other taxes or assessments due from
Enerdyne prior to the Closing Date have been paid or will be paid
on or before the Closing Date. There are no pending assessments,
asserted deficiencies or claims for additional taxes that have
not been paid or reserved for. The reserves for taxes, if any,
reflected on the Enerdyne Financial Statements are adequate, and
there are no tax liens on any property or assets of Enerdyne
(other than liens for taxes not yet due and payable). There have
been no audits or examinations of any Enerdyne tax returns or
reports by any applicable governmental agency. No facts exist
which would constitute grounds for a disallowance of any
deduction taken in any tax returns and reports filed by Enerdyne.
To Enerdyne's knowledge, no facts exist or have existed which
would constitute grounds for the assessment of any penalty or any
further tax liability beyond that shown on the respective tax
reports, returns or estimates. There are no outstanding
agreements or waivers extending the statutory period of
limitation applicable to any federal, foreign, state or local tax
return or report for any period.
(b) All taxes which Enerdyne has been required to collect or
withhold have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing authority.
(c) Enerdyne is not a party to any tax-sharing agreement or
similar arrangement with any other party.
(d) At no time has Enerdyne been included in the federal
consolidated income tax return of any affiliated group of
corporations.
(e) Enerdyne will not be required to include any adjustment in
taxable income for any tax period (or portion thereof) ending
after the Closing Date pursuant to Section 481(c) of the Code or
any provision of the tax laws of any jurisdiction requiring tax
adjustments as a result of a change in method of accounting
implemented by Enerdyne prior the Closing Date for any tax period
(or portion thereof) ending on or before the Closing Date or
pursuant to the provisions of any agreement entered into by
Enerdyne prior to the Closing Date with any taxing authority with
regard to the tax liability of Enerdyne for any tax period (or
portion thereof) ending on or before the Closing Date.
(f) Enerdyne is not currently under any contractual obligation
to pay to any Governmental Body any tax obligations of, or with
respect to any transaction relating to, any other person or to
indemnify any other person with respect to any tax, other than
pursuant to this Agreement.
2.6 Enerdyne Projections. Section 2.6 of the Enerdyne
Disclosure Schedule itemizes the projections of Enerdyne
regarding all quotations, commitments or proposals (including,
without limitation, development projects) made by Enerdyne which
may result in future sales. All orders that have been accepted
by the Company will be satisfied in the normal course of business
within three months after such orders were placed, if such
delivery schedule was agreed upon at the time the order was
placed.
2.7 Absence of Certain Changes or Events. From March 31, 1998,
to the date of this Agreement:
(a) there has not been any Material Adverse Change in
Enerdyne's financial condition or in the operations of Enerdyne's business
prospects, assets or income, nor any Material Adverse Change in
its balance sheet (with the Enerdyne Financial Statements and any
subsequent balance sheet analyzed as if each had been prepared
according to GAAP exclusive of footnotes and year-end
adjustments), and including but not limited to cash distributions
or material decreases in the net assets of Enerdyne;
(b) there has not been any damage, destruction or loss of
property of Enerdyne, whether or not covered by insurance, in an
aggregate amount in excess of Ten Thousand Dollars ($10,000);
(c) no grant or agreement to make any increase in the
compensation payable or to become payable by Enerdyne to its
officers or employees, has been made except those occurring in
the ordinary course of business;
(d) no dividend or other distribution has been declared, set
aside or paid on or in respect of the capital stock of Enerdyne,
nor has any direct or indirect redemption, retirement, purchase
or other acquisition by Enerdyne of such shares occurred;
(e) Enerdyne has not issued any shares of capital stock of
Enerdyne or any warrants, rights, options or entered into any
commitment relating to the shares of Enerdyne;
(f) Enerdyne has not made any change in the accounting methods
or practices it follows, whether for general financial or tax
purposes, or any change in depreciation or amortization policies
or rates adopted therein;
(g) Enerdyne has not sold, leased, abandoned or otherwise
disposed of any real property or any machinery, equipment or
other operating property other than in the ordinary course of
business;
(h) Enerdyne has not sold, assigned, transferred, licensed or
otherwise disposed of any patent, trademark, trade name, brand
name, copyright (or pending application for any patent, trademark
or copyright), invention, work of authorship, process, know-how,
formula or trade secret or interest thereunder or other
intangible asset, except in the ordinary course of its business;
(i) Enerdyne has not been involved in any legal proceeding or
received any threat of litigation involving any employee which
may result in a material liability to Enerdyne;
(j) Enerdyne has not engaged in any activity or entered into any
material commitment or transaction (including without limitation
any borrowing or capital expenditure), in either case, other than
in the ordinary course of business;
(k) Enerdyne has not incurred any liabilities, contingent or
otherwise, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with GAAP,
and whether due or to become due), except for (i) liabilities
identified as such in the of the Enerdyne Interim Financials,
(ii) accounts payable, accrued taxes or accrued salaries that
have been incurred by Enerdyne since March 31, 1998 in the
ordinary course of business and consistent with Enerdyne's past
practices, (iii) liabilities which individually or in the
aggregate would not have a Material Adverse Effect, and
(iv) liabilities in Section 2.7 (k) of the Enerdyne Disclosure
Schedule;
(l) Enerdyne has not permitted or allowed any of its material
property or assets to be subjected to any mortgage, deed of
trust, pledge, lien, security interest or other encumbrance of
any kind, except those permitted under Section 2.8 hereof, other
than any purchase money security interests incurred in the
ordinary course of business;
(m) Enerdyne has not made any capital expenditure or commitment
for additions to property, plant or equipment individually in
excess of Ten Thousand Dollars ($10,000), or in the aggregate, in
excess of Fifty Thousand Dollars ($50,000);
(n) Enerdyne has not paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets to, or
entered into any agreement or arrangement with any of its
officers, directors or shareholders or, to Enerdyne's knowledge,
any Affiliate or associate of any of the foregoing;
(o) Enerdyne has not made any amendment to, or terminated any
agreement which, if not so amended or terminated, would be
required to be disclosed on the Enerdyne Disclosure Schedule; or
(p) Enerdyne has not agreed to take any action described in this
Section 2.7 or outside of its ordinary course of business or
which would constitute a breach of any of the representations
contained in this Agreement.
2.8 Title and Related Matters. Enerdyne has good and marketable
title to all the properties, interests in properties and assets,
real and personal, reflected in the Enerdyne Financial Statements
or acquired after the date of the Enerdyne Financial Statements
(except properties, interests in properties and assets sold or
otherwise disposed of since the date of the Enerdyne Financial
Statements in the ordinary course of business), free and clear of
all mortgages, liens, pledges, charges or encumbrances of any
kind or character, except the lien of current taxes not yet due
and payable, brokers' fees and expenses and except for liens
which in the aggregate do not secure more than Ten Thousand
Dollars ($10,000) in liabilities. The equipment of Enerdyne used
in the operation of its business is in good operating condition
and repair, normal wear and tear excepted. All real or personal
property leases to which Enerdyne is a party are, to Enerdyne's
knowledge, valid, binding, enforceable and effective in
accordance with their respective terms, subject to (i) laws of
general application relating to bankruptcy, insolvency, and the
relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
There is not under any of such leases any existing default by
Enerdyne or event of default or event which, with notice or lapse
of time or both, would constitute a default. The Enerdyne
Disclosure Schedule contains a listing of all real and personal
property leased or owned by Enerdyne, describing Enerdyne's
interest in said property. True and correct copies of Enerdyne's
leases have been provided to Boatracs or its representatives
2.9 Proprietary Rights and Warranty Claims.
(a) Section 2.9(a)(i) of the Enerdyne Disclosure Schedule sets
forth, with respect to each Enerdyne Proprietary Asset registered
with any Governmental Body or for which an application for
registration has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names
of the jurisdictions covered by the applicable registration or
application. Section 2.9(a)(ii) of the Enerdyne Disclosure
Schedule identifies and provides a brief description of each
Proprietary Asset licensed to Enerdyne by any Person (except for
any Proprietary Asset that is licensed to Enerdyne under any
third party software license generally available to the public at
a cost of less than Ten Thousand Dollars ($10,000)), and
identifies the license agreement under which such Proprietary
Asset is being licensed to Enerdyne. Except as set forth in
Section 2.9(a)(iii) of the Enerdyne Disclosure Schedule, Enerdyne
has valid and marketable title to all Enerdyne Proprietary Assets
used in or necessary for the conduct of its business free and
clear of all material liens and other encumbrances, except for
third party rights licensed to it, which it has a valid right to
use with respect to such Enerdyne Proprietary Assets (all of the
foregoing are referred to herein as "Enerdyne Proprietary
Rights"). Except as set forth in Section 2.9(a)(iv) of the
Enerdyne Disclosure Schedule, Enerdyne is not obligated to make
any material payment to any Person for the use of any Enerdyne
Proprietary Asset. Except as set forth in Section 2.9(a)(v) of
the Enerdyne Disclosure Schedule, Enerdyne has not developed
jointly with any other Person any Enerdyne Proprietary Asset with
respect to which such other Person has any rights.
(b) Except as set forth in Section 2.9(b) of the Enerdyne
Disclosure Schedule, Enerdyne has taken all reasonable and
customary measures and precautions necessary to protect and
maintain the confidentiality and secrecy of all Enerdyne
Proprietary Assets (except Enerdyne Proprietary Assets whose
value would be unimpaired by public disclosure) and otherwise to
maintain and protect the value of all Enerdyne Proprietary
Assets. Except as set forth in Section 2.9(b) of the Enerdyne
Disclosure Schedule or for portions and components delivered to
third parties for interface design and testing purposes, Enerdyne
has not disclosed or delivered, or permitted the disclosure of or
delivery to any Person, other than employees or consultants who
have signed confidentiality agreements, the source code or
circuit board diagrams, or any portion or aspect of the source
code or circuit board diagrams, of any Enerdyne Product. At the
time such portions and components were delivered, Enerdyne did
not expect the recipient to become a competitor for the Enerdyne
Products incorporating such portions and components and, absent
reverse engineering, such portions or components were not
sufficient to permit the recipient to develop competitive
products. The custom and practice of Enerdyne with respect to
delivery of such limited portions or components has not changed
to any material degree in the last two years.
(c) Enerdyne is not infringing, misappropriating or making any
unlawful use of, and Enerdyne has not at any time infringed,
misappropriated or made any unlawful use of, and Enerdyne has not
received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other Person. To
Enerdyne's knowledge, no other Person is infringing,
misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Enerdyne Proprietary Asset.
(d) Except as set forth in Section 2.9(d) of the Enerdyne
Disclosure Schedule or to the extent of rework activities in the
ordinary course of business in amounts consistent with past
practice: (i) each Enerdyne Product conforms in all material
respects with any specification, documentation, performance
standard, representation or statement made or provided with
respect thereto by or on behalf of Enerdyne and (ii) there has
not been during the last three years any claim made against
Enerdyne by any customer or other Person alleging that any
Enerdyne Product (including each version thereof that has been
licensed or otherwise made available by Enerdyne to any Person)
does not conform in all material respects with any specification,
documentation, performance standard, representation or statement
made or provided by or on behalf of Enerdyne, and, to Enerdyne's
knowledge, there is not a reasonable basis for any such claim.
No product liability or warranty claims which individually or in
the aggregate could exceed the reserves therefor on the Enerdyne
Financial Statements have been communicated to, or threatened
against, Enerdyne.
(e) The Enerdyne Proprietary Assets constitute all the
Proprietary Assets necessary to enable Enerdyne to conduct its
business in the manner in which such business has been and is
being conducted. Except as set forth in Section 2.9(e) of the
Enerdyne Disclosure Schedule, (i) Enerdyne has not licensed any
of the Enerdyne Proprietary Assets to any Person and
(ii) Enerdyne has not entered into any covenant not to compete or
contract limiting its ability to exploit fully any of the
Enerdyne Proprietary Assets or to transact business in any market
or geographical area or with any Person.
(f) Except as set forth in Section 2.9(f) of the Enerdyne
Disclosure Schedule, (i) all current and former employees of
Enerdyne (if employed in the last three years) have executed and
delivered to Enerdyne an agreement (containing no exceptions to
or exclusions from the scope of its coverage relevant to
Enerdyne's business) that is substantially identical to the form
of the Confidentiality, Trade Secret and Intangible Assignment
Agreement previously delivered to Boatracs, and (ii) all current
and former consultants and independent contractors to Enerdyne
(if employed in the last three years) providing technical
services relating to Enerdyne's Proprietary Assets have executed
and delivered to Enerdyne an agreement (containing no exceptions
to or exclusions from the scope of its coverage relevant to
Enerdyne's business), the material provisions of which are in
substance similar to the terms of the form of the
Confidentiality, Trade Secret and Intangible Assignment Agreement
previously delivered to Boatracs.
2.10 Employee Benefit Plans.
(a) As used in this Section 2.10, the following terms have the
meanings set forth below.
"Company Plan" means all plans as given the meaning in ERISA
3(3) of which Enerdyne is or was a Plan Sponsor, or to which
Enerdyne otherwise contributes or has contributed, or in which
Enerdyne otherwise participates or has participated.
"Multi-Employer Plan" has the meaning given in ERISA
3(37)(A).
"Other Benefit Obligations" means all obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as
compensation for services rendered, to present or former
directors, employees, or agents, other than obligations,
arrangements, and practices that are plans as given the meaning
in ERISA 3(3) and which are owned, adopted or followed by
Enerdyne. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance
payment policies, and fringe benefits within the meaning of Code
132.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Pension Plan" has the meaning given in ERISA 3(2)(A).
"Plan Sponsor" has the meaning given in ERISA 3(16)(B).
"Qualified Plan" means any Company Plan that meets or
purports to meet the requirements of Code 401(a).
"Title IV Plans" means all Pension Plans that are subject to
Title IV of XXXXX, 00 X.X.X. 0000 et seq., other than Multi-
Employer Plans.
"Welfare Plan" has the meaning given in ERISA 3(1).
(b) The Enerdyne Disclosure Schedule contains the following
information:
(i) Section 2.10(b)(i) of the Enerdyne Disclosure Schedule
contains a complete and accurate list of all Company Plans and
Other Benefit Obligations, and identifies as such all Company
Plans that are (A) defined benefit Pension Plans, (B) Qualified
Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Section 2.10(b)(ii) of the Enerdyne Disclosure Schedule sets
forth a calculation of the liability of Enerdyne for post-
retirement benefits other than pensions, made in accordance with
Financial Accounting Statement 106 of the Financial Accounting
Standards Board, regardless of whether Enerdyne is required by
this Statement to disclose such information.
(iii) Section 2.10(b)(iii) of the Enerdyne Disclosure
Schedule sets forth the financial cost of all obligations owed
under any Company Plan or Other Benefit Obligation that is not
subject to the disclosure and reporting requirements of ERISA.
(c) The Shareholders or Enerdyne have delivered to Boatracs:
(i)
all documents that set forth the terms of
each Company Plan or Other Benefit Obligation and of any related
trust and any amendments to such documents (and descriptions of
amendments that have not been reduced to writing), including
(A) all plan descriptions, summary plan descriptions and summary
of material modifications of Company Plans for which the
Shareholders or Enerdyne are required to prepare, file, and
distribute plan descriptions and summary plan descriptions, and
(B) all summaries and descriptions furnished to participants and
beneficiaries regarding Company Plans and Other Benefit
Obligations, for which a plan description or summary plan
description is not required;
(ii) all personnel, payroll, and employment manuals and written
policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including
both pension and benefits) by Enerdyne, and all collective
bargaining agreements pursuant to which contributions are being
made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Other Benefit
Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan or Other
Benefit Obligation;
(viii) all reports (other than routine correspondence)
submitted within the four years preceding the date of this
Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with
respect to any Company Plan or Other Benefit Obligation;
(ix) all notifications to employees of their rights under ERISA
601 et seq. and Code 4980B;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all schedules
thereto and the opinions of independent accountants;
(xi) all notices and correspondence that were given by Enerdyne
or any Company Plan to the Internal Revenue Service ("IRS"), the
PBGC, or any participant or beneficiary, pursuant to statute,
within the two years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this
Section 2.10;
(xii) all notices and correspondence that were given by the
IRS, the PBGC, or the Department of Labor to Enerdyne or any
Company Plan within the four years preceding the date of this
Agreement;
(xiii) with respect to Qualified Plans, the most recent
determination letter for each Company Plan of Enerdyne that is a
Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed
for each of the three most recent plan years.
(d) Except as set forth in Section 2.10(d) of the Enerdyne
Disclosure Schedule:
(i) Enerdyne has performed all of its obligations under all
Company Plans and Other Benefit Obligations. Enerdyne has made
appropriate entries in its financial records and statements for
all obligations and liabilities under such Company Plans and
Other Benefit Obligations that have accrued but are not due. The
Qualified Title IV Profit Sharing Plan is fully funded.
(ii) No statement, either written or oral, has been made by
Enerdyne to any Person with regard to any Company Plan or Other
Benefit Obligation that was not in accordance with the Company
Plan or Other Benefit Obligation and that could have a Material
Adverse Effect upon Enerdyne or Boatracs.
(iii) Enerdyne is, with respect to all Company Plans and
Other Benefits Obligations, and each Company Plan and Company
Other Benefit Obligation is, in full compliance with ERISA, the
Code, and other applicable laws, rules and regulations including
the provisions of such laws, rules and regulations that are
expressly mentioned in this Section 2.10.
(1) No transaction prohibited by ERISA 406 and no "prohibited
transaction" under Code 4975(c) have occurred with respect to
any Company Plan.
(2) No Shareholder nor Enerdyne has any liability to the IRS
with respect to any Company Plan, including any liability imposed
by Chapter 43 of the Code.
(3) No Shareholder nor Enerdyne has any liability to the PBGC
with respect to any Company Plan or has any liability under ERISA
502 or 4071.
(4) All filings required by ERISA and the Code as to each
Company Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or the Code
have been timely provided.
(5) All contributions and payments made or accrued with respect
to all Company Plans and Other Benefit Obligations are deductible
under Code 162 or Section 404. No amount, or any asset of any
Company Plan is subject to tax as unrelated business taxable
income.
(iv) Except as otherwise required by the provisions of the Code
or ERISA, each Company Plan can be terminated within thirty (30)
days, without payment of any additional contribution or amount
and without the vesting or acceleration of any benefits promised
by such Company Plan.
(v) Since March 31, 1998, there has been no establishment or
amendment of any Company Plan or Other Benefit Obligation.
(vi) No event has occurred or circumstance exists, other than
general conditions that would affect other companies in a similar
fashion, that could result in a material increase in premium
costs of Company Plans or Other Benefit Obligations that are
insured, or a material increase in benefit costs of such Company
Plans and Other Benefit Obligations that are self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, any Company Plan or Other Benefit
Obligation is pending or, to the Shareholders' knowledge, is
threatened.
(viii) Except as described in Section 2.10(d)(viii) of the
Enerdyne Disclosure Schedule, no Company Plan is a stock bonus,
pension, or profit-sharing plan within the meaning of Code
401(a).
(ix) Each Qualified Plan of Enerdyne is qualified in form and
operation under Code 401(a); each trust for each such Qualified
Plan is exempt from federal income tax under Code 501(a); no
event has occurred or circumstance exists that will or could give
rise to disqualification or loss of tax-exempt status of any such
Qualified Plan or trust.
(x) Enerdyne has met the minimum funding standard, and has made
all contributions required, under ERISA 302 and Code 412.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) Enerdyne has paid all amounts due to the PBGC pursuant
to ERISA 4007.
(xiii) Enerdyne has not ceased operations at any facility or
has withdrawn from any Title IV Plan in a manner that would
subject Enerdyne, Boatracs or any entity or Person to liability
under ERISA 4062(e), 4063, or 4064.
(xiv) Enerdyne has not filed a notice of intent to terminate
any Company Plan nor has Enerdyne adopted any amendment to treat
a Company Plan as terminated. The PBGC has not instituted
proceedings to treat any Company Plan as terminated. No event
has occurred or circumstance exists that may constitute grounds
under ERISA 4042 for the termination of, or the appointment of
a trustee to administer, any Company Plan.
(xv) No amendment has been made, or is reasonably expected to be
made, to any Company Plan that has required or could require the
provision of security under ERISA 307 or Code 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has
occurred or circumstance exists that may result in an accumulated
funding deficiency as of the last day of the current plan year of
any such Company Plan.
(xvii) The actuarial report for each Pension Plan of Enerdyne
fairly presents the financial condition and the results of
operations of each such Plan in accordance with GAAP.
(xviii) Since the last valuation date for each Pension Plan of
Enerdyne, no event has occurred or circumstance exists, other
than general conditions that would affect other companies in a
similar fashion, that would increase the amount of benefits under
any such Pension Plan or that would cause the excess of the
Pension Plan assets over benefit liabilities (as defined in ERISA
4001) to decrease, or the amount by which benefit liabilities
exceed assets to increase.
(xix) No reportable event (as defined in ERISA 4043 and in
regulations issued thereunder) has occurred.
(xx) No Shareholder nor Enerdyne has knowledge of any facts or
circumstances that may give rise to any liability of Enerdyne,
Boatracs or any other entity or Person to the PBGC under Title IV
of ERISA.
(xxi) Enerdyne has not ever established, maintained, or
contributed to or otherwise participated in, or had an obligation
to maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan.
(xxii) Except to the extent required under ERISA 601 et seq.
and Code 4980B, Enerdyne neither provides health or welfare
benefits for any retired or former employee nor is it obligated
to provide health or welfare benefits to any active employee
following such employee's retirement or other termination of
service.
(xxiii) Enerdyne has the right to modify and terminate benefits
to retirees (other than pensions) with respect to both retired
and active employees.
(xxiv) The Shareholders and Enerdyne have complied with the
provisions of ERISA 601 et seq. and Code 4980B.
(xxv) No payment that is owed or may become due to any
director, officer, employee, or agent of Enerdyne will be
non-deductible to Enerdyne or subject to tax under Code 280G or
4999; nor will Enerdyne be required to "gross up" or otherwise
compensate any such person because of the imposition of any
excise tax on a payment to such person.
(xxvi) The consummation of the transactions under this
Agreement will not result in the payment, vesting, or
acceleration of any benefit.
2.11 Bank Accounts. The Enerdyne Disclosure Schedule sets
forth the names and locations of all banks, savings and loan
associations, and other financial institutions at which Enerdyne
maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom.
2.12 Contracts.
(a) The Enerdyne Disclosure Schedule identifies each material
license agreement, development agreement, manufacturing and
supply agreement, sales representative agreement, distribution
agreement, and OEM agreement to which Enerdyne is a party.
(b) Except as set forth in Section 2.12(b) of the Enerdyne
Disclosure Schedule,
(i) Enerdyne has no agreements, contracts or commitments that
call for prospective fixed and/or contingent payments or
expenditures by or to Enerdyne of more than Ten Thousand
Dollars ($10,000) other than those entered into in the ordinary
course of business concerning the sale of Enerdyne Products;
(ii) There are no outstanding sales contracts, commitments or
proposals (including, without limitation, development projects)
of Enerdyne that Enerdyne currently expects to result either
individually or in the aggregate in any material loss to Enerdyne
upon completion or performance thereof;
(iii) Enerdyne has no outstanding agreements, contracts or
commitments with officers, employees, agents, consultants,
advisors, salesmen, sales representatives, distributors or
dealers that are not cancelable by it on notice of not longer
than ninety days and without liability, commission, penalty or
premium exceeding Five Thousand Dollars ($5,000) in any single
instance or Twenty Thousand Dollars ($20,000) in the aggregate;
(iv) Enerdyne has no currently effective collective bargaining or
union agreements, contracts or commitments;
(v) Enerdyne is not restricted by agreement from competing with
any person or from carrying on its business anywhere in the
world;
(vi) Enerdyne is under no liability or obligation, and no such
outstanding claim has been made, with respect to the return to
Enerdyne of inventory or merchandise in the possession of
wholesalers, distributors, retailers, or other customers, except
such liabilities, obligations and claims as, in the aggregate, do
not exceed the reserves therefor set forth in the Enerdyne
Financial Statements;
(vii) Enerdyne has not guaranteed any obligations of other
persons or made any agreements to acquire or guarantee any
obligations of other persons; and
(viii) Enerdyne has no outstanding loan or advance to any
person; nor is it party to any line of credit, standby financing,
revolving credit or other similar financing arrangement of any
sort which would permit the borrowing by Enerdyne of any sum not
reflected in the Enerdyne Financial Statements.
(c) The Enerdyne Disclosure Schedule lists all agreements
pursuant to which Enerdyne has agreed to (i) manufacture for, or
supply to, any third party any Enerdyne Products or components
thereto or, (ii) purchase materials or supplies from third
parties, in either case requiring, or expected to require,
payments of Twenty-Five Thousand Dollars ($25,000) or more over
the life of any such agreement. The Enerdyne Disclosure Schedule
also lists each vendor which is the sole source for any product
or component included in the Enerdyne Products which Enerdyne
believes is not readily available from other sources.
(d) Enerdyne has delivered or made available to Boatracs or its
representatives accurate and complete copies of all written
contracts identified in Section 2.12 of the Enerdyne Disclosure
Schedule, including all amendments thereto. Enerdyne has not
entered into any material oral contracts. Each contract
identified in Section 2.12 of the Enerdyne Disclosure Schedule (a
"Material Contract") is valid and in full force and effect, and
to the knowledge of Enerdyne is enforceable by Enerdyne in
accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and (ii) rules of law governing indemnification, specific
performance, injunctive relief and other equitable remedies. No
such contract, agreement or instrument contains any liquidated
damages, penalty or similar provision. To Enerdyne's knowledge,
no party to any such contract, agreement or instrument intends to
cancel, withdraw, modify or amend such contract, agreement or
instrument.
(e) Except as set forth in Section 2.12 of the Enerdyne
Disclosure Schedule:
(i) Enerdyne has not violated or breached, or committed any
default under, any Material Contract, and, to Enerdyne's
knowledge, no other Person has violated or breached, or committed
any default under, any Material Contract, which violation, breach
or default would individually or in the aggregate have a Material
Adverse Effect; and
(ii) No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Material Contract,
(B) give any Person the right to declare default or exercise any
remedy under any Material Contract, (C) give any Person the right
to accelerate the maturity or performance of any Material
Contract or (D) give any Person the right to cancel, terminate or
modify any Material Contract, other than such violations,
breaches, defaults, exercises, accelerations, cancellations,
terminations or modifications which individually or in the
aggregate would have a Material Adverse Effect.
2.13 Orders, Commitments and Returns. All accepted and
unfilled orders entered into by Enerdyne for the sale, license,
or lease or other disposition by Enerdyne of its products, and
all agreements, contracts, or commitments for the purchase of
supplies by Enerdyne, were made in the ordinary course of
business. No outstanding material purchase or outstanding lease
commitment of Enerdyne is in excess of the normal, ordinary and
usual requirements of its business or was made at a price (on
both a per unit and aggregate basis) in excess of the current
market price at the time made, or contains terms and conditions
materially more onerous to Enerdyne than those usual and
customary in the industry.
2.14 Compliance With Law. Enerdyne is in compliance in all
material respects with all applicable laws and regulations.
Neither Enerdyne nor, to Enerdyne's knowledge, any of its
employees has directly or indirectly paid or delivered any fee,
commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other
party in the United States or any other country, that was or is
in violation of any federal, state, or local statute or law or of
any statute or law of any other country having jurisdiction.
Enerdyne has not participated directly or indirectly in any
boycotts or other similar practices affecting any of its
customers. Enerdyne has complied in all material respects at all
times with any and all applicable federal, state and foreign
laws, rules, regulations, proclamations and orders relating to
the importation or exportation of its products. All licenses,
franchises, permits and other governmental authorizations held by
Enerdyne and which are material to its business are valid and
sufficient in all respects for the business presently carried on
by Enerdyne. All representations and certifications made by
Enerdyne in any contract with the government were true and
correct as of the date made and, to the extent intended to
continue in effect, continue to be true and correct as of the
date hereof.
2.15 Labor Matters.
(a) Enerdyne is not engaged in any unfair labor practice and is
not in violation of any applicable laws relating to employment
and employment practices, terms and conditions of employment, and
wages and hours.
(b) There is no unfair labor practice complaint against Enerdyne
pending or threatened before the National Labor Relations Board.
(c) There is no strike, labor dispute, slowdown, or stoppage
pending or threatened against Enerdyne.
(d) No union representation question exists with respect to the
employees of Enerdyne and, to Enerdyne's knowledge, no union
organizing activities are taking place.
(e) No grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is pending and to
Enerdyne's knowledge no claims therefor exist.
(f) No agreement that is binding on Enerdyne restricts it from
relocating or closing any of its operations.
(g) Enerdyne has not experienced any work stoppage or other
labor difficulty.
(h) There is and has not been any claim against Enerdyne based
on actual or alleged wrongful termination or on actual or alleged
race, age, sex, disability or other harassment or discrimination,
or similar tortious conduct, nor to Enerdyne's knowledge, is
there any reasonable basis for any such claim.
(i) Enerdyne is not aware of any key Enerdyne employee who
intends to terminate his or her employment with Enerdyne.
2.16 Trade Regulation. Enerdyne has not terminated its
relationship with or refused to ship Enerdyne Products to any
dealer, distributor, OEM, third party marketing entity or
customer which had theretofore paid or been obligated to pay
Enerdyne in excess of Ten Thousand Dollars ($10,000) over any
consecutive twelve (12) month period. The prices charged by
Enerdyne in connection with the marketing or sale of any products
or services have been in compliance in all material respects with
all applicable laws and regulations. No claims against Enerdyne
have been communicated or threatened to Enerdyne with respect to
wrongful termination of any dealer, distributor or any other
marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any
laws or regulations relating to anti-competitive practices or
unfair trade practices of any kind, and to Enerdyne's knowledge,
no specific situation, set of facts, or occurrence provides a
reasonable basis for any such claim.
2.17 Insider Transactions. No Affiliate of Enerdyne has any
interest in (i) any equipment or other material property, real or
personal, tangible or intangible, including, without limitation,
any Proprietary Asset, used in connection with or pertaining to
the business of Enerdyne or, (ii) any creditor, supplier,
customer, manufacturer, agent, representative, or distributor of
Enerdyne Products; provided, however, that no such Affiliate or
other person shall be deemed to have such an interest solely by
virtue of (a) the ownership of less than one percent (1%) of the
outstanding stock or debt securities of any publicly-held company
whose stock or debt securities are traded on a recognized stock
exchange or quoted on the National Association of Securities
Dealers Automated Quotation System, or (b) such person's status
as a general or limited partner of a venture capital or similar
fund, which fund is also a holder of the securities of such
creditor, supplier, customer, manufacturer, agent, representative
or distributor.
2.18 Employees, Independent Contractors and Consultants.
The Enerdyne Disclosure Schedule lists all currently effective
consulting, independent contractor and/or employment agreements
and other material agreements concluded with individual
employees, independent contractors or consultants to which
Enerdyne is a party other than those terminable at will or within
thirty (30) days. If oral, the Enerdyne Disclosure Schedule also
contains a brief summary of such agreements. True and correct
copies of all such written agreements have been provided to
Boatracs or its representatives. The Enerdyne Disclosure
Schedule lists (i) the names of all persons currently employed by
Enerdyne and the salaries and other compensation arrangements
(bonus, deferred compensation, etc.) for each such person. The
Enerdyne Disclosure Schedule sets forth the approximate aggregate
accrued vacation and severance pay for such persons as of
March 31, 1998.
2.19 Insurance. The Enerdyne Disclosure Schedule contains a
list of the policies of fire, liability and other forms of
insurance held by Enerdyne. To Enerdyne's knowledge, Enerdyne
has not done anything, either by way of action or inaction, that
might reasonably be expected to invalidate such policies in whole
or in part.
2.20 Litigation. There are no suits, actions or proceedings
pending or, to Enerdyne's knowledge, threatened against Enerdyne
which could have a Material Adverse Effect or which question or
challenge the validity of this Agreement or the Transaction
Documents. There is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Enerdyne.
2.21 Section 341(f)(2). Enerdyne has not, with regard to
any property or assets held, acquired or to be acquired by it, at
any time, filed a consent to the application of Section 341(f)(2)
of the Code nor will any such consent be filed before the
Closing.
2.22 Subsidiaries. Enerdyne has no subsidiaries. Enerdyne
does not own or control (directly or indirectly) any capital
stock, bonds or other securities of, and does not have any
proprietary interest in, any other corporation, general or
limited partnership, firm, association or business organization,
entity or enterprise, and Enerdyne does not control (directly or
indirectly) the management or policies of any other corporation,
partnership, firm, association or business organization, entity
or enterprise.
2.23 Compliance with Environmental Requirements. Enerdyne
has obtained all material permits, licenses and other
authorizations which are required under federal, state and local
laws applicable to Enerdyne and relating to pollution or
protection of the environment, including laws or provisions
relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic
materials, substances, or wastes into air, surface water,
groundwater, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous
or toxic materials, substances, or wastes. Enerdyne is in
material compliance with all terms and conditions of the required
permits, licenses and authorizations. Enerdyne is not aware of,
nor has Enerdyne received written notice of, any conditions,
circumstances, activities, practices, incidents, or actions which
might reasonably form the basis of a claim, action, suit,
proceeding, hearing, or investigation of, by, against or relating
to Enerdyne, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or
hazardous or toxic substance, material or waste.
2.24 Corporate Documents. Enerdyne has furnished or made
available to Boatracs for its examination: (i) copies of its
articles of incorporation and bylaws, (ii) its minute book
containing all records required to be set forth of all
proceedings, consents, actions, and meetings of the shareholders,
the board of directors and any committees thereof, (iii) any
material permits, orders, and consents issued by any regulatory
agency with respect to Enerdyne, or any securities of Enerdyne,
and all applications for such permits, orders, and consents, and
(iv) the stock transfer books of Enerdyne setting forth all
transfers of any capital stock. The corporate minute books,
stock certificate books, stock registers and other corporate
records of Enerdyne are complete and accurate in all respects,
and the signatures appearing on all documents contained therein
are the true signatures of the persons purporting to have signed
the same. All actions reflected in such books and records were
duly and validly taken in compliance in all material respects
with the laws of the applicable jurisdiction.
2.25 No Brokers. Except as set forth in Section 2.25 of the
Enerdyne Disclosure Schedule, neither Enerdyne nor the
Shareholders are obligated for the payment of fees or expenses of
any broker or finder in connection with the origin, negotiation
or execution of this Agreement or in connection with any
transaction contemplated hereby or thereby.
2.26 Disclosure. The statements by Enerdyne contained in
this Agreement, the exhibits and schedules hereto, and the
certificates or documents required to be delivered by Enerdyne to
Boatracs under this Agreement, taken as a whole, do not contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances
under which they were made.
2.27 Material Consents. Enerdyne has obtained any and all
consents necessary with respect to the Material Contracts to
consummate the transactions contemplated by this Agreement.
2.28 Cash Balance; Payment of Certain Expenses. Enerdyne
has at least Two Hundred Twenty Thousand Dollars ($220,000) of
Cash and Cash Equivalents on hand at the Closing after paying or
making adequate provision for all of Enerdyne's legal fees, and
all other costs and expenses (including any broker or finder's
fees and expenses) incurred in connection with this Agreement and
the transactions contemplated herein. These expenses shall be
paid on or before the Closing or through establishment and
funding of restricted accounts for payment of such amounts
following the Closing.
3. SECTION 3 Representations and Warranties of the Shareholders.
The Shareholders jointly and severally represent and warrant to
Boatracs and Merger Sub as set forth below.
3.1 Ownership of Enerdyne Securities. The Shareholders are the
sole owners of all rights, title and interest in and to the
Enerdyne Securities free and clear of all liens and claims of any
third party.
3.2 Boatracs Securities.
(a) The Shareholders have been advised that (i) the issuance of
shares of Boatracs Common Stock in connection with the Merger is
expected to be effected pursuant to an exemption from
registration under the Act, which exemption depends upon, among
other things, the bona fide nature of the Shareholders'
investment intent as expressed in Section 3.2(b) below and
(ii) the resale of such shares will be subject to the
restrictions set forth in Rule 144 promulgated under the Act
unless otherwise transferred pursuant to an effective
registration statement under the Act or an appropriate exemption
from registration. Each Shareholder accordingly agrees not to
sell, pledge, transfer or otherwise dispose of any Boatracs
Common Stock issued to the Shareholders in the Merger unless
(i) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 144, (ii) such sale,
pledge, transfer or other disposition is made pursuant to an
effective registration statement under the Act or an appropriate
exemption from registration, or (iii) the Shareholder delivers to
Boatracs a written opinion of counsel, reasonably acceptable to
Boatracs in form and substance, that such sale, pledge, transfer
or other disposition is otherwise exempt from registration under
the Act.
(b) Each Shareholder will hold Boatracs Common Stock for
investment for such Shareholder's own account only and not with a
view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Act.
(c) Each Shareholder has had an opportunity to: (i) review this
Agreement, the exhibits hereto, all other documents contemplated
hereby, and the SEC reports (as defined in Section 4.5),
including the risk factors and cautionary language contained
therein; (ii) obtain legal and financial advice from experienced
advisors which the Shareholder considers sufficient to evaluate
the merits and risks of a prospective investment in Boatracs and
(iii) request any additional information regarding the business
and affairs of Boatracs as such Shareholder and the advisors of
such Shareholder consider appropriate to provide a full
understanding of or to evaluate the merits and risks of a
prospective investment in Boatracs; the Shareholders have
received such requested information.
4. SECTION 4 Representations and Warranties of Boatracs and Merger
Sub. Boatracs and Merger Sub represent and warrant to Enerdyne
and the Shareholders that:
4.1 Organization and Good Standing. Boatracs and Merger Sub are
corporations duly organized, validly existing and in good
standing under the laws of the State of California and each of
them has full power and authority to carry on its business as now
conducted and as proposed to be conducted. Each of Boatracs and
Merger Sub is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the nature of its
business or properties makes such qualification or licensing
necessary, except where the failure to qualify would not be
material to its business.
4.2 Capitalization.
(a) The authorized capital stock of Boatracs as of the date of
this Agreement consists of: (i) One Hundred Million
(100,000,000) Common Shares and (ii) One Million
(1,000,000) Preferred Shares of Boatracs. As of April 30, 1998,
Fifteen Million Eight Hundred Sixty-One Thousand Three Hundred
Seventy-Seven (15,861,377) shares of Common Stock of Boatracs and
no shares of preferred stock of Boatracs were issued and
outstanding.
(b) All of the outstanding shares of capital stock of Boatracs
have been duly authorized and validly issued, fully paid and are
nonassessable. All outstanding shares of capital stock of
Boatracs were issued in compliance with applicable securities
laws. The capital stock of Boatracs constituting Merger
Consideration will be duly authorized, fully paid and
nonassessable when issued.
4.3 Power, Authorization and Validity. Boatracs and Merger Sub
have the right, power, legal capacity and authority to enter into
and perform their obligations under this Agreement and the other
Transaction Documents to which they are a party. The execution
and delivery of this Agreement and the other Transaction
Documents have been duly and validly approved and authorized by
the board of directors of Boatracs and Merger Sub. No
authorization or approval, governmental or otherwise, is
necessary in order to enable Boatracs or Merger Sub to enter into
and to perform the terms of this Agreement or the other
Transaction Documents on their part to be performed, except for
(i) the filing of appropriate documents with the relevant
authorities of other states, if any, in which Boatracs and Merger
Sub are qualified to do business, and (ii) such other consents,
approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign
country in which Boatracs or any of Boatracs' subsidiaries or
Merger Sub conducts any business or owns any property or assets.
This Agreement is, and the other Transaction Documents when
executed and delivered by Boatracs and Merger Sub shall be, the
valid and binding obligations of Boatracs and Merger Sub
enforceable in accordance with their respective terms.
4.4 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated herein will conflict with, or result in
a material breach or violation of, any provision of Boatracs' or
Merger Sub's articles of incorporation, and bylaws as currently
in effect, any instrument or contract to which Boatracs or Merger
Sub is a party or by which either of them is bound, or any
federal, state or local judgment, writ, decree, order, statute,
rule or regulation applicable to either of them.
4.5 Litigation. Except as noted in the forms, reports and
documents filed or required to be filed by Boatracs with the
Securities and Exchange Commission (the "SEC") since December 31,
1996 other than registration statements on Form S-8
(collectively, the "Boatracs SEC Reports") and other than the
actions disclosed to the Shareholders regarding SEACOR Marine,
Inc. and Globe Wireless, Inc., there is no suit, action,
proceeding, claim or investigation pending or, to Boatracs' or
Merger Sub's knowledge, threatened against Boatracs or Merger Sub
before any court or administrative agency which questions or
challenges the validity of this Agreement or which could have a
Material Adverse Effect.
4.6 SEC Filings. Boatracs has delivered to the Shareholders all
of the Boatracs SEC Reports. The Boatracs SEC Reports (i) at
the time filed, complied in all material respects with the
applicable requirements of the Act, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as the case may be,
and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be
stated in such Boatracs SEC Reports or necessary in order to make
the statements in such Boatracs SEC Reports, in the light of the
circumstances under which they were made, not misleading.
4.7 Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes) contained
in the Boatracs SEC Reports, complied as to form in all material
respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as
permitted by Form 10-QSB promulgated by the SEC) and presented
fairly, in all material respects, the consolidated financial
position of Boatracs as at the respective dates and the
consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in
amount.
4.8 Enerdyne Securities. Boatracs and Merger Sub have had an
opportunity to: (i) review this Agreement, the exhibits hereto,
all other documents contemplated hereby; (ii) obtain legal and
financial advice from experienced advisors and (iii) request any
additional information regarding the business and affairs of
Enerdyne as Boatracs and Merger Sub consider appropriate to
provide a full understanding of or to evaluate the merits and
risks of a merger of Enerdyne with and into Merger Sub; the
Shareholders have received such requested information.
5. SECTION 5 Items to be Delivered by Boatracs or Merger Sub at the
Closing. At the Closing, in addition to the Merger Consideration
Boatracs shall deliver each of the following:
5.1 Boatracs Authorizations. A certificate or certificates of
an executive officer of Boatracs attaching copies of the
resolutions authorizing (a) the execution, delivery and
performance of Boatracs' obligations under this Agreement and the
issuance of debt contemplated hereunder and certifying that such
resolutions have been duly and validly approved and authorized by
the Board of Directors of Boatracs and (b) the execution,
delivery and performance of Merger Subs' obligations under this
Agreement and certifying that such resolutions have been duly and
validly approved and authorized by the sole shareholder of Merger
Sub.
5.2 Merger Sub Authorizations. A certificate of an executive
officer of Merger Sub attaching copies of the resolutions
authorizing the execution, delivery and performance of Merger
Subs' obligations under this Agreement and the issuance of debt
contemplated hereunder and certifying that such resolutions have
been duly and validly approved and authorized by the Board of
Directors of Merger Sub.
6. SECTION 6 Documents to be Delivered by Enerdyne or the
Shareholders at Closing. At the Closing, in addition to the
certificates for the Common Shares and Preferred Shares Enerdyne
and the Shareholders shall deliver each of the following:
6.1 Authorizations. A certificate of the Secretary of Enerdyne
attaching copies of the resolutions of Enerdyne's Board of
Directors and the Shareholders authorizing the execution,
delivery and performance of this Agreement and certifying that
such resolutions have been duly and validly approved and
authorized.
6.2 Opinion of Enerdyne's Counsel. An opinion in substantially
the form attached hereto as Exhibit I ("Opinion of Counsel to
Enerdyne").
6.3 Resignations of Enerdyne's Directors and Officers. The
written resignations, effective as of the Closing Date, of all
directors and officers of Enerdyne.
6.4 Employment Agreements. Employment Agreements substantially
in the form attached hereto as Exhibit J executed by each
Shareholders.
6.5 Noncompetition Agreements. Each of the Shareholders shall
have executed and delivered Noncompetition Agreements
substantially in the form attached hereto as Exhibit J.
7. SECTION 7 Indemnification And Related Matters.
7.1 Indemnification by Enerdyne and the Shareholders. Subject
to the limitations set forth in this Section 7 and elsewhere in
this Agreement, the Shareholders shall, jointly and severally,
indemnify Boatracs against any Damages that Boatracs actually
incurs during the three-year period commencing on the Closing
Date as a result of any breach by Enerdyne or the Shareholders of
any representation, warranty or covenant of Enerdyne or the
Shareholders as set forth in Sections 2 or 3 hereof. The
representations, warranties or covenants of Enerdyne and the
Shareholders shall not be limited or otherwise affected by, or as
a result of, any information furnished to, or any investigation
made by or knowledge of (except as specifically provided in the
Enerdyne Disclosure Schedule), any of the parties or any of their
representatives.
7.2 Indemnification by Boatracs. Subject to the limitations set
forth in this Section 7 and elsewhere in this Agreement,
Boatracs or the Merger Sub shall indemnify the Shareholders
against any Damages that the Shareholders actually incur during
the three-year period commencing on the Closing Date as a result
of any breach by Boatracs or the Merger Sub of any
representation, warranty or covenant of Boatracs as set forth in
Section 4. The representations, warranties or covenants of
Boatracs shall not be limited or otherwise affected by, or as a
result of, any information furnished to, or any investigation
made by or knowledge of any of the parties or any of their
representatives.
7.3 Expiration of Representations, Warranties and Covenants.
Except for Section 2.5 all of the representations and warranties
of Enerdyne, the Shareholders and Boatracs set forth in this
Agreement shall terminate and expire, and shall cease to be of
any force or effect, at 10:00 a.m. (California time) on the third
anniversary of the Closing Date, and all liability of Enerdyne,
the Shareholders and Boatracs with respect to such
representations and warranties shall thereupon be extinguished;
provided, however, that if, prior to such third anniversary,
Boatracs on the one hand or the Shareholders on the other hand
shall have duly delivered a Claim Notice to the other parties in
conformity with all of the applicable procedures set forth in
this Section 7, then the specific indemnification claim set
forth in such Claim Notice shall survive such third anniversary
(and shall not be extinguished thereby).
7.4 Threshold Amount. Without limiting the effect of any of the
other limitations set forth herein, the Shareholders shall not be
required to make any indemnification payment hereunder with
respect to any breach of any of their representations, warranties
or covenants except to the extent that the cumulative amount of
the Damages actually incurred by Boatracs as a direct result of
all such breaches of such representations, warranties or
covenants actually exceeds the Threshold Amount; provided,
however, that once the Threshold Amount is exceeded, Boatracs
shall be entitled to recover the full amount of all Damages from
the Shareholders subject to the limitations set forth in Section
7.5 below. The "Threshold Amount" shall be $50,000.
7.5 Maximum Liability of the Shareholders. Except for breaches
arising as a result of a misrepresentation or for intentional
misrepresentation, the total amount of the payments that the
Shareholders can be required to make under or in connection with
this Agreement (including all indemnification payments required
to be made to Boatracs and all amounts payable to any counsel
retained by Boatracs in accordance with Section 7.10) shall be
limited in the aggregate to a maximum of the lesser of (i)
$2,000,000 or (ii) the aggregate unpaid and outstanding balance
under the Subordinated Notes, and the Shareholder's cumulative
liability shall in no event exceed such amount. Boatracs' sole
recourse for any indemnification payments required to be made by
the Shareholders hereunder shall be a right of set-off under the
Seller's Notes as described in Section 7.6 below. Boatracs
shall have no recourse against the Shareholders or against any of
the assets of the Shareholders in connection with any
indemnification claim or any other claim of any nature.
Notwithstanding the foregoing, in the event of any breach of the
representations and warranties contained in Section 2.5 or
Section 2.23, the total amount of the payments that the
Shareholders can be required to make (including all
indemnification payments required to be made to Boatracs and all
amounts payable to any counsel retained by Boatracs in accordance
with Section 7.10) shall be: limited in the aggregate (a) with
respect to any breach of the representations and warranties
contained in Section 2.5 to a maximum of the value of the
aggregate cash and stock consideration actually paid under
Section 1.8 (provided that the value of securities of Boatracs
shall be determined as of the Closing Date) and (b) with respect
to any breach of the representations and warranties contained in
Section 2.23, limited in the aggregate to maximum of $5,000,000.
7.6 Sole Recourse of Boatracs. Except as provided in Section
7.5, Boatracs' sole recourse under this Section 7 shall be a
right of set-off against the Subordinated Notes. Each
Subordinated Note contains a payment schedule (each referred to
as a "Payment Schedule"). Any set-off for Damages allowed under
this Section 7 shall be divided equally between the two
Subordinated Notes and shall be made as described in this Section
7.6. If Boatracs determines that it has a right of set-off
hereunder, Boatracs may prepare a Test Balance Sheet to determine
the timing of such set-off. The Test Balance Sheet shall be
prepared in accordance with GAAP, but as if (i) the next
installment payment upon the Subordinated Notes, (ii) the next
installment payment upon the Senior Notes and (iii) any payments
due upon liabilities triggering the right of set-off hereunder
had been made. If the cash and cash equivalents shown on the
Test Balance Sheet are less than $240,000, then Boatracs shall
provide notice of an Inverse Set-Off to the Shareholders. After
notice of an Inverse Set-Off, until Boatracs receives a Waiver
(as defined below), set-offs shall be made first against the
principal and interest to be paid under the next payment due to
be made pursuant to the Payment Schedule of each Subordinated
Note, then against the principal and interest to be paid under
the subsequent payment to be made pursuant to the Payment
Schedule of each Subordinated Note and so forth until the maximum
liability of the Shareholders as set forth in Section 7.5 is
reached (each, an "Inverse Set-Off"). In the event of a receipt
of a notice of an Inverse Set-Off, the Shareholders may determine
jointly that they wish to waive the requirement that Boatracs
maintain a minimum of $240,000 in cash so that Boatracs will not
be in default under the Senior Notes. If the Shareholders make
such determination, then the Shareholders shall provide a written
waiver of such requirement in a form reasonably satisfactory to
Boatracs (the "Waiver"). At all times (a) before Boatracs
provides notice of an Inverse Set-Off or (b) after receipt of a
Waiver, set-offs shall be made first against the principal and
interest to be paid under the final payment to be made pursuant
to the Payment Schedule of each Subordinated Note, then against
the principal and interest to be paid under the second to last
payment to be made pursuant to the Payment Schedule of each
Subordinated Note and so forth until the maximum liability of the
Shareholders as set forth in Section 7.5 is reached
7.7 No Contribution. The Shareholders acknowledge and agree
that they shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right
of indemnity or other right or remedy against Enerdyne in
connection with (a) any indemnification obligation or any other
liability to which the Shareholders or Enerdyne may become
subject under or in connection with this Agreement or (b) any
certificate delivered by Enerdyne in connection with this
Agreement.
7.8 No Implied Representations. Boatracs and the Shareholders
acknowledge that, except as expressly provided in Sections 2, 3
and 4, neither party hereto, and none of the representatives of
either party hereto, has made or is making any representations or
warranties whatsoever, implied or otherwise.
7.9 Indemnification Claims.
(a) If either party hereto (the "Claimant") wishes to assert an
indemnification claim against the other party hereto (the
"Respondent"), the Claimant shall deliver to the Respondent a
written notice (a "Claim Notice") setting forth:
(i) the specific representation, warranty or covenant alleged to
have been breached by the Respondent;
(ii) a detailed description of the facts and circumstances giving
rise to the alleged breach of such representation, warranty or
covenant; and
(iii) a detailed description of, and a reasonable estimate
(to the extent practicable) of the total amount of, the Damages
actually incurred or expected to be incurred by the Claimant as a
direct result of such alleged breach.
(b) Response Notice; Uncontested Claims. Within fifteen (15)
business days of the date of a Claim Notice (the "Response
Date"), the Respondent shall provide the Claimant a written
response (the "Response Notice") in which the Respondent shall
(i) agree that the full Claimed Amount is valid, (ii) agree that
part, but not all, of the Claimed Amount (the "Agreed Amount") is
valid, or (iii) contest that any of the Claimed Amount is valid.
The Respondent may contest all or a portion of a Claimed Amount
only based upon a good faith belief that all or such portion of
the Claimed Amount does not constitute Damages for which the
Claimant is entitled to indemnification under this Section 7.
(c) Uncontested Claims. If the Respondent in the Response
Notice agrees that the Claimed Amount is valid, the Claimant
shall be entitled to (i) prompt payment of the Claimed Amount if
the Claimant is a Shareholder, or (ii) its remedy in accordance
with Section 7.6 if the Claimant is Boatracs.
(d) Contested Claims. If the Respondent in the Response Notice
contests the Claimed Amount (the "Contested Amount"), the Agreed
Amount shall be paid or set-off as provided in subpart (c) above,
but the Claimant shall not be entitled to any further remedy
until (i) a settlement agreement has been executed by the
Shareholders and Boatracs setting forth the amount of further
Damages to be paid by Boatracs or set-off in accordance with
Section 7.6, if any, or (ii) a court order or arbitration
determination has been entered setting forth the amount of
further Damages to be paid by Boatracs or set-off in accordance
with Section 7.6.
7.10 Defense of Third Party Actions. If either party hereto
(the "Indemnitee") receives notice or otherwise obtains knowledge
of any Legal Proceeding or any threatened Legal Proceeding that
may give rise to an indemnification claim against the other party
hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice
describing such Legal Proceeding in reasonable detail; provided,
however, that for the sole purpose of determining whether a Legal
Proceeding or threatened Legal Proceeding may give rise to an
indemnification claim against the Shareholders within the meaning
of this sentence, the limitation set forth in Section 7.4 shall
not be taken into account. The timely delivery of such written
notice by the Indemnitee to the Indemnifying Party shall not be a
condition precedent to any liability on the part of the
Indemnifying Party under this Section 7 with respect to such
Legal Proceeding, except to the extent the Indemnifying Party is
actually prejudiced. With the consent of the Indemnified Party,
which will not be unreasonably withheld, the Indemnifying Party
shall have the right, at its option, to assume the defense of any
such Legal Proceeding with its own counsel. If the Indemnifying
Party assumes the defense of any such Legal Proceeding, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or
otherwise indemnify the Indemnitee against any attorneys' fees or
other expenses incurred on behalf of the Indemnitee in connection
with such Legal Proceeding following the Indemnifying Party's
election to assume the defense of such Legal Proceeding;
(b) the Indemnitee shall make available to the Indemnifying
Party all books, records and other documents and materials that
are under the direct or indirect control of the Indemnitee or any
of the Indemnitee's representatives and that the Indemnifying
Party considers necessary or desirable for the defense of such
Legal Proceeding;
(c) the Indemnitee shall execute such documents and take such
other actions as the Indemnifying Party may reasonably request
for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Legal
Proceeding;
(d) the Indemnitee shall otherwise cooperate as reasonably
requested by the Indemnifying Party in the defense of such Legal
Proceeding;
(e) the Indemnitee shall not admit any liability with respect to
such Legal Proceeding; and
(f) the Indemnifying Party shall not settle, adjust or
compromise such Legal Proceeding without the prior written
consent of the Indemnitee, such consent not to be unreasonably
withheld.
If the Indemnifying Party does not assume the defense of such
Legal Proceeding, then the Indemnitee shall proceed diligently to
defend such Legal Proceeding with the assistance of counsel
satisfactory to the Indemnifying Party; provided, however, that
the Indemnitee shall not settle, adjust or compromise such Legal
Proceeding, or admit any liability with respect to such Legal
Proceeding, without the prior written consent of the Indemnifying
Party, such consent not to be unreasonably withheld.
7.11 Subrogation. To the extent that either party hereto
(the "Indemnitor") makes or is required to make any
indemnification payment to the other party hereto (the
"Indemnified Party"), the Indemnitor shall be entitled to
exercise, and shall be subrogated to, any rights and remedies
(including rights of indemnity, rights of contribution and other
rights of recovery) that the Indemnified Party or any of the
Indemnified Party's representatives may have against any other
Person with respect to any Damages, circumstances or Legal
Proceeding to which such indemnification payment is directly or
indirectly related. The Indemnified Party shall permit the
Indemnitor to use the name of the Indemnified Party and the names
of the Indemnified Party's representatives in any transaction or
in any proceeding or other Legal Proceeding involving any of such
rights or remedies; and the Indemnified Party shall take such
actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the
Indemnitor's right of subrogation hereunder.
7.12 Exclusivity. Except as set forth in Section 7.6, the
right of each party hereto to assert indemnification claims and
receive indemnification payments pursuant to this Section 7
shall be the sole and exclusive right and remedy exercisable by
such party with respect to any breach by the other party hereto
of any representation, warranty or covenant.
8. SECTION 8 Termination of Agreements.
8.1 Stock Ownership Agreement. Effective upon the Closing, the
Stock Ownership Agreement dated July 1, 1995 by and among
Enerdyne and the Shareholders shall be deemed terminated and of
no further force and effect.
8.2 Termination of Employment Agreements.
(a) Effective upon the Closing, (i) the Employment Agreement
dated July 1, 1995 between Enerdyne and Boden is terminated and
of no further force and effect; and (ii) the Employment Agreement
dated July 1, 1995 between Enerdyne and Xxxxxxxx is terminated
and no further force and effect. Each Shareholder agrees that
he/she has been paid all sums due such Shareholder under the
foregoing employment agreements as of the Closing and that such
Shareholder intends to continue under the employ of Enerdyne on
an at-will basis until the commencement of the term of the
Employment Agreements substantially in the form of Exhibit J
attached hereto. As such, neither Shareholder shall be entitled
to any bonus, severance or other notification or payment as a
result of termination of his or her Employment Agreement, other
than payments made or provided for by Enerdyne prior to the
Closing Date.
(b) Each Shareholder fully and forever releases and discharges
Enerdyne, Boatracs and Merger Sub, their agents, employees,
officers, directors, attorneys and assigns from any and all
claims, demands, damages, liabilities and obligations, whether
known or unknown, in any way relating to the employment
agreements that were terminated in accordance with Section
8.2((a)) above.
(c) Each Shareholder expressly waives all rights under
Section 1542 of the California Civil Code with regard to the
release set forth in Section 8.2((b)) above, which provides:
A general release does not extend to claims
which the creditor does not know or suspect
to exist in his favor at the time of
executing the release, which if know by him,
must have materially affected his settlement
with the debtor.
9. SECTION 9 Covenants Following Closing.
9.1 Enerdyne of Europe. The Shareholders shall use their best
efforts to obtain an Option Agreement from Enerdyne of Europe,
which provides Enerdyne with an option to acquire all rights to
the name "Enerdyne."
9.2 S-8 Registration Statement. Reasonably promptly following
the Effective Date, Boatracs will file a registration statement
on Form S-8 to register under the Securities Act the shares
issuable upon exercise of options granted to the Shareholders
pursuant to their Employment Agreements.
9.3 Board Visitation Rights. For as long as the Senior Note
issued to her remains outstanding, Xxxxx Xxxxxxxx shall be
entitled to attend all meetings of the Board of Directors of
Boatracs in a nonvoting capacity, and in connection therewith to
receive all notices, minutes, consents and other materials,
financial or otherwise (including annual budgets and operating
plans) which the Company provides to its Board of Directors;
provided, however, that the Board of Directors may meet in
executive session excluding all non-director employees to discuss
sensitive issues, such as personnel decisions.
9.4 Key Man Life Insurance. Xxxxx Xxxxx shall make himself
reasonably available and shall cooperate with Boatracs to permit
Boatracs to obtain key-man insurance on his life for the benefit
of Boatracs.
10. SECTION 10 Miscellaneous.
10.1 Governing Laws. It is the intention of the parties
hereto that the internal laws of the State of California
(irrespective of its choice of law principles) shall govern the
validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of
the parties hereto.
10.2 Binding upon Successors and Assigns. Subject to, and
unless otherwise provided in, this Agreement, each and all of the
covenants, terms, provisions, and agreements contained herein
shall be binding upon, and inure to the benefit of, the permitted
successors, executors, heirs, representatives, administrators and
assigns of the parties hereto. Neither Enerdyne nor any
Shareholder shall assign this Agreement to any person or entity
(including by operation of law) without the prior written consent
of the other parties, which consent shall not be unreasonably
withheld.
10.3 Severability. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent
be invalid or unenforceable, the remainder of this Agreement and
application of such provision to other persons or circumstances
shall be interpreted so as best to effect reasonably the intent
of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid
and enforceable provision which will achieve, to the extent
possible, the economic, business and other purposes of the void
or unenforceable provision.
10.4 Entire Agreement. This Agreement, the exhibits hereto,
the documents referenced herein, and the exhibits thereto,
constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and
thereto including, but not limited to, the Letter Agreement.
10.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original as
against any party whose signature appears thereon and all of
which together shall constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
10.6 Expenses. Except as provided to the contrary herein,
each party shall pay all of its own costs and expenses incurred
with respect to the negotiation, execution and delivery of this
Agreement and the exhibits hereto. The obligation to pay a
finder's fee to Xxxx Xxxxxxxxxx and Xxxx Xxxxxxx shall be
assumed by Boatracs but shall be taken into account as an offset
in calculating the merger consideration. No other legal,
accounting, investment banking, broker's and finder's fees
incurred by Enerdyne or the Shareholders in connection with the
transactions contemplated by this Agreement shall be borne or
assumed by Boatracs.
10.7 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach
or default.
10.8 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby notwithstanding any
investigation of the parties hereto.
10.9 No Waiver. The failure of any party to enforce any of
the provisions hereof shall not be construed to be a waiver of
the right of such party thereafter to enforce such provisions.
10.10 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall
be entitled to recover, as an element of the costs of suit and
not as damages, reasonable attorneys' fees to be fixed by the
court (including, without limitation, costs, expenses and fees on
any appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit
proceeds to final judgment. A party not entitled to recover its
costs shall not be entitled to recover attorneys' fees. No sum
for attorneys' fees shall be counted in calculating the amount of
a judgment for purposes of determining if a party is entitled to
recover costs or attorneys' fees.
10.11 Notices. Any notice provided for or permitted under
this Agreement will be treated as having been given when
(a) delivered personally, (b) sent by confirmed telecopy,
(c) sent by commercial overnight courier with written
verification of receipt, or (d) mailed postage prepaid by
certified or registered mail, return receipt requested, to the
party to be notified, at the address set forth below, or at such
other place of which the other party has been notified in
accordance with the provisions of this Section 10.11.
Enerdyne: Enerdyne Technologies, Inc.
Attn: Xxxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: 000-000-0000
Xxxxx X. Xxxxx: 0000 Xx Xxxxxx xxx Xxxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxxx: 0000 Xxxxxxx Xxxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
With copy to: Xxxxxx Godward, LLP
Attention: Xxxxx Xxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Boatracs or
Merger Sub: Boatracs, Inc.
0000 Xxxx Xxxxxxxxx, Xxxxx X000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With copy to: Xxxx Xxxx Xxxx & Freidenrich, LLP
Attention: Xxxxxxx X. Xxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Such notice will be treated as having been received upon actual
receipt.
10.12 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys
and the language hereof shall not be construed for or against any
party. The titles and headings herein are for reference purposes
only and shall not in any manner limit the construction of this
Agreement which shall be considered as a whole.
10.13 No Joint Venture. Nothing contained in this Agreement
shall be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. No party is by
virtue of this Agreement authorized as an agent, employee or
legal representative of any other party. No party shall have the
power to control the activities and operations of any other and
their status is, and at all times, will continue to be, that of
independent contractors with respect to each other. No party
shall have any power or authority to bind or commit any other.
No party shall hold itself out as having any authority or
relationship in contravention of this Section 10.13.
10.14 Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person, persons,
entity or entities may require.
10.15 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further
instruments, documents and agreements and to give such further
written assurances, as may be reasonably requested by any other
party to evidence and reflect better the transactions described
herein and contemplated hereby and to carry into effect the
intents and purposes of this Agreement.
10.16 Absence of Third Party Beneficiary Rights. No
provisions of this Agreement including Section 10.6 are intended,
nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or
any other person or entity, and, except as specifically provided
otherwise herein, all provisions hereof shall be personal solely
between the parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
Boatracs, Inc. Enerdyne Technologies, Inc.
a California corporation a California corporation
By: /S/ XXXXXXX XXXXXXXXX By: /S/ XXXXX XXXXXXXX
Name: XXXXXXX XXXXXXXXX Name: XXXXX XXXXXXXX
Its: CHAIRMAN Its: PRESIDENT
By: /S/ XXXX XXXXXXXX
Xxxx XxXxxxxx
Secretary
Boatracs Acquisition, Inc. Shareholders:
a California corporation
By: /S/ XXX X. XXXXXXX /S/ XXXXX XXXXXXXX
Xxxxx Xxxxxxxx
Name: XXX X. XXXXXXX
Its: PRESIDENT /S/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
By: /S/ XXXX XXXXXXXX
Xxxx XxXxxxxx
Secretary
