AGREEMENT AND PLAN OF MERGER
by and among
EARTH SEARCH SCIENCES INC.
(a Utah corporation),
ESS ACQUISITION CORP.
(a Virginia corporation),
SPACE TECHNOLOGY DEVELOPMENT CORPORATION
(a Virginia corporation),
Bruce D. Berkowitz, Burton Edelson,
Craig E. Musick, Lloyd Preslar, Lenore M. Rumpf,
Paul C. and Patricia J. Setze, and Helmut Sonnenfeldt as trustee,
the Shareholders of Space Technology Development Corporation
Dated as of November 15, 1999
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 15,
1999 (the "Agreement"), is by and among EARTH SEARCH SCIENCES INC., a Utah
corporation (the "Parent"), ESS ACQUISITION CORP., a Virginia corporation (the
"Acquisition Sub"), SPACE TECHNOLOGY DEVELOPMENT CORPORATION, a Virginia
corporation (the "Company") and the individual shareholders of the Company
parties hereto (the "Shareholders").
BACKGROUND
The Company is a party to an Agreement for Naval EarthMap
Observer ("NEMO"), a hyperspectral imaging satellite, with the
United States Office of Naval Research, dated December 10, 1997
(as amended, modified, or otherwise supplemented from time to
time, the "Contract");
In connection with the Contract, the Company has entered into
certain agreements with various subcontractors with respect to
one or more aspects of NEMO (such companies, the "Subcontractors"
and such agreements, the "Subcontracts");
The Shareholders are the legal and beneficial owners of all of
the outstanding capital stock of the Company as set forth on
Schedule A hereto;
The Parent has formed the Acquisition Sub for the purposes of
this Agreement and owns 100% of the capital stock of the
Acquisition Sub; and
The Shareholders, the Parent, the Acquisition Sub and the Company
desire that the Acquisition Sub be merged with and into the
Company on the terms and conditions hereof.
The Parent expects to enter into a joint venture with one or more
major industrial companies who are interested in making equity
investments in the NEMO project. The Parent expects that the
joint venture will be formed either by direct investment in the
survivor of the merger of the Company and the Acquisition Sub or
by investment in a successor entity of such survivor (such
survivor or successor entity, hereafter "NEMOCo").
AGREEMENTS
In consideration of the background and of the respective
representations and warranties hereinafter set forth and the respective
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
THE MERGER AND OTHER CONSIDERATION
The Merger. Subject to the terms and conditions of this
Agreement and applicable law, and in reliance on the representations, warranties
and covenants contained in this Agreement, at the Effective Time (as defined
below), the Acquisition Sub shall be merged with and into the Company (the
"Merger") which shall be the surviving corporation (in such capacity, the
"Surviving Corporation"), and which shall continue to be governed by the laws of
the Commonwealth of Virginia. From and after the Closing, the corporate
existence of the Company, with all its rights, privileges and immunities, shall
continue unaffected and unimpaired by the Merger, and the corporate existence of
the Acquisition Sub, with all its rights, privileges and immunities, shall be
merged into the Company and the Company shall, as the Surviving Corporation, be
fully vested therewith in accordance with the applicable laws of the
Commonwealth of Virginia. The separate existence and corporate organization of
the Acquisition Sub, except insofar as they may be continued by law, shall cease
at the Effective Time. The Merger is intended to be a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code.
Effective Time; Closing. As soon as practicable after
satisfaction or waiver of all conditions to the Merger, the parties shall cause
a certificate of merger (the "Merger Certificate") to be filed and recorded with
the appropriate state authorities and shall take all such further actions as may
be required by law to make the Merger effective. The Merger shall be effective
at such time as the Merger Certificate is filed with such state authorities or
at such later time as is specified in the Merger Certificate (the "Effective
Time"). Immediately prior to the filing of the Merger Certificate, a closing
(the "Closing") will be held at the offices of Ballard Spahr Andrews &
Ingersoll, LLP, 601 13th Street N.W., Suite 1000 South, Washington, D.C., at
10:00 a.m., local time. It is intended that the Closing shall take place on
December 15, 1999, or at such other time as the parties may agree, but not later
than December 31, 1999. The date on which the Closing occurs is referred to
herein as the "Closing Date."
Articles of Incorporation; Bylaws. The Bylaws of the
Acquisition Sub in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation immediately after the Effective Time and the
Articles of Incorporation immediately after the Effective Time shall be those
filed with the Merger Certificate.
Directors and Officers. The directors and officers of the
Acquisition Sub (as identified by the Parent) immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation
immediately after the Effective Time, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation. The Board of
Directors of the Surviving Corporation may designate such other officers as it
determines. If, at the Effective Time, a vacancy shall exist in the Board of
Directors or in any of the offices of the Surviving Corporation by reason of
death or inability to act, or for any other reason, such vacancy may be filled
in the manner provided in the Bylaws of the Surviving Corporation.
Exchange of Stock and Options. At the Effective Time, by virtue
of the Merger and as consideration therefor, the following shall take place:
Each issued and outstanding share of common stock of
the Company ("Company Shares") shall be converted into and become
(i) the right to receive an amount of common
stock of the Parent ("Parent Shares") equal to 4,000,000
divided by the number of Company Shares issued and outstanding
on the Effective Date. The Parent Shares shall be divided
amongst the Shareholders in proportion to the percentage of
Company Shares set forth on Schedule A; and
(ii) the right (as more fully described in a
separate agreement among the Parent or the Acquisition Sub and
the Shareholders) to purchase an amount of Parent Shares equal
to 4,000,000 divided by the number of Company Shares issued
and outstanding on the Effective Date in the aggregate amount
for all Shareholders and at the prices set forth below, at any
time before the date two years after a successful launch and
deployment of NEMO (the "Launch"). The rights of each
Shareholder to purchase such additional Parent Shares shall be
in proportion to the percentage of Company Shares set forth on
Schedule A.
Number of Parent Shares Price Per Share
500,000 $0.50
500,000 $1.00
500,000 $1.50
1,250,000 $2.00
750,000 $3.00
250,000 $4.00
250,000 $5.00
--------
Total 4,000,000
Each of the Shareholders shall deliver to the Parent
all of the certificates for Company Shares held by it on the Closing
Date. The Parent shall deliver to each of the Shareholders or their
designees on the Closing Date certificates, duly endorsed in blank,
evidencing the number of Parent Shares into which the Company Shares
held by such Shareholder are convertible under this Section.
All Company Shares held by the Company at the
Effective Time as treasury stock shall be cancelled and no payment
shall be made with respect thereto.
With respect to all Parent Shares owned or purchased by the Shareholders
pursuant to this Section 1.5 (or the separate agreements referred to herein),
but excluding the Deposit Shares (as defined below), the Parent and the
Acquisition Sub guarantee that, until the second anniversary of the Launch, such
shares shall not be diluted by the future issuance of Parent Shares or rights to
purchase Parent Shares to the Officers and Directors of Parent, members of their
immediate families or companies controlled by any of them. Notwithstanding the
preceding sentence, nothing herein shall limit the Parent's right to issue or
sell Parent Shares or rights to purchase Parent Shares (i) in a sale in which
the Shareholders are provided rights to sell Parent Shares on the same terms as
are offered to the Officers and Directors of the Parent, or (ii) if the Parent
Shares owned by the Shareholders are registered for public sale or otherwise
eligible for sale without restriction.
No Fractional Shares. Notwithstanding the foregoing, no
certificates representing fractional Parent Shares shall be issued upon the
surrender for exchange of Company Shares and no fractional interest shall
entitle the owner to vote or to any rights of a security holder.
Deposit. The Parent shall hold 400,000 shares of common stock
of the Parent (the "Deposit Shares") for the benefit of the Shareholders,
subject to the terms of this Agreement. In the event that (a) the Closing does
not occur on or before the date required herein, as it may be extended, as a
result of the Parent's or the Acquisition Sub's failure to satisfy the
conditions set forth in Section 4.2 or its obligations set forth in Section 4.3
as those sections may be amended, and (ii) the Shareholders and the Company have
not failed to satisfy any of the conditions set forth in Section 4.1 or their
obligations set forth in Section 4.3 as those sections may be amended, the
Parent shall deliver the Deposit Shares to the Shareholders to be distributed
among them in proportion to the number of Company Shares held by each such
Shareholder as set forth on Schedule A. In the event that the Closing takes
place, the Shareholders shall have no rights to or interest in the Deposit
Shares. This Section 1.7 shall survive the termination of the Agreement.
Tax-Free Reorganization. None of the parties will knowingly
take any action that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code. Each of the
parties shall report the Merger for income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code (and any comparable state or
local tax statute).
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants to the Parent
and the Acquisition Sub that, as of the date hereof:
Organization, Qualification and Power. The Company is a
Virginia corporation in good standing under the laws of the Commonwealth of
Virginia, and EarthMap, Inc. ("Earthmap"), a wholly-owned subsidiary of the
Company, is a Virginia corporation in good standing under the laws of the
Commonwealth of Virginia, and each of the Company and Earthmap has all requisite
power and authority to own, operate and lease the properties and assets that it
now owns, operates or leases and to carry on its business as it is now being
conducted.
Authorization. The Company has full power and authority under
its governing documents to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors and the stockholders of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms.
Title to Company Shares and Related Matters.
The Shares listed on Schedule A are all of the issued
and outstanding capital stock of the Company. The Company is the owner of 100%
of the outstanding capital stock of Earthmap. There are no outstanding written
or oral subscriptions, options, warrants, preemptive rights, conversion
rights, contracts, calls, commitments or demands of any character relating to
the issued and outstanding or authorized but unissued capital stock of the
Company or Earthmap or to which the Company or Earthmap is a party or by which
it or its capital stock is bound that will not be terminated at or before the
Closing. No proxy has been granted to any person with respect to any of such
capital stock.
All of the Company Shares are validly issued, fully
paid and non-assessable.
Restricted Shares
Each of the Shareholders is acquiring the Parent
Shares for its own account and not with a view to distributing them. Each
Shareholder understands that it must bear the economic risk of its ownership
of the Parent Shares because the Parent Shares have not been nor will they be
registered for sale under the Securities Act of 1933 (the "1933 Act"), or
under any applicable blue sky laws, and therefore may not be resold by the
Shareholders unless subsequently registered for sale under the 1933 Act and
any applicable blue sky laws or an exemption from such registration is
available.
Each of the Shareholders has received a copy of the
Parent's most recent filings with the Securities Exchange Commission and has
made such other investigation of the Parent and the Acquisition Sub as it has
deemed appropriate.
Legal Proceedings. Except as set forth on Schedule 2.5, there
are no suits, actions, claims, proceedings (including, without limitation,
arbitration or administrative proceedings) or investigations pending or, to such
Shareholder's knowledge, threatened against the Company or Earthmap or, to such
Shareholder's knowledge, pending or threatened against, relating to or involving
any of the officers, directors, employees, agents or consultants of the Company
or Earthmap in connection with the business of the Company or Earthmap or the
Contract or any Subcontract. There are no such suits, actions, claims,
proceedings or investigations pending, or, to such Shareholder's knowledge,
threatened, challenging the validity or propriety of the transactions
contemplated by this Agreement. There is no judgment, order, injunction, decree
or award (whether issued by a court, an arbitrator or an administrative agency)
to which the Company, Earthmap or such Shareholder is a party, or involving the
property or assets used in the conduct of the business of the Company or
Earthmap, which is unsatisfied or which requires continuing compliance therewith
by the Company or Earthmap.
Employee, Labor Matters. Except as set forth on Schedule
2.6(a) hereto, (i) neither the Company nor Earthmap currently maintains, nor is
currently obligated to contribute to, any of the following types of employee
benefit plans: any welfare plan as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); any pension plan, as defined in
Section 3(2) of ERISA; any bonus or profit sharing plan; any retirement,
insurance, bonus, deferred compensation or other similar plan or arrangement; or
any group health, medical, dental insurance plan, fringe benefit, vacation or
sick leave plan. Except as set forth on Schedule 2.6(b), neither the Company nor
Earthmap is a party to any employment agreement or consulting arrangement.
Neither the Company nor Earthmap is a party to or obligated under any collective
bargaining or other labor agreement, or deferred compensation agreement.
Taxes.
Each of the Company and Earthmap has, in accordance
with applicable law, filed all returns that are required to be filed by
it for any Taxes (as defined below). For purposes of this Agreement,
"Taxes" shall mean all income or profits taxes (including, but not
limited to, foreign and federal income taxes and state income taxes),
estimated taxes, payroll and employee withholding taxes, unemployment
insurance, social security taxes, sales and use taxes, ad valorem
taxes, value added taxes, excise taxes, capital stock or franchise
taxes, gross receipts taxes, business license taxes, occupation taxes,
real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation, Pension Benefit Guaranty
Corporation premiums and other governmental charges, and other
obligations of the same or a similar nature to any of the foregoing,
which a corporation may be required to pay, withhold or collect,
imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government.
The Company and Earthmap have paid all Taxes which
have become due pursuant to the above mentioned returns and have paid
all installments of estimated Taxes due.
All Taxes which the Company and Earthmap are required
by law to withhold or to collect have been duly withheld and collected
and have been paid over to the proper governmental authorities to the
extent due and payable.
Contracts.
Schedule 2.8 is a list of all Subcontracts to which
the Company is a party, and, with respect to each such Subcontract, all known
defaults that have occurred and are continuing, the committed amount, including
all change orders, the amount paid to date, any amounts in dispute, and the
amount remaining to be paid for completion.
Subject to the defaults set forth on Schedule 2.8,
(i) to the best knowledge of such Shareholder, all Subcontracts are valid,
binding and in full force and effect, and (ii) neither the Company nor any other
party to any such Subcontract has assigned its rights or obligations
thereunder nor created or permitted to be imposed any liens, attachments,
charges, pledges, security interests, encumbrances or claims thereon of any
kind whatsoever.
Schedule 2.8 also lists all other material contracts,
not listed on another Schedule hereto, to which the Company is a party.
Compliance with Laws. Except as set forth on Schedule 2.9
hereto, the Company and Earthmap are in compliance with all laws, rules,
regulations, orders, injunctions and decrees of any court or governmental
authority applicable to the Company or Earthmap.
Permits and Licenses. Schedule 2.10 describes all Permits (as
defined below), the governmental authority by whom granted, and where
applicable, a summary of the geographic area and services or activities covered
by each and the date of grant thereof. Except as set forth in Schedule 2.10, no
other Permits are required for the NEMO project. As used herein, "Permit" shall
mean any action, approval, consent, waiver, exemption, variance, franchise,
order, permit, authorization, right or license of or from any governmental
authority, including but not limited to the commercial remote sensing license of
the United States Department of Commerce. All Permits are in full force and
effect and no suspension or cancellation of any have been threatened. True and
correct copies of all Permits have been delivered to the Parent.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND THE ACQUISITION SUB
The Parent, regarding itself and the Acquisition Sub, and the
Acquisition sub regarding itself, represent and warrant to the Company and the
Shareholders that, as of the date hereof:
Organization, Qualification and Power. The Parent is a Utah
corporation and the Acquisition Sub is a Virginia corporation, each in good
standing under the laws of its state of incorporation and each has all requisite
power and authority to own, operate and lease the properties and assets that it
now owns, operates or leases and to carry on its business as it is now being
conducted. Acquisition Sub is a newly formed entity, formed solely for the
purpose of carrying out the transactions contemplated in this Agreement, and has
no other assets or activities.
Authorization. The Parent and the Acquisition Sub each have
full power and authority under their respective governing documents to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Parent and the Acquisition Sub and the sole stockholder of the
Acquisition Sub, and no other corporate proceedings on the part of the Parent or
the Acquisition Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Parent and the Acquisition Sub and constitutes the valid and
binding agreement of the Parent and the Acquisition Sub, enforceable in
accordance with its terms.
Title to Parent Shares and Related Matters.
Upon the issuance thereof, all of the Parent Shares
will be validly issued, fully paid and non-assessable.
None of the Parent Shares have been registered under
the 1933 Act and neither the Parent nor the Acquisition Sub is under any
contractual obligation to register any of the Parent Shares under the 1933
Act except as provided in this Agreement.
Restricted Shares. The Parent is acquiring the Company Shares
for its own account and not with a view to distributing them. The Parent
understands that it must bear the economic risk of its ownership of the Company
Shares because the Company Shares have not been nor will they be registered for
sale under the 1933 Act, or under any applicable blue sky laws, and therefore
may not be resold by the Parent unless subsequently registered for sale under
the 1933 Act and any applicable blue sky laws or an exemption from such
registration is available.
SEC Reports; No Material Adverse Change.
(a) As of their respective dates, the Form 10-K
and Form 10-Q most recently filed by the Parent with the Securities and Exchange
Commission (the "SEC Reports") (i) were prepared in compliance in all material
respects with the requirements of the 1933 Act, and the rules and regulations
of the Securities and Exchange Commission thereunder applicable to such SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) Since the date of the most recently filed Form
10-Q referred to in subsection 3.5(a), except as disclosed to the Company and
the Shareholders, there has not been any material adverse change in the
Parent's condition (financial or otherwise), properties, assets,
liabilities or prospects, nor has any event or condition occurred which may
result in such a change.
CONDITIONS TO CLOSING
Conditions to Obligations of The Parent and the Acquisition
Sub. The obligations of the Parent and the Acquisition Sub to complete the
transactions hereunder are, at the option of the Parent and the Acquisition sub,
subject to and contingent upon satisfaction of the following conditions
precedent, each of which is included for the exclusive benefit of the Parent and
the Acquisition Sub and may be waived by the Parent and the Acquisition Sub in
their discretion:
Certificates. The representations and warranties of
the Shareholders contained in Article II and paragraph (c) below shall be
true and correct on and with the same force and effect as though such
representations and warranties had been made on and as of the Effective Time;
all the terms, covenants and conditions of this Agreement shall have been
duly complied with and performed; and each Shareholder shall have delivered
to the Parent a certificate to such effect, dated the Closing Date, signed by
such Shareholder.
Permits. The Parent, the Acquisition Sub or the
Surviving Corporation (as applicable) shall have obtained all applicable Permits
required to permit the consummation by the parties of the transactions
contemplated by this Agreement and the performance of the obligations of
the Company under the Contract and the Subcontracts, and any modification
or renegotiation thereof or successor thereto.
Financial Statements; Material Adverse Change. The
Parent shall have received the most recent audited annual consolidated
financial statements and most recent interim financial statements of the
Company prior to the Closing Date, which shall completely and accurately
set out and disclose in all respects the Company's financial condition
as of the date thereof. As of the date of the Closing, the Company shall
represent and warrant to the Parent and the Acquisition Sub that the
Company does not have any indebtedness or contingent obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise), of any
nature, whether or not conditional and whether or not repayable on demand,
other than those stated in the consolidated financial statements of the
Company. Since the date of the annual financial statements referred to in the
preceding sentence, there shall not, except as disclosed in the interim
financial statements referred to in the preceding sentence, havebeen any
material adverse change in the Company's condition (financial or
otherwise), properties, assets, liabilities or prospects (including any such
change caused by damage, destruction or loss, whether or not insured and any
change caused by discontinued operations), nor shall any event or condition have
occurred which may result in such a change.
Completion of Due Diligence. The Parent shall have
completed its due diligence investigation of the Company and there shall be
no material liability or obligation except with respect to the Subcontracts,
or any lien or encumbrance upon or assignment of any Company assets that has not
been disclosed, satisfied or indemnified to the satisfaction of the Parent.
Unless waived in writing by the Parent on or before the Closing, the
Shareholders, the Company and (i) affiliated third parties shall have entered
into waivers, terminations, releases and other agreements, in form and substance
satisfactory to the Parent, as set forth on Schedule 4.1(d)(i) hereto, and
(ii) applicable unaffiliated third parties shall have entered into waivers,
terminations, releases and other agreements, in form and substance
satisfactory to the Parent, as set forth on Schedule 4.1(d)(ii) hereto.
Delivery of the Company Shares. The Shareholders
shall have delivered the Company Shares to the Parent, as required by
Section 1.5.
Renegotiation of Contract; Permits. The United
States Office of Naval Research shall have entered into modifications,
amendments or renewals of the Contract satisfactory to the Parent such
that, among other things, neither the Company nor any other party is in default
thereunder and the Parent shall have received a certificate and opinion of
such other parties to the Contract to that effect satisfactory to the Parent.
The Parent or the Surviving Corporation shall have obtained an assignment of,
or other rights to, each Permit satisfactory to the Parent.
Renegotiation of Subcontracts. The parties to each
Subcontract shall have entered into modifications, amendments or renewals of e
ach Subcontract satisfactory to Parent such that neither the Company nor
any other party is in default thereunder and the terms of each Subcontract
are consistent with the terms of the Contract as amended, modified or renewed
and the Parent shall have received certificates and opinions of other parties
to the Subcontracts to that effect satisfactory to Parent.
Financing Arrangements. The Parent or the
Acquisition Sub shall have arranged for suitable financing or other arrangements
satisfactory to the Parent to fund the completion of the Subcontracts and the
Contract including but not limited to obtaining equity investments in NEMOCo.
Material Contracts. There shall be no material
contracts to which the Company is a party that have not been disclosed to the
Parent and copies thereof delivered to the Parent.
Merger Certificate. The Company shall have executed
and delivered the Merger Certificate to the Parent and the Acquisition Sub.
Officer and Director Resignations. Each officer and
director of the Company and Earthmap, Inc. shall have delivered his or her
resignation as an officer and/or director to the Parent and the Acquisition Sub.
(l) Board of Directors and Shareholders'
Meeting. Meetings of the Board of Directors and the shareholders of the
Company shall have been duly called and noticed (or proper written waiver of
notice shall have been obtained) for the Closing Date and the Board of
Directors and shareholders of the Company shall have approved the Merger and
all transactions contemplated hereby.
(m) Shareholder Release of Claims. Each of the
Shareholders shall have executed and delivered to the Parent and the Acquisition
Sub a release of all claims that such Shareholder then has or thereafter
discovers against the Company, except for any claims arising out of or expressly
preserved by this Agreement. Each such release shall be in form and substance
satisfactory to the Parent.
Conditions to Obligations of the Shareholders. The obligations
of the Shareholders to complete the transactions hereunder are, at the option of
the Shareholders, subject to and contingent upon satisfaction of the following
conditions precedent, each of which is included for the exclusive benefit of the
Shareholders and may be waived only by the Shareholders:
Officers' Certificate. The representations and
warranties of the Parent and the Acquisition Sub contained in Article III
shall be true and correct on and with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date;
all the terms, covenants and conditions of this Agreement shall have been duly
complied with and performed; and the Parent and the Acquisition Sub shall have
delivered to the Company and the Shareholders a certificate to such effect,
dated the Closing Date, signed by the Parent and the Acquisition Sub.
Delivery of the Parent Shares. The Parent or the
Acquisition Sub shall have delivered to the Shareholders the Parent Shares, as
required by Section 1.5.
(c) Approvals. The Board of Directors of the
Parent and the Acquisition Sub and the sole stockholder of the Acquisition Sub
shall have approved the transactions contemplated hereby.
(d) Additional Agreements. NEMOCo and the
Parent shall have executed and delivered the agreements contemplated by
Sections 4.3(c) and (d).
Due Diligence; Good Faith Efforts; Additional Agreements.
Access to Offices, Officers, Accountants, Due
Diligence, Etc. From the date hereof until fifteen (15) days thereafter (the
"Due Diligence Period"), the Company shall have afforded to the officers and
authorized representatives of the Parent (including without limitation,
attorneys, accountants, surveyors, building inspectors, engineers,
environmental consultants, insurance brokers, financial advisors and bankers)
access to the offices, officers, properties, books and records of the Company,
including contact with attorneys, accountants and other representatives of the
Company and with any and all persons the Parent deems appropriate in order to
consummate the transactions contemplated hereby, and shall have furnished the
Parent with such additional contracts, financial and operating data, and other
information as to the business and properties of the Company as the Parent
may from time to time reasonably request. All investigations conducted
by the Parent and its agents shall have been conducted in such a manner as to
minimize, to the extent reasonably practicable, the disruption of the orderly
business operations of the Company and the properties examined shall have been
returned to their preexamination condition by the Parent.
Actions Before the Closing. Between the date hereof
and the Closing Date, each of the Shareholders, the Company, the Parent and
the Acquisition Sub shall have exercised good faith and due diligence in
satisfying the conditions precedent to their respective obligations and shall
have taken all action necessary or desirable to carry out and perform
the transactions contemplated by this Agreement in accordance with
applicable law. In particular each of the Shareholders and the personnel
of the Company shall assist the Parent and the Acquisition Sub in carrying
out the renegotiations of the Contract and Subcontracts contemplated by
Sections 4.1(f) and (g) as requested by the Parent and the Acquisition Sub but
shall not enter into any direct discussions with the
other parties to the Contract (including, but not limited to, any regular
project meetings regarding the Contract) or Subcontracts except at the direction
of Parent. On or before the 10th day after the date hereof, any schedule hereto
may be amended or supplemented by the Company or the Sellers. Between the date
hereof and the Closing Date, the Company:
(i) shall operate its business in the ordinary
course and use reasonable efforts to preserve and maintain its business,
properties, insurance, goodwill and intellectual and other property rights,
except as otherwise provided herein;
(ii) shall not sell, transfer, mortgage, pledge or
permit any lien to be created on,
any of the Company's property or assets;
(iii) shall not incur any obligation or liability or
make any expenditures except in
the ordinary course of business in excess of $5,000, or incur any liability for
borrowed money; provided that payments to or negotiations with the
Subcontractors shall not be considered to be in the ordinary course of business;
(iv) shall not change the compensation or benefits of
any employee, officer, director,
shareholder or consultant, or enter into or modify any benefit plan, employment
or severance agreement or other agreement with any employee, officer, director,
shareholder or consultant;
(v) shall not issue any capital stock, or grant any
option, warrant or other right to purchase shares of its capital stock, or
declare or pay any dividend or other distribution in respect of shares of its
capital stock;
(vi) shall not amend the Articles of Incorporation or
Bylaws of the Company; and
(vii) shall not take or omit to take any actions that
could be material to the
Company or NEMO, unless in the case of subsections (ii) through (vii), the prior
written consent of the Parent has been obtained.
(ii) Sales Commissions. At the Closing, NEMOCo shall enter into an agreement
with the Shareholders or their designee providing that from the Closing until
the second anniversary of the Launch, the Shareholders or their designee shall
act as agents for NEMOCo for the sale of hyperspectral imaging data and NEMOCo
shall pay a commission to the Shareholders or their designee for revenues earned
by NEMOCo from the customers introduced to NEMOCo by Shareholders or their
designee (that were not customers prior to the Closing or introduced to NEMOCo
through its own efforts or the efforts of others) introduced by such Shareholder
after the Closing. Such commission shall equal 4% of gross revenues for the sale
of imaging products and services through the NEMO satellite.
(d) Option and Exchange Agreements.
(i) At the Closing, the Parent, shall have entered
into an agreement with the Shareholders, pursuant to Sections 1.5(a)(ii) hereof.
(ii) The Parent shall have entered into an agreement
with the Shareholders giving
the Shareholders the right to exchange their Parent Shares and options to
acquire Parent Shares received pursuant to Section 1.5(a)(ii) for shares of
NEMOCo and options to acquire shares of NEMOCo in amounts that bear the same
proportion to Parent's interest in NEMOCo after investment by the other equity
partner or partners as the Parent Shares and options to acquire Parent Shares
owned by the Shareholders bear to the aggregate outstanding Parent Shares and
options to acquire Parent Shares. The aggregate purchase price under the options
shall be the same as the aggregate purchase price before conversion, but
allocated to the resulting number of optioned shares or interests in NEMOCo.
Such agreement will terminate upon the earlier of (x) a public offering of
NEMOCo shares, and (y) two years after the Launch.
(iii) The agreements provided for in clauses (i) and
(ii) above shall provide for
typical antidilution protection in the event of stock splits, stock dividends,
reorganizations or recapitalizations of Parent and or NEMOCo.
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNITY
Survival of Representations. All representations and
warranties made in Articles II and III of this Agreement (including Schedules
thereto) shall survive the transfer of the Company Shares and the Parent Shares.
Indemnity by the Shareholders. Each of the Shareholders agrees
jointly and severally to defend, indemnify and hold the Company, the Parent, and
the Acquisition Sub and their respective officers, directors, shareholders,
affiliates, employees and agents, and their respective heirs, executors,
personal representatives, successors and assigns harmless from and against any
and all claims, actions, damages, obligations, losses, liabilities, costs and
expenses (including attorneys' fees, costs of collection and other costs of
defense) (collectively "Damages") resulting from: (a) any misrepresentation or
material omission from or breach of warranty by any Shareholder made or
contained in this Agreement or the transactions contemplated hereby; and (b) any
liability under any agreement listed in items 1 through 4 on the first section
of Schedule 4.1(d)(ii) that has not been terminated and a release of liability
obtained in favor of the Company on or prior to Closing.
Indemnity by The Parent and the Acquisition Sub. Each of the
Parent and the Acquisition Sub agrees to defend, indemnify and hold each
Shareholder and their respective officers, directors, shareholders, affiliates,
employees and agents, and their respective heirs, executors, personal
representatives, successors and assigns harmless from and against any and all
Damages resulting from any misrepresentation or material omission from or breach
of warranty by the Parent or the Acquisition Sub made or contained in this
Agreement or the transactions contemplated hereby.
Notice of Claims and Potential Claims. Any person seeking
indemnity under this Article V (an "Indemnified Person") shall be entitled to
make a claim for indemnity under Sections 5.2 or 5.3 hereof, as the case may be,
only if written notice, specifying in reasonable detail the basis of the claim,
shall have been provided to the party from which indemnity may be sought (the
"Indemnifying Party") (a) within ninety (90) days after the Indemnified Person
shall have become aware of facts constituting the basis for such claim, or (b)
if earlier, in the case of any action or proceeding by a third party, not more
than fifteen (15) days after the commencement of such action or proceeding. In
the case of any such action or proceeding by a third party, if the Indemnifying
Party so elects or is requested by the Indemnified Person, the Indemnifying
Party will assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of the fees and disbursements of such counsel. In the event, however,
that such counsel reasonably determines that its representation of both the
Indemnifying Party and one or more Indemnified Persons would present such
counsel with a conflict of interest or if the Indemnifying Party fails to assume
the defense of the action or proceeding in a timely manner, then such
Indemnified Person may employ separate counsel to represent or defend it in any
such action or proceeding and the Indemnifying Party will pay the fees and
disbursements of such counsel; provided, however, that the Indemnifying Party
will not be required to pay the fees and disbursements of more than one separate
law firm for all Indemnified Persons in any jurisdiction in any single action or
proceeding. The Indemnifying Party, in the defense of any such claim, shall not,
except with the prior written consent of the Indemnified Person, consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
Indemnified Person of a release from all liability in respect of such claim.
Each party will cooperate with the other in resolving or attempting to resolve
any claim, and will permit the other party access to all books and records which
might be useful for such purpose, during normal business hours and at the place
where the same are normally kept, with full right to make copies thereof or
extracts therefrom at the cost of the copying party, except to the extent any
such disclosure would constitute a waiver of attorney client or attorney work
product privilege or such disclosure would violate any third party contractual
agreement or constitute a violation of any court order.
Limitation of Indemnification. (a) The obligation of the
Shareholders to indemnify the Indemnified Persons under Section 5.2 shall be for
all Damages suffered by the Parent, the Acquisition Sub and all other
Indemnified Persons, up to an aggregate amount of Damages equal to the Indemnity
Limit (as defined below); provided that, with respect to the breach by any
Shareholder of any representation or warranty contained herein with respect to
taxes, the indemnification obligation of such Shareholder shall terminate after
the date seven years after the Closing, and with respect to all other
representations and warranties of the Shareholders herein, such indemnification
obligation shall terminate after the date one year after the Closing. The
Indemnity Limit shall be the greater of (i) $1,500,000 or (ii) 20% of the market
value of the Parent Shares issued to all Shareholders pursuant to Section
1.5(a)(i) and issuable to all Shareholders upon exercise of options granted
pursuant to Section 1.5(a)(ii), as adjusted for the effect of stock splits,
stock dividends, reorganizations or other recapitalizations; provided, that the
Indemnity Limit shall not be greater than $3,000,000; and provided further,
that, if the combined value resulting from the calculation in clause (ii) above
(calculated with respect to 100% of the Parent Shares and options) (the
"Securities' Value") does not exceed $1,500,000, the Indemnity Limit shall be
the Securities' Value. A Shareholder may satisfy any obligation to indemnify any
Indemnified Person by delivering Parent Shares having a market value equal to
the indemnification obligation. For purposes of this provision, the market value
of Parent Shares shall be equal to the average of the bid and asked price on the
date which is one day prior to the day that the notice required by Section 5.4
was sent by the Indemnified Person.
(b) The obligation of the Parent and Acquisition
Sub to indemnify the Indemnified Persons under Section 5.3 shall be for all
Damages suffered by the Shareholders and all other Indemnified Persons up to
an aggregate amount of Damages equal to $500,000 and shall terminate one year
after the Closing.
(c) Notwithstanding any provision herein to the
contrary, the limitations on indemnification set forth in the preceding
paragraphs (a) and (b) shall not apply in the event of fraud, intentional
misrepresentation or willful misconduct of the Indemnifying Party.
(d) The obligation of the Indemnifying Parties
to indemnify the Indemnified Persons under Sections 5.2 and 5.3 shall
terminate on the expiration of the applicable indemnification period provided
in this Section except as to matters as to which an Indemnified Person has
given a notice of a claim for indemnification in accordance with Section
5.4 hereof on or prior to such date, in which case such claim shall survive
until finally resolved.
MISCELLANEOUS
Further Action and Covenants. After the Closing, each
Shareholder shall, at its own expense and upon the request of the Parent or the
Surviving Corporation, take the actions to do, execute, acknowledge and deliver,
or cause to be done, executed, acknowledged and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably required to perfect the transactions
contemplated herein and to fulfill and implement the terms of this Agreement or
realize the benefits intended to be afforded hereby. Each party shall cooperate
with the other's reasonable requests as they relate to the Company Shares and
the Parent Shares being transferred and the liabilities being assumed hereunder
after the date of this Agreement.
Confidentiality. Each of the Shareholders, the Company, the
Acquisition Sub and the Parent shall take all reasonable precautions to maintain
the confidentiality of any nonpublic information concerning the other parties
("Confidential Information") as provided to or discovered by it or its
representatives in the course of negotiating this Agreement and shall not
disclose such information to anyone other than (a) those people directly
involved in the investigation and negotiations pertaining to the transactions
contemplated by this Agreement, including without limitation, attorneys,
accountants, appraisers, insurance brokers, environmental consultants and
similar representatives, (b) such lenders or investors as may be necessary to
finance the transactions contemplated hereby and (c) such persons or
governmental authorities whose consents or approvals may be necessary or to whom
notice need be given to permit consummation of the transactions contemplated
hereby; provided that after the Closing, the Parent and the Acquisition Sub
shall not be subject to this provision with respect to the Company or the
Shareholders. As used herein, "Confidential Information" shall exclude
information if and to the extent such information (i) is or becomes generally
available to the public without any party violating any obligation of secrecy
relating to the information disclosed, (ii) is received by a party in good faith
from a third party who discloses such information on a non-confidential basis
without violating any obligation of secrecy relating to the information
disclosed, (iii) can be shown by the recipient's prior records to have been
already known to the recipient other than through disclosure by a third party
which would not be subject to exclusion based on clause (ii) above, or (iv) is
required to be disclosed by order of a court or regulatory agency of competent
jurisdiction or by the securities laws of the United States or any State.
Notwithstanding anything to the contrary contained in this Section, the Parent
and the Acquisition Sub shall not be in violation of this Section as a result of
its discussions and negotiations with any parties to the Contract or any
Subcontract. This Section shall survive the Closing and any termination of this
Agreement.
Public Statements. Except as required by any court or other
governmental authority, prior to the Closing, no party to this Agreement shall,
without the prior written consent of the others, which consent shall not be
unreasonably withheld, make or cause to be made any press release or other
public statement or announcement that directly or indirectly discloses the
transactions contemplated by this Agreement or the identity of the parties
hereto or parties being acquired. Except as required by any court or other
governmental authority, after the Closing Date, neither party to this Agreement
shall make or cause to be made any press release or other public statement or
announcement that directly or indirectly discloses the consideration exchanged
pursuant hereto.
Expenses. Each party hereto shall bear its own expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement.
Post-Closing Employment. Except as expressly determined by the
Parent in its sole discretion, no person employed by the Company or who is an
officer, director or shareholder of the Company prior to the Closing shall have
any rights to continue in such position with the Surviving Corporation after the
Closing or December 31, 1999, whichever is later. The Parent agrees to consider
each person employed by the Company as of the Closing for employment with the
Surviving Corporation after the Closing.
Non-Competition. Each of the Shareholders who is an officer of
the Company agrees that for a period of eighteen months after the closing he
will not, without consent of the Parent, which consent shall not be unreasonably
withheld, (i) be a director or officer of or act as a consultant or independent
contractor to or own an interest of more than five percent or having a fair
market value in excess of $500,000 in a company, agency, or other entity that is
engaged in a commercial operation involving the collection or sale of
hyperspectral imaging data collected from satellites or aircraft (each such
company, agency or entity, hereafter a "Hyperspectral Imaging Concern") or (ii)
be an employee of a Hyperspectral Imaging Concern if his duties as an employee
would materially contribute to the competitive capabilities of such
Hyperspectral Imaging Concern in the area of commercial exploitation of
hyperspectral imagery.
Termination of Agreement. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned:
by mutual written agreement among the all of the
parties hereto;
by the Shareholders or the Company if such
transactions have not been consummated, through no fault or failure of
the Shareholders or the Company, on or before December 31, 1999; or
by the Parent if such transactions have not been
consummated, through no fault or failure of Parent or the Acquisition
Sub, on or before December 31, 1999.
Upon any termination of this Agreement pursuant to this
Section, this Agreement shall become void and have no effect, except as
explicitly provided otherwise herein.
Right of First Refusal. Each of the Shareholders agrees that
it will not sell, transfer, convey, pledge, assign or otherwise dispose of the
Parent Shares received by it pursuant to this Agreement for two years after the
Closing, without first notifying the Parent of such Shareholder's intent to sell
and offering the Parent the opportunity to make an offer to purchase such Parent
Shares.
Registration Rights. In the event that at any time after the
Closing Date, the Parent shall determine to register any of its securities
either for its own account or otherwise, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a Rule
145 transaction, or a registration on any registration form which does not
permit secondary sales, the Parent will:
promptly give to each Shareholder written notice
thereof; and
use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), and
in any underwriting involved therein, all the Parent Shares specified in a
written request or requests, made by any Shareholder within twenty (20) days
after written notice from the Parent of such intended registration is sent by
the Parent.
Notwithstanding any other provisions of this Section 6.9, the
registration of Parent Shares for the benefit of any Shareholder shall be
subject to reduction in number based on market, underwriting and other factors
limiting the number of shares to be registered or purchased and the
Shareholder's satisfaction of conditions to the registration required by the
underwriter, including without limitation, executing any underwriting agreement
and other agreements or documents.
Governing Laws; Successors and Assigns; Counterparts; Entire
Agreement; Amendment; and Waiver. This Agreement: (i) shall be construed under
and in accordance with the laws of the State of Virginia; (ii) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; (iii) may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same instrument; (iv) along with the other written agreements expressly
contemplated hereunder, constitutes the entire agreement and understanding, and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto relating to the subject matter hereof; (v) may not be
assigned by any party without the prior written consent of the other parties and
any assignment without such consent shall be void; and (vi) shall not be amended
or modified except by written agreement executed by each of the parties hereto.
Severance Agreement. Craig E. Musick hereby waives any right
he may have to severance pay from the Company in exchange for a prepayment by
the Surviving Corporation of $11,400 in option exercise price, upon exercise
under Section 1.5(a)(ii).
Notices. Any notices or other communications required or
permitted hereunder shall be sufficient if given or sent by certified mail,
postage prepaid, or nationally recognized overnight courier or transmitted by
facsimile to the following addresses or such other addresses as shall be
furnished in writing by any party to the other parties to this Agreement. Any
such notice or communication shall be deemed given five business days after
mailing, one business day after dispatch by overnight courier and upon confirmed
receipt of facsimile.
To the Parent or: Earth Search Sciences Inc.
the Acquisition Sub 502 North 3rd Street, #8
McCall, Idaho 83638
Attn: John W. Peel
Facsimile No.: (208) 634-2978
with copies to: C. Baird Brown, Esquire
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Facsimile No.: (215) 864-8999
To the Shareholders or: Lloyd Preslar
the Company c/o Space Technology Development Corporation
100 North Pitt Street, Suite 403
Alexandria, VA 22314
Facsimile No.: (703) 836-8074
Headings. The section and other headings and Table of Contents
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
Severability. Any provision of this Agreement which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
The Parent:
EARTH SEARCH SCIENCES INC.
By: /s/ John W. Peel, III
Name: John W. Peel, III
Title: Chief Executive Officer
The Acquisition Sub:
ESS ACQUISITION CORP.
By: /s/ John W. Peel, III
Name: John W. Peel, III
Title: President
The Company:
SPACE TECHNOLOGY DEVELOPMENT CORPORATION
By: /s/ Bruce D. Berkowitz
Name: Bruce D. Berkowitz
Title: President
The Shareholders:
By: /s/ Paul C. Setze
Paul C. Setze
And Spouse:*
By: /s/ Patricia J. Setze
Patricia J. Setze
By: /s/ Bruce D. Berkowitz
Bruce D. Berkowitz
By: /s/ Lloyd Preslar
Lloyd Preslar
By: /s/ Craig E. Musick
Craig E. Musick
By:/s/ Helmut Sonnenfeldt
Helmut Sonnenfeldt, trustee, under the
Helmut Sonnenfeldt Trust dated
November 15, 1988
By: /s/ Burton Edelson
Burton Edelson
By: /s/ Lenore M. Rumpf
Lenore M. Rumpf
--------
* The spouse of Paul C. Setze joins in the Amendment only for the purpose
of binding any interest, community or otherwise, said spouse may now or
hereafter have in the Company Shares.
