772891--1/9/2006--ENGINEERED_SUPPORT_SYSTEMS

related topics

{investment, property, distribution}

{stock, price, operating}

{operation, natural, condition}

{debt, indebtedness, cash}

{cost, contract, operation}

{personnel, key, retain}

THE OBLIGATIONS OF ESSI AND DRS TO COMPLETE THE PROPOSED MERGER ARE SUBJECT TO THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS. THE FAILURE TO SATISFY THESE CONDITIONS COULD RESULT IN TERMINATION OF THE MERGER AGREEMENT, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON ESSI. THE MERGER AGREEMENT MAY BE TERMINATED PRIOR TO COMPLETION OF THE MERGER, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON ESSI. DRS MAY NOT BE ABLE TO OBTAIN FINANCING TO PAY THE CASH PORTION OF THE MERGER CONSIDERATION. ESSI CURRENTLY IS SUBJECT TO AN SEC INVESTIGATION THAT COULD REQUIRE SIGNIFICANT MANAGEMENT ATTENTION AND LEGAL RESOURCES AND COULD HAVE A MATERIAL ADVERSE EFFECT ON ESSI OR THE COMBINED COMPANY. THE VALUE OF THE STOCK COMPONENT OF THE MERGER CONSIDERATION COULD VARY BASED UPON THE PRICE OF DRS COMMON STOCK. THE PRICE OF DRS COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM THOSE AFFECTING THE PRICE OF ESSI COMMON STOCK. THE MARKET PRICE OF DRS COMMON STOCK MAY DECREASE AS A RESULT OF THE MERGER. TIME-CONSUMING AND EXPENSIVE AND MAY ADVERSELY AFFECT THE RESULTS OF OPERATIONS OF DRS AFTER THE MERGER. IF DRS IS UNABLE TO SUCCESSFULLY INTEGRATE ESSI INTO DRS'S OPERATIONS ON A TIMELY BASIS, DRS'S PROFITABILITY COULD BE NEGATIVELY AFFECTED. DRS'S LEVEL OF INDEBTEDNESS FOLLOWING THE MERGER COULD LIMIT CASH FLOW AVAILABLE AND COULD ADVERSELY AFFECT ITS OPERATIONS OR ITS ABILITY TO OBTAIN ADDITIONAL FINANCING, IF NECESSARY. DRS MAY INCUR SUBSTANTIAL ADDITIONAL INDEBTEDNESS IN THE FUTURE. THE MERGER MAY ADVERSELY AFFECT THE COMBINED COMPANY'S ABILITY TO ATTRACT AND RETAIN KEY ESSI EMPLOYEES.

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