EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 26, 1998
among
DRS TECHNOLOGIES, INC.,
DRS MERGER SUB, INC.
and
NAI TECHNOLOGIES, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I
MERGER...................................................................................2
1.1. The Merger.................................................................2
1.2. Filing.....................................................................2
1.3. Effective Time of the Merger...............................................2
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; ETC...............................................2
2.1. Certificate of Incorporation and By-Laws of Surviving Corporation...........2
2.2. Directors and Officers of Surviving Corporation............................3
2.3. Board of Directors of Acquiror.............................................3
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER.....................................................................3
3.1. Share Consideration; Conversion or Cancellation of Shares in the
Merger.....................................................................3
3.2. Payment for Shares in the Merger...........................................6
3.3. Fractional Shares..........................................................9
3.4. Transfer of Shares After the Effective Time................................9
ARTICLE IV
CERTAIN EFFECTS OF THE MERGER............................................................9
4.1. Effect of the Merger.......................................................9
4.2. Further Assurances........................................................10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................10
5.1. Organization and Qualification............................................10
5.2. Subsidiaries..............................................................11
5.3. Capitalization............................................................11
5.4. Authority Relative to This Agreement......................................12
5.5. No Violations, etc........................................................13
5.6. Commission Filings; Financial Statements..................................14
5.7. Absence of Changes or Events..............................................14
5.8. Absence of Undisclosed Liabilities........................................15
5.9. Joint Proxy Statement.....................................................15
5.10. Accounts Receivable......................................................16
5.11. Inventories..............................................................16
5.12. Litigation...............................................................16
5.13. Title to and Condition of Properties; Leases.............................17
5.14. Contracts and Commitments................................................17
5.15. Labor Matters............................................................18
5.16. Compliance with Law......................................................18
5.17. Board Recommendation.....................................................18
5.18. Intellectual Property....................................................18
5.19. Taxes....................................................................20
5.20. Employee Benefit Plans...................................................21
5.21. Environmental Matters....................................................24
5.22. Government Contracts.....................................................25
5.23. Disclosure...............................................................28
5.24. Finders or Brokers.......................................................29
5.25. State Anti-takeover Statutes.............................................29
5.26. Opinion of Financial Advisor.............................................29
5.27. Insurance................................................................29
5.28. Employment and Labor Contracts...........................................30
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB...............................30
6.1. Organization and Qualification............................................30
6.2. Subsidiaries..............................................................31
6.3. Capitalization............................................................31
6.4. Authority Relative to This Agreement......................................31
6.5. No Violations, etc........................................................32
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6.6. Commission Filings; Financial Statements..................................33
6.7. Absence of Changes or Events..............................................33
6.8. Litigation................................................................34
6.8. Joint Proxy Statement.....................................................34
6.9. Board Recommendation......................................................34
6.10. Disclosure...............................................................34
6.11. Finders or Brokers.......................................................35
6.12. Opinion of Financial Advisor.............................................35
ARTICLE VII
CONDUCT OF BUSINESS OF ACQUIROR AND THE COMPANY PENDING THE
MERGER..................................................................................35
7.1. Conduct of Business of the Company Pending the Merger.....................35
7.2. Conduct of Business of Acquiror Pending the Merger........................37
ARTICLE VIII
COVENANTS AND AGREEMENTS................................................................38
8.1. Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings......................................................38
8.2. Letters of the Company's Accountants......................................40
8.3. Letters of Acquiror's Accountants.........................................40
8.4. Additional Agreements; Cooperation........................................40
8.5. Publicity.................................................................41
8.6. No Solicitation...........................................................41
8.7. Access to Information.....................................................43
8.8. Notification of Certain Matters...........................................43
8.9. Directors and Officers; Insurance.........................................44
8.10. Fees and Expenses........................................................44
8.11. Affiliates...............................................................44
8.12. AMEX Listing.............................................................45
8.13. Stockholder Litigation...................................................45
8.14. Tax Treatment............................................................45
8.15. Fairness Opinion.........................................................45
8.16. Credit Facilities........................................................45
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8.17. Patent, Trademark and Copyright Filings..................................45
8.18. Convertible Notes........................................................46
ARTICLE IX
CONDITIONS TO CLOSING...................................................................46
9.1. Conditions to Each Party's Obligation to Effect the Merger................46
9.2. Conditions to Obligations of Acquiror.....................................47
9.3. Conditions to Obligations of the Company..................................50
ARTICLE X
TERMINATION.............................................................................51
10.1. Termination..............................................................51
10.2. Effect of Termination....................................................53
ARTICLE XI
MISCELLANEOUS...........................................................................54
11.1. Non-Survival of Representations and Warranties...........................54
11.2. Closing and Waiver.......................................................54
11.3. Notices..................................................................54
11.4. Counterparts.............................................................55
11.5. Interpretation...........................................................55
11.6. Amendment................................................................56
11.7. No Third Party Beneficiaries.............................................56
11.8. Governing Law............................................................56
11.9. Entire Agreement.........................................................56
11.10. Validity................................................................56
EXHIBIT A................................................................................1
ANNEX I TO EXHIBIT A.....................................................................1
EXHIBIT B................................................................................1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 26, 1998, by and among
DRS TECHNOLOGIES, INC., a Delaware corporation ("Acquiror"), DRS MERGER SUB,
INC., a New York corporation and a direct wholly owned subsidiary of Acquiror
("Merger Sub"), and NAI TECHNOLOGIES, INC., a New York corporation (the
"Company" and, together with Merger Sub, the "Constituent Corporations").
W I T N E S S E T H :
WHEREAS, Acquiror, the Company and Merger Sub have determined that it is
advisable that Merger Sub be merged with and into the Company, with the Company
being the survivor (the "Merger"), upon the terms and subject to the conditions
set forth herein and in accordance with the laws of the State of New York and
any other applicable statutes and regulations;
WHEREAS, in consideration of Acquiror's entering into this Agreement,
each of certain holders of the common stock, par value $0.10 per share, of the
Company (the "Company Common Stock"), has entered into a Shareholder's Agreement
(as defined herein) as of the date hereof, pursuant to which, among other
things, each of such shareholders has agreed to vote his or her shares of
Company Common Stock in favor of the Merger;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a tax free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the respective boards of directors of Acquiror, the Company and
Merger Sub have authorized and approved the execution, delivery and performance
of this Agreement and the transactions contemplated hereby, and the respective
boards of directors of Acquiror and the Company have directed that this
Agreement be submitted to the respective stockholders of Acquiror and the
Company in order for such stockholders to consider and vote upon the approval of
this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
representations and warranties herein contained, the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
MERGER
1.1 The Merger
Upon the terms and conditions set forth in this Agreement, at the
Effective Time (as hereinafter defined), Merger Sub shall be merged with and
into the Company as provided herein. Thereupon, the corporate existence of the
Company, with all its purposes, powers and objects, shall continue unaffected
and unimpaired by the Merger, and the corporate identity and existence, with all
the purposes, powers and objects, of Merger Sub shall be merged with and into
the Company, and the Company as the corporation surviving the Merger
(hereinafter sometimes called the "Surviving Corporation") shall continue its
corporate existence under the laws of the State of New York.
1.2 Filing
As soon as practicable after the fulfillment or waiver of the conditions
set forth in Sections 9.1, 9.2 and 9.3, or on such later date as may be mutually
agreed to between Acquiror and the Company, the parties hereto will cause to be
filed with the office of the Secretary of State of the State of New York, a
certificate of merger (the "Certificate of Merger"), in such form as required
by, and executed in accordance with, the relevant provisions of the New York
Business Corporation Law ("NYBCL").
1.3 Effective Time of the Merger
The Merger shall be effective at the time of the filing of the
Certificate of Merger with the office of the Secretary of State of the State of
New York, or at such later time specified in such Certificate of Merger, which
time is herein sometimes referred to as the "Effective Time" and the date
thereof is herein sometimes referred to as the "Effective Date" or the "Closing
Date."
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; ETC.
2.1 Certificate of Incorporation and By-Laws of Surviving Corporation
The Certificate of Incorporation and By-Laws of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws, respectively, of the Surviving Corporation, until
thereafter amended in accordance with applicable law.
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2.2. Directors and Officers of Surviving Corporation
(a) The directors of Merger Sub immediately prior to the Effective
Time shall continue as the directors of the Surviving Corporation, in each case
until their successors are elected and qualified or until their earlier death,
resignation or removal.
(b) Unless otherwise provided in this Agreement, the officers of
the Company immediately prior to the effective time shall continue as the
officers of the Surviving Corporation, in each case until removed or until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
2.3 Board of Directors of Acquiror.
At or prior to the Effective Time, C. Xxxxxxx Xxxxx, currently a
director of the Company, shall be elected to the Board of Directors of Acquiror,
such person to serve for a term of three (3) years (the "Term") or until the
earlier death, resignation or removal of such person; provided, however, that if
such person is unable to serve as a director of Acquiror for the full Term due
to his death or incapacitation, then the Board of Directors of Acquiror shall
fill such vacancy by electing to the Board of Directors such person as it shall
designate.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
3.1. Share Consideration; Conversion or Cancellation of Shares in the
Merger
Subject to the provisions of this Article III, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
the shares of the Constituent Corporations shall be converted as follows:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive 0.23 shares of duly authorized, validly issued, fully paid and
non-assessable shares of common stock, par value $0.01 per share (the "Acquiror
Common Stock"), of Acquiror (the "Merger Consideration") (such fraction being
referred to herein as the "Exchange Ratio"); provided, however, that if the
average of the reported closing prices per share of Acquiror Common Stock on the
American Stock Exchange, Inc. ("AMEX") for the consecutive 60-trading day period
ending two business days before the Effective Date falls below $12.00 per share,
then the Exchange Ratio shall be 0.25. If, prior to the Effective Time, Acquiror
should split or combine the Acquiror Common Stock, or pay a stock dividend or
other stock distribution in shares of Acquiror Common Stock, or otherwise change
the Acquiror Common Stock into any other securities, or make any other dividend
or distribution on the
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Acquiror Common Stock (other than normal quarterly dividends as the same
may be adjusted from time to time in the ordinary course), then the Exchange
Ratio will be appropriately adjusted to reflect such split, combination,
dividend or other distribution or change.
(b) All shares of Company Common Stock to be converted into shares
of Acquiror Common Stock pursuant to this Section 3.1 shall cease to be
outstanding, shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall thereafter cease to
have any rights with respect to such shares, except the right to receive for
each of such shares, upon the surrender of such certificate in accordance with
Section 3.2, the Merger Consideration and cash in lieu of fractional shares of
Acquiror Common Stock as contemplated by Section 3.3.
(c) Each share of common stock, par value $1.00 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall represent one share of common stock of the
Surviving Corporation, which shares shall be issued to Acquiror and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(d) At the Effective Time, each option to purchase shares of
Company Common Stock (each an "Option") granted by the Company under the
Company's 1991 Stock Option Plan, as amended, 1993 Stock Option Plan for
Directors, as amended, or 1996 Stock Option Plan (collectively, the "Stock
Option Plans") then outstanding, whether vested or unvested, shall be converted
into and become rights with respect to Acquiror Common Stock, and (i) the
Company and a committee of the Company's board of directors, which shall be
under the supervision of Acquiror and its compensation committee, shall be
substituted in each Stock Option Plan as the "committee" authorized to
administer each Stock Option Plan; (ii) each Option may be exercised solely for
shares of Acquiror Common Stock; (iii) the number of shares of Acquiror Common
Stock subject to each Option shall be equal to the product of the Exchange Ratio
and the number of shares of Company Common Stock subject to such Option; and
(iv) the per share exercise price of each Option shall be equal to the aggregate
exercise price for the shares of Company Common Stock subject to such Option
divided by the number of full shares of Acquiror Common Stock, as provided
above, purchasable pursuant to such Option; provided, however, that the number
of shares of Acquiror Common Stock that may be purchased upon exercise of each
Option shall not include any fractional shares and, upon such exercise of such
Option, a cash payment shall be made for any fractional share based upon the per
share average of the highest and lowest sale prices of a share of Acquiror
Common Stock as reported on the AMEX on the date of such exercise.
(e) No Options shall be granted under any of the Stock Option Plans
after the date hereof, and the Company shall not accelerate the vesting of any
Option. The provisions of any other benefit plan or option agreement of the
Company providing for the issuance, transfer or grant of any capital stock of
the Company, or any interest in respect of any capital stock of the Company,
shall be terminated as of the Effective Time, and the Company shall ensure that
following the Effective Time, no holder of an Option, no participant in any
Stock Option Plan or any other benefit plan, shall have any right
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thereunder to acquire any capital stock of the Company or the Surviving
Corporation. The Company shall terminate the Company's 1992 Employee Stock
Purchase Plan prior to the Effective Time and shall return all payroll
deductions held thereunder to the applicable participants.
(f) Each Warrant to purchase shares of Company Common Stock at an
exercise price of $2.50 per share issued by the Company and outstanding and
unexercised as of the Effective Time (each a "Warrant") shall be assumed by
Acquiror and, in accordance with Section 5(a) of each Warrant, shall be deemed
to be immediately converted into and shall constitute a warrant issued by
Acquiror fully and to the same extent as if such assumed Warrant had been
initially executed and delivered by Acquiror, and shall constitute rights with
respect to Acquiror Common Stock on substantially the same terms and conditions
as contained in such Warrant, such that (i) each assumed Warrant may be
exercised solely for shares of Acquiror Common Stock; (ii) the number of shares
of Acquiror Common Stock subject to each assumed Warrant shall be equal to the
product of the Exchange Ratio and the number of shares of Company Common Stock
subject to such assumed Warrant; and (iii) the per share exercise price of each
assumed Warrant shall be equal to the aggregate exercise price for the shares of
Company Common Stock subject to such assumed Warrant divided by the number of
full shares of Acquiror Common Stock, as provided above, purchasable pursuant to
such assumed Warrant; provided, however, that the number of shares of Acquiror
Common Stock that may be purchased upon exercise of each assumed Warrant shall
not include any fractional shares and, upon such exercise of such assumed
Warrant, a cash payment shall be made for any fractional share based upon the
per share average of the highest and lowest sale prices of a share of Acquiror
Common Stock as reported on the AMEX on the date of such exercise. Each such
assumed Warrant as of the Effective Time shall be referred to as an "Acquiror
Warrant." To implement this understanding, Acquiror shall register on its Form
S-4 (as defined in Section 5.9 below) the Acquiror Warrants and the shares of
Acquiror Common Stock issuable upon exercise of such Acquiror Warrants.
(g) Each 12% Convertible Subordinated Promissory Note due January
15, 2001, convertible into shares of Company Common Stock at a conversion price
of $2.00 per share, subject to adjustment, issued by the Company and outstanding
and unexercised as of the Effective Time (each a "Convertible Note")
representing up to 10% of the aggregate principal amount of such Convertible
Notes outstanding as of the date hereof that have not been converted in
accordance with Section 9.2(h) below, shall, prior to the Effective Time, have
been duly amended as set forth in Sections 8.18 and 9.2(h) below, and each
outstanding Convertible Note shall be deemed to represent an amended Convertible
Note (each an "Amended Convertible Note"), and shall, in accordance with Section
6(a) of each Amended Convertible Note, be deemed to represent rights with
respect to Acquiror Common Stock, such that (i) each Amended Convertible Note
may be exercised solely for shares of Acquiror Common Stock; (ii) the number of
shares of Acquiror Common Stock subject to each Amended Convertible Note shall
be equal to the product of the Exchange Ratio and the number of shares of
Company Common Stock subject to such Amended Convertible Note; and (iii) the per
share exercise price of each Amended Convertible Note shall be equal to the
aggregate exercise price for the shares of Company Common Stock subject to such
Amended Convertible Note divided by the
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number of full shares of Acquiror Common Stock, as provided above, purchasable
pursuant to such Amended Convertible Note; provided, however, that the number of
shares of Acquiror Common Stock that may be purchased upon exercise of each
Amended Convertible Note shall not include any fractional shares and, upon such
exercise of such Amended Convertible Note, a cash payment shall be made for any
fractional share based upon the per share average of the highest and lowest sale
prices of a share of Acquiror Common Stock as reported on the AMEX on the date
of such exercise.
(h) All shares of Company Common Stock, outstanding or issuable
upon exercise or conversion of the Options, the Warrants and the Convertible
Notes, which are owned by Acquiror or any of its subsidiaries or held in the
treasury of the Company or any of its subsidiaries in each case shall be
canceled and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(i) Acquiror shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of the Options and assumed Warrants or Acquiror Warrants in
accordance with this Section 3.1. Acquiror shall file a registration statement
on Form S-8 (or any successor form) or another appropriate form with respect to
Acquiror Common Stock subject to such Options and shall use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectuses
contained therein) for so long as such Options remain outstanding. With respect
to those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), Acquiror shall cause the Options of such persons to be
administered pursuant to Section 3.1(d) in a manner that complies with Rule
16b-3 promulgated under the Exchange Act to the extent the applicable Stock
Option Plan complied with such rule prior to the Merger.
3.2. Payment for Shares in the Merger
The manner of making payment for shares in the Merger shall be as
follows:
(a) At the Effective Time, Acquiror shall make available to an
exchange agent selected by Acquiror (the "Exchange Agent"), for the benefit of
those persons who immediately prior to the Effective Time were the holders of
Company Common Stock, a sufficient number of certificates representing Acquiror
Common Stock required to effect the delivery of the aggregate Merger
Consideration required to be issued pursuant to Section 3.1(a) (the certificates
representing Acquiror Common Stock comprising such aggregate Merger
Consideration being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions from Acquiror,
deliver the Acquiror Common Stock contemplated to be issued pursuant to Section
3.1(a) and effect the sales provided for in Section 3.3 out of the Exchange
Fund. The Exchange Fund shall not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall
mail to each holder of record (other than Acquiror and the Company) of a
certificate or certificates,
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which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Share Certificates"), (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and the risk
of loss and title to the Share Certificates shall pass, only upon proper
delivery of the Share Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Share Certificates for payment
therefor. Upon surrender of Share Certificates for cancellation to the Exchange
Agent, together with such letter of transmittal duly executed and any other
required documents, the holder of such Share Certificates shall be entitled to
receive the Merger Consideration for each of the shares of Company Common Stock
formerly represented by such Share Certificates, and the Share Certificates so
surrendered shall forthwith be canceled. Until so surrendered, Share
Certificates shall represent solely the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Acquiror Common Stock
as contemplated by Section 3.3 with respect to each of the shares formerly
represented thereby. No dividends or other distributions that are declared after
the Effective Time on Acquiror Common Stock and payable to the holders of record
thereof after the Effective Time will be paid to persons entitled by reason of
the Merger to receive Acquiror Common Stock until such persons surrender their
Share Certificates. Upon such surrender, there shall be paid to the Person in
whose name the shares of the Acquiror Common Stock are issued any dividends or
other distributions on such Acquiror Common Stock that shall have a record date
after the Effective Time and prior to such surrender and a payment date after
such surrender and such payment shall be made on such payment date. In no event
shall the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions, except to
the extent so paid to all stockholders of Acquiror. If any cash or any
certificate representing Acquiror Common Stock is to be paid to or issued in a
name other than that in which the Share Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the Share
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
certificates for such Acquiror Common Stock in a name other than that of the
registered holder of the Share Certificate surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any Acquiror Common Stock or dividends thereon or, in accordance with Section
3.3, proceeds of the sale of fractional interests, delivered to a public
official pursuant to applicable escheat law. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to Acquiror
Common Stock held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or distributed with
respect to such Acquiror Common Stock for the account of the persons entitled
thereto.
(c) Each certificate, which immediately prior to the Effective Time
represented outstanding Warrants (each a "Warrant Certificate") or Convertible
Notes (each a "Note Certificate"), shall as of the Effective Time become a
certificate representing Acquiror Warrants (each an "Acquiror Warrant
Certificate") pursuant to Section 3.1(f) or Amended Convertible Notes (each a
"New Note Certificate") pursuant to Section 3.1(g), unless surrendered for
cancellation or transfer, and after the Effective Time, conversions
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into Acquiror Common Stock available to a holder of record of the Warrants or
Convertible Notes may be made, regardless of whether such holder has surrendered
his, her or its Warrant or Note Certificate(s). At the Effective Time, Acquiror
shall make available to the transfer agent (the "Warrant Agent"), which served
for the benefit of those persons who or which immediately prior to the Effective
Time were the holders of Warrants, a sufficient number of Acquiror Warrant
Certificates equal to the number of Warrant Certificates. At the Effective Time,
Acquiror shall cause the Company to make available to United Bank (formerly
First Trust National Association), as trustee (the "Trustee") under the
Indenture, dated as of July 15, 1996 (the "Indenture"), between the Company and
First Trust National Association, a sufficient number of New Note Certificates
equal to the number of Note Certificates representing up to 10% of the aggregate
principal amount of the Convertible Notes outstanding as of the date hereof that
have not been converted in accordance with Section 9.2(h) below. Upon surrender
of Warrant or Note Certificates for cancellation or transfer to the Warrant
Agent or Trustee, (i) the holder of such Warrant or Note Certificates shall be
entitled to receive Acquiror Warrant Certificates formerly represented by such
Warrant Certificates or New Note Certificates formerly represented by such Note
Certificates; (ii) the Warrant Agent or Trustee shall, pursuant to irrevocable
instructions from Acquiror or the Company, respectively, deliver Acquiror
Warrant Certificates or New Note Certificates; and (iii) the Warrant or Note
Certificates so surrendered shall forthwith be canceled. The Warrant Agent or
Trustee shall not be entitled to exercise any rights of ownership with respect
to Acquiror Warrant Certificates or New Note Certificates, respectively, held by
it from time to time hereunder.
(d) Share Certificates surrendered for exchange by any person
constituting an affiliate of the Company for purposes of Rule 145 under the
Securities Act shall not be exchanged for certificates representing Acquiror
Common Stock until Acquiror has received a written agreement from such person as
provided in Section 8.11.
(e) Any portion of the Exchange Fund and the Fractional Securities
Fund (as hereinafter defined) which remains unclaimed by the former shareholders
of the Company for one year after the Effective Time shall be delivered by the
Exchange Agent to Acquiror, upon demand of Acquiror, and any former shareholders
of the Company shall thereafter look only to Acquiror for payment of their
claims for the Merger Consideration in respect of Company Common Stock or for
any cash in lieu of fractional shares of Acquiror Common Stock.
3.3. Fractional Shares
No fraction of Acquiror Common Stock shall be issued in the Merger. In
lieu of any such fractional securities, each holder of Company Common Stock who
would otherwise have been entitled to a fraction of Acquiror Common Stock upon
surrender of Share Certificates for exchange pursuant to this Article III will
be paid an amount in cash (without interest) equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
shares of fractional Acquiror Common Stock issued pursuant to this Article III.
As soon as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (i) the number of full shares of Acquiror Common Stock
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delivered to the Exchange Agent by Acquiror over (ii) the aggregate number of
full shares of Acquiror Common Stock to be distributed (such excess being herein
called the "Excess Shares"), and the Exchange Agent, as agent for the former
holders of shares of Company Common Stock, shall sell the Excess Shares at the
prevailing prices on the AMEX. The sale of the Excess Shares by the Exchange
Agent shall be executed on the AMEX through one or more member firms of the AMEX
and shall be executed in round lots to the extent practicable. Acquiror shall
pay all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Shares. Until the net proceeds of such sale
have been distributed to the former shareholders of the Company, the Exchange
Agent will hold such proceeds in trust for such former shareholders (the
"Fractional Securities Fund"). As soon as practicable after the determination of
the amount of cash to be paid to former shareholders of the Company in lieu of
any fractional interest, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former shareholders.
3.4. Transfer of Shares After the Effective Time.
No transfers of Company Common Stock or Warrants shall be made on the
stock transfer books of the Company after the close of business on the day prior
to the date of the Effective Time. If, after the Effective Time, certificates
are presented to the Surviving Corporation, Acquiror or the Exchange Agent, they
shall be cancelled and exchanged as provided in this Article III.
ARTICLE IV
CERTAIN EFFECTS OF THE MERGER
4.1. Effect of the Merger.
On and after the Effective Time and pursuant to the NYBCL, the Surviving
Corporation shall possess all the rights, privileges, immunities, powers and
purposes of each of Merger Sub and the Company; all the property, real and
personal, including subscriptions to shares, causes of action and every other
asset (including books and records) of Merger Sub and the Company, shall vest in
the Surviving Corporation without further act or deed; and the Surviving
Corporation shall assume and be liable for all of the liabilities, obligations
and penalties of Merger Sub and the Company. No liability or obligation due or
to become due and no claim or demand for any cause existing against either
Merger Sub or the Company, or any shareholder, officer or director thereof,
shall be released or impaired by the Merger, and no action or proceeding,
whether civil or criminal, then pending by or against Merger Sub or the Company,
or any shareholder, officer or director thereof, shall xxxxx or be discontinued
by the Merger, but may be enforced, prosecuted, settled or compromised as if the
Merger had not occurred, and the Surviving Corporation may be substituted in any
such action or proceeding in place of Merger Sub or the Company.
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4.2. Further Assurances.
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 either of Merger Sub or
the Company, the officers of such corporation are fully authorized in the name
of their corporation or otherwise to take, and shall take, all such further
action.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror and Merger Sub that the
statements contained in this Article V are true and correct:
5.1. Organization and Qualification.
Each of the Company and its subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation. Each of the Company and its subsidiaries
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except for
such failures that could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect (as defined below). Each of the
Company and its subsidiaries is duly qualified to conduct its business, and is
in good standing, in each jurisdiction where the character of its properties
owned, leased or operated, or the nature of its activities, makes such
qualification necessary, except for such failures that could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Section 5.1 of the Disclosure Schedule previously delivered by the
Company to Acquiror (the "Disclosure Schedule") sets forth, with respect to the
Company, each jurisdiction within the United States where it is qualified or
otherwise licensed as a foreign corporation to do business, and with respect to
each of its subsidiaries, (i) its name and jurisdiction of incorporation; (ii)
each jurisdiction where it is qualified or otherwise licensed as a foreign
corporation to do business; (iii) the number of shares of authorized capital
stock of each class of its capital stock; (iv) the number of issued and
outstanding shares of each class of its capital stock; (v) the number of shares
of its capital stock held in treasury; and (vi) its duly elected directors and
officers. The Company has heretofore made available to Acquiror a complete and
correct copy of the Certificate of Incorporation (or other applicable charter
document) and the By-Laws (or other applicable organizational document), each as
amended to the date hereof, of the Company and each of its subsidiaries other
than Wilcom, Inc. (the "Retained Subsidiaries"). Neither the Company nor any of
its subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation (or other applicable charter document) or its By-Laws (or other
applicable organizational document). As used herein, the term "Company Material
Adverse Effect"
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means any material adverse effect on the general affairs, business, management,
operations, assets and liabilities or prospects of the Company and its Material
Subsidiaries taken as a whole or any material adverse effect on the condition
(financial or otherwise) of the Company or any Material Subsidiary. For purposes
of the preceding sentence, the term "Material Subsidiary" shall mean each of
Codar Technology, Inc., Lynwood Rugged Systems Limited and NAI
Technologies-Systems Division Corporation.
5.2. Subsidiaries
The only direct or indirect subsidiaries of the Company are those listed
in Section 5.1 of the Disclosure Schedule. The Company is directly or indirectly
the record (or legal and registered) and beneficial owner of all of the
outstanding shares of capital stock of each of its subsidiaries, there are no
proxies with respect to such shares, and no equity securities of any of such
subsidiaries are or may be required to be issued by reason of any options,
warrants, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any such subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any such
subsidiary is bound to issue additional shares of its capital stock or
securities convertible into or exchangeable for such shares. Other than as set
forth in Section 5.1 of the Disclosure Schedule, all of such shares so owned by
the Company are validly issued, fully paid and non-assessable and are owned by
it free and clear of any claim, lien or encumbrance of any kind with respect
thereto, and the Company does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association or
entity.
5.3. Capitalization
The authorized capital stock of the Company consists, as of the date
hereof, of: (i) 25,000,000 shares of Company Common Stock, of which 9,179,567
are issued and outstanding; and (ii) 2,000,000 shares of preferred stock, par
value $0.10 per share (the "Company Preferred Stock"), of which none are issued
and outstanding. There is no other capital stock authorized for issuance. All of
such issued and outstanding shares of Company Common Stock are validly issued,
fully paid and non-assessable and free of preemptive rights. As of the date
hereof, the Company does not hold any shares of its capital stock in treasury.
As of the date hereof, (i) 494,232 shares of Company Common Stock were reserved
for issuance upon exercise of outstanding Options under the Stock Option Plans,
(ii) 98,377 shares of Company Common Stock were reserved for issuance upon the
purchase of shares under the Stock Purchase Plan, (iii) 4,112,700 shares of
Company Common Stock were reserved for issuance upon exercise of the Warrants
and (iv) 2,542,250 shares of Company Common Stock were reserved for issuance
upon exercise of outstanding Convertible Notes. Section 5.3 of the Disclosure
Schedule lists and describes the Stock Option Plans, the Stock Purchase Plan,
the Warrants and the Convertible Notes, including the number of Warrants and the
aggregate principal amount of Convertible Notes issued and outstanding as of the
date hereof. Other than the Stock Option Plans, the Stock Purchase Plan, the
Warrants and the Convertible Notes, the Company has no other plan which provides
for the grant of options or warrants to
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purchase shares of capital stock, stock appreciation or similar rights or stock
awards. Except as set forth above, there are not now, and at the Effective Time,
except for shares of Company Common Stock issued after the date hereof upon the
conversion of the Convertible Notes and the exercise of Options and Warrants
outstanding on the date hereof or pursuant to the Company's 401(k) Plan, there
will not be, any shares of capital stock of the Company issued or outstanding or
any subscriptions, options, warrants, calls, claims, rights (including without
limitation any stock appreciation or similar rights), convertible securities or
other agreements or commitments of any character obligating the Company to
issue, transfer or sell any of its securities or to distribute any evidences of
indebtedness or assets to holders of any class of its capital stock. Except as
disclosed in Section 5.3 of the Disclosure Schedule, none of the Company and its
Retained Subsidiaries is a party to any voting agreement, voting trust, proxy or
similar agreement, arrangement or understanding relating to its capital stock or
any agreement, arrangement or understanding relating to or providing for
registration rights with respect to its capital stock. The Company has made all
payments required through the date hereof under the Convertible Notes.
5.4. Authority Relative to This Agreement.
The Company has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining any necessary shareholder
approval of the Merger, to consummate the Merger and other transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Merger and other transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Merger or other transactions
contemplated hereby (other than, with respect to the Merger, the approval of the
Company's shareholders in accordance with the NYBCL). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Acquiror and Merger Sub,
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
5.5 No Violations, etc.
(a) Other than the filings, permits, authorizations, consents and
approvals or waivers thereof that are identified in Section 5.5(b) and that have
been duly made or obtained as contemplated herein, and except as listed in
Section 5.5 of the Disclosure Schedule, neither the execution and delivery of
this Agreement by the Company nor the consummation of the Merger or other
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
or suspension of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of (x) their respective charters
-12-
or by-laws (or other applicable organizational document), (y) any note, bond,
mortgage, debenture, indenture or deed of trust or (z) any license, lease,
contract, agreement or other instrument or obligation to which the Company or
any such subsidiary is a party or to which they or any of their respective
properties or assets may be subject; or (ii) violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, except, in the case of clauses (i) and (ii) above, for any such
violations, conflicts, breaches, defaults or other alterations or occurrences
that could not have, individually or in the aggregate, a Company Material
Adverse Effect and would not, in any material respect, prevent or delay
consummation of the Merger or otherwise prevent the Company from performing its
obligations under this Agreement.
(b) No filing or registration with, no notification to and no
permit, authorization, consent or approval of any governmental entity
(including, without limitation, any federal, state or local regulatory authority
or agency) is required of the Company in connection with the execution and
delivery of this Agreement or the consummation by the Company of the Merger or
other transactions contemplated hereby, except (i) as required by (A) applicable
requirements, if any, of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (B) the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act"), and
the Exchange Act, (C) state securities or "blue sky" laws and (D) the National
Association of Securities Dealers, Inc. or the NASDAQ; (ii) the filing and
recordation of appropriate merger documents as required by the NYBCL; (iii) the
approval of the Company's shareholders as required by the NYBCL; and (iv) such
other filings, registrations, notifications, permits, authorizations, consents
or approvals the failure of which to be obtained, made or given would not,
individually or in the aggregate, either have a Company Material Adverse Effect
or materially impair the Company's ability to consummate the Merger or other
transactions contemplated hereby.
(c) The Company and its Retained Subsidiaries are not in violation
of or default under, except as set forth in Section 5.5 of the Disclosure
Schedule, (i) any note, bond, mortgage, debenture, indenture or deed of trust;
or (ii) any license, lease, contract, agreement or other instrument or
obligation to which the Company or any such subsidiary is a party or to which
they or any of their respective properties or assets may be subject, except, in
the case of clauses (i) and (ii) above, for such violations or defaults that
would not, individually or in the aggregate, either have a Company Material
Adverse Effect or materially impair the Company's ability to consummate the
Merger or other transactions contemplated hereby.
5.6 Commission Filings; Financial Statements.
The Company has filed all forms, reports, schedules, statements and
other documents required to be filed by it since December 31, 1994 (as
supplemented and amended since the time of filing, collectively, the "SEC
Reports") with the Securities and Exchange Commission (the "SEC"), each of which
complied when filed in all material respects with all applicable requirements of
the Securities Act and the Exchange Act. All of the historical financial
statements contained in the SEC Reports were prepared from
-13-
the books and records of the Company and its subsidiaries. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company and its subsidiaries included or incorporated by
reference in such SEC Reports have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and present fairly
the financial position and results of operations and cash flows of the Company
and its subsidiaries on a consolidated basis at the respective dates and for the
respective periods indicated (subject, in the case of all such financial
statements that are interim financial statements, to normal year-end audit
adjustments, none of which will be material). None of the SEC Reports contained
at the time filed any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.7 Absence of Changes or Events.
Except as set forth in Section 5.7 of the Disclosure Schedule, the
Company's Form 10-K for the fiscal year ended December 31, 1997, as filed with
the SEC, or the Company's Form 10-Q for the fiscal quarter ended March 28, 1998,
as filed with the SEC, since December 31, 1997, the Company and its subsidiaries
have conducted their respective businesses in the ordinary course consistent
with their past practices and have not incurred any material liability, except
in the ordinary course of their businesses consistent with their past practices,
and there has not been (i) any change, or any event involving a prospective
change, in the business, financial condition or results of operations of the
Company or any of its subsidiaries which has had, or could have, individually or
in the aggregate, a Company Material Adverse Effect; (ii) any damage,
destruction or loss, whether covered by insurance or not, which has had, or
could have, individually or in the aggregate, a Company Material Adverse Effect;
(iii) any entry into or termination of any material commitment, contract,
agreement or transaction (including, without limitation, any material borrowing
or capital expenditure or sale or other disposition of any material asset or
assets) of or involving the Company and its subsidiaries, other than this
Agreement, the Stock Purchase Agreement, a form of which is attached hereto as
Exhibit B (the "Wilcom Agreement"), to be entered into among Wilcom Acquisition
Corp., as Buyer, and the Company, as Seller, relating to the sale of Wilcom,
Inc. and agreements executed in the ordinary course of business; (iv) any
redemption, repurchase or other acquisition for value of its capital stock by
the Company, or any issuance of capital stock of the Company or any of its
subsidiaries or of securities convertible into or rights to acquire any such
capital stock or any dividend or distribution declared, set aside, or paid on
capital stock of the Company, other than the sale of Wilcom, Inc.; (v) any
transfer of or right granted under any material lease, license, agreement or
Intellectual Property (as defined in Section 5.18 below) of the Company or any
of its Retained Subsidiaries or any liens or other security interests in any
Intellectual Property of the Company or any of its Retained Subsidiaries; (vi)
any sale or other disposition of any asset of the Company or any of its
subsidiaries or any charge, mortgage, pledge or imposition of any lien or other
encumbrance (or any satisfaction and discharge thereof) on any asset of the
Company or any of its subsidiaries, other than in the ordinary course of
business, or any agreement relating to any of the foregoing; (vii)
-14-
any default or breach by the Company or any of its subsidiaries in any material
respect under any contract, license or permit; (viii) any general wage or salary
increase or any increase in compensation payable or to become payable to any
executive officers or management employees of the Company or any of its
subsidiaries or any entry into any employment contract with any executive
officer or key salaried employee of the Company or any of its subsidiaries; and
(ix) any change in the accounting methods of the Company or any of its
subsidiaries.
5.8 Absence of Undisclosed Liabilities.
Except as set forth in Section 5.8 of the Disclosure Schedule, neither
the Company nor any of its subsidiaries has any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except for (i) liabilities recorded on the Company's
consolidated balance sheet at December 31, 1997 included in the financial
statements referred to in Section 5.6 and the notes thereto; (ii) liabilities or
obligations incurred in the ordinary course of business and consistent with past
practice since December 31, 1997; and (iii) liabilities or obligations that do
not exceed $25,000 individually and $100,000 in the aggregate.
5.9 Joint Proxy Statement.
None of the information supplied or to be supplied by or on behalf of
the Company for inclusion or incorporation by reference in the registration
statement to be filed with the SEC by Acquiror in connection with the issuance
of shares of Acquiror Common Stock in the Merger (the "Form S-4") will, at the
time the Form S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in the joint proxy statement, in
definitive form, relating to the Company Shareholder Meeting (as hereinafter
defined) and the Acquiror Stockholder Meeting (as hereinafter defined), or in
the related proxy and notice of meeting, or soliciting material used in
connection therewith (referred to herein collectively as the "Joint Proxy
Statement") will, at the dates mailed to stockholders and at the times of the
Company Shareholder Meeting and the Acquiror Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Form
S-4 and the Joint Proxy Statement as it relates to the Company and its
subsidiaries will comply as to form in all material respects with the provisions
of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to information relating to or supplied by Acquiror.
-15-
5.10 Accounts Receivable.
All accounts receivable of the Company reflected in the Company's
December 31, 1997 audited consolidated balance sheet contained in the Company's
Form 10-K for the fiscal year ended December 31, 1997 filed with the SEC (the
"Balance Sheet") represent transactions in the ordinary course of business
(including without limitation recoverable costs and accrued profits on progress
completed but not billed under Government Contracts (as defined in Section 5.22
below) or other contracts) and are current and collectible net of any reserves
shown on such Balance Sheet (which reserves are adequate and were calculated
consistent with past practice). Section 5.10 of the Disclosure Schedule sets
forth (i) the aging of the Company's receivables in excess of $25,000; (ii) each
receivable in excess of $25,000; (iii) each receivable in an amount in excess of
$25,000 that is more than ninety (90) days outstanding; and (iv) each receivable
from a person or entity from whom the aggregate of such receivables exceeds
$25,000.
5.11 Inventories.
All inventories of the Company reflected in the Balance Sheet are of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which, in
the aggregate, are immaterial in amount. Items included in such inventories are
carried on the books of the Company and are valued on such Balance Sheet at the
lower of cost or market and, in any event, at not greater than their net
realizable value after appropriate deduction for costs of completion, marketing
costs, transportation expense and allocation of overhead.
5.12 Litigation.
Except as set forth in Section 5.12 of the Disclosure Schedule, there is
no (i) claim, action, suit or proceeding pending or, to the best knowledge of
the Company or any of its Retained Subsidiaries, threatened against or relating
to the Company or any of its Retained Subsidiaries before any court or
governmental or regulatory authority or body or arbitration tribunal; or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding, seeking unspecified damages, damages in excess of $100,000 or any
injunctive or other equitable relief to which the Company, any Retained
Subsidiary of the Company or any of their respective assets is a party.
5.13 Title to and Condition of Properties; Leases.
(a) Each of the Company and its subsidiaries (i) except as set
forth in Section 5.13(a)(i) of the Disclosure Schedule, has good, marketable and
insurable title to all of the properties and assets reflected on the Company's
December 31, 1997 audited consolidated balance sheet contained in the Company's
Form 10-K for the fiscal year ended December 31, 1997 filed with the SEC (the
"Balance Sheet") as being owned by the Company or its subsidiaries, except for
any property or asset since sold or otherwise disposed of since the date thereof
in the ordinary course of business and consistent with past practice; and (ii)
is the lessee under all of the leases set forth in Section 5.13(a)(ii) of
-16-
the Disclosure Schedule and has valid, effective, enforceable and continuing
leasehold rights without default in all property leased by it under such leases,
free and clear of all encumbrances, except in the case of clauses (i) and (ii)
above (x) statutory liens securing payments not yet due and (y) such
imperfections or irregularities of title, claims, liens, charges, security
interests or encumbrances as do not materially affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially impair the
business operations at such properties. The assets and properties of the Company
and its Retained Subsidiaries are in good operating condition and repair and are
adequate for the uses to which they are being put, all of which are lawful,
authorized and permitted.
(b) The Company is not a party to any executory contract to sell or
transfer any part of any leasehold interest of the Company. True and accurate
copies of all leases, and of all amendments, supplements, extensions and
modifications thereof, have been delivered to Acquiror by the Company.
5.14 Contracts and Commitments.
Other than as disclosed in Section 5.14 of the Disclosure Schedule, no
existing contract or commitment of the Company or any of its subsidiaries, or as
to which any thereof is a party or their respective assets are bound, contains
an agreement with respect to any change of control that would be triggered by
the Merger. Other than as set forth in Section 5.14 of the Disclosure Schedule,
neither this Agreement, the Merger nor the other transactions contemplated
hereby will result in any outstanding loans or borrowings in excess of $50,000
by the Company or any Retained Subsidiary of the Company becoming due, going
into default or giving the lenders or other holders of debt instruments the
right to require the Company or any of its Retained Subsidiaries to repay all or
a portion of such loans or borrowings; provided, that it is expressly understood
and agreed that the Company is not making any representations or warranties with
respect to the effect of the financial condition or results of operation of
Acquiror and Merger Sub.
5.15 Labor Matters.
Each of the Company and its Retained Subsidiaries is in compliance in
all material respects with all applicable laws relating to employment and
employment practices, terms and conditions of employment and wages and hours. To
the Company's knowledge, there is no labor strike, slowdown or work stoppage
pending or threatened against or affecting the Company or any of its
subsidiaries. No petition for certification has been filed and is pending before
the National Labor Relations Board with respect to any employees of the Company
or any of its Retained Subsidiaries who are not currently organized.
5.16 Compliance with Law.
Except as set forth in Section 5.16 of the Disclosure Schedule, neither
the Company nor any of its Retained Subsidiaries has violated or failed to
comply with any applicable statute, law, ordinance, regulation, rule or order
(including without limitation any U.S. export control statutes, regulations and
Executive Orders) of any foreign,
-17-
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to its
business or operations or the conduct thereof by the Company and its Retained
Subsidiaries, except for such violations, if any, that could not have,
individually or in the aggregate, a Company Material Effect. The Company and its
Retained Subsidiaries have all permits, licenses and franchises from
governmental agencies required to conduct their businesses as now being
conducted, except for any permits, licenses, franchises, the absence of which
could not have, individually or in the aggregate, a Company Material Effect.
5.17 Board Recommendation.
The Board of Directors of the Company has approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby, has
determined that the transactions contemplated by this Agreement are in the best
interests of the Company and its shareholders and has recommended that the
shareholders of the Company vote in favor thereof.
5.18 Intellectual Property.
(a) Section 5.18 of the Disclosure Schedule lists all of the
Intellectual Property of the Company, its Retained Subsidiaries and any
predecessor entities of the foregoing.
(b) The Company and its Retained Subsidiaries own or have the right
to use all Intellectual Property used in the conduct of their respective
businesses. None of the Intellectual Property used in the conduct of their
respective businesses infringes or violates the intellectual property rights of
any third parties. Consummation of the transactions contemplated hereby shall
not impair any rights or impose any obligations with respect to Intellectual
Property used in the conduct of the businesses of the Company and its Retained
Subsidiaries.
(c) There is no pending or, to the knowledge of the Company or its
Retained Subsidiaries, threatened (or unasserted but considered probable of
assertion) claim against the Company or any of its Retained Subsidiaries, nor
has the Company or any of its Retained Subsidiaries received any notice, (i)
asserting that any of the Intellectual Property, or that the past, present or,
to the knowledge of the Company or its Retained Subsidiaries, contemplated
future conduct of the Company's or its Retained Subsidiaries' business,
infringes or violates the intellectual property rights of any third parties;
(ii) asserting that any third parties have any rights to use any of the
Intellectual Property except for Licensed Intellectual Property licensed to the
Company or a Retained Subsidiary on a nonexclusive basis; or (iii) which could,
if adversely determined against the Company or any Retained Subsidiary,
adversely affect the ability of the Company or a Retained Subsidiary to use any
of the Intellectual Property upon consummation of the transactions contemplated
hereby or thereafter, and to the knowledge of the Company and its Retained
Subsidiaries, there is no basis for any claim of the foregoing types.
-18-
(d) Neither the Company nor any Retained Subsidiary has given
notice to any third parties asserting infringement by such third parties of any
of the Intellectual Property, and to the knowledge of the Company and its
Retained Subsidiaries, there is no basis for any such claim against a third
party.
(e) All of the Licensed Intellectual Property is licensed pursuant
to valid written agreements (the "License Agreements"), enforceable in
accordance with their terms.
(f) Neither the Company nor any Retained Subsidiary is subject to
any bars or other restrictions with respect to its rights to utilize the
Intellectual Property, except for the terms and conditions of the License
Agreements and, to the knowledge of the Company and its Retained Subsidiaries,
no bars or other restrictions on such rights will be created by or exist after
the consummation of the transactions contemplated herein.
(g) There is no pending or, to the knowledge of the Company or any
of its Retained Subsidiaries, threatened claim that the Company, any Retained
Subsidiary or any licensor is in breach of any of the License Agreements and, to
the knowledge of the Company and its Retained Subsidiaries, no basis for any
such claim exists.
(h) There is no pending or, to the knowledge of the Company or any
of its Retained Subsidiaries, threatened claim against the Company, any Retained
Subsidiary or the licensor of any Licensed Intellectual Property asserting that
any of the Licensed Intellectual Property infringes or conflicts with the rights
of third parties, and to the knowledge of the Company and its Retained
Subsidiaries, no basis for any such claim exists.
(i) Each of the Company and its Retained Subsidiaries has performed
all of the obligations required to be performed by it, and is not in default
under any agreement relating to any Intellectual Property.
(j) Section 5.18(j) of the Disclosure Schedule identifies each
trade name, fictitious business name, or other similar name under which the
Company or any of its Retained Subsidiaries has conducted any part of its
business during the five (5) years preceding the date hereof.
(k) For purposes of this Section 5.18 and Section 5.7 above:
(i) "Copyrights" shall mean all registered and unregistered
copyrights and applications for copyright registration in every country of the
world;
(ii) "Intellectual Property" shall mean Patents, Trademarks,
Copyrights and Know-How, including Licensed Intellectual Property;
(iii) "Know-How" shall mean technical information, trade
secrets, inventions, processes, specifications, manuals, reports, documents,
drawings, procedures, processes, devices, software and source code, software
documentation, flow
-19-
charts, recording media, research and development data, notebooks, marketing
information, customer lists, database rights, other tangible embodiments of
information and proprietary rights other than Copyrights Patents, and
Trademarks, in every country of the world;
(iv) "Licensed Intellectual Property" shall mean all
intellectual property owned by third parties and licensed to the Company or any
Retained Subsidiary;
(v) "Patents" shall mean all utility and design patents and
patent applications (including any divisions, continuations,
continuations-in-part, reexaminations, extensions, renewals or reissues
thereof), design, design registrations, utility models and any similar rights
and applications therefor, in every country of the world; and
(vi) "Trademarks" shall mean all registered and unregistered
trademarks, service marks, trade dress, trade names, fictitious business names
or other similar names and applications for registration of any of the
foregoing, in every country of the world.
5.19 Taxes.
"Tax" (including, with correlative meaning, the term "Taxes") shall mean
all federal, state, local and foreign taxes, duties, levies, charges and
assessments of any nature, including social security payments and deductibles
relating to wages, salaries and benefits and payments to subcontractors (to the
extent required under applicable Tax law), and also including all interest,
penalties and additions imposed with respect to such amounts. Except as set
forth in Section 5.19 of the Disclosure Schedule, (i) the Company and its
subsidiaries have prepared and timely filed or will timely file with the
appropriate governmental agencies all franchise, income and all other Tax
returns and reports required to be filed for any period ending on or before the
Effective Time, taking into account any extension of time to file granted to or
obtained on behalf of the Company and/or its subsidiaries; (ii) all Taxes of the
Company and its subsidiaries in respect of the pre-Merger period have been paid
in full to the proper authorities, other than such Taxes as are being contested
in good faith by appropriate proceedings and/or are adequately reserved for in
accordance with generally accepted accounting principles; (iii) all deficiencies
resulting from Tax examinations, inquiries or investigations of federal, state
and foreign income, sales and franchise and all other Tax returns filed by the
Company and its subsidiaries have either been paid or are being contested in
good faith by appropriate proceedings; (iv) to the best knowledge of the
Company, no deficiency has been asserted or assessed against the Company or any
of its subsidiaries, and no examination, inquiry or investigation of the Company
or any of its subsidiaries is pending or threatened for any amount of Tax by any
taxing authority; (v) no extension of the period for assessment or collection of
any Tax is currently in effect and no extension of time within which to file any
Tax return has been requested, which Tax return has not since been filed; (vi)
no Tax liens have been filed with respect to any Taxes; (vii) the Company and
each of its subsidiaries will not make any voluntary adjustment by reason of a
change in their accounting methods for any pre-Merger period that would affect
the
-20-
taxable income or deductions of the Company or any of its subsidiaries for any
period ending after the Effective Date; (viii) the Company and its subsidiaries
have made timely payments of the Taxes required to be deducted and withheld from
the wages paid to their employees; and (ix) the Company and its subsidiaries are
not parties to any tax sharing or tax matters agreement.
5.20 Employee Benefit Plans.
(a) Section 5.20(a) of the Disclosure Schedule contains a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, vacation, worker's
compensation, medical, life or other material insurance, profit-sharing, or
pension plan, program, agreement or arrangement, and each other material
employee benefit plan, program, agreement or arrangement, sponsored, maintained
or contributed to or required to be contributed to by the Company or any of its
subsidiaries or by any trade or business, whether or not incorporated, that
together with the Company or any of its subsidiaries would be deemed a "single
employer" under Section 414 of the Code (an "ERISA Affiliate") for the benefit
of any employee or director or former employee or former director of the Company
or any of its subsidiaries, whether formal or informal and whether legally
binding or not (the "Plans"). With respect to each Plan, Section 5.20(a) of the
Disclosure Schedule identifies each ERISA Affiliate that sponsors, maintains, or
contributes to the Plan and whether the Plan covers or provides benefits to
current or former employees or directors of any ERISA Affiliate (and if so, the
identity of each such ERISA Affiliate). Neither the Company nor any --------- of
its subsidiaries has any formal plan or commitment, whether legally binding or
not, to create any additional plan or modify or change any existing Plan that
would affect any employee or director or former employee or former director of
the Company or any of its subsidiaries.
(b) With respect to each of the Plans, the Company has heretofore
delivered to the Acquiror true and complete copies of each of the following
documents: (i) the Plan and related documents (including all amendments
thereto); (ii) the two most recent annual reports, actuarial reports, and
financial statements, if any; (iii) the most recent Summary Plan Description,
together with each Summary of Material Modifications, required under The
Employee Retirement Income Security Act of 1974, as amended ("ERISA") with
respect to such Plan, and all material employee communications relating to such
Plan; and (iv) the most recent determination letter received from the IRS with
respect to each Plan that is intended to be qualified under the Code, all
authorizations and approvals from the UK Inland Revenue in relation to each
other Plan and all communications to or from the IRS or any other governmental
or regulatory authority relating to each Plan.
(c) No liability under Title IV of ERISA has been incurred by the
Company or any of its subsidiaries or any ERISA Affiliate since the effective
date of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company or any of its subsidiaries or any ERISA
Affiliate of incurring a liability under such Title other than liability for the
payment of PBGC premiums, which have been or will be paid when due.
-21-
(d) Neither the Company nor any of its subsidiaries nor any ERISA
Affiliate, nor any of the Plans, nor any trust created thereunder, nor, to the
Company's knowledge, any trustee or administrator thereof has engaged in a
transaction in connection with which the Company, or any of its subsidiaries,
any of the Plans, any such trust, or any trustee or administrator thereof,
could, directly or indirectly, be subject to a civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA, a tax imposed pursuant to Section 4975 or
4976 of the Code, or any other liability.
(e) Full payment has been made, or will be made (where applicable)
in accordance with Section 404(a)(6) of the Code, of all amounts that the
Company or any of its subsidiaries or any ERISA Affiliate is required to pay
under Section 412 of the Code or under the terms of the Plans and the applicable
contracts of employment, and all such amounts properly accrued through the
Closing Date, with respect to the current plan year thereof will be paid on or
prior to the Closing Date or will be properly recorded on the Company's
financial statements.
(f) As of the time immediately prior to the consummation of the
Company's sale of Wilcom, Inc. and as of the Closing Date, the then fair market
value of the assets held under each Plan that is subject to Title IV of ERISA
will be sufficient so as to permit a "standard termination" of each such Plan
under Section 4042(b) of ERISA without the need to make any additional
contributions to such Plans. No reportable event under Section 4043 of ERISA has
occurred or will occur with respect to any Plan on or before the Closing Date
other than any reportable event occurring by reason of the transactions
contemplated by this Agreement.
(g) None of the Plans is a "multi-employer pension plan," as such
term is defined in Section 3(37) of ERISA, a "multiple employer welfare
arrangement," as such term is defined in Section 3(40) of ERISA, or a single
employer plan that has two or more contributing sponsors, at least two of whom
are not under common control, within the meaning of Section 4063(a) of ERISA.
(h) Each of the Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and a favorable
determination to that effect has been issued by the IRS with respect to each
such Plan. Each of the Plans that is intended to satisfy the requirements of
Section 125 or 501(c)(9) of the Code satisfies such requirements. Each of the
Plans has been operated and administered in all material respects in accordance
with its terms and applicable laws and regulations, including but not limited to
ERISA and the Code.
(i) Except as set forth in Section 5.20(i) of the Disclosure
Schedule, each Plan may be amended or terminated without liability to the
Company or any of its subsidiaries or any ERISA Affiliate. No amounts payable
under the Plans will fail to be deductible for federal income tax purposes under
Section 280G of the Code or for United Kingdom corporation tax purposes. To the
Company's knowledge, each person who performs services for the Company or any of
its subsidiaries has been, and is, properly
-22-
classified by the Company or any of its subsidiaries as an employee or
independent contractor.
(j) There are no claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Plan, the assets of any Plan or against the Company or any of its
subsidiaries or any ERISA Affiliate with respect to any Plan. There is no
judgment, decree, injunction, rule or order of any court, governmental body,
commission, agency or arbitrator outstanding against or in favor of any Plan or
any fiduciary thereof (other than rules of general applicability). There are no
pending or, to the knowledge of the Company, threatened audits or investigations
by any governmental body, commission or agency involving any Plan.
(k) Except as set forth in Section 5.20(k) of the Disclosure
Schedule, no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees or directors after retirement or other termination of service (other
than (i) coverage mandated by applicable law; (ii) death benefit or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA; (iii) deferred compensation benefits accrued as liabilities on
the books of the Company or the ERISA Affiliates; or (iv) benefits, the full
cost of which is borne by the current or former employee or director (or his
beneficiary)).
(l) Except as set forth in Section 5.20(l) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or director of the Company
or any of its subsidiaries to severance pay, unemployment compensation,
termination or any similar payment; or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any such current or
former employee or director; or (iii) renew or extend the term of any agreement
regarding compensation for any such current or former employee or director.
5.21 Environmental Matters.
Except as set forth in Section 5.21 of the Disclosure Schedule:
(a) The Company and its subsidiaries have obtained all material
Environmental Permits and all material licenses and other authorizations and
have made all registrations and given all notifications that are required under
any applicable Environmental Law, except where such failure could not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) There is no Environmental Claim pending against the Company and
its subsidiaries under an Environmental Law, except for any such Environmental
Claims that could not, individually or in the aggregate, have a Company Material
Adverse Effect.
(c) The Company and its subsidiaries are in compliance with all
material terms and conditions of their Environmental Permits, and are in
compliance with
-23-
all applicable Environmental Laws, except where such failure could not,
individually or in the aggregate, have a Company Material Adverse Effect.
(d) The Company and its subsidiaries did not, in any material
respect, generate, treat, store, transport, discharge, dispose of or release any
Hazardous Materials on or from any property now or previously owned, leased or
used by the Company and its subsidiaries.
(e) For purposes of this Section 5.21:
(i) "Environment" shall mean any surface water, ground water,
or drinking water supply, land surface or subsurface strata, or ambient air and
includes, without limitation, any indoor location;
(ii) "Environmental Claim" means any written notice or written
claim by any person alleging potential liability (including, without limitation,
potential liability for investigator costs, cleanup costs, governmental costs,
or harm, injuries or damages to any person, property or natural resources, and
any fines or penalties) arising out of, based upon, resulting from or relating
to (1) the emission, discharge, disposal or other release or threatened release
in or into the Environment of any Hazardous Materials or (2) circumstances
forming the basis of any violation, or alleged violation, of any applicable
Environmental Law;
(iii) "Environmental Laws" means any national, supranational,
federal, state, and local laws, codes, and regulations as now or previously in
effect relating to pollution, the protection of human health, the protection of
the Environment or the emission, discharge, disposal or other release or
threatened release of Hazardous Materials in or into the Environment;
(iv) "Environmental Permit" shall mean a permit, identification
number, license or other written authorization required under any applicable
Environmental Law; and
(v) "Hazardous Materials" shall mean all pollutants,
contaminants, or chemical, hazardous or toxic materials, substances,
constituents or wastes, including, without limitation, asbestos or
asbestos-containing materials, polychlorinated biphenyl's and petroleum, oil, or
petroleum or oil derivatives or constituents, including, without limitation,
crude oil or any fraction thereof.
5.22 Government Contracts.
(a) Section 5.22 of the Disclosure Schedule constitutes a complete
and accurate record of (i) all of the Company's past and present Government
Contracts that were in force since January 1, 1992, with the exception of such
completed and "closed out" Government Contracts to which the Company was a party
during the period of time the Company had operations in Hauppauge, New York (the
"Hauppauge Contracts") (which Hauppauge Contracts were subsequently assigned to
Codar Technology, Inc. as of January 1, 1996 and which operations were therefore
transferred to Longmont, Colorado); (ii) all
-24-
of the Company's Government Contracts currently in force; (iii) all of the
Company's outstanding quotations, bids and proposals for Government Contracts;
and (iv) all of the Company's Government Contracts under which the Company knows
or has reason to know are currently or are likely to experience substantial
cost, schedule, technical or quality problems that could result in a claim
against the Company (or its successors in interest) by the Government, a prime
contractor or a higher-tier subcontractor. The Company has made available to
Acquiror true and complete copies of all Contracts (other than the Hauppauge
Contracts) listed in Section 5.22 of the Disclosure Schedule. Except as
described in Section 5.22 of the Disclosure Schedule, all of the Company's
Government Contracts were legally awarded, are binding on the parties thereto,
and are in full force and effect. Such Government Contracts (or, where
applicable, the Prime Government Contracts under which such Government Contracts
were awarded) are not currently the subject of bid protest or analogous
proceedings in any agency, administrative or judicial forum, and the Company has
no knowledge that such Government Contracts (or, where applicable, the Prime
Government Contracts under which such Government Contracts were awarded) are
reasonably likely to become the subject of bid protest or analogous proceedings.
(b) The Company has complied with all statutory and regulatory
requirements, including, but not limited to, the False Claims Act ("FCA"), the
Truth in Negotiations Act ("XXXX"), the Federal Acquisition Regulation ("FAR"),
the FAR cost principles and the Cost Accounting Standards, where and as
applicable to each of the Company's Government Contracts and each of the
Company's quotations, bids and proposals for Government Contracts.
(c) The Company has complied with all terms, conditions, clauses,
provisions and specifications of the Company's Government Contracts, whether
incorporated expressly, by reference, or by operation of law.
(d) To the Company's knowledge, after due inquiry, all facts set
forth in or acknowledged by any representations, certifications or disclosure
schedules made or submitted by or on behalf of the Company in connection with
each of the Company's Government Contracts and each of the Company's quotations,
bids and proposals for Government Contracts were current, accurate and complete
as of the date of submission.
(e) The Company has complied with all applicable representations,
certifications and disclosure requirements under each of the Company's
Government Contracts and each of the Company's quotations, bids and proposals
for Government Contracts.
(f) The Company has developed and implemented a government
contracts compliance program that includes corporate policies and procedures to
ensure compliance with applicable government procurement statutes, regulations
and contract requirements. The Company has delivered to Acquiror a true and
complete copy of such compliance program.
(g) With respect to the Company's Government Contracts, neither the
Government nor any prime contractor or higher-tier subcontractor under a
Government
-25-
Contract nor any other person has notified the Company, either orally or in
writing, of any actual or alleged violation or breach of any statute,
regulation, representation, certification or contract term, condition, clause,
provision or specification.
(h) To the Company's knowledge, after due inquiry, no facts exist
which could give rise to a claim for price adjustment under the XXXX or to any
other request for a material reduction in the price of any of the Company's
Government Contracts.
(i) Except as described in Section 5.22 of the Disclosure Schedule,
the Company is not aware of and has received no show cause, cure, deficiency,
default or similar notice relating to its outstanding Government Contracts, and
none of the Company's Government Contracts has been terminated for default.
Except as described in Section 5.22 of the Disclosure Schedule, the Company has
received no notice of an intent to terminate any of the Company's contracts for
convenience or of any consideration of such termination.
(j) Except as described in Section 5.22 of the Disclosure Schedule,
there are no outstanding disputes or claims relating to the Company's Government
Contracts and involving either the Government, any prime contractor, any
higher-tier subcontractor or any third party, and the Company neither knows nor
has reason to know of any facts or allegations that could give rise to such a
dispute or claim in the future.
(k) Except as described in Section 5.22 of the Disclosure Schedule,
there are no outstanding disputes or claims relating to the Company's Government
Contracts which, if resolved unfavorably to the Company, would materially
increase the Company's cost to complete performance of such Government Contract
above the amounts set forth in the Estimates to Complete prepared by the Company
and made available to Acquiror for each Government Contract. In addition, there
are no known or reasonably foreseeable expenditures which would increase the
cost to complete performance of the Company's Government Contracts above the
amounts set forth in the Estimates to Complete.
(l) The Company has not been and is not now blacklisted, suspended
or debarred, or proposed for suspension or debarment, from participation in the
award of Government Contracts. No facts exist which could give rise to such
suspension or debarment.
(m) No negative determination of responsibility has ever been
issued against the Company with respect to any quotation, bid or proposal for a
Government Contract.
(n) Except as described in Section 5.22 of the Disclosure Schedule,
the Company has not undergone and is not undergoing any audit, review, survey,
inspection, investigation or examination of records relating to the Company's
Government Contracts, and neither knows nor has reason to know of any basis for
any such audit, review, survey, inspection, investigation or examination of
records. No audit, review, survey, inspection,
-26-
investigation or examination of records described in Section 5.22 of the
Disclosure Schedule has revealed any occurrence or practice that could affect
the assets, business or financial statements of the Company.
(o) The Company has not been and is not now under any
administrative, civil or criminal investigation or indictment involving alleged
false statements, false claims or other improprieties relating to the Company's
Government Contracts or quotations, bids and proposals for Government Contracts.
The Company neither knows nor has reason to know of any basis for any such
investigation or indictment.
(p) The Company has not been and is not now a party to any
administrative or civil litigation involving alleged false statements, false
claims or other improprieties relating to the Company's Government Contracts or
quotations, bids and proposals for Government Contracts. The Company neither
knows nor has reason to know of any basis for any such proceeding.
(q) The Company has made no payment, directly or indirectly, to any
person in violation of applicable Government procurement laws, including (but
not limited to) laws relating to bribes, gratuities, kickbacks, lobbying
expenditures, political contributions and contingent fee payments.
(r) Except as described in Section 5.22 of the Disclosure Schedule,
neither the Government nor any prime contractor or higher-tier subcontractor
under a Government Contract has withheld or set off, or attempted to withhold or
set off, monies due to the Company under any of the Company's Government
Contracts.
(s) The Company's cost accounting, purchasing, inventory and
quality control systems are in compliance with all applicable government
procurement statutes and regulations and with the requirements of all of the
Company's Government Contracts.
(t) Except as described in Section 5.22 of the Disclosure Schedule,
neither the Government nor any prime contractor or higher-tier subcontractor
under a Government Contract has questioned or disallowed any costs claimed by
the Company under the Company's outstanding Government Contracts. The Company
neither knows nor has reason to know of any basis for disallowing any such
costs.
(u) Except as described in Section 5.22 of the Disclosure Schedule,
the Company has made no assignments of the Company's Government Contracts or of
any interests in the Company's Government Contracts, and the Company has entered
into no financing arrangements with respect to the performance of any
outstanding Government Contract.
(v) The Company lists in Section 5.22 of the Disclosure Schedule
all government property that has been provided to the Company pursuant to the
Company's Government Contracts.
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(w) The Company has complied with all applicable requirements under
each of the Company's Government Contracts relating to the protection of
classified information, except as described in Section 5.22 of the Disclosure
Schedule.
(x) For purposes of this Section 5.22 and Section 5.10 above:
(i) The term "Government" includes any agency, department,
ministry, division, subdivision or office of a Government, including the
officials, employees and agents thereof.
(ii) The term "Company" includes the Company's subsidiaries,
affiliates, directors, officers, employees and agents.
(iii) The term "Contract" includes any prime contract,
subcontract, basic ordering agreement, letter contract, purchase order or
delivery order of any kind, including all amendments, modifications and options
thereunder or relating thereto.
(iv) The term "Government Contract" means any prime Contract
with a Government and any subcontract with a prime contractor or higher-tier
subcontractor under a prime contract with a Government.
(v) The term "Prime Government Contract" means any prime
Contract with a Government.
5.23 Disclosure.
All of the facts and circumstances not required to be disclosed as
exceptions under or to any of the foregoing representations and warranties made
by the Company in this Article V by reason of any minimum disclosure requirement
in any such representation and warranty would not, in the aggregate, have a
Company Material Adverse Effect. The information contained in the Disclosure
Schedule (and any updated Disclosure Schedule) as it relates to the
representations and warranties made by the Company in this Article V does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the information
or statements contained or referenced therein not misleading.
5.24 Finders or Brokers.
Except as set forth in Section 5.24 of the Disclosure Schedule, none of
the Company, the Retained Subsidiaries of the Company, the Board of Directors or
any member of the Board of Directors has employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or any commission in connection with the Merger,
and Section 5.24 of the Disclosure Schedule sets forth the maximum consideration
(present and future) agreed to be paid to each such party.
-28-
5.25 State Anti-takeover Statutes.
The Company has granted all approvals and taken all other steps
necessary to exempt the Merger and the other transactions contemplated hereby
from the requirements and provisions of Section 912 of the NYBCL and any other
applicable national, supranational or state anti-takeover statute or regulation
such that none of the provisions of such Section 912 or any other "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation (i) prohibits or restricts the Company's ability to perform its
obligations under this Agreement or its ability to consummate the Merger and the
other transactions contemplated hereby; (ii) would have the effect of
invalidating or voiding this Agreement any provision hereof; or (iii) would
subject Acquiror to any impediment or condition in connection with the exercise
of any of its rights under this Agreement.
5.26 Opinion of Financial Advisor.
The Company has received the opinion of Commonwealth Associates
("Commonwealth") dated July 7, 1998, to the effect that, as of such date, the
Exchange Ratio is fair from a financial point of view to the holders of shares
of Company Common Stock.
5.27 Insurance.
Section 5.27 of the Disclosure Schedule contains a list of all insurance
policies maintained by the Company for the benefit of or in connection with the
assets of the Company and its Retained Subsidiaries. The Company has not
received any notice of cancellation, termination or reduction of coverage, nor
has the Company received any notice of intention to cancel, terminate or reduce
coverage, relating thereto. The Company has given Acquiror access to complete
and correct copies of all such policies together with all riders and amendments
thereto. Such policies are (i) in such amounts as are appropriate and
reasonable, in the judgment of the Company's Board of Directors, taking into
account the Company's and its Retained Subsidiaries' properties, business and
operations; and (ii) are in full force and effect, with all premiums due thereon
having been paid.
5.28 Employment and Labor Contracts.
Neither the Company nor any of its Retained Subsidiaries is a party to
any employment contract or other similar contract or any other contract for the
provision of management or consulting services to the Company or any of its
Retained Subsidiaries with any past or present officer, director, employee or,
to the best of the Company's knowledge, any entity affiliated with any past or
present officer, director or employee, other than those set forth in Section
5.28 of the Disclosure Schedule and other than the agreements executed by
employees generally, the forms of which have been delivered to Acquiror.
-29-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Each of Acquiror and Merger Sub jointly and severally represents and
warrants to the Company that:
6.1 Organization and Qualification.
Each of Acquiror, Merger Sub and Acquiror's other subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Acquiror, Merger Sub and Acquiror's
other subsidiaries is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business, operations,
condition (financial or otherwise) or prospects of Acquiror and its subsidiaries
taken as a whole (an "Acquiror Material Adverse Effect"). Except as set forth in
Section 6.1 of the Disclosure Schedule previously delivered by Acquiror to the
Company (the "DRS Disclosure Schedule"), neither Acquiror nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation (or other
applicable charter document) or By-Laws (or other applicable organizational
document). Acquiror has delivered to the Company accurate and complete copies of
the Certificate of Incorporation (or other applicable charter document) and
By-Laws (or other applicable organizational document), each as amended to date,
of each of Acquiror and Merger Sub. Neither Acquiror nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation (or other
applicable charter document) or By-Laws (or other applicable organizational
document).
6.2 Subsidiaries.
The only direct or indirect subsidiaries of Acquiror as of the date
hereof are those listed in Section 6.2 of the DRS Disclosure Schedule. As of the
date hereof, Acquiror is directly or indirectly the record (except for
directors' qualifying shares) and beneficial owner (including all qualifying
shares owned by directors of such subsidiaries as reflected in Section 6.2 of
the DRS Disclosure Schedule) of all of the outstanding shares of capital stock
of each of its subsidiaries, there are no proxies with respect to such shares,
and no equity securities of any of such subsidiaries are or may be required to
be issued by reason of any options, warrants, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any capital stock of any
such subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any such subsidiary is bound to issue additional shares of
its capital stock or securities convertible
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into or exchangeable for such shares. All of the capital stock of Merger Sub
will at all times be owned directly by Acquiror, free and clear of any liens,
claims or encumbrances.
6.3 Capitalization.
The authorized capital stock of Acquiror consists of 20,000,000 shares
of Acquiror Common Stock, par value $.01 per share, and 2,000,000 shares of
undesignated preferred stock, par value $10.00 per share. As of July 27, 1998,
6,208,976 shares of Common Stock are issued and outstanding and no shares of
preferred stock are issued and outstanding. All of such issued and outstanding
shares are validly issued, fully paid and non-assessable and free of preemptive
rights. As of July 27, 1998, Acquiror holds 402,461 shares of Acquiror Common
Stock in treasury. Except as set forth above and except as disclosed in Section
6.3 of the DRS Disclosure Schedule, there are not as of the date hereof any
shares of capital stock of Acquiror issued or outstanding or any subscriptions,
options, warrants, calls, claims, rights (including without limitation any stock
appreciation or similar rights), convertible securities or other agreements or
commitments of any character obligating Acquiror to issue, transfer or sell any
of its securities. Except as disclosed in Section 6.3 of the DRS Disclosure
Schedule, Acquiror is not a party to any voting agreement, voting trust, proxy
or similar agreement, arrangement or understanding relating to its capital stock
or any agreement, arrangement or understanding relating to or providing for
registration rights with respect to its capital stock.
6.4 Authority Relative to This Agreement.
Each of Acquiror and Merger Sub has full corporate power and authority
to execute and deliver this Agreement and to consummate the Merger and other
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger and other transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Acquiror and
Merger Sub and no other corporate proceedings on the part of Acquiror and Merger
Sub are necessary to authorize this Agreement or to consummate the Merger or
other transactions contemplated hereby (other than the approval of Acquiror's
stockholders of the Merger as required by Section 712(b) of the AMEX Company
Guide. This Agreement has been duly and validly executed and delivered by
Acquiror and, assuming the due authorization, execution and delivery hereof by
the Company, constitutes a valid and binding agreement of Acquiror, enforceable
against Acquiror in accordance with its terms.
6.5 No Violations, etc.
(a) Other than the filings, permits, authorizations, consents and
approvals or waivers thereof that are identified in Section 6.5(b) and that have
been duly made or obtained as contemplated herein, neither the execution and
delivery of this Agreement by Acquiror and Merger Sub nor the consummation of
the Merger or other transactions contemplated hereby nor compliance by Acquiror
and Merger Sub with any of the provisions hereof will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or
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both, would constitute a default) under, or result in the termination or
suspension of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Acquiror or Merger Sub under, any of the terms, conditions or provisions of (x)
their respective charters or by-laws, (y) any note, bond, mortgage, indenture or
deed of trust or (z) any license, lease, contract, agreement or other instrument
or obligation, to which Acquiror or Merger Sub is a party or to which they or
any of their respective properties or assets may be subject; or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Acquiror or Merger Sub or any of their respective
properties or assets, except, in the case of clauses (i) and (ii) above, for
such violations, conflicts, breaches, defaults, terminations, suspensions,
accelerations, rights of termination or acceleration or creations of liens,
security interests, charges or encumbrances which would not, individually or in
the aggregate, either have an Acquiror Material Adverse Effect or materially
impair Acquiror's or Merger Sub's ability to consummate the Merger or other
transactions contemplated hereby.
(b) No filing or registration with, no notification to and no
permit, authorization, consent or approval of any governmental entity
(including, without limitation, any federal, state or local regulatory authority
or agency) is required of Acquiror or Merger Sub in connection with the
execution and delivery of this Agreement or the consummation by Merger Sub of
the Merger or other transactions contemplated hereby, except (i) as required by
(A) applicable requirements, if any, of the HSR Act, (B) the Securities Act and
the Exchange Act, (C) state securities or "blue sky" laws and (D) the AMEX; (ii)
the filing and recordation of appropriate merger documents as required by the
NYBCL; (iii) the approval of Acquiror's stockholders as required by the AMEX
rules; and (iv) such other filings, registrations, notifications, permits,
authorizations, consents or approvals the failure of which to be obtained, made
or given would not, individually or in the aggregate, either have an Acquiror
Material Adverse Effect or materially impair Acquiror's or Merger Sub's ability
to consummate the Merger or other transactions contemplated hereby.
(c) Acquiror and Merger Sub are not in violation of or default
under, except as set forth in Section 6.5 of the DRS Disclosure Schedule, (i)
any note, bond, mortgage, indenture or deed of trust; or (ii) any license,
lease, contract, agreement or other instrument or obligation to which Acquiror
or Merger Sub is a party or to which they or any of their respective properties
or assets may be subject, except, in the case of clauses (i) and (ii) above, for
such violations or defaults which would not, individually or in the aggregate,
either have an Acquiror Material Adverse Effect or materially impair Acquiror's
or Merger Sub's ability to consummate the Merger or other transactions
contemplated hereby.
6.6 Commission Filings; Financial Statements.
Acquiror has filed all required forms, reports, schedules, statements
and other documents required to be filed by it since March 31, 1995 to the date
hereof (as
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supplemented and amended since the time of filing, collectively, the "Acquiror
SEC Reports") with the SEC, all of which complied when filed in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act. All of the historical financial statements contained in the Acquiror SEC
Reports were prepared from the books and records of Acquiror and its
subsidiaries. The audited consolidated financial statements and unaudited
consolidated interim financial statements of Acquiror and its subsidiaries
included or incorporated by reference in such Acquiror SEC Reports were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and present fairly, in all material respects, the financial
position and results of operations and cash flows of the Acquiror and its
subsidiaries on a consolidated basis at the respective dates and for the
respective periods indicated (subject, in the case of all such financial
statements that are interim financial statements, to normal year-end audit
adjustments, none of which will be material). None of the Acquiror SEC Reports
contained at the time filed any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
6.7 Absence of Changes or Events.
Except as set forth in Acquiror's Form 10-K for the fiscal year ended
March 31, 1998, as filed with the SEC, or except as set forth in Section 6.7 of
the DRS Disclosure Schedule, since March 31, 1998 to the date hereof, Acquiror
and its subsidiaries have not incurred any material liability, except in the
ordinary course of their businesses consistent with their past practices, and
there has not been any change in the business, financial condition or results of
operations of Acquiror and its subsidiaries taken as a whole which has had, or
could have, an Acquiror Material Adverse Effect, and Acquiror and its
subsidiaries taken as a whole have conducted their respective business in the
ordinary course consistent with their past practices.
6.8 Litigation.
Except as set forth in Section 6.8 of the DRS Disclosure Schedule, there
is no (i) claim, action, suit or proceeding pending or, to the best knowledge of
Acquiror, threatened against or relating to Acquiror before any court or
governmental or regulatory authority or body or arbitration tribunal; or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding to which Acquiror is a party, except, in the case of clauses (i)
and (ii) above, such as would not, individually or in the aggregate, materially
impair Acquiror's or Merger Sub's ability to consummate the Merger.
6.9 Joint Proxy Statement.
None of the information supplied or to be supplied by or on behalf of
Acquiror and Merger Sub for inclusion or incorporation by reference in the Form
S-4 will, at the time the Form S-4 becomes effective under the Securities Act,
contain any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of Acquiror and Merger
Sub for inclusion or incorporation by reference in the Joint Proxy Statement
will, at the dates mailed to stockholders and at the times of the Company
Shareholder Meeting and the Acquiror Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Form S-4 and
the Joint Proxy Statement as it relates to Acquiror, Merger Sub and Acquiror's
other subsidiaries will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Acquiror with respect to information relating to or supplied by the Company.
6.10 Board Recommendation.
The Board of Directors of Acquiror has approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby (including,
without limitation, the issuance of Acquiror Common Stock as a result of the
Merger), has determined that the transactions contemplated by this Agreement are
in the best interests of Acquiror and its stockholders and has recommended that
the stockholders of Acquiror vote in favor thereof (including in favor of the
issuance of Acquiror Common Stock as a result of the Merger as required by the
AMEX).
6.11 Disclosure.
All of the facts and circumstances not required to be disclosed as
exceptions under or to any of the foregoing representations and warranties made
by Acquiror in this Article VI by reason of any minimum disclosure requirement
in any such representation and warranty would not, in the aggregate, have an
Acquiror Material Adverse Effect.
6.12 Finders or Brokers.
Except as set forth in Section 6.12 of the DRS Disclosure Schedule, none
of Acquiror, the subsidiaries of Acquiror, the Board of Directors of Acquiror or
any member of the Board of Directors of Acquiror has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or any commission in
connection with of the Merger, and Section 6.12 of the DRS Disclosure Schedule
sets forth the maximum consideration (present and future) agreed to be paid to
each such party.
6.13 Opinion of Financial Advisor.
Acquiror has received the opinion (the "Fairness Opinion") of XxXxxxxxx
Xxxxx & Co., LLC, dated July 23, 1998, to the effect that as of such date, the
Exchange Ratio is fair from a financial point of view to Acquiror.
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ARTICLE VII
CONDUCT OF BUSINESS OF ACQUIROR AND THE COMPANY PENDING THE
MERGER
7.1 Conduct of Business of the Company Pending the Merger.
Except as contemplated by this Agreement or as expressly agreed to in
writing by Acquiror, during the period from the date of this Agreement to the
Effective Time, each of the Company and its subsidiaries will conduct their
respective operations according to its ordinary course of business consistent
with past practice, and will use all commercially reasonable efforts to preserve
intact its business organization, to keep available the services of its officers
and employees and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it and
will take no action which would materially adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, the Company will not
nor will it permit any of its subsidiaries to, without the prior written consent
of Acquiror, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation, by-laws or other
organizational documents;
(b) authorize for issuance, issue, sell, deliver, grant any options
for or otherwise agree or commit to issue, sell or deliver any shares of any
class of its capital stock or any securities convertible into shares of any
class of its capital stock, except pursuant to and in accordance with the terms
of the currently outstanding Convertible Notes, Warrants and Options;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or of
any of its subsidiaries, except as otherwise expressly provided in this
Agreement;
(d) (i) create, incur, assume, maintain or permit to exist any debt
for borrowed money other than under existing lines of credit in the ordinary
course of business consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except for
its wholly owned subsidiaries in the ordinary course of business and consistent
with past practices; or (iii) make any loans, advances or capital contributions
to, or investments in, any other person in an aggregate amount not to exceed
$50,000;
(e) (i) increase in any manner the compensation of (x) any employee
except in the ordinary course of business consistent with past practice or (y)
any of its directors or officers; (ii) pay or agree to pay any pension,
retirement allowance, welfare
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benefit or other employee benefit not required, or enter into or agree
to enter into any agreement or arrangement with such director or officer or
employee, whether past or present, relating to any such pension, retirement
allowance, welfare benefit or other employee benefit, except as required under
currently existing agreements, plans or arrangements; (iii) grant any severance
or termination pay to, or enter into any employment or severance agreement with,
(x) any employee except in the ordinary course of business consistent with past
practice or (y) any of its directors or officers except for honorarium payments
to outside directors of the Company in an amount not to exceed $10,000 in the
aggregate for each director; or (iv) except as may be required to comply with
applicable law, become obligated (other than pursuant to any new or renewed
collective bargaining agreement) under any new pension plan, welfare plan,
multi-employer plan, employee benefit plan, benefit arrangement, or similar plan
or arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; provided, however, that this clause
(iv) shall not prohibit the Company from renewing any such plan, agreement or
arrangement already in existence on terms no more favorable to the parties to
such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this Agreement,
enter into any other agreements, commitments or contracts, except agreements,
commitments or contracts for the purchase, sale or lease of goods or services
involving payments or receipts by the Company or its subsidiaries in excess of
$50,000, other than (i) customer agreements; (ii) leases for rental space in an
amount not to exceed $50,000 for any lease; or (iii) developer agreements in an
amount not to exceed $50,000 for any agreement;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities, any sale, transfer,
lease, license, pledge, mortgage, or other disposition or encumbrance of a
material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of any
material contract rights;
(h) authorize or commit to make capital expenditures in excess of
$50,000 for any one order in the Company's service business (other than
purchases by the Company's systems business in the ordinary course of business
consistent with past practice);
(i) make any change in the accounting methods, accounting practices
or tax policies or procedures followed by the Company;
(j) settle any action, suit, claim, investigation or proceeding
(legal, administrative or arbitrative) in excess of $50,000 without the consent
of the Acquiror;
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(k) make any election under the Code which would have a Company
Material Adverse Effect;
(l) take or cause to be taken, whether before or after the
Effective Time, any action that would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(m) agree to do any of the foregoing.
7.2 Conduct of Business of Acquiror Pending the Merger.
Except as contemplated by this Agreement or Section 6.7 of the DRS
Disclosure Schedule or as expressly agreed to in writing by the Company, during
the period from the date of this Agreement to the Effective Time, Acquiror will
use all commercially reasonable efforts to keep substantially intact its
business, properties and business relationships and will take no action which
would materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, Acquiror will not, without the prior written
consent of the Company, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation or by-laws;
(b) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock,
except as otherwise expressly provided in this Agreement;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution;
(d) take or cause to be taken, whether before or after the
Effective Time, any action that would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(e) agree to do any of the foregoing.
ARTICLE VIII
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COVENANTS AND AGREEMENTS
8.1 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings.
(a) As soon as practicable following the date of this Agreement, the
Company and Acquiror shall prepare and file with the SEC the Joint Proxy
Statement and Acquiror thereafter shall prepare and file with the SEC the Form
S-4, in which the Joint Proxy Statement will be included as a prospectus. Each
of the Company and Acquiror shall use their respective best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing. The Company will use all best efforts to cause the Joint
Proxy Statement to be mailed to the Company's shareholders, and Acquiror will
use all best efforts to cause the Joint Proxy Statement to be mailed to
Acquiror's stockholders, in each case as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Acquiror shall also take any
action required to be taken under any applicable state securities laws in
connection with the issuance of Acquiror Common Stock and Acquiror Warrants in
the Merger. Acquiror will make no filing of, or amendment or supplement to, the
Form S-4 or the Joint Proxy Statement without providing the Company and its
advisors the opportunity to review and comment thereon; provided, that such
review be completed and such comments provided to Acquiror within a
reasonable period of time; provided, further, that such comments shall be
subject to the review of Acquiror and its advisors. Acquiror will advise
the Company, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
the Acquiror Common Stock or Acquiror Warrants issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to the Company or
Acquiror, or any of their respective affiliates, officers or directors, should
be discovered by the Company or Acquiror which should be set forth in an
amendment or supplement to any of the Form S-4 or the Joint Proxy Statement, so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and Acquiror.
(b) The Company shall, as soon as practicable following the date of
this Agreement take all action necessary in accordance with the NYBCL and its
Certificate of Incorporation and By-Laws to convene and hold a meeting of its
shareholders (together with any adjournment or postponement thereof, the
"Company Shareholder Meeting") for the purpose of obtaining the approval (the
"Company Shareholder Approval") of two-thirds of the shareholders of the Company
of this Agreement and shall, through its Board of Directors, recommend to its
shareholders the approval and adoption of this Agreement, the
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Merger and the other transactions contemplated hereby, and shall use all
commercially reasonable efforts to solicit from its shareholders proxies in
favor of approval and adoption of this Agreement; provided, however, that such
recommendation is subject to any action required by the fiduciary duties of the
Board of Directors.
(c) Acquiror shall, as soon as practicable following the date of
this Agreement, take all action necessary in accordance with the General
Corporation Law of Delaware and its Certificate of Incorporation and By-Laws to
convene and hold a meeting of its stockholders (together with any adjournment or
postponement thereof, the "Acquiror Stockholder Meeting") for the purpose of
obtaining the approval (the "Acquiror Stockholder Approval") of a majority of
votes cast by the stockholders of Acquiror of, amongst other things, the Merger
and the issuance of the Acquiror Common Stock in connection with the Merger (the
"Issuance"), and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, the Merger, the
Issuance and the other transactions contemplated hereby, and shall use all
commercially reasonable efforts to solicit from its stockholders proxies in
favor of approval and adoption of this Agreement.
(d) Acquiror and the Company will use best efforts to hold the
Company Shareholder Meeting and the Acquiror Stockholder Meeting on the same
date and as soon as practicable after the date hereof.
8.2 Letters of the Company's Accountants.
The Company shall use its best efforts to cause to be delivered to
Acquiror two letters from the Company's independent accountants, one dated the
date of effectiveness of Form S-4 and one dated the Closing Date, each addressed
to Acquiror, in form and substance reasonably satisfactory to Acquiror and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
8.3 Letters of Acquiror's Accountants.
Acquiror shall use its best efforts to cause to be delivered to the
Company two letters from Acquiror's independent accountants, one dated the date
of effectiveness of Form S-4 and one dated the Closing Date, each addressed to
the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
8.4 Additional Agreements; Cooperation.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing, including using its best efforts (i) to obtain all necessary
waivers, consents and approvals from other parties to loan
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agreements, material leases and other material contracts that are specified on
Schedule 8.4 to the Disclosure Schedule or the DRS Disclosure Schedule; (ii) to
obtain all necessary consents, approvals and authorizations as are required to
be obtained under any federal, state or foreign law or regulations; (iii) to
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby; (iv) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby; (v)
to effect all necessary registrations and filings, including, but not limited
to, filings under the HSR Act and submissions of information requested by
governmental authorities; (vi) provide all necessary information for the Joint
Proxy Statement and the Form S-4; and (vii) to fulfill all conditions to this
Agreement.
(b) The Company shall use its best efforts to facilitate, and assist
and cooperate with Acquiror in, Acquiror's conduct of on-site visits by
representatives of Acquiror to representatives of customers of the Company and
its subsidiaries.
(c) Each of the parties hereto agrees to furnish to the other party
hereto such necessary information and reasonable assistance as such other party
may request in connection with its preparation of necessary filings or
submissions to any regulatory or governmental agency or authority, including,
without limitation, any filing necessary under the provisions of the HSR Act or
any other applicable Federal or state statute. At any time upon the written
request of Acquiror, the Company shall advise Acquiror of the number of shares
of Company Common Stock outstanding on such date.
8.5 Publicity.
The Company, Acquiror and Merger Sub agree to consult with each other in
issuing any press release and with respect to the general content of other
public statements with respect to the transactions contemplated hereby, and
shall not issue any such press release prior to such consultation, except as may
be required by law.
8.6 No Solicitation.
(a) The Company shall not, nor shall it permit any of its Retained
Subsidiaries to, nor shall it authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to, directly
or indirectly, (i) solicit any Company Takeover Proposal (as hereinafter
defined); or (ii) participate in any discussions or negotiations regarding any
Company Takeover Proposal; provided, however, that if, at any time prior
to the Company Shareholders Meeting, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company may, in response to a
Company Takeover Proposal that was not solicited, and subject to compliance with
Section 8.6(c), (x) furnish information with respect to the Company to any
person pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with its outside counsel) and (y) participate in
negotiations regarding such Company Takeover Proposal; and provided,
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further, that if the Company responds to a Company Takeover Proposal, the
Company shall within two (2) business days of such response reimburse Acquiror
for all of Acquiror's out-of-pocket expenses (including without limitation fees
and expenses of outside professionals) (in any case all such expenses not to
exceed in the aggregate $300,000) by wire transfer of immediately available
funds to an account specified by Acquiror. For purposes of this Agreement,
"Company Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 15% or more of the
assets of the Company or its Retained Subsidiaries or 15% or more of any class
of equity securities of the Company or any of its Retained Subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of the Company
or any of its Retained Subsidiaries, any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Retained Subsidiaries, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could impede, interfere with, prevent or materially delay
the Merger or which could dilute materially the benefits to Acquiror of the
transactions contemplated by this Agreement.
(b) Except as set forth in this Section 8.6, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Acquiror, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement; (ii) approve or recommend, or propose publicly to
approve or recommend, any Company Takeover Proposal; or (iii) cause the Company
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Company Acquisition Agreement")
related to any Company Takeover Proposal. Notwithstanding the foregoing, in the
event that prior to the Company Shareholders Meeting the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's shareholders under applicable law, the Board of Directors of the
Company may (subject to this and the following sentences) (x) withdraw or modify
its approval or recommendation of the Merger and this Agreement or (y) approve
or recommend a Superior Company Proposal (as defined below) or terminate this
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into any Company Acquisition Agreement with respect
to any Superior Company Proposal), but in each of the cases set forth in this
clause (y), no action shall be taken by the Company pursuant to clause (y) until
a time that is after the fifth (5th) business day following Acquiror's receipt
of written notice advising Acquiror that the Board of Directors of the Company
has received a Superior Company Proposal, specifying the material terms and
conditions of such Superior Company Proposal and identifying the person making
such Superior Company Proposal, to the extent such identification of the person
making such proposal does not breach the fiduciary duties of the Board of
Directors as advised by outside legal counsel; and provided, that if the Board
of Directors takes any action pursuant to the foregoing clauses (x) and (y), the
Company shall within two (2) business days of such action reimburse Acquiror for
any of Acquiror's out-of-pocket expenses (including without limitation fees and
expenses of outside professionals) not previously reimbursed (in any case all
such expenses not to exceed in the aggregate $300,000) by wire transfer of
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immediately available funds to an account specified by Acquiror. For purposes of
this Agreement, a "Superior Company Proposal" means any bona fide proposal made
by a third party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the combined voting power
of the shares of Company Common Stock then outstanding or all or substantially
all the assets of the Company and otherwise on terms that the Board of Directors
of the Company determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
the Company's shareholders than the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 8.6, the Company shall immediately advise
Acquiror orally and in writing of any request for information or of any Company
Takeover Proposal, the material terms and conditions of such request or Company
Takeover Proposal, and to the extent such disclosure is not a breach of the
fiduciary duties of the Board of Directors as advised by outside legal counsel
or a violation of law or statute, the identity of the person making such request
or Company Takeover Proposal.
(d) Nothing contained in this Section 8.6 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act, or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with its fiduciary duties to the Company's
shareholders under applicable law; provided, however, neither the Company nor
its Board of Directors nor any committee thereof shall, except as permitted by
Section 8.6(b), withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a Company Takeover
Proposal.
8.7 Access to Information.
(a) From the date of this Agreement until the Effective Time, each
of the Company and Acquiror will give the other party and its authorized
representatives (including counsel, environmental and other consultants,
accountants and auditors) reasonable access during normal business hours to all
facilities, personnel and operations and to all books and records of it and its
subsidiaries, will permit the other party to make such inspections as it may
reasonably require and will cause its officers and those of its subsidiaries to
furnish the other party with such financial and operating data and other
information with respect to its business and properties as such party may from
time to time reasonably request.
(b) Each of the parties hereto will hold and will cause its
consultants and advisors to hold in strict confidence on the terms and
conditions set forth in the Confidentiality Agreement, dated November 28, 1997,
between Acquiror and the Company (the "Confidentiality Agreement") all documents
and information furnished to the other in connection with the transactions
contemplated by this Agreement as if each of the parties hereto and such
consultant or advisor was a party thereto, and this provision shall survive any
termination of this Agreement.
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8.8 Notification of Certain Matters.
The Company or Acquiror, as the case may be, shall promptly notify the
other of (i) its obtaining of actual knowledge as to the matters set forth in
clauses (x) and (y) below; or (ii) the occurrence, or failure to occur, of any
event, which occurrence or failure to occur would be likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, or (y) any material failure of the Company or Acquiror, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
8.9 Directors and Officers; Insurance.
(a) At or prior to the Effective Time, the Company shall take all
commercially reasonable efforts to deliver to Acquiror the resignations of such
directors and officers of the Company and its subsidiaries as Acquiror shall
specify, effective at the Effective Time.
(b) Acquiror shall cause the Surviving Corporation to maintain in
effect for not less than three (3) years from the Effective Time the current
polices of directors' and officers' liability insurance maintained by the
Company and its subsidiaries (provided that Acquiror may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the Indemnified Parties in all material respects so long
as no lapse in coverage occurs as a result of such substitution) with respect to
all matters, including the transactions contemplated hereby, occurring prior to,
and including the Effective Time; provided, that in the event that any Claim is
asserted or made within such three (3) year period, such insurance shall be
continued in respect of any such Claim until final disposition of any and all
such Claims; provided, further, that Acquiror shall not be obligated to make
premium payments (calculated on an annual basis) for such insurance in excess of
100% of the annual premiums paid as of the date hereof by the Company for such
insurance.
8.10 Fees and Expenses.
Except as set forth in Sections 8.6 and 8.7 herein, whether or not the
Merger is consummated, the Company and Acquiror shall bear their respective
expenses incurred in connection with the Merger, including, without limitation,
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants ,
except that each of Acquiror and the Company shall bear and pay one-half of the
actual costs and expenses (excluding those of investment bankers, finders,
brokers, agents, representatives, counsel and accountants) relating to (i) the
filing, printing and mailing of the Form S-4 and the Joint Proxy Statement
(including SEC filing fees); and
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(ii) the filings of the pre-merger notification and report forms under the HSR
Act (including filing fees).
8.11 Affiliates.
As soon as practicable after the date hereof, the Company shall deliver
to Acquiror a letter identifying all persons who are, at the time this Agreement
is submitted for adoption by the shareholders of the Company, "affiliates" of
the Company for purposes of Rule 145 under the Securities Act. The Company shall
use its reasonable efforts to cause each such person to deliver to Acquiror as
of the Closing Date, a written agreement substantially in the form attached as
Exhibit A hereto.
8.12 AMEX Listing.
Acquiror shall use its reasonable best efforts to cause the Acquiror
Common Stock to be issued in connection with the Merger to be approved for
listing on the AMEX, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing Date.
8.13 Stockholder Litigation.
Each of the Company and Acquiror shall give the other the reasonable
opportunity to participate in the defense of any stockholder litigation against
or in the name of the Company or Acquiror, as applicable, and/or their
respective directors relating to the transactions contemplated by this
Agreement.
8.14 Tax Treatment.
Each of Acquiror and the Company shall use its respective best efforts
(including, without limitation, providing information and providing for itself
and obtaining from its affiliates reasonable and necessary representations and
covenants in connection with the tax opinions required by Article IX) and
Acquiror shall cause the Surviving Corporation to use its best efforts to cause
the Merger to qualify as a reorganization under the provisions of Section 368(a)
of the Code and shall treat the Merger as a tax free reorganization on its tax
returns.
8.15 Fairness Opinion.
Each of the Acquiror and the Company shall use their respective best
efforts to cause to be delivered to each of their respective stockholders a
fairness opinion dated the date of the Joint Proxy Statement.
8.16 Credit Facilities.
The Company shall use its best commercial efforts to assist and
cooperate with Acquiror in Acquiror's termination (including the release of all
collateral relating thereto) of (i) the U.K. Credit Agreement, dated as of April
23, 1997, between Midland Bank and Lynwood Scientific Developments Ltd. (now
Lynwood Rugged Systems Limited) and
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(ii) the Amended and Restated Credit Agreement, dated as of April 12, 1995, as
amended, by and among the Company, Chemical Bank, a New York banking corporation
("Chemical"), The Bank of New York, a New York banking corporation ("BNY"), each
of the other financial institutions which from time to time becomes a party
thereto, BNY, as Administrative Agent, and Chemical, as Collateral Agent.
8.17 Patent, Trademark and Copyright Filings.
The Company shall use its best commercial efforts to assist and
cooperate with Acquiror in Acquiror's preparation and filing of documents
relating to the Company's Patents, Trademarks and Copyrights with the United
States Patent and Trademark Office and the United States Copyright Office.
8.18 Convertible Notes.
The Company shall use its best commercial efforts to (a) obtain the
consents of holders of at least 90% of the aggregate principal amount of the
Convertible Notes outstanding as of the date hereof to convert all of their
Convertible Notes to Company Common Stock immediately prior to the Effective
Time and successfully complete such conversion immediately prior to the
Effective Time; provided, that in connection with its consent solicitation, the
Company may offer an additional payment with respect to each Convertible Note of
no more than the present value of the interest that would have accrued to
February 15, 1999 on the outstanding principal amount of each Convertible Note
discounted at 9.5% (the "Discount Rate"); (b) obtain the consents of holders of
at least 75% of the aggregate principal amount of the Convertible Notes
outstanding immediately prior to the Effective Time in accordance with the terms
of the Convertible Notes and the terms of the Indenture to (i) eliminate as of
the Effective Time (1) Section 6(f) (1996 EBITDA Adjustment), (2) Section 9
(Covenants) in its entirety, (3) Section 10(a)(iii)-(v) (Events of Default), (4)
Section 11(a)-(c) (Certain Consequences Upon Default - Defaulted Interest,
Additional Director Nominee and Additional Warrants), (5) Section 13(b),
(d)-(h), (j)--(k) (Definitions - Change in Control, Consolidated Net Income,
GAAP, Indebtedness, Lien, 1996 EBITDA, Permitted Investments and Permitted
Lien), (6) Section 16(a)-(b) (Miscellaneous) of the Convertible Notes, (7)
Article 4 (Covenants) in its entirety, other than Section 4.1 (Payment of
Securities) and Section 4.13 (Stay, Extension and Usury Laws), (8) Section
6.1(iii)-(v) (Events of Default) and (9) Section 8.1(2) (Termination of
Company's Obligations) of the Indenture, and (ii) amend Section 8.1 (Termination
of Company's Obligations) of the Indenture to change the date of "February 23,
1999" therein to "the earlier of September 30, 1998 or the effective date of any
merger of the Company approved by its Board of Directors;" and (c) obtain the
consents of at least a majority of the holders of the Convertible Notes to
permit the removal of the Convertible Notes from the registration requirements
of the United States securities laws and the scope of the Trust Indenture Act of
1939, as amended.
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ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The Company Shareholder Approval and the
Acquiror Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any court or other governmental entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Merger.
(d) Governmental Action. No action or proceeding shall be instituted
by any governmental authority seeking to prevent consummation of the Merger or
seeking material damages in connection with the transactions contemplated hereby
which continues to be outstanding.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order and no stop order or similar restraining order shall be
threatened or entered by the SEC or any state securities administration
preventing the Merger.
(f) AMEX Listing. The shares of Acquiror Common Stock issuable to
the Company's shareholders as contemplated by this Agreement shall have been
approved for listing on the AMEX, subject to official notice of issuance.
(g) Convertible Note Consents. The Company shall have obtained all
necessary consents of holders of the Convertible Notes required by the terms of
the Convertible Notes to the sale by the Company of all of the issued and
outstanding capital stock of Wilcom.
9.2 Conditions to Obligations of Acquiror.
The obligation of Acquiror to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct both when
made and
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on and as of the Closing Date, as if made on and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date). If
applicable, the Company shall deliver to Acquiror a complete Disclosure
Schedule, updated as of the Closing Date.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time after December 31, 1997,
there shall not have occurred any material adverse change, in the reasonable
judgment of Acquiror, in the general affairs, business, management, operations,
assets and liabilities or prospects of the Company and its Material Subsidiaries
taken as a whole or in the condition (financial or otherwise) of the Company or
any Material Subsidiary.
(d) Governmental Consents. All necessary consents and approvals of
any federal, state or local governmental authority or any other third party
required for the consummation of the transactions contemplated by this Agreement
shall have been obtained, except for such consents and approvals the failure to
obtain which individually or in the aggregate would not have a material adverse
effect on the Surviving Corporation or materially impair the ability of the
Company to fulfill its obligations under this Agreement.
(e) Affiliate Letters. Acquiror shall have received a written
agreement substantially in the form attached as Exhibit A hereto from each of
the persons specified pursuant to Section 8.11.
(f) Shareholders' Agreement. Each of the shareholders of the Company
listed on Section 9.2(f) of the Disclosure Schedule shall have entered into a
Shareholder's Agreement with Acquiror (the "Shareholder's Agreement"), and each
Shareholder's Agreement is in full force and effect.
(g) Sale of Wilcom, Inc. The (i) sale by the Company of all of the
issued and outstanding capital stock of Wilcom, Inc. to Wilcom Acquisition Corp.
(the "Wilcom Sale") pursuant to the Stock Purchase Agreement (which has been
defined as the Wilcom Agreement and a form of which is attached hereto as
Exhibit B) to be entered into among Wilcom Acquisition Corp., as Buyer, and the
Company, as Seller, shall have been consummated on terms and conditions
negotiated at arm's-length satisfactory to Acquiror; (ii) representations and
warranties of the Company set forth in the Wilcom Agreement shall be true and
correct both when made and on and as of the closing date thereunder, as if made
on and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date); (iii) Company shall have received the
fairness opinion of Commonwealth to the effect that as of its date, the terms
and conditions of the Wilcom Sale are fair from a financial point of view to the
shareholders of the Company; and (iv) Company shall, in accordance with the
Wilcom Agreement,
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take such actions as may be reasonably requested by Acquiror with respect to the
Tax treatment of the Wilcom Sale.
(h) Convertible Notes. The Company shall have (i) obtained the
consents of holders of at least 90% of the aggregate principal amount of the
Convertible Notes outstanding as of the date hereof to convert all of their
Convertible Notes to Company Common Stock immediately prior to the Effective
Time and successfully complete such conversion immediately prior to the
Effective Time; provided, that in connection with its consent solicitation, the
Company may offer an additional payment with respect to each Convertible Note of
no more than the present value of the interest that would have accrued to
February 15, 1999 on the outstanding principal amount of each Convertible Note
discounted at the Discount Rate; (ii) obtained the consents of holders of at
least 75% of the aggregate principal amount of the Convertible Notes outstanding
as of the date hereof in accordance with the terms of the Convertible Notes and
the terms of the Indenture to (A) eliminate as of the Effective Time (1) Section
6(f) (1996 EBITDA Adjustment), (2) Section 9 (Covenants) in its entirety, (3)
Section 10(a)(iii)-(v) (Events of Default), (4) Section 11(a)-(c) (Certain
Consequences Upon Default Defaulted Interest, Additional Director Nominee and
Additional Warrants), (5) Section 13(b), (d)-(h), (j)--(k) (Definitions - Change
in Control, Consolidated Net Income, GAAP, Indebtedness, Lien, 1996 EBITDA,
Permitted Investments and Permitted Lien), (6) Section 16(a)-(b) (Miscellaneous)
of the Convertible Notes, (7) Article 4 (Covenants) in its entirety, other than
Section 4.1 (Payment of Securities) and Section 4.13 (Stay, Extension and Usury
Laws), (8) Section 6.1(iii)-(v) (Events of Default) and (9) Section 8.1(2)
(Termination of Company's Obligations) of the Indenture, and (B) amend Section
8.1 (Termination of Company's Obligations) of the Indenture to change the date
of "February 23, 1999" therein to "the earlier of September 30, 1998 or the
effective date of any merger of the Company approved by its Board of Directors;"
and (iii) obtained the consents of at least a majority of the holders of the
Convertible Notes outstanding as of the date hereof to permit the removal of the
Convertible Notes from the registration requirements under the United States
securities laws and the scope of the Trust Indenture Act of 1939, as amended.
(i) Mellon Consent. Pursuant to the Revolving Credit Loan and Term
Loan Agreement, dated as of October 29, 1997, among Acquiror, DRS Technologies
Canada Company/Compagnie DRS Technologies Canada and DRS Technologies Canada,
Inc., as the Co-Borrowers, and Mellon Bank, N.A., as the Agent and as a Lender,
Mellon Bank Canada, as a Lender, and the Other Lenders Thereafter Signatory
Thereto, as Lenders, Acquiror shall have obtained the written consent of the
Requisite Lenders (as defined therein) to the Merger.
(j) Employee Benefits. The Company shall have duly terminated,
without liability or cost to the Company or any or its subsidiaries, the
eligibility of officers and their spouses, children and dependents to retiree
medical benefits under that certain resolution of the Minutes of the Board of
Directors Meeting of the Company dated March 5, 1986 relating to continued
medical coverage and shall have obtained any necessary consents with respect to
such termination; notwithstanding the foregoing, the
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Company shall provide medical benefits for Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxxx
(and each of their respective spouses until such spouse becomes eligible for
Medicare).
(k) Tax Opinion. Acquiror shall have received an opinion of Xxxxxx &
Xxxxxx, in form and substance reasonably satisfactory to it, to the effect that
the Merger when consummated in accordance with the terms of this Agreement will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
Acquiror and the Company shall provide Xxxxxx & Xxxxxx with the facts,
representations and assumptions (including without limitation the standard
representations set forth in Revenue Procedure 86-42, 1986-2 C.B. 772) on which
Xxxxxx & Xxxxxx may rely in rendering its opinion, which facts, representations
and assumptions will be consistent with the state of facts Acquiror and the
Company believe will exist at the Effective Time.
(l) Officer's Certificate. Acquiror shall have received, on and as
of the Effective Date, from the Company an officer's certificate, executed by
the Chief Executive Officer and the Chief Financial Officer of the Company (in
their respective capacities as such) dated the Effective Date, as to the
satisfaction of the conditions in paragraphs (a), (b), (c), (d) and (e) of this
Section.
(m) Legal Opinion. Acquiror shall have received, on and as of the
Effective Date, an opinion of Xxxxxxx Breed Xxxxxx & Xxxxxx LLP, in form and
substance reasonably satisfactory to it.
9.3 Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub set forth herein shall be true and correct
both when made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date).
(b) Performance of Obligations of Acquiror and Merger Sub. Acquiror
and Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date.
(c) No Material Adverse Change. At any time after March 31, 1998,
there shall not have occurred any material adverse change, in the reasonable
judgment of the Company, in the general affairs, management, business,
operations, assets, condition (financial or otherwise) or prospects of Acquiror
and its subsidiaries.
(d) Governmental Consents. All necessary consents and approvals of
any federal, state or local governmental authority or any other third party
required for the consummation by Acquiror of the transactions contemplated by
this Agreement shall have been obtained except for such consents and approvals
the failure to obtain which,
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individually or in the aggregate, would not materially impair the ability of
Acquiror to fulfill its obligations under this Agreement.
(e) Tax Opinion. The Company shall have received an opinion of
Xxxxxxx Breed Xxxxxx & Xxxxxx LLP, in form and substance reasonably satisfactory
to it, to the effect that (1) the Merger when consummated in accordance with the
terms of this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code; (2) no gain or loss will be recognized by a
shareholder of the Company who exchanges all of the shareholder's Company Common
Stock solely for Acquiror Common Stock (except with respect to cash received in
lieu of a fractional share interest in Acquiror Common Stock); (3) the tax basis
of the Acquiror Common Stock received by a shareholder of the Company who
exchanges all of their Company Common Stock solely for Acquiror Common Stock in
the Merger will be the same as the tax basis of the Company Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received); (4) the holding period of
the shares of Acquiror Common Stock to be received by a shareholder of the
Company will include the period during which such shareholder held the shares of
Company Common Stock surrendered in exchange therefor, provided the Company
Common Stock surrendered is held as a capital asset at the Effective Time; and
(5) no gain or loss will be recognized by a holder of Warrants(1) who exchanges
such Warrants for warrants representing rights to acquire shares of Acquiror
Common Stock on substantially the same terms and conditions as contained in the
Warrants surrendered in exchange therefor. Acquiror and the Company shall
provide Xxxxxxx Breed Xxxxxx & Xxxxxx LLP with the facts, representations and
assumptions (including without limitation the standard representations set forth
in Revenue Procedure 86-42, 1986-2 C.B. 772) on which Xxxxxxx Breed Xxxxxx &
Xxxxxx LLP may rely in rendering its opinion, which facts, representations and
assumptions will be consistent with the state of facts Acquiror and the Company
believe will exist at the Effective Time.
(f) Officer's Certificate. The Company shall have received from
Acquiror, on and as of the Effective Date, an officer's certificate, executed by
the Chief Executive Officer and the Chief Financial Officer of the Company (in
their respective capacities as such) dated the Effective Date, as to the
satisfaction of the conditions in paragraphs (a), (b), (c) and (d) of this
Section.
(g) Legal Opinion. The Company shall have received, on and as of the
Effective Date, an opinion of Xxxxxx & Xxxxxx, in form and substance reasonably
satisfactory to it.
----------------
(1) If applicable, separate opinions should be given with respect to the
Warrants and the Warrants to purchase shares of Company Common Stock at an
exercise price of $3.00.
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ARTICLE X
TERMINATION
10.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement by either the Company's
shareholders or the Acquiror's stockholders:
(a) by mutual written consent of the Company and Acquiror;
(b) by either the Company or Acquiror;
(i) if the Merger shall not have been consummated by December
31, 1998, unless the Merger has not occurred by such time solely by reason of
the failure by the SEC to give timely approval to the Joint Proxy Statement or
the Form S-4 or by reason of the conditions set forth in Sections 9.1(b) or
9.2(e) having not yet been satisfied, in which case as soon as possible after
the SEC has given approval to the Joint Proxy Statement or the Form S-4 if
consented to by Acquiror (such consent not to be unreasonably withheld);
(ii) if the Company Shareholder Approval shall not have been
obtained at a Company Shareholder Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth in
Section 9.1(c) shall be in effect and shall have become final and
non-appealable;
(c) by the Company, if Acquiror shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement;
(d) by the Company, if it elects to terminate this Agreement in
accordance with Section 8.6(b); provided, that it has complied with all
provisions thereof, including the notice provisions therein, and that it
complies with applicable requirements relating to the payment (including the
timing of any payment) of Acquiror's expenses and the termination fee required
by Section 10.2(b)-(c);
(e) by Acquiror, if the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements (other than Section 8.6) contained in this
Agreement;
(f) by Acquiror, if (i) Section 8.6 shall be breached by the Company
or any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative of the Company,
and the Company shall have failed promptly to terminate the activity giving rise
to such breach and use best efforts to cure such breach, or (ii) the Company
shall breach Section 8.6 by failing to promptly notify
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Acquiror as required thereunder; provided, in the case of (i), the Company shall
comply with applicable requirements relating to the payment (including the
timing of any payment) of Acquiror's expenses and the termination fee required
by Section 10.2(b)-(c);
(g) by Acquiror if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Acquiror its approval or recommendation of the Merger or this Agreement, or
failed to reconfirm its recommendation within fifteen business days after a
written request to do so, or approved or recommended any Company Takeover
Proposal or (ii) the Board of Directors of the Company or any committee thereof
shall have resolved to take any of the foregoing actions; provided, that in the
case of clauses (i) or (ii), the Company shall comply with applicable
requirements relating to the payment (including the timing of any payment) of
Acquiror's expenses and the termination fee required by Section 10.2(b)-(c); or
(h) by the Company if the Board of Directors of Acquiror or any
committee thereof shall have withdrawn or modified in a manner adverse to the
Company its approval or recommendation of the Merger or this Agreement;
provided, that no event giving rise to Acquiror's right to terminate this
Agreement under Sections 10.1(e), 10.1(f) or 10.1(g) shall have occurred.
10.2 Effect of Termination.
(a) The termination of this Agreement shall become effective upon
delivery to the other party of written notice thereof. In the event of the
termination of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, with no liability on the part of any party
(except as provided in paragraphs (b) and (c) below) or its stockholders or
directors or officers in respect thereof except for agreements which survive the
termination of this Agreement and except for liability that Acquiror or the
Company might have arising from a breach of this Agreement.
(b) In the event of a termination of this Agreement by the Company
pursuant to Section 10.1(d) or by Acquiror pursuant to Sections 10.1(f)-(g),
then the Company shall (i) within two (2) business days promptly reimburse
Acquiror by wire transfer of immediately available funds to an account specified
by Acquiror for any out-of-pocket expenses incurred by Acquiror (including
without limitation fees and expenses of outside professionals) not previously
reimbursed (in any case all such expenses not to exceed in the aggregate
$300,000) and (ii) promptly pay Acquiror a termination fee of $1.5 million if
Acquiror becomes entitled to such termination fee pursuant to Section 10.2(c).
(c) In the event the Company enters into a definitive Company
Acquisition Agreement related to a Company Takeover Proposal at any time prior
to six months after the termination of the Letter of Intent dated April 3, 1998
(the "Letter of Intent") between Acquiror and the Company or this Agreement with
any third party that was in contact, directly or indirectly, with the Company
during the period that the Letter of Intent was in effect, regardless of whether
the transactions contemplated by such Company Acquisition Agreement are
consummated or are more favorable than the
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transactions contemplated under this Agreement, then the Company shall
within two (2) business days of entering into such Company Acquisition
Agreement pay Acquiror by wire transfer of immediately available funds to an
account specified by Acquiror a termination fee of $1.5 million and to promptly
reimburse Acquiror for any of its out-of-pocket expenses (including without
limitation fees and expenses of outside professionals) not previously reimbursed
(in any case all such expenses not to exceed in the aggregate $300,000);
provided, however, that such termination fee shall not be payable if (i) the
conditions set forth in Sections 9.1(a)-(b) and 9.2(e) were not satisfied by
December 31, 1998, unless such conditions were not satisfied due to the failure
by the Company to use its best efforts or (ii) if this Agreement was terminated
pursuant to Section 10.1(c).
ARTICLE XI
MISCELLANEOUS
11.1 Non-Survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 11.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
11.2 Closing and Waiver.
(a) Unless this Agreement shall have been terminated in accordance
with the provisions of Section 10.1 hereof, a closing (the "Closing" and the
date and time thereof being the "Closing Date") will be held as soon as
practicable after the conditions set forth in Sections 9.1, 9.2 and 9.3 shall
have been satisfied or waived. The Closing will be held at the offices of Xxxxxx
& Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or at such other places as the
parties may agree. Simultaneously therewith, the Certificate of Merger will be
filed.
(b) At any time prior to the Effective Date, any party hereto may
(i) extend the time for the performance of any of the obligations or other acts
of any other party hereto; (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing duly authorized by and
signed on behalf of such party.
11.3 Notices.
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), facsimile or overnight air
courier guaranteeing next day delivery, to such other party's address.
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If to Acquiror or Merger Sub:
DRS Technologies, Inc.
0 Xxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx Xxxx, Esq.
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Tata, Esq.
If to the Company:
NAI Technologies, Inc.
c/o Xxxxxxx X. Xxxxxxxxx
00 Xxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Breed Xxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) All notices and communications will be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, if mailed; when sent, if sent by
facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
11.4 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.5 Interpretation.
The headings of articles and sections herein are for convenience of
reference, do not constitute a part of this Agreement, and shall not be deemed
to limit or affect any of
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the provisions hereof. As used in this Agreement, "person" means any individual,
corporation, limited or general partnership, joint venture, association, joint
stock company, trust, unincorporated organization or government or any agency or
political subdivision thereof; "subsidiary" of any person means (i) a
corporation more than 50% of the outstanding voting stock of which is owned,
directly or indirectly, by such person or by one or more other subsidiaries of
such person or by such person and one or more subsidiaries thereof; or (ii) any
other person (other than a corporation) in which such person, or one or more
other subsidiaries of such person or such person and one or more other
subsidiaries thereof, directly or indirectly, have at least a majority ownership
and voting power relating to the policies, management and affairs thereof; and
"voting stock" of any person means capital stock of such person which ordinarily
has voting power for the election of directors (or persons performing similar
functions) of such person, whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency.
11.6 Amendment.
This Agreement may be amended by the parties at any time before or after
any required approval of matters presented in connection with the Merger by each
of the stockholders of the Company and Acquiror; provided, however, that after
any such approval, there shall not be made any amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
11.7 No Third Party Beneficiaries.
Nothing in this Agreement shall confer any rights upon any person or
entity that is not a party or permitted assignee of a party to this Agreement.
11.8 Governing Law.
Except as the laws of the State of Delaware are by their terms
applicable, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to principles of
conflicts of laws.
11.9 Entire Agreement.
This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
11.10 Validity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed by their respective duly authorized officers all as of
the day and year first above written.
DRS TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------
Name: Xxxx X. Xxxxxx
Title: President & Chief Executive
Officer
DRS MERGER SUB, INC.
By: /s/ Xxxx X. Xxxx
--------------------------
Name: Xxxx X. Xxxx
Title: Vice President and
Secretary
NAI TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive
Officer
