-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UAdTW3iW2wle1KVgNOcfgLmjW3IuY79PNONCG92g7hH1yzCV+B+yYQbn8NTrrzH2 vkboyLephKakrI0UXwbg7Q== 0000950136-01-000463.txt : 20010316 0000950136-01-000463.hdr.sgml : 20010316 ACCESSION NUMBER: 0000950136-01-000463 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: L 3 COMMUNICATIONS HOLDINGS INC CENTRAL INDEX KEY: 0001056239 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133937434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14141 FILM NUMBER: 1568541 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971111 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: L 3 COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001039101 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133937436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-46983 FILM NUMBER: 1568542 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 1216971111 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 10-K 1 0001.txt FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file numbers 001-14141 and 333-46983 L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION (Exact names of registrants as specified in their charters) DELAWARE 13-3937434 AND 13-3937436 (State or other jurisdiction of (I.R.S. Employer Identification Nos.) incorporation or organization) 600 THIRD AVENUE, NEW YORK, NEW YORK 10016 (Address of principal executive offices) (Zip Code) (212) 697-1111 (Telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS L-3 Communications Holdings, Inc. common stock, par value $0.01 per share NAME OF EACH EXCHANGE ON WHICH REGISTERED: New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ ] Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] There were 33,953,182 shares of L-3 Communications Holdings, Inc. common stock with a par value of $0.01 outstanding as of the close of business on March 12, 2001. The aggregate market value of the L-3 Communications Holdings, Inc. voting stock held by non-affiliates of the registrant as of March 12, 2001 was approximately $2,948.8 million. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be filed with Securities and Exchange Commission ("SEC") pursuant to Regulation 14A relating to the registrant's Annual Meeting of Shareholders, to be held on April 26, 2001, will be incorporated by reference in Part III of this Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days after the registrant's fiscal year ended December 31, 2000. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000
PAGE ----- PART I Item 1: Business ................................................................. 1 Item 2: Properties ............................................................... 20 Item 3: Legal Proceedings ........................................................ 20 Item 4: Submission of Matters to a Vote of Security Holders ...................... 20 PART II Item 5: Market for Registrant's Common Equity and Related Stockholder Matters ................................................................. 21 Item 6: Selected Financial Data .................................................. 22 Item 7: Management's Discussion and Analysis of Results of Operations and Financial Condition ..................................................... 23 Item 7A: Quantitative and Qualitative Disclosures about Market Risk ............... 33 Item 8: Financial Statements and Supplementary Data .............................. 33 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................... 33 PART III Item 10: Directors and Executive Officers of the Registrant ....................... 34 Item 11: Executive Compensation ................................................... 34 Item 12: Security Ownership of Certain Beneficial Owners and Management ........... 34 Item 13: Certain Relationships and Related Transactions ........................... 34 PART IV Item 14: Exhibits, Financial Statement Schedules and reports on Form 8-K .......... 35 Signatures ....................................................................... 38
PART I For convenience purposes in this Annual Report on Form 10-K, "L-3 Holdings" refers to L-3 Communications Holdings, Inc., and "L-3 Communications" refers to L-3 Communications Corporation, a wholly-owned operating subsidiary of L-3 Holdings. "L-3", "we", "us" and "our" refer to L-3 Holdings and its subsidiaries, including L-3 Communications. The predecessor company refers to the ten initial business units we purchased from Lockheed Martin Corporation in April 1997. ITEM 1. BUSINESS L-3 Holdings, a Delaware corporation organized in 1997, derives all of its operating income and cash flow from its wholly-owned subsidiary L-3 Communications. L-3 Communications, a Delaware corporation, was organized in 1997 to acquire the predecessor company. The only indebtedness of L-3 Holdings is its 5.25% Convertible Senior Subordinated Notes due 2009 which are jointly and severally guaranteed by substantially all of its direct and indirect domestic subsidiaries including L-3 Communications. L-3 Holdings also has guaranteed the indebtedness under the bank credit facilities of L-3 Communications. L-3 Holdings relies on dividends and other payments from its subsidiaries or must raise funds in public or private equity or debt offerings to generate the funds necessary to pay principal and interest on its indebtedness. OVERVIEW We are a leading merchant supplier of sophisticated secure communication systems and specialized communication products. We produce secure, high data rate communication systems, training and simulation systems, avionics and ocean products, telemetry, instrumentation and space products and microwave components. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. Our systems and specialized products are used to connect a variety of airborne, space, ground-and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems. Our customers include the U.S. Department of Defense ("DoD"), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other U.S. agencies. For the year ended December 31, 2000, direct and indirect sales to the DoD provided 62.7% of our sales, and sales to commercial customers, foreign governments and U.S. Government agencies other than the DoD provided 37.3% of our sales. Our business areas employ proprietary technologies and capabilities and have leading positions in their respective primary markets. For the year ended December 31, 2000 we had sales of $1.9 billion and operating income of $222.7 million. We have two reportable segments: Secure Communication Systems and Specialized Communication Products. Information on our reportable segments is included in Note 16 of our consolidated financial statements included elsewhere herein. SECURE COMMUNICATION SYSTEMS We are an established leader in secure, high data rate communications for military and other U.S. Government reconnaissance and surveillance applications and we believe that we have developed virtually every high bandwidth data link that is currently used by the DoD for surveillance and reconnaissance. Our major secure communication programs and systems include: o secure data links for airborne, satellite, ground and sea-based remote platforms for real time information collection and dissemination to users; o strategic and tactical signal intelligence systems that detect, collect, identify, analyze and disseminate information; o secure telephone and network equipment and encryption management; o communication software support services; and o communication systems for surface and undersea vessels and manned space flights. 1 Our Secure Communication Systems segment includes our training and simulation business. We design, develop and manufacture advanced simulation products with high-fidelity representations of cockpits and operator stations for aircraft and vehicle system simulation. We also provide a full range of teaching, training, logistic and training device support services to domestic and international military customers, and ballistic targets for the DoD. Our Secure Communication Systems segment provided $847.1 million or 44.3% of our total sales for the year ended December 31, 2000. SPECIALIZED COMMUNICATION PRODUCTS We are a leading merchant supplier of products to military and commercial customers. We focus on niche markets in which we believe we can achieve a market leadership position. This reportable segment includes three product categories: o Avionics and Ocean Products; o Telemetry, Instrumentation and Space Products; and o Microwave Components. Avionics and Ocean Products. This business area includes our aviation recorders, airborne collision avoidance products, displays, antennas, acoustic undersea warfare products and naval power distribution, conditioning, switching and protection equipment. We believe we are the leading manufacturer of commercial cockpit voice and flight data recorders (known as "black boxes") and a leading supplier of acoustic undersea warfare products and airborne dipping sonars to the U.S. Navy and over 20 foreign navies. These products represented 56.0% of our Specialized Communications Products segment sales for the year ended December 31, 2000. Telemetry, Instrumentation and Space Products. We develop and manufacture commercial off-the-shelf, real-time data collection and transmission products and components for missile, aircraft and space-based electronic systems. These products are used to gather flight data and other critical information and transmit it from air or space to the ground. We are also a leading global satellite communications systems provider offering systems and services used in the satellite transmission of voice, video and data through earth stations for uplink and downlink terminals. We provide commercial, off-the-shelf satellite control software, telemetry, tracking and control, mission processors and software engineering services to foreign governments and commercial satellite markets. We are a leading producer of navigation products, gyroscopes, controlled momentum devices and star sensors for commercial, military and other applications. These products represented 35.4% of our Specialized Communications Products segment sales for the year ended December 31, 2000. Microwave Components. We believe we are a premier worldwide supplier of commercial off-the-shelf, high-performance microwave components and frequency monitoring equipment. Our microwave components are sold under the industry-recognized Narda brand name using a standard catalog for the wireless, industrial and military communication markets. We also provide state-of-the-art, space-qualified communication components including channel amplifiers and frequency filters for the commercial communications satellite market. These products represented 8.6% of our Specialized Communications Products segment sales for the year ended December 31, 2000. Our Specialized Communication Products segment provided $1,063.0 million or 55.7% of our total sales for the year ended December 31, 2000. DEVELOPING COMMERCIAL OPPORTUNITIES An integral part of our growth strategy is to identify and exploit commercial applications for select products and technologies currently sold to defense customers. We have currently identified two vertical markets where we believe there are significant opportunities to expand our existing commercial sales: Transportation Products and Broadband Wireless Communications Products. We believe that these vertical markets, together with our existing commercial products, provide us with the opportunity for substantial commercial growth in future years. 2 Within the transportation market, we have developed and are offering an explosive detection system for checked baggage at airports, cruise ship voyage recorders, power propulsion systems and power switches and displays for rail transportation and internet service providers. We are developing additional products, including an enhanced collision avoidance product that incorporates ground proximity warning. Within the communications product market, we are offering local wireless access equipment for voice, DSL and internet access, transceivers for LMDS (Local Multipoint Distribution Service) and a broad range of commercial components and digital test equipment for broadband communications providers. We have developed the majority of our commercial products employing technology funded by and used in our defense electronics businesses, thereby minimizing any required incremental development expenses. Sales generated from our developing commercial opportunities have not yet been material to us. INDUSTRY OVERVIEW The U.S. defense industry has undergone significant changes precipitated by ongoing U.S. federal budget pressures and adjustments in political roles and missions to reflect changing strategic and tactical threats. From the mid-1980s to the late 1990s, the U.S. defense budget experienced a decline in real dollars. This trend was reversed by an increase in defense spending in 1999, followed by current dollar increases in fiscal 2000 and 2001, with an anticipated increase in fiscal 2002 to $310.0 billion. In addition, the DoD has increased its focus on enhancing military readiness, modernization, joint operations and digital command and control communications capabilities by incorporating advanced electronics to improve performance, reduce operating cost, and extend the life expectancy of its existing and future platforms. As a result, defense budget program allocations have shifted in favor of advanced information technologies related to command and control communications, computers, intelligence, surveillance and reconnaissance. In addition, the DoD's emphasis on system interoperability, force multipliers and providing battlefield commanders with real-time data is increasing the electronics content of nearly all of the major military procurement and research programs. As a result, the DoD's budget for communications and defense electronics is expected to grow. The U.S. defense industry has also undergone dramatic consolidation resulting in the emergence of four dominant prime system contractors: The Boeing Company, Lockheed Martin, Northrop Grumman Corporation and Raytheon Company. One outcome of this consolidation is that the DoD wants to ensure that vertical integration does not further diminish the fragmented, yet critical DoD vendor base. Additionally, it has become economically unfeasible for the prime contractors to design, develop or manufacture numerous essential products, components and systems for their own use. This situation creates opportunities for merchant suppliers such as L-3. As the prime contractors continue to evaluate their core competencies and competitive position, focusing their resources on larger programs and platforms, we expect the prime contractors to continue to exit non-strategic business areas and procure these needed elements on more favorable terms from independent, commercially-oriented merchant suppliers. Recent examples of this trend include divestitures of certain non-core defense-related businesses by Lockheed Martin and Raytheon Company. The focus on cost reduction by the prime contractors and DoD is also driving increased use of commercial off-the-shelf products for upgrades of existing systems and in new systems. We believe the prime contractors will continue to be under pressure to reduce their costs and will increasingly seek to focus their resources and capabilities on major systems, turning to commercially oriented best of breed merchant suppliers to produce subsystems, components and products. We believe successful merchant suppliers will continue to use their resources to complement and support, rather than compete with, the prime contractors. We anticipate that the relationships between the major prime contractors and their primary suppliers will continue to evolve in a fashion similar to those employed in the automotive and commercial aircraft industries. We expect that these relationships will be defined by critical partnerships encompassing increasingly greater outsourcing of non-core products and systems by the prime contractors to their key merchant suppliers and increasing supplier participation in the development of future 3 programs. We believe early involvement in the upgrading of existing systems and the design and engineering of new systems incorporating these outsourced products will provide merchant suppliers, including us, with a competitive advantage in securing new business and provide the prime contractors with significant cost reduction opportunities through coordination of the design, development and manufacturing processes. BUSINESS STRATEGY We intend to grow our sales, enhance our profitability and build on our position as a leading merchant supplier of communication systems and products to the major contractors in the aerospace and defense industry as well as the U.S. Government. We also intend to leverage our expertise and products into new commercial business areas where we can adapt our existing products and technologies. Our strategy to achieve our objectives includes: EXPAND MERCHANT SUPPLIER RELATIONSHIPS. We have developed strong relationships with the DoD, several other U.S. Government agencies and all of the major U.S. defense prime contractors, enabling us to identify new business opportunities and anticipate customer needs. As an independent merchant supplier, we anticipate that our growth will be driven by expanding our share of existing programs and by participating in new programs. We identify opportunities where we are able to use our strong relationships to increase our business presence and allow customers to reduce their costs. We also expect to benefit from increased outsourcing by prime contractors who in the past may have limited their purchases to captive suppliers and who are now expected to view our capabilities on a more favorable basis due to our status as an independent company, which positions us to be a merchant supplier to multiple bidders on prime contract bids. SUPPORT CUSTOMER REQUIREMENTS. A significant portion of our sales is derived from strategic, long-term programs and from programs for which we have been the incumbent supplier, and in many cases acted as the sole provider over many years. Our customer satisfaction and excellent performance record are evidenced by our performance-based award fees exceeding an average of 90% of the available award fees since our inception in April 1997. We believe that prime contractors will increasingly award long-term, outsourcing contracts to the best-of-breed merchant suppliers they believe to be most capable on the basis of quality, responsiveness, design, engineering and program management support as well as cost. We intend to continue to align our research and development, manufacturing and new business efforts to complement our customers' requirements and provide state-of-the-art products. ENHANCE OPERATING MARGINS. We have a history of improving the operating performance of the businesses we acquire through the reduction of corporate administrative expenses and facilities costs, increasing sales, improving contract bidding controls and practices and increasing competitive contract award win rates. We have a tradition of enhancing operating margins, primarily due to efficient management and elimination of significant corporate expense allocations. We intend to continue to enhance our operating performance by reducing overhead expenses, continuing consolidation and increasing productivity. LEVERAGE TECHNICAL AND MARKET LEADERSHIP POSITIONS. We have developed strong, proprietary technical capabilities that have enabled us to capture a number one or two market position in most of our key business areas, including secure, high data rate communications systems, solid state aviation recorders, telemetry, instrumentation and space products, advanced antenna products and high performance microwave components. We continue to invest in L-3 sponsored independent research and development, including bid and proposal costs, in addition to making substantial investments in our technical and manufacturing resources. Further, we have a highly skilled workforce, including approximately 5,600 engineers. We are applying our technical expertise and capabilities to several closely aligned commercial business markets and applications such as transportation and broadband wireless communications and will continue to explore other similar commercial opportunities. MAINTAIN DIVERSIFIED BUSINESS MIX. We have a diverse and broad business mix with limited reliance on any particular program, a balance of cost-plus and fixed price contracts, a significant follow-on business and an attractive customer profile. Our largest program represented 3.8% of our sales for the year ended 4 December 31, 2000 and is a long term, cost-plus contract for the U.S. Air Force aerial reconnaissance program. No other program represented more than 2.3% of sales for the year ended December 31, 2000. Furthermore, 28.6% of our sales for the same period were from cost-plus contracts, and 71.4% were from fixed price contracts, providing us with a mix of predictable profitability (cost-plus) and higher margin (fixed price) business. We also enjoy a mix of defense and non-defense business, with direct and indirect sales to the DoD accounting for 62.7%, and sales to commercial customers, foreign governments and U.S. Government agencies other than the DoD accounting for 37.3% of our sales for the year ended December 31, 2000. We intend to leverage this business profile to expand our merchant supplier business base. CAPITALIZE ON STRATEGIC ACQUISITION OPPORTUNITIES. Recent industry consolidation has significantly reduced the number of traditional middle-tier aerospace and defense companies. We intend to enhance our existing product base through internal research and development efforts and selective acquisitions that will add new products in areas that complement our present technologies. We intend to acquire potential targets with the following criteria: o significant market position in their business area; o product offerings which complement and/or extend our product offerings; and o positive future growth and earnings prospects. 5 During the year ended December 31, 2000, we acquired ten businesses for an aggregate purchase price of $590.2 million, subject to adjustment and, in three cases, additional purchase price contingent upon the post-acquisition financial performance of the acquired company. The following chart summarizes our primary acquisitions since January 1, 2000. SELECTED RECENT ACQUISITIONS
PRICE BUSINESS NAME DATE ACQUIRED ACQUIRED FROM ($ MM) BUSINESS DESCRIPTION - ----------------------- ------------------- ------------------- ---------- ----------------------------------- Coleman Research December 29, 2000 Thermo Electron $ 60.0 Provides communications, signal Corporation Corporation processing, intelligence and space instrumentation equipment, as well as simulation, training, missile targeting, modeling and exercise support services. Logi Metrics, Inc. July 11, 2000 LogiMetrics, Inc. 15.0 Designs, manufactures and (53 1/2% interest) markets solid state, broadband wireless communications infrastructure equipment, subsystems and modules used to provide point-to-multipoint terrestrial and satellite-based distribution services in frequency bands from 24 to 38 gigahertz. MPRI, Inc. June 30, 2000 MPRI Stockholders 35.6 Provides teaching and training programs to the U.S. and international governments and to commercial customers. Traffic Alert and April 28, 2000 Honeywell Inc. 239.1 Produces airborne collision Collision Avoidance avoidance products that reduce Systems mid-air collisions and near-miss incidents among aircraft. Trex Communications February 14, 2000 MCK 49.3 Provides antennas and tracking Communications for telemetry, tracking and Statutory Trust control systems, flight termination systems, fixed and portable command and control ground stations, and portable commercial satellite news gathering uplinks and satellite components. Training Devices and February 10, 2000 Raytheon Company 160.0 Produces and supports training Training Services systems and equipment designed to enhance operational proficiency.
6 PRODUCTS AND SERVICES The systems, products and services, selected applications and selected platforms or end users of our Secure Communication Systems segment as of December 31, 2000 are summarized in the table below. SECURE COMMUNICATION SYSTEMS PRODUCTS AND SERVICES
SYSTEMS/PRODUCTS/SERVICES SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ---------------------------------------- -------------------------------------- -------------------------------------- HIGH DATA RATE COMMUNICATIONS o Wideband data links and ground o High performance, wideband o Manned and unmanned aircraft, terminals secure communication links for naval ships, terminals and relaying of intelligence and satellites reconnaissance information SATELLITE COMMUNICATION TERMINALS o Ground-based satellite o Interoperable, transportable o Remote personnel provided with communication terminals and ground terminals communication links to distant payloads forces SPACE COMMUNICATION AND SATELLITE CONTROL o Satellite communication and o On-board satellite external o International Space Station, tracking system communications, video systems, Space Shuttle and various solid state recorders and ground satellites support equipment o Satellite command and control o Software integration, test and o U.S. Air Force Satellite Control sustainment and support maintenance support satellite Network and rocket launch control network and engineering system support for satellite launch system MILITARY COMMUNICATIONS o Shipboard communications o Internal and external o Naval vessels systems communications (radio room) o Communication software o Value-added, critical software o DoD support services support for C3I (Command, Control, Communication and Intelligence) INFORMATION SECURITY SYSTEMS o STE (Secure Terminal o Secure and non-secure voice, o U.S. Armed services, intelligence Equipment) data and video communication and security agencies for office and battlefield utilizing ISDN and ATM commercial network technologies TRAINING AND SIMULATION o Military Flight Simulators o Training for pilots, navigators, o Military fixed and rotary winged flight engineers, gunners and aircraft and ground vehicles operators o Battlefield and Weapon o Missile system modeling and o U.S. Army Missile Command Simulation simulation o Design and manufacture ballistic o U.S. Army Missile Command missile ground launched and air launched for threat replication targets o Training o Training for soldiers on complex o DoD command and control systems o Training and logistics services o DoD and foreign governments and training device support o Human Patient Simulators o Medical training o Medical schools, nursing schools, and DoD
7 SECURE COMMUNICATION SYSTEMS We are an established leader in the development, construction and installation of communication systems for high performance intelligence collection, imagery processing and ground, air, sea and satellite communications for the DoD and other U.S. Government agencies. We provide secure, high data rate, real-time communication systems for surveillance, reconnaissance and other intelligence collection systems. We also design, develop, produce and integrate communication systems and support equipment for space, ground and naval applications, as well as provide communication software support services to military and related government intelligence markets. Product lines of the Secure Communication Systems business include high data rate communications links, satellite communications terminals, naval vessel communication systems, space communications and satellite control systems, signal intelligence information processing systems, information security systems, tactical battlefield sensor systems and commercial communication systems. High Data Rate Communications We are a technology leader in high data rate, covert, jam-resistant microwave communications used in military and other national agency reconnaissance and surveillance applications. Our product line covers a full range of tactical and strategic secure point-to-point and relay data transmission systems, products and support services that conform to military and intelligence specifications. Our systems and products are capable of providing battlefield commanders with real-time, secure surveillance and targeting information and were used extensively by U.S. armed forces in the Persian Gulf War and during operations in Bosnia. Our current family of strategic and tactical data links or CDL (Common Data Link) systems are considered DoD standards for data link hardware. Our primary focus is spread spectrum secure communication links technology, which involves transmitting a data signal with a high-rate noise signal making it difficult to detect by others, and then re-capturing the signal and removing the noise. Our data links are capable of providing information at over 300 megabytes per second and use point-to-point and point-to-multipoint architectures. We provide these secure high bandwidth products to the U.S. Air Force, the U.S. Navy, the U.S. Army and various U.S. Government agencies, many through long-term sole-source programs. The scope of these programs include air-to-ground, air-to-air, ground-to-air and satellite communications such as the U-2 Support Program, CHBDL (Common High Band-Width Data Link), LAMPS (Light Airborne Multi-Purpose System) GUARDRAIL, ASTOR and major UAV (unmanned aerial vehicle) programs, such as Predator and Globalhawk. Satellite Communication Terminals We provide ground-to-satellite, high availability, real-time global communications capability through a family of transportable field terminals used to communicate with commercial, military and international satellites. These terminals provide remote personnel with constant and effective communication capability and provide communications links to distant forces. Our TSS (TriBand SATCOM Subsystem) employs a 6.25 meter tactical dish with a single point feed that provides C, Ku and X band communication to support the U.S. Army. We also offer an 11.3 meter dish which is transportable on two C-130 aircraft. The SHF PTS (Portable Terminal System) is a lightweight (28 lbs.), portable terminal, which communicates through DSCS, NATO or SKYNET satellites and brings connectivity to small military tactical units and mobile command posts. We delivered 14 of these terminals for use by NATO forces in Bosnia. Space Communications and Satellite Control We are currently producing and delivering three communication subsystems for the ISS (International Space Station). These systems will control all ISS radio frequency communications and external video activities. We also provide solid-state recorders and memory units for data capture, storage, transfer and retrieval for space applications. Our standard NASA tape recorder has completed over five million hours of service without a mission failure. Our recorders are on National Oceanic & Atmospheric 8 Administration weather satellites, the Earth Observing Satellite, AM spacecraft and Landsat-7 Earth-monitoring spacecraft. We also provide space and satellite system simulation, satellite operations and computer system training, depot support, network engineering, resource scheduling, launch system engineering, support, software integration and test through cost-plus contracts with the U.S. Air Force. Military Communications We provide integrated, computer controlled switching systems for the interior and exterior voice and data needs of naval vessels. Our products include Integrated Voice Communication Systems for Aegis class cruisers and Arleigh Burke class destroyers and the Integrated Radio Room for Trident class submarines, the first computer-controlled communications center in a submarine. These products integrate the intercom, tactical and administrative communications network into one system accessing various types of communication terminals throughout the ship. Our MarCom 2000 secure digital switching system provides an integrated approach to the specialized voice and data communications needs of a shipboard environment for internal and external communications, command and control and air traffic control. Along with the Keyswitch Integrated Terminals, MarCom 2000 provides automated switching of radio/crypto circuits, which results in significant time savings. We also offer on-board, high data rate communications systems which provide a data link for carrier battle groups which are interoperable with the U.S. Air Force's surveillance/reconnaissance terminals. We supply the U.S. Army's Command and Control Vehicle Mission Module Systems, which provide the "communications on the move" capability needed for the digital battlefield by packaging advanced communications into a modified Bradley Fighting Vehicle. Information Security Systems We are a leader in the development of secure communications equipment for both military and commercial applications. We are producing the next generation digital, ISDN-compatible STE (secure telephone equipment). STE provides clearer voice and thirteen-times faster data/fax transmission capabilities than the previous generation secure telecommunications equipment. STE also supports secure conference calls and secure video teleconferencing. STE uses a CryptoCard security system which consists of a small, portable, cryptographic module holding the algorithms, keys and personalized credentials to identify its user for secure communications access. We also provide the workstation component of the U.S. Government's EKMS (Electronic Key Management System), the next generation of information security systems. EKMS is the government system to replace current "paper" encryption keys used to secure government communications with "electronic" encryption keys. The component we provide produces and distributes the electronic keys. We also develop specialized strategic and tactical signal intelligence systems to detect, acquire, collect, and process information derived from electronic sources. These systems are used by classified customers for intelligence gathering and require high-speed digital signal processing and high-density custom hardware designs. Training and Simulation We are a leading provider of fully-integrated simulation training systems and related support services to the U.S. and foreign military agencies. Our training devices business designs, develops and manufacturers advanced virtual reality simulation and training products for training air crews with high-fidelity representations of cockpits and operator stations for aircraft and vehicle simulation. We believe that we have developed flight simulators for most of the U.S. military aircraft in active operation. We have numerous proprietary technologies and fully-developed systems integration capabilities that provide competitive advantages. Our proprietary software is used for visual display systems, high-fidelity system models, database production, digital radar land mass image simulation and creation of synthetic environments. We are also a leader in developing DMT (Distributed Mission Training) systems which allow multiple trainees at multiple sites to engage in group, unit and task force training and combat simulations. In addition we are currently developing all phases of the U.S. Air Force's warfighter training and combat readiness program. 9 Our products and services can be designed to meet customer training requirements for pilots, navigators, flight engineers, gunners, operators and maintenance technicians for virtually any platform, including military fixed and rotary wing aircraft, air vehicles and various ground vehicles. As one of the leading suppliers of both simulator systems and training services, we believe we are able to leverage our unique full-service capabilities to develop fully-integrated, innovative solutions for training systems, propose and provide program upgrades and modifications, as well as provide hands-on, best-in-class training operations in accordance with virtually any customer requirement in a timely manner. Our training services business is a recognized provider of premium training services and helps us maintain our market presence in training devices by providing our primary customers, including the U.S. Air Force, U.S. Army and U.S. Navy, with synergistic technical expertise in system instructional design, maintainability, user requirements integration and system development. We also design and develop prototypes of ballistic missle targets for present and future threat scenarios. We provide high-fidelity custom targets to the DOD that are complementary to the U.S. Government's growing focus and priority on national missile defense and space programs. We also develop and manage extensive programs in the United States and internationally focusing on training and education, strategic planning, organizational design, democracy transition and leadership development. To provide these services, we utilize a pool of experienced former armed service, law enforcement and other national security professionals. In the United States, our personnel are instructors in the U.S. Army's ROTC program and are involved in recruiting for the U.S. Army. In addition, we own a one-third interest in Medical Education Technologies, Inc., which has developed and is producing human patient simulators for sale to medical teaching and training institutions and the DoD. The products, selected applications and selected platforms or end users of our Specialized Communication Products segment as of December 31, 2000, are summarized in the table below. SPECIALIZED COMMUNICATION PRODUCTS
PRODUCTS SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ------------------------------------------ -------------------------------------- ------------------------------------- AVIONICS AND OCEAN PRODUCTS Aviation Products o Solid state crash protected o Voice recorders continuously o Business and commercial aircraft cockpit voice and flight data record most recent 30-120 and certain military transport recorders minutes of voice and sounds aircraft; sold to both aircraft from cockpit and aircraft manufacturers and airlines under intercommunications. Flight data the Fairchild brand name recorders record the last 25 hours of flight parameters o TCAS (Traffic Alert and o Reduce the potential for midair o Commercial, business, regional Collision Avoidance System) aircraft collisions by providing and military transport aircraft visual and audible warnings and maneuvering instructions to pilots Antenna Products o Ultra-wide frequency and o Surveillance and radar detection o Military aircraft including advanced radar antennas and surveillance, fighters and rotary joints bombers, attack helicopters and transpor o Precision antennas serving major o Antennas for high frequency, o Various military and commercial military and commercial millimeter satellite customers including scientific frequencies, including Ka band communications astronomers Display Products o Cockpit and mission displays o High performance, ruggedized o Military aircraft including and controls flat panel and cathode ray tube surveillance, fighters and displays and processors bombers, attack helicopters, transport aircraft and land vehicles
10 SPECIALIZED COMMUNICATION PRODUCTS (CONT.)
PRODUCTS SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ----------------------------------------- -------------------------------------- -------------------------------------- Ocean Products o Airborne dipping sonars o Submarine detection and o Various military helicopters localization o Submarine and surface ship o Submarine and surface ship o U.S. Navy and foreign navies towed arrays detection and localization o Naval and commercial power o Switching, distribution and o All naval combatants: delivery and switching products protection, as well as frequency submarines, surface ships and and voltage conversion aircraft carriers o Commercial transfer switches, o Production and maintenance of o Federal Aviation uninterrupted power supplies systems and high-speed switches Administration, internet service and power products for power interruption providers, financial institutions prevention and rail transportation TELEMETRY, INSTRUMENTATION AND SPACE PRODUCTS Airborne, Ground and Space Telemetry o Aircraft, missile and satellite o Real-time data acquisition, o Aircraft, missiles and satellites telemetry and instrumentation measurement, processing, systems simulation, distribution, display and storage for flight testing o GPS (Global Positioning o Tracking location o Guided projectiles Systems) receivers o Navigation systems and o Space navigation o Hubble Space Telescope, subsystems, gyroscopes, reaction Delta IV launch vehicle and wheels, star sensor satellites Space Products o Global satellite communications o Satellite transmission of voice, o Rural telephony or private systems video and data networks, direct to home uplinks, satellite news gathering and wideband applications MICROWAVE COMPONENTS o Passive components, switches o Radio transmission, switching o DoD, telephony service and wireless assemblies and conditioning, antenna and providers and original base station testing and equipment manufacturers monitoring, broad-band and narrow-band applications (PCS, cellular, SMR and paging infrastructure) o Safety products o Radio frequency monitoring and o Monitor cellular base station and measurement for safety industrial radio frequency emissions o Satellite and wireless o Satellite transponder control, o Communications satellites and components (channel amplifiers, channel and frequency wireless communications transceivers, converters, filters separation equipment and multiplexers) o Amplifiers and amplifier based o Automated test equipment, o DoD and commercial satellite components (amplifiers, up/down military electronic warfare, operators converters and Ka assemblies) ground and space communications
11 SPECIALIZED COMMUNICATION PRODUCTS Avionics and Ocean Products Aviation Recorders. We manufacture commercial, solid-state, crash-protected aviation recorders, commonly known as black boxes, under the Fairchild brand name, and have delivered over 50,000 flight recorders to airplane manufacturers and airlines around the world. We believe we are the leading manufacturer of commercial cockpit voice recorders and flight data recorders. We offer two types of recorders: o the cockpit voice recorder, which records the last 30 to 120 minutes of crew conversation and ambient sounds from the cockpit; and o the flight data recorder, which records the last 25 hours of aircraft flight parameters such as speed, altitude, acceleration, thrust from each engine and direction of the flight in its final moments. Recorders are highly ruggedized instruments, designed to absorb the shock equivalent to that of an object traveling at 268 knots stopping in 18 inches, fire resistant to 1,100 degrees centigrade and pressure resistant to 20,000 feet undersea for 30 days. Our recorders are mandated and regulated by various worldwide agencies for use in commercial airlines and a large portion of business aviation aircraft. We anticipate growth opportunities in aviation recorders as a result of the current high level of orders for new commercial aircraft. The U.S. military has recently required the installation of black boxes in military transport aircraft. We believe this development will provide us with new opportunities for expansion into the military market. Our recorders were recently selected for installation on certain military transport aircraft. We have completed development of a combined voice and data recorder and are developing an enhanced recorder that monitors engine and other aircraft parameters for use in maintenance and safety applications. Antenna Products. We produce high performance antennas under the Randtron brand name which are designed for: o surveillance of high-resolution, ultra-wide frequency bands; o detection of low radar cross-section targets and low radar cross-section installations; o severe environmental applications; and o polarization diversity. Our primary product is a sophisticated 24-foot diameter antenna used on all E-2C surveillance aircraft. This airborne antenna is a rotating aerodynamic radome containing a UHF surveillance radar antenna, an IFF antenna, and forward and aft auxiliary antennas. Production is planned beyond 2000 for the E-2C, P-3 and C-130 AEW aircraft. We have been funded to begin the development of the next generation for this antenna. We also produce broadband antennas for a variety of tactical aircraft, as well as rotary joints for the AWAC antenna. We have delivered over 2,000 sets of antennas for aircraft and have a backlog of orders through 2004. We are a leading supplier of ground based radomes used for air traffic control, weather radar, defense and scientific purposes. These radomes enclose an antenna system as a protective shield against the environment and are intended to enhance the performance of an antenna system. Display Products. We design, develop and manufacture ruggedized displays for military and high-end commercial applications. Our current product line includes a family of high performance display processing systems, which use either a cathode ray tube or active matrix liquid crystal display. Our displays are used in numerous airborne, ship-board and ground based platforms and are designed to survive in military and harsh environments. Ocean Products. We are one of the world's leading suppliers of acoustic undersea warfare systems. Our experience spans a wide range of platforms, including helicopters, submarines and surface ships. Our products include towed array sonar, hull mounted sonar, airborne dipping sonar and ocean mapping sonar for navies around the world. 12 We are also a leading provider of state-of-the-art electronics and electrical power delivery systems and subsystems, as well as communications and control systems for the military and commercial customers. We offer the following: o military power delivery equipment and components which focus on switching, distribution and protection, providing engineering design and development, manufacturing and overhaul and repair services; o high technology electrical power distribution, control and conversion equipment, which focus on frequency and voltage conversion for military and commercial applications; and o ship control and interior communications equipment. We have been able to apply our static transfer switch technology, which we developed for the U.S. military, to commercial applications. Our commercial customers for static transfer switches are primarily financial institutions and internet service providers, including American Express, AOL-Time Warner, AT&T, Schwab and the Federal Aviation Administration. In addition, we provide electrical products for rail transportation and utilities businesses. Telemetry, Instrumentation and Space Products We are a leader in the development and marketing of component products and systems used in telemetry and instrumentation for airborne applications such as satellites, aircraft, UAVs, launch vehicles, guided missiles, projectiles and targets. Telemetry involves the collection of data of various equipment performance parameters and is required when the object under test is moving too quickly or is of too great a distance to use direct connection. Telemetry measures as many as 1,000 different parameters of the platform's operation such as heat, vibration, stress and operational performance and transmits this data to the ground. Additionally, our satellite telemetry equipment transmits data necessary for ground processing. These applications demand high reliability of components because of the high cost of satellite repair and the need for uninterrupted service. Telemetry also provides the data used to terminate the flight of missiles and rockets under errant conditions and/or at the end of a mission. These telemetry and command/control products are currently used for a variety of missile and satellite programs. Airborne, Ground and Space Telemetry. We provide airborne equipment and data link systems that gather critical information and then process, format and transmit the data to the ground from communications satellites, spacecraft, aircraft and missiles. These products are available in both commercial off-the-shelf and custom configurations and include software and software engineering services. Primary customers include many of the major defense contractors who manufacture aircraft, missiles, warheads, launch vehicles and munitions. Our ground station instrumentation receives, encrypts and/or decrypts the serial stream of combined data in real-time as it is received from the airborne platform. We are a leader in digital GPS (Global Positioning System) receiver technology for high performance military applications. These GPS receivers are currently in use on aircraft, cruise missiles and precision guided bombs and provide highly accurate positioning and navigational information. Additionally, we provide navigation systems for high performance weapon pointing and positioning systems for programs such as MLRS (Multiple Launch Rocket System) and MFCS (Mortar Fire Control System). Space Products. We offer value-added solutions that provide our customers with complex product integration and comprehensive support. We focus on the following niches within the satellite ground segment equipment market: telephony, video broadcasting and multimedia. Our customers include foreign communications companies, domestic and international prime communications infrastructure contractors, telecommunications or satellite service providers, broadcasters and media-related companies. We also provide space products for advanced guidance and control systems including gyroscopes, controlled momentum devices and star sensors. These products are used on satellites, launch vehicles, the Hubble Telescope, the Space Shuttle and the International Space Station. 13 Microwave Components We believe we are a premier worldwide supplier of commercial off-the-shelf, high performance RF (radio frequency) microwave components, assemblies and instruments supplying the wireless communications, industrial and military markets. We are also a leading provider of state-of-the-art space-qualified commercial satellite and strategic military RF products and millimeter amplifier based products. We sell many of these components under the well-recognized Narda brand name through a comprehensive catalog of standard, stocked hardware. We also sell our products through a direct sales force and an extensive network of market representatives. Specific catalog offerings include wireless products, electro-mechanical switches, power dividers and hybrids, couplers/detectors, attenuators, terminations and phase shifters, isolators and circulators, adapters, control products, sources, mixers, waveguide components, RF safety products, power meters/monitors and custom passive products. Passive components are generally purchased in narrow frequency configurations by wireless equipment manufacturers, wireless service providers and military equipment suppliers. Commercial applications include cellular and PCS base station automated test equipment, and equipment for the paging industry. Military applications include electronic surveillance and countermeasure systems. Our space-qualified and wireless components separate various signals and direct them to sections of the satellites' payload. Our main satellite products are channel amplifiers and linearizers, payload products, transponders and antennas. Channel amplifiers amplify the weak signals received from earth stations, and then drive the power amplifier tubes that broadcast the signal back to earth. Linearizers, used either in conjunction with a channel amplifier or by themselves, pre-distort a signal to be transmitted back to earth before it enters a traveling wave tube for amplification. This pre-distortion is exactly the opposite of the distortion created at peak power by the traveling wave tube and, consequently, has a cancellation effect that keeps the signal linear over a much larger power band of the tube. The traveling wave tube and area covered by the satellite is significantly increased. We design and manufacture both broad and narrow band amplifiers and amplifier-based products in the microwave and millimeter wave frequencies. We use these amplifiers in defense and communications applications. These devices can be narrow band for communication needs or broadband for electronic warfare. We offer standard packaged amplifiers for use in various test equipment and system applications. We design and manufacture millimeter range (at least 20 to 38 GHz) amplifier products for use in emerging communication applications such as back haul radios, LMDS (Local Multipoint Distribution Service) and ground terminals for LEO satellites. On July 11, 2000, to further our millimeter wave efforts, we acquired a 53 1/2% equity interest in LogiMetrics, Inc. LogiMetrics designs, manufactures and markets solid state, broadband wireless communications infrastructure equipment, subsystems and modules used to provide point-to-multipoint terrestrial and satellite-based distribution services in frequency bands from 24 to 38 gigahertz. LogiMetrics' products include solid-state power amplifiers, hub transmitters, active repeaters, cell-to-cell relays, internet access systems and other millimeter wave-based modules and subsystems. These products are used in various applications, such as broadband communications, including LMDS, PMP (Point to Multipoint) local loop services and Ka-band satellite communications. DEVELOPING COMMERCIAL OPPORTUNITIES Part of our growth strategy is to identify commercial applications for select products and technologies currently sold to defense customers. We have initially identified two vertical markets where we believe there are significant opportunities to expand our products: transportation and broadband wireless communications. Transportation. Our products, designed to meet strict government quality and reliability standards, are easily adapted to the commercial transportation marketplace. Our aircraft voice recorders, designed to meet FAA requirements, have been successfully marketed to the cruise ship, marine shipping and railroad industries. Similarly, our state-of-the-art power propulsion products, originally designed for the 14 U.S. Navy, meet the needs of commuter railroads, including Philadelphia's regional rail system and New York City's Metropolitan Transportation Authority. Our explosive detection system, the eXaminer 3DXTM 6000, enables the rapid scanning of passenger checked baggage at airports using state-of-the-art technology. Communications. The wireless communications technology we developed for our military customers also meets the needs of a growing commercial marketplace for technologically advanced communications products. Some of the products we have developed or are developing to exploit this market include wireless loop products, transceivers, LMDS, compression products, remote sensing internet networks, microwave links and products for microwave base stations. Our fixed wireless loop products are an example of our expanding involvement in the commercial communications industry. Using synchronous CDMA technology that supports terrestrial, space, fixed and mobile communications, we produce wireless loop equipment for use in areas that do not have an adequate telecommunications infrastructure, including emerging market countries and customers in rural areas. In the expanding broadband wireless commercial communications market, we also have developed a broad assortment of other products including transponders, payloads, uplinks- downlinks, fly-away SATCOM terminals, telemetry tracking and control and test equipment and waveform generators. BACKLOG AND ORDERS We define funded backlog as the value of contract awards received from the U.S. Government, which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government, which have yet to be recognized as sales. Our funded backlog as of December 31, 2000 was $1,354.0 million and as of December 31, 1999 was $1,003.7 million. We expect to record as sales approximately 72.0% of our funded backlog as of December 31, 2000 during 2001. However, there can be no assurance that our backlog will become sales in any particular period, if at all. Our funded orders for the year ended December 31, 2000 was $2,013.7, for the year ended December 31, 1999 was $1,423.1 million and for the year ended December 31, 1998 was $1,057.0 million. Our funded backlog does not include the full value of our contract awards including those pertaining to multi-year, cost-plus reimbursable contracts, which are generally funded on an annual basis. Funded backlog also excludes the sales value of unexercised contract options that may be exercised by customers under existing contracts and the sales value of purchase orders that may be issued under indefinite quantity contracts or basic ordering agreements. MAJOR CUSTOMERS For the year ended December 31, 2000, direct and indirect sales to the DoD provided 62.7% of our sales, and sales to commercial, foreign governments and U.S. Government agencies other than the DoD provided 37.3% of our sales. Our government sales are predominantly derived from contracts with agencies of, and prime contractors to, the U.S. Government. Various U.S. Government agencies and contracting entities exercise independent purchasing decisions. Therefore, we do not regard sales to the U.S. Government generally as constituting sales to one customer. Instead, we regard each contracting entity as a separate customer. As of December 31, 2000, we had approximately 600 contracts each with a value exceeding $1.0 million. For the year ended December 31, 2000, sales to our five largest customers amounted to $196.3 million or 10.3% of our sales. We are working to grow our relationships with our major commercial customers, and believe that we have established a competitive position in the markets that we have entered. RESEARCH AND DEVELOPMENT We conduct research and development activities that consist of projects involving basic research, applied research, development, and systems and other concept studies. We employ scientific, engineering and other personnel to improve our existing product lines and develop new products and technologies. As of December 31, 2000, we employed approximately 5,600 engineers, a substantial portion of whom held 15 advanced degrees. For the year ended December 31, 2000, we incurred $299.3 million on research and development costs for customer-funded contracts and spent $101.9 million on company-sponsored research projects including bid and proposal costs. COMPETITION We encounter intense competition in all of our businesses. We believe that we are a significant supplier of many of the products that we manufacture and services we provide in our defense and government businesses, as well as in our commercial activities. Defense and Government Business Our ability to compete for defense contracts depends on a variety of factors, including: o the effectiveness and innovation of our research and development programs; o our ability to offer better program performance than our competitors at a lower cost; and o the availability of our facilities, equipment and personnel to undertake the programs for which we compete. In some instances, programs are sole-source or work directed by the customer to a single supplier. In such cases, there may be other suppliers who have the capability to compete for the programs involved, but they can only enter or reenter the market if the customer chooses to reopen the particular program to competition. Competitive contracts accounted for approximately 39% of our total sales for the year ended December 31, 2000. The majority of our sales are derived from contracts with the U.S. Government and its prime contractors, which are principally awarded on the basis of negotiations or competitive bids. We compete with various industrial firms, some of which have substantially greater resources than we have available to us. Several of these companies are listed below. We do not believe that any of these individual competitors, nor any small number of these competitors together, are dominant in any of our business areas. o Cubic Corporation; o Scientific-Atlanta, Inc.; o Eaton Corporation; o Thomson Marconi Sonar Ltd.; o Harris Corporation; o Titan Corporation; and o Motorola, Inc.; o TRW Inc. o CAE Electronics Ltd.;
We believe that we will continue to be a successful participant in the business areas in which we compete, based upon the quality and cost competitiveness of our products and services. Commercial Activities Our commercial activities have become an increasingly significant portion of our business mix, and comprised 25.2% of our total sales for the year ended December 31, 2000. Our ability to compete for commercial business depends on a variety of factors, including: o Pricing; o Customer relationships, service and support; and o Product features and performance; o Reliability, scalability and compatibility; o Brand recognition.
16 In these markets, we compete with various companies, several of which are listed below. o Agilent Technologies, Inc.; o Honeywell Inc.; and o Globecomm Systems, Inc.; o Smiths Industries. o ViaSat, Inc.;
We believe that our sales in these business areas will continue to grow as a percentage of our total sales, even though several of our competitors may have greater resources and technologies than we have available to us. PATENTS AND LICENSES Although we own some patents and have filed applications for additional patents, we do not believe that our operations depend upon our ownership of patents. In addition, our U.S. Government contracts generally permit us to use patents owned by others. Similar provisions in U.S. Government contracts awarded to other companies make it impossible for us to prevent the use of our patents in most domestic work performed by other companies for the U.S. Government. CONTRACTS A significant portion of our sales are derived from strategic, long-term programs and from programs for which we are the incumbent supplier or have been the sole provider for many years. Approximately 61% of our sales for the year ended December 31, 2000 were generated from sole-source contracts. Our customer satisfaction and performance record are evidenced by our receipt of performance-based award fees exceeding 90% of the available award fees on average during the year ended December 31, 2000. We believe that our customers will award long-term, sole-source, outsourcing contracts to the most capable merchant supplier in terms of quality, responsiveness, design, engineering and program management support as well as cost. As a consequence of our strong competitive position, for the year ended December 31, 2000 we won contract awards in excess of 57.0% on new competitive contracts that we bid on, and in excess of 90.0% of the contracts for which we were the incumbent supplier. We have a diverse business mix with limited reliance on any single program, a balance of cost-plus and fixed price contracts, a significant sole-source follow-on business and an attractive customer profile. For the year ended December 31, 2000, 28.6% of our sales were generated from cost-plus contracts and 71.4% from fixed price contracts, providing us with a mix of predictable profitability (cost-plus) and higher profit margin (fixed price) business. Under firm fixed price contracts we agree to perform for a predetermined contract price. Although our fixed price contracts generally permit us to keep profits if costs are less than projected, we bear the risk that increased or unexpected costs may reduce profit or cause us to sustain losses on the contracts. Generally, firm fixed price contracts offer higher margins than cost plus type contracts. All domestic defense contracts and subcontracts to which we are a party are subject to audit, various profit and cost controls and standard provisions for termination at the convenience of the U.S. Government. Upon termination other than for a contractor's default, the contractor will normally be entitled to reimbursement for allowable costs and an allowance for profit. Foreign defense contracts generally contain comparable provisions permitting termination at the convenience of the government. To date, none of our significant fixed price contracts have been terminated. Companies supplying defense-related equipment to the U.S Government are subject to certain additional business risks peculiar to that industry. Among these risks are the ability of the U.S. Government to unilaterally suspend a company from new contracts pending resolution of alleged violations of procurement laws or regulations. Other risks include a dependence on appropriations by the U.S. Government, changes in the U.S. Government's procurement policies (such as greater emphasis on competitive procurements) and the need to bid on programs in advance of design completion. A reduction in expenditures by the U.S. Government for products and services of the type we manufacture and provide, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts or subcontracts awarded to us or substantial cost overruns could have an adverse effect on us. 17 ENVIRONMENTAL MATTERS Our operations are subject to various federal, state and local environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations. We continually assess our obligations and compliance with respect to these requirements. We have also assessed the risk of environmental contamination on various manufacturing facilities of our acquired businesses and, where appropriate, have obtained indemnification, either from the sellers of those acquired businesses or through pollution liability insurance. Management believes that our current operations are in substantial compliance with all existing applicable environmental laws and permits. We believe our current expenditures will allow us to continue to be in compliance with applicable environmental laws and regulations. While it is difficult to determine the timing and ultimate costs to be incurred in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations. Despite our current level of compliance, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require us to incur costs in the future that could have a negative effect on our financial condition or results of operations. PENSION PLANS In connection with our acquisition of the predecessor company, we assumed certain liabilities relating to defined benefit pension plans for present and former employees and retirees of certain businesses which were transferred from Lockheed Martin to us. Prior to the consummation of our acquisition of the predecessor company, Lockheed Martin received a letter from the Pension Benefit Guaranty Corporation (the "PBGC") which requested information regarding the transfer of such pension plans and indicated that the PBGC believed certain of such pension plans were underfunded using the PBGC's actuarial assumptions. The PBGC assumptions result in a larger liability for accrued benefits than the assumptions used for financial reporting under Statement of Financial Accounting Standards No. 87. The PBGC underfunding is related to the Communication Systems - -- West and Aviation Recorders pension plans (the "Subject Plans"). With respect to the Subject Plans, Lockheed Martin entered into an agreement (the "Lockheed Martin Commitment") among Lockheed Martin, L-3 Communications and the PBGC dated as of April 30, 1997. The material terms and conditions of the Lockheed Martin Commitment include a commitment by Lockheed Martin to the PBGC to, under certain circumstances, assume sponsorship of the Subject Plans or provide another form of financial support for the Subject Plans. The Lockheed Martin Commitment will continue with respect to any Subject Plan until such time as such Subject Plan is no longer underfunded on a PBGC basis for two consecutive years or, at any time after May 31, 2002, the Company achieves investment grade credit ratings. Pursuant to the Lockheed Martin Commitment, the PBGC agreed that it would take no further action in connection with the L-3 Acquisition. Upon the occurrence of certain events, Lockheed Martin, at its option, has the right to decide whether to cause the Company to transfer sponsorship of any or all of the Subject Plans to Lockheed Martin, even if the PBGC has not sought to terminate the Subject Plans. Such a triggering event occurred in 1998, but reversed in 1999, relating to a decrease in the PBGC-mandated discount rate in 1998 that had resulted in an increase in the underlying liability. We notified Lockheed Martin of the 1998 triggering event, and in February 1999, Lockheed Martin informed the Company that it had no present intention to exercise its right to cause the Company to transfer sponsorship of the Subject Plans. If Lockheed Martin did assume sponsorship of these plans, it would be primarily liable for the costs associated with funding the Subject Plans or any costs associated with the termination of the Subject Plans but L-3 Communications would be required to reimburse Lockheed Martin for these costs. To date, the impact on pension expense and funding requirements resulting from this arrangement has not been significant. However, should Lockheed Martin assume sponsorship of the Subject Plans or if these plans were terminated, the impact of any increased pension expenses or funding requirements could be material to the Company. The Company has performed its obligations under the letter agreement with Lockheed Martin and the 18 Lockheed Martin Commitment and has not received any communications from the PBGC concerning actions which the PBGC contemplates taking in respect of the Subject Plans. EMPLOYEES As of December 31, 2000, we employed approximately 14,000 full-time and part-time employees, the majority of whom are located in the United States. Of these employees, approximately 10.9% are covered by 23 separate collective bargaining agreements with various labor unions. We have a continuing need for skilled and professional personnel to meet contract schedules and obtain new and ongoing orders for our products. We believe that relations with our employees are good. 19 ITEM 2. PROPERTIES The table below sets forth certain information with respect to significant facilities and properties of the Company as of December 31, 2000. LOCATION OWNED LEASED - -------------------------------------------------- --------- --------- (thousands of square feet) L-3 Headquarters, New York, NY ................... -- 35.4 L-3 Washington Operations, Arlington, VA ......... -- 6.3 SECURE COMMUNICATION SYSTEMS: Camden, NJ ...................................... -- 580.6 Arlington, TX ................................... 82.5 182.6 Salt Lake City, UT .............................. -- 497.5 Orlando, FL ..................................... -- 153.6 SPECIALIZED COMMUNICATION PRODUCTS: Anaheim, CA ..................................... 293.6 242.0 Folsom, CA ...................................... -- 57.5 Menlo Park, CA .................................. -- 93.1 San Diego, CA ................................... 196.0 68.9 Sylmar, CA ...................................... -- 253.0 Ocala, FL ....................................... 112.0 -- Sarasota, FL .................................... -- 143.7 Alpharetta, GA .................................. 93.0 -- Concord, MA ..................................... -- 60.0 Newburyport, MA ................................. -- 82.5 Teterboro, NJ ................................... -- 250.0 Binghamton, NY .................................. -- 428.0 Hauppauge, NY ................................... 90.0 149.9 Newton, PA ...................................... 78.0 -- Philadelphia, PA ................................ -- 230.0 Kiel, Germany ................................... -- 67.2 Leer, Germany ................................... -- 26.5 In total, the Company owns approximately 1.1 million square feet and leases approximately 4.5 million square feet of manufacturing facilities and properties. ITEM 3. LEGAL PROCEEDINGS From time to time the Company is involved in legal proceedings arising in the ordinary course of its business. Management believes it is adequately reserved for these liabilities and that there is no litigation pending that could have a material adverse effect on the Company's results of operations and financial condition. On December 27, 2000, we filed a complaint against Raytheon and Raytheon Technical Services Company in the Court of Chancery for the State of Delaware in and for New Castle County, alleging that Raytheon failed to disclose material liabilities in connection with the sale of the Training Devices and Training Service businesses ("TDTS") to us in February 2000. Specifically, the complaint alleges that Raytheon misrepresented the financial liabilities associated with the U.S. Army Aviation Combined Arms Tactical Trainer ("AVCATT") contract which will cause us to incur damages of approximately $100 million. We assumed the AVCATT contract as part of our acquisition of TDTS from Raytheon which was completed in February 2000. The complaint seeks rescission of the TDTS Asset Purchase and Sale Agreement and, alternatively, rescission of the AVCATT contract, rescissory damages and breach of contract. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The common stock of L-3 Holdings is traded on the New York Stock Exchange (the "NYSE") under the symbol "LLL". The following table sets forth, for each of the quarterly periods indicated, the high and low closing price of the common stock as reported on the NYSE. PRICE RANGE OF COMMON STOCK ------------------------- HIGH LOW ----------- ----------- FISCAL YEAR ENDED DECEMBER 31, 1999: Quarter Ended: March 31, 1999 .................. $ 47.88 $ 39.38 June 30, 1999 ................... 52.88 44.31 September 30, 1999 .............. 48.44 36.38 December 31, 1999 ............... 45.13 34.81 FISCAL YEAR ENDED DECEMBER 31, 2000: Quarter Ended: March 31, 2000 .................. $ 51.94 $ 35.69 June 30, 2000 ................... 58.63 45.25 September 30, 2000 .............. 63.75 52.56 December 31, 2000 ............... 77.56 57.19 On March 12, 2001, the closing price of L-3 Holdings common stock, as reported by the NYSE, was $86.85 per share. As of March 12, 2001, there were 152 stockholders of record of L-3 Holdings' common stock, not including the stockholders for whom shares are held in a "nominee" or "street" name. L-3 Communications is a wholly owned subsidiary of L-3 Holdings. DIVIDEND POLICY L-3 Holdings currently intends to retain its earnings to finance future growth and, therefore, does not anticipate paying any cash dividends on its common stock in the foreseeable future. Since its formation, L-3 Holdings has not paid any cash dividends to its stockholders. Any determination as to the payment of dividends will depend upon the future results of operations, capital requirements and financial condition of L-3 Holdings and its subsidiaries and such other facts as the Board of Directors of L-3 Holdings may consider, including any contractual or statutory restrictions on L-3 Holdings' ability to pay dividends. Moreover, L-3 Holdings is a holding company and its ability to pay dividends is dependent upon receipt of dividends, distributions, advances, loans or other cash transfers from L-3 Communications. Certain outstanding debt instruments of L-3 Communications limit its ability to pay dividends or other distributions on its common stock or to make advances, loans or other cash transfers to L-3 Holdings. 21 ITEM 6. SELECTED FINANCIAL DATA We derived the selected financial data presented below as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 from our audited consolidated financial statements included elsewhere herein. We derived the selected financial data presented below as of December 31, 1998 and 1997 and for the nine months ended December 31, 1997 from our audited consolidated financial statements not included herein. We derived the selected financial data presented below as of December 31, 1996, for the three months ended March 31, 1997 and for the year ended December 31, 1996 from the audited combined financial statements of our predecessor company not included herein. You should read the selected financial data together with our "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements.
L-3 PREDECESSOR COMPANY ---------------------------------------------------------- ------------------------ THREE YEAR ENDED NINE MONTHS MONTHS DECEMBER 31, ENDED ENDED YEAR ENDED ----------------------------------------- DECEMBER 31, MARCH 31, DECEMBER 31, 2000(1) 1999(1) 1998(1) 1997(2) 1997 1996(3) ------------- ------------- ------------- ---------------- ---------- ------------- (in millions, except per share data) STATEMENT OF OPERATIONS DATA: Sales ........................................ $ 1,910.1 $ 1,405.5 $ 1,037.0 $ 546.5 $ 158.9 $ 543.1 Operating income ............................. 222.7 150.5 100.3 51.5(4) 7.9 43.7 Interest expense, net of interest and other income ................................ 88.6 55.1 46.9 28.5 8.4 24.2 Provision (benefit) for income taxes ......... 51.4 36.7 20.9 10.7 (0.2) 7.8 Net income (loss) ............................ 82.7 58.7 32.6 12.3(4) (0.3) 11.7 Earnings per common share: -- -- Basic ....................................... $ 2.48 $ 1.83 $ 1.32 $ 0.62(4) -- -- Diluted ..................................... 2.37 1.75 1.26 0.61(4) -- -- Weighted average common shares outstanding: Basic ....................................... 33.4 32.1 24.7 20.0 -- -- Diluted ..................................... 35.0 33.5 25.9 20.0 -- -- BALANCE SHEET DATA (AT PERIOD END): Working capital .............................. $ 360.9 $ 255.5 $ 157.8 $ 143.2 -- $ 98.8 Total assets ................................. 2,463.5 1,628.7 1,285.4 697.0 -- 590.6 Long-term debt ............................... 1,095.0 605.0 605.0 392.0 -- -- Invested equity .............................. -- -- -- -- -- 473.6 Shareholders' equity ......................... 692.6 583.2 300.0 113.7 -- --
- ---------- (1) The results of operations are impacted significantly by our acquisitions described elsewhere herein. (2) Reflects the acquisition of our predecessor company and the commencement of our operations effective April 1, 1997. (3) Reflects our predecessor company's ownership of nine business units acquired by Lockheed Martin from Loral Corporation effective April 1, 1996. Prior to April 1, 1996, the predecessor company was comprised only of one business unit. (4) Includes a nonrecurring, noncash compensation charge of $4.4 million ($0.22 per share) related to our initial capitalization, which we recorded effective April 1, 1997. 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW We are a leading merchant supplier of sophisticated secure communication systems and specialized communication products. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. Our customers include the DoD, certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments and commercial customers. We have two reportable segments: Secure Communication Systems and Specialized Communication Products. Our Secure Communication Systems segment provides secure, high data rate communications systems for military and other U.S. Government reconnaissance and surveillance applications. The Secure Communication Systems segment also produces advanced simulation and training products, and provides communication software support services and a full range of teaching, training, logistic and training device support services to domestic and international customers. Our Specialized Communication Products segment includes three product categories: avionics and ocean products, telemetry, instrumentation and space products and microwave components. All of our domestic government contracts and subcontracts are subject to audit and various cost controls, and include standard provisions for termination for the convenience of the U.S. Government. Multiyear U.S. Government contracts and related orders are subject to cancellation if funds for contract performance for any subsequent year become unavailable. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government. ACQUISITIONS In April 1997, we completed our acquisition of the predecessor company and began operating as L-3. Our predecessor company was comprised of nine business units that Lockheed Martin acquired from Loral Corporation in April 1996 and one business unit purchased by Lockheed Martin as part of its acquisition of the aerospace business of General Electric Company in April 1993. On February 5, 1998, March 4, 1998 and March 30, 1998 we purchased the assets of the Satellite Transmission Systems division of California Microwave, Inc., ILEX Systems and Ocean Systems business of the former AlliedSignal, Inc. for cash of $26.1 million, $54.3 million and $68.8 million. On August 13, 1998, we purchased all of the outstanding stock of SPD Technologies, Inc. for cash of $238.3 million. In August 1999, we issued 150,955 shares of our common stock valued at $6.4 million as additional consideration for the ILEX acquisition based on the 1998 financial performance of ILEX. As of December 31, 2000, we had recorded a liability of $17.7 million for shares of our common stock expected to be issued in 2001 as additional consideration for the ILEX acquisition based on the financial performance of ILEX in 1999 and 2000. There is no other remaining contingent consideration for the ILEX acquisition. On January 8, 1999, we acquired all of the outstanding common stock of Microdyne Corporation for $94.2 million in cash including expenses. On April 16, 1999, we acquired all of the outstanding common stock of Aydin Corporation for $75.7 million in cash including expenses. On June 30, 1999, we acquired all of the outstanding common stock of Interstate Electronics Corporation from Scott Technologies Inc. for $40.7 million in cash incuding expenses. On December 31, 1999, we completed our acquisition of the assets of Space and Navigation Systems from Honeywell Inc. for $55.0 million in cash plus expenses, subject to adjustment. On February 10, 2000, we acquired the assets of the TDTS business of the Raytheon Company for $160.0 million in cash plus expenses, subject to adjustment. Following the acquisition we changed TDTS's name to L-3 Communications Link Simulation and Training. On February 14, 2000, we acquired the assets of Trex Communications Corporation for $50.0 million in cash including expenses. 23 On April 28, 2000, we acquired the Traffic Alert and Collision Avoidance System ("TCAS") product line from Honeywell for a purchase price of $239.6 million in cash including expenses. In anticipation of the TCAS acquisition, on February 25, 2000, we entered into a Memorandum of Agreement with Thomson-CSF Sextant S.A., a subsidiary of Thomson-CSF, under which the parties agreed to create a limited liability corporation for TCAS, contribute 100% of the TCAS assets to be acquired from Honeywell to TCAS LLC, and sell a 30% interest in the TCAS LLC to Sextant for a cash purchase price equal to 30% of the final purchase price we paid to Honeywell for TCAS (approximately $71.7 million). We will consolidate the financial statements of the TCAS LLC. We expect to complete this transaction during the first half of 2001. On June 30, 2000, we acquired all of the outstanding stock of MPRI, Inc. for $35.7 million in cash including expenses, subject to additional consideration not to exceed $4.0 million based on the financial performance of MPRI for the year ending June 30, 2001. On July 11, 2000, we acquired 53.5% of the outstanding common stock of LogiMetrics, Inc. ("LogiMetrics") for a purchase price of $15.0 million, of which $8.5 million was paid in cash at closing and the balance was paid in installments that were completed in the first quarter of 2001. We also agreed to invest an additional $5.0 million in cash during 2001 for additional common stock. On December 29, 2000, we acquired all of the outstanding common stock of Coleman Research Corporation ("Coleman"), a subsidiary of Thermo Electron Corporation for $60.0 million in cash plus expenses, subject to adjustment and additional consideration not to exceed $5.0 million based on the financial performance of Coleman for the year ending December 31, 2001. Additionally, during 1998, 1999 and 2000 we purchased several other operations and product lines, which individually and in the aggregate were not material to our results of operations or financial position. All of our acquisitions have been accounted for as purchase business combinations and are included in our results of operations from their respective effective dates. As described above, on February 10, 2000 we acquired the assets of the TDTS business of Raytheon Company and on April 28, 2000 we acquired the TCAS product line from Honeywell. The rules of the SEC require us to file separate audited financial statements and unaudited pro forma financial information for each of these two acquired businesses for periods prior to their acquisitions within 75 days of the completion of each acquisition. We were unable to complete these SEC filings within their required filing dates because, prior to the acquisitions, each of the operations of TDTS and TCAS were not stand-alone entities and their financial statements were not audited. However, the audits of these financial statements were recently completed and we intend to file the required TDTS and TCAS financial statements and pro forma financial information with the SEC in March 2001. We regularly evaluate potential acquisitions and joint venture transactions, but we have not entered into any agreements with respect to any material transactions at this time. 24 RESULTS OF OPERATIONS The following information should be read in conjunction with our consolidated financial statements. Our results of operations for the periods presented are impacted significantly by our acquisitions. The tables below provide selected income statement data for L-3 for the years ended December 31, 2000, 1999 and 1998. SEGMENT OPERATING DATA
YEAR ENDED DECEMBER 31, ----------------------------------------- 2000 1999 1998 ------------ ------------ ----------- (in millions) Sales(1): Secure Communication Systems .................... $ 847.1 $ 542.9 $ 483.5 Specialized Communication Products .............. 1,063.0 862.6 553.5 --------- --------- --------- Total ........................................ $ 1,910.1 $ 1,405.5 $ 1,037.0 ========= ========= ========= Operating income: Secure Communication Systems .................... $ 91.3 $ 47.0 $ 39.9 Specialized Communication Products .............. 131.4 103.5 60.4 --------- --------- --------- Operating income ............................. $ 222.7 $ 150.5 $ 100.3 ========= ========= ========= Depreciation and amortization expenses included in operating income: Secure Communication Systems .................... $ 26.4 $ 18.4 $ 17.3 Specialized Communication Products .............. 47.9 35.3 23.1 --------- --------- --------- Total ........................................ $ 74.3 $ 53.7 $ 40.4 ========= ========= ========= EBITDA(2) Secure Communication Systems .................... $ 117.7 $ 65.4 $ 57.2 Specialized Communication Products .............. 179.3 138.8 83.5 --------- --------- --------- Total ........................................ $ 297.0 $ 204.2 $ 140.7 ========= ========= =========
- ---------- (1) Sales are after intersegment eliminations. See Note 16 to the consolidated financial statements. (2) EBITDA is defined as operating income plus depreciation expense and amortization expense (excluding the amortization of debt issuance costs). EBITDA is not a substitute for operating income, net income or cash flows from operating activities as determined in accordance with generally accepted accounting principles as a measure of profitability or liquidity. We present EBITDA as additional information because we believe it to be a useful indicator of our ability to meet debt service and capital expenditure requirements. EBITDA as we defined it may differ from similarly named measures used by other entities. YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999 Sales increased $504.6 million to $1,910.1 million in 2000. Sales grew $304.2 million in the Secure Communication Systems segment and $200.4 million in the Specialized Communication Systems. Operating income increased $72.2 million to $222.7 million in 2000. Operating income as a percentage of sales ("operating margin") improved to 11.7% from 10.7%. Depreciation and amortization expenses increased $20.6 million to $74.3 million in 2000, reflecting increased goodwill amortization associated with our acquisitions and additional depreciation related to our capital expenditures and acquired businesses. Our EBITDA for 2000 increased $92.8 million to $297.0 million. EBITDA as a percentage of sales ("EBITDA margin") increased to 15.5% in 2000 from 14.5% in 1999. Basic earnings per share ("EPS") grew 35.5% to $2.48 in 2000 and diluted EPS grew 35.4% to $2.37 in 2000. Basic weighted-average common shares outstanding increased 3.9% in 2000, and diluted weighted-average common shares outstanding increased 4.3% in 2000, primarily because of common stock issued for exercises of employee stock options. Sales of our Secure Communication Systems segment increased $304.2 million to $847.1 million in 2000. Operating income increased $44.3 million in 2000. Operating margin improved to 10.8% from 8.7%. We attribute the increase in sales principally to the acquisitions of Link Training and Simulation and MPRI and increased sales of secure telephone equipment ("STE"), wideband secure data link programs, communication software support services and airport security equipment. The increase in operating margin was principally attributable to improved margin on military communication systems and high data 25 rate communications systems. These margin improvements arose from cost reductions and improved operating efficiencies. Additionally, during 2000 a larger percentage of our sales were generated from fixed-price contracts which generally have higher margins than sales generated from cost-plus contracts. EBITDA increased $52.3 million to $117.7 million in 2000 and EBITDA margin improved to 13.9% from 12.0% in 1999. We expect operating margins for our Secure Communications Systems segment in 2001 to remain relatively unchanged from those in 2000 and we do not expect a significant change in our mix of fixed price and cost-plus contracts from that in 2000. Sales within our Specialized Communication Products segment increased $200.4 million to $1,063.0 milliion in 2000. Operating income increased $27.9 million in 2000. Operating margin improved to 12.4% from 12.0%. We attribute this increase in sales principally to the acquisitions of TCAS and Space and Navigation Systems and volume increases on airborne dipping sonar systems, aviation recorders, and display products. These increases in sales were partially offset by decreased shipments of naval power systems in 2000 compared with 1999 principally due to the slippage of certain sales into 2001 which were previously anticipated to occur in 2000. Sales of our telemetry products were essentially unchanged in 2000 compared with 1999 due to continued softness in the space and broadband commercial communications markets. We attribute our increase in operating margin principally to improved margins on avionics and ocean products. These margin improvements arose from sales volume increases, costs reductions and the higher margins from the TCAS business. Lower margins on our naval power systems due to less shipments and on our telemetry products and microwave components due to changes in product sales mix partially offset these operating margin improvements. EBITDA increased $40.5 million to $179.3 million in 2000 and EBITDA margin improved to 16.9% from 16.1% in 1999. Interest expense increased $32.4 million to $93.0 million in 2000 principally because of the higher average outstanding debt during 2000. Interest and other income decreased $1.1 million to $4.4 million. Interest and other income for 2000 includes gains of $14.9 million from the sales of our interests in certain businesses. These gains were largely offset by losses of $12.4 million on the write-down in the carrying value of certain investments and intangible assets. The net gain contributed $0.04 to our 2000 diluted EPS. Excluding the net gain, diluted EPS was $2.33, an increase of 33.1% in 2000 compared with 1999. The income tax provision for 2000 reflects our effective income tax rate for 2000 of 38.3% compared with the effective tax rate of 38.5% for 1999. YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998 Sales increased $368.5 million to $1,405.5 million in 1999. Sales in the Secure Communication Systems segment grew $59.4 million and sales in the Specialized Communication Products segment grew $309.1 million in 1999. Operating income increased $50.2 million to $150.5 million in 1999. Operating margin improved to 10.7% from 9.7%. Depreciation and amortization expenses increased $13.3 million to $53.7 million in 1999, reflecting increased goodwill amortization associated with our acquisitions and additional depreciation related to our capital expenditures and acquired businesses. Our EBITDA for 1999 increased $63.5 million to $204.2 million. EBITDA margin improved to 14.5% in 1999 from 13.6% in 1998. Basic earnings per common share grew 38.6% to $1.83 in 1999 and diluted earnings per share grew 38.9% to $1.75 in 1999. Basic weighted-average common shares outstanding increased 30.1% in 1999 and diluted weighted-average common shares outstanding increased 29.4% in 1999, principally because of the timing of the issuance of 5.0 million shares of common stock in connection with L-3 Holdings' February 1999 stock offering. Sales within our Secure Communication Systems segment increased $59.4 million to $542.9 million in 1999. Operating income increased $7.1 million to $47.0 million in 1999. Operating margin improved to 8.7% from 8.3%. We attribute this increase in sales to greater sales on the U-2 Support Program, STE and airport security systems and our acquisition of Microdyne. Declines in sales on secure wideband data link programs, communication subsystems for the ISS (International Space Station) and LMD/KP (Local Management Device/Key Processor) units which occurred from the scheduled phasedown of these programs partially offset our sales gains. We attribute the improvement in operating margin to military communication systems and high data rate communication systems. These margin improvements arose 26 from cost reductions and operating efficiencies and sales volume increases on STE, and were partially offset by lower margins from our Microdyne acquired businesses and costs incurred for network security systems. EBITDA increased $8.2 million to $65.4 million in 1999 and EBITDA margin improved to 12.0% from 11.8% in 1998. Sales within our Specialized Communication Products segment increased $309.1 million to $862.6 million in 1999. Operating income increased $43.1 million to $103.5 million in 1999, and operating margin increased to 12.0% from 10.9%. The increase in sales was principally attributable to the timing of our Aydin and IEC acquisitions in 1999 and the SPD and Ocean Systems acquisitions in 1998, as well as volume increases on ocean products, primarily for power distribution, control and conversion systems aviation recorders and space and satellite control products. Lower volume on microwave components and decreased shipments of displays and antenna products partially offset our sales gains. We attribute the increase in operating margin to higher margins on ocean products and aviation recorders caused by volume increases and cost reductions, higher margins from the SPD business and improved margins in 1999 for the STS business acquired in February 1998. Lower operating margins from the Aydin and IEC businesses and lower margins due to declines in sales on microwave components and antenna products partially offset our operating margin improvements. EBITDA increased $55.3 million to $138.8 million in 1999, and EBITDA margin increased to 16.1% from 15.1% in 1998. Interest expense increased $11.0 million to $60.6 million in 1999 because of the higher average outstanding debt during 1999 compared with 1998 principally because of the $200.0 million of senior subordinated notes that we sold in December 1998. Interest and other income for 1999 included $0.4 million for a gain on the sale of a business. The income tax provision for 1999 reflects our effective income tax rate for 1999 of 38.5%, compared with the effective tax rate of 39.1% for 1998. LIQUIDITY AND CAPITAL RESOURCES BALANCE SHEET During 2000, contracts in process increased $221.0 million to $700.1 million at December 31, 2000. The increase included $154.6 million related to acquired businesses, and the remaining increase of $66.4 million was principally from: o increases in unbilled contract receivables principally arising from an increase in programs in production phases, during which unbilled costs and profits generally exceed progress payments and advances received from the customers until contract shipments are completed; and o increases in inventories for production on certain programs and products. The increases in deferred tax assets, property, plant and equipment, intangibles, accrued employment costs, accrued expenses, other current liabilities and other liabilities during 2000 were principally related to acquired businesses. The increase in accounts payable was principally related to balances of acquired businesses and the timing of payments to vendors. The increase in other current liabilities was principally due to increases in estimated costs in excess of billings to complete contracts in process including the AVCATT contract that were assumed as part of the TDTS acquisition. The increase in accrued interest was attributable to higher outstanding debt balances and the timing of interest payments. STATEMENT OF CASH FLOWS The following table provides cash flow statement data:
YEAR ENDED DECEMBER 31, ----------------------------------------- 2000 1999 1998 ----------- ------------ ------------ (in millions) Net cash from operating activities .............. $ 113.8 $ 99.0 $ 85.1 Net cash (used in) investing activities ......... $ (608.2) $ (284.8) $ (472.9) Net cash from financing activities .............. $ 484.3 $ 202.4 $ 336.4
27 OPERATING ACTIVITIES During 2000, we generated $113.8 million of cash from our operating activities, an increase of $14.8 million from the $99.0 million generated during 1999. Earnings adjusted for non-cash items and deferred taxes increased $48.5 million to $200.3 million in 2000 from $151.8 million in 1999. During 2000, our working capital and operating assets and liabilities increased $86.5 million compared with an increase of $52.8 million in 1999. Our cash flows from operating activities during 2000 include uses of cash relating to performance on certain contracts in process including the AVCATT contract that were assumed in the TDTS acquisition for which the estimated costs exceed the estimated billings to complete these contracts. We expect to continue to experience negative impacts on our cash flows as a result of the completion of these TDTS acquired contracts in process during 2001, but to a lesser extent than in 2000. Additionally, we expect our working capital to increase during the first half of 2001 in connection with certain commercial programs and products. During 1999, we generated $99.0 million in cash from operating activities, an increase of $13.9 million over 1998. Earnings adjusted for non-cash items and deferred taxes increased $55.6 million to $151.8 million in 1999 from $96.2 million in 1998. During 1999 our working capital and other operating assets and liabilities increased $52.8 million compared with an increase of $11.1 million in 1998. The increase was principally related to the greater working capital requirements primarily for contracts in process. INVESTING ACTIVITIES We continued to pursue our acquisition strategy during 2000 and invested $599.6 million to acquire businesses, compared with $272.2 million in 1999. We used $448.0 million in 1998 to acquire businesses. We make capital expenditures for improvement of manufacturing facilities and equipment. We expect that our capital expenditures for the year ending December 31, 2001 will be between $40.0 million and $45.0 million, compared with $33.6 million for the year ended December 31, 2000. The anticipated increase is principally due to capital expenditures for our acquired businesses. Dispositions of property, plant and equipment for 2000 includes net proceeds of $13.3 million related to a facility located in Hauppauge, NY which we sold and leased back in December 2000. In 2000, we sold our interests in two businesses for net cash proceeds of $19.6 million, which are included in other investing activities. FINANCING ACTIVITIES At December 31, 2000, available revolver borrowings under our senior credit facilities were $400.9 million after reductions for outstanding borrowings of $190.0 million used principally to finance acquisitions and outstanding letters of credit of $109.1 million. At December 31, 1999, there were no borrowings outstanding under our senior credit facilities. On April 28, 2000 we entered into a new 364-day revolving senior credit facility for $300.0 million that expires on April 27, 2001, which increased our senior credit facilities to $700.0 million. On April 28, 2000 we borrowed $237.0 million under the facility to finance the TCAS acquisition. These borrowings were repaid in November 2000 with a portion of the proceeds from our offering of the convertible senior subordinated notes which are described below. At December 31, 2000, there were no borrowings outstanding under this credit facility. Additionally, on April 28, 2000 we amended all of the senior credit facilities to change the spreads used to calculate the interest rates on borrowings and commitment fees on the unused commitments under the senior credit facilities. The spreads are the same for all senior credit facilities, and the lenders all rank pari passu under our senior credit facilities. In August 2000, the other outstanding revolving 364-day credit facility for $200.0 million that was scheduled to expire was renewed for an additional 364 days and will expire on August 9, 2001. At that time, we may extend the term, with the consent of our lenders, for a period of 364 days and we also may exercise an option to convert 80% of the borrowings outstanding into term loans which fully amortize over an eighteen month period beginning September 30, 2001. During the first half of 2001 we intend to restructure our $300.0 million 364-day revolving credit facility that expires April 27, 2001 together with all of our senior credit facilities to extend their maturities. 28 In the fourth quarter of 2000 L-3 Holdings sold $300.0 million of 5.25% Convertible Senior Subordinated Notes due 2009 (the "Convertible Notes") in a private placement. The net proceeds from this offering amounted to $290.5 million after debt issuance costs, and were used to repay revolver borrowings outstanding under our senior credit facilities. The Convertible Notes may be converted at any time into our common stock at a conversion price of $81.50 per share. The Convertible Notes are jointly and severally guaranteed (the "Guarantees") by certain existing and future direct and indirect domestic subsidiaries of L-3 Holdings, including L-3 Communications (the "Guarantors"). The Guarantees are subordinated in right of payment to all existing and future senior debt of the Guarantors and rank pari passu with the other senior subordinated indebtedness of the Guarantors, which are described below. Pursuant to a registration rights agreement that we entered into with the initial purchaser of the Convertible Notes, we agreed to file a registration statement with the SEC by April 5, 2001, which is 135 days after the original issuance of the notes to cover resales by holders of the Convertible Notes and Guarantees, and the L-3 Holdings common stock issuable upon conversion of the notes. If we do not file the registration statement with the SEC on or before April 5, 2001, liquidated damages, in the form of additional interest, will accrue on the Convertible Notes from April 5, 2001 to but excluding the day on which the registration statement is filed. In no event will liquidated damages exceed 0.50% per annum of the principal amount outstanding under the notes. We expect to file the registration statement with the SEC by the end of March 2001. On February 4, 1999, we sold 5.0 million shares of L-3 Holdings common stock in a public offering for $42.00 per share which generated net proceeds of $201.6 million. In addition, as part of the same transaction 6.5 million shares of L-3 Holdings common stock were sold by Lehman Brothers Capital Partners III, L.P. and its affiliates ("the Lehman Partnership") and Lockheed Martin in a secondary public offering. In October 1999, Lockheed Martin sold its remaining L-3 Holdings common stock. In December 1999, the Lehman Partnership distributed approximately 3.8 million shares of its shares of common stock of L-3 Holdings to its partners. On December 31, 2000 the Lehman Partnership owned approximately 16.4% of the outstanding common stock of L-3 Holdings. In April 1997, May 1998 and December 1998, L-3 Communications sold $225.0 million of 10 3/8% Senior Subordinated Notes due 2007, $180.0 million of 81/2% Senior Subordinated Notes due 2008, and $200.0 million of 8% Senior Subordinated Notes due 2008 (collectively, the "Senior Subordinated Notes"), whose aggregate net proceeds amounted to $576.0 million after debt issuance costs. The senior credit facilities, Senior Subordinated Notes and Convertible Notes contain financial covenants which remain in effect so long as we owe any amount or any commitment to lend exists thereunder. As of December 31, 2000, L-3 Communications had been in compliance with the covenants of the agreements governing those loans at all times. The borrowings under the senior credit facilities are guaranteed by L-3 Holdings and by substantially all of the domestic subsidiaries of L-3 Communications. The payments of principal and premium, if any, and interest on the Senior Subordinated Notes are unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by L-3 Holdings and substantially all of its direct and indirect wholly owned subsidiaries, including L-3 Communications. See Note 7 to our consolidated financial statements for a description of our debt and related financial covenants at December 31, 2000. Based upon our current level of operations, we believe that our cash from operating activities, together with available borrowings under the senior credit facilities, will be adequate to meet our anticipated requirements for working capital, capital expenditures, research and development expenditures, program and other discretionary investments, and interest payments for the foreseeable future, including at least the next three years. There can be no assurance, however, that our business will continue to generate cash flow at current levels, or that currently anticipated improvements will be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the defense industry and to general economic, political, 29 financial, competitive, legislative and regulatory factors beyond our control. There can be no assurance that sufficient funds will be available to enable us to service our indebtedness, to make necessary capital expenditures and to make discretionary investments. MARKET RISKS All of our financial instruments that are sensitive to market risk are entered into for purposes other than trading. INTEREST RATE RISK. Our financial instruments that are sensitive to changes in interest rates include borrowings under the senior credit facilities, purchased interest rate cap contracts and written interest rate floor contracts, all of which are denominated in U.S. dollars. The weighted average interest rate on our borrowings outstanding under the senior credit facilities at December 31, 2000 was 8.5%. The interest rates on the Senior Subordinated Notes and Convertible Notes are fixed-rate and are not affected by changes in interest rates. To mitigate risks associated with changing interest rates on borrowings under the senior credit facilities that bear interest at variable rates we entered into interest rate cap and floor contracts. The interest rate cap contract provides protection against increases in interest rates on borrowings to the extent: o those borrowings are less than or equal to the notional amount of the cap contract; and o the interest rate paid on the borrowings rises above the sum of the cap reference rate plus our applicable borrowing spread. However, the written interest rate floor limits our ability to enjoy decreases in interest rates on our borrowings to the extent: o those borrowings are less than or equal to the notional amount of the floor contract; and o the interest rate paid on those borrowings falls below the sum of the floor reference rate plus our applicable borrowing spread. We attempt to manage exposure to counterparty credit risk by entering into interest rate agreements only with major financial institutions that are expected to perform fully under the terms of such agreements. Cash payments between us and the counterparties are made at the end of each quarter. Such payments are recorded as adjustments to interest expense and were not material to interest expense or cash flows for 2000, 1999 or 1998. Additional data on our debt obligations, our applicable borrowing spreads included in the interest rates we pay on borrowings under the senior credit facilities and interest rate agreements are provided in Notes 7 and 8 to our consolidated financial statements. For the interest rate agreements, the table below presents significant contract terms and fair values on December 31, 2000. CAPS FLOORS ------------------ --------------- (in millions) Notional amount ................. $ 100.0 $ 50.0 Cap/floor interest rate ......... 7.5% 5.5% Reference rate .................. 3 month LIBOR 3 month LIBOR Designated maturity ............. Quarterly Quarterly Expiration date ................. March 28, 2002 March 28, 2002 Fair value ...................... -- ($0.1) FOREIGN CURRENCY EXCHANGE RISK. We conduct some of our operations outside the U.S. in functional currencies other than the U.S. dollar. Additionally, some of our U.S. operations have contracts with foreign customers denominated in foreign currencies. To mitigate the risk associated with certain of these contracts denominated in foreign currency we have entered into foreign currency forward contracts. At December 31, 2000, the notional value of foreign currency forward contracts was $6.9 million and the fair value of these contracts was $0.4 million. We account for these contracts as hedges. 30 EQUITY PRICE RISK. Our investments in common equities are subject to equity price risk. Both the carrying values and estimated fair values of such instruments amounted to $9.0 million at the end of 2000. There were no significant changes in our market risks during 2000. BACKLOG AND ORDERS We define funded backlog as the value of contract awards received from the U.S. Government, which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government which have yet to be recognized as sales. Our funded backlog as of December 31, 2000 was $1,354.0 million and as of December 31, 1999 was $1,003.7 million. We expect to record as sales approximately 72% of our December 31, 2000 funded backlog during 2001. However, there can be no assurance that our funded backlog will become sales in any particular period, if at all. Our funded orders were $2,013.7 for 2000, $1,423.1 million for 1999 and $1,057.0 million for 1998. Our funded backlog does not include the full value of our contract awards including those pertaining to multi-year, cost-plus reimbursable contracts, which are generally funded on an annual basis. Funded backlog also excludes the sales value of unexercised contract options that may be exercised by customers under existing contracts and the sales value of purchase orders that may be issued under indefinite quantity contracts or basic ordering agreements. RESEARCH AND DEVELOPMENT Company-sponsored research and development costs including bid and proposal costs were $101.9 million for 2000, $76.1 million for 1999, and $59.9 million for 1998. Customer-funded research and development were $299.3 million for 2000, $226.3 million for 1999, and $181.4 million for 1998. CONTINGENCIES We are engaged in providing products and services under contracts with the U.S. Government and to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, periodically, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under government procurement regulations, an indictment by a federal grand jury could result in the suspension for a period of time from eligibility for awards of new government contracts. A conviction could result in debarment from contracting with the federal government for a specified term. Additionally, in the event that U.S. Government expenditures for products and services of the type we manufacture and provide are reduced, and not offset by greater commercial sales or other new programs or products, or acquisitions, there may be a reduction in the volume of contracts or subcontracts awarded to us. We continually assess our obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost to be incurred in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations. Also, we have been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to our business. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to those investigative actions, items of litigation, claims or assessments of which we are aware, we are of the opinion that the probability is remote that, after taking into account certain provisions that have been made with respect to these matters, the ultimate resolution of any such investigative actions, items of litigation, claims or assessments will have a material adverse effect on our financial position or results of operations. On December 27, 2000, we filed a complaint against Raytheon and Raytheon Technical Services Company in the Court of Chancery for the State of Delaware in and for New Castle County, alleging that 31 Raytheon failed to disclose material liabilities in connection with the sale of TDTS to us in February 2000. Specifically, the complaint alleges that Raytheon misrepresented the financial liabilities associated with the AVCATT contract which will cause us to incur damages of approximately $100 million. We assumed the AVCATT contract as part of our acquisition of TDTS from Raytheon which was completed in February 2000. The complaint seeks rescission of the TDTS Asset Purchase and Sale Agreement and alternatively, rescission of the AVCATT contract, rescissory damages and breach of contract. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value and is effective for all quarters of fiscal years beginning after June 15, 2000. We do not expect SFAS 133 to have a material impact on our consolidated results of operations or financial position. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"), which replaces SFAS 125. SFAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS 125's provisions without reconsideration. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. We do not expect SFAS 140 to have a material impact on our consolidated results of operations or financial position. In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation -- An Interpretation of APB Opinion No. 25 ("FIN 44"). FIN 44 clarifies the definition of an employee for purposes of calculating stock-based compensation, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of previously fixed stock options or awards, and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is primarily effective July 1, 2000, with some provisions effective earlier. We have adopted the accounting and disclosures required by FIN 44 for all periods presented. INFLATION The effect of inflation on our sales and earnings has not been significant. Although a majority of our sales are made under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to be incurred in these future periods. In addition, some contracts provide for price adjustments through escalation clauses. FORWARD-LOOKING STATEMENTS Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance, and financial condition, including in particular, the likelihood of our success in developing and expanding our business and the realization of sales from backlog, include forward- looking statements within the meaning of section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are predictive in nature, that depend upon or refer to events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures and other projections, they are subject to several risks and uncertainties, and therefore, we can give no assurance that these statements will be achieved. 32 Such statements will also be influenced by factors such as: o our dependence on the defense industry and the business risks peculiar to that industry including changing priorities or reductions in the U.S. Government defense budget; o our reliance on contracts with a limited number of agencies of, or contractors to, the U.S. Government and the possibility of termination of government contracts by unilateral government action or for failure to perform; o the ability to obtain or the timing of obtaining future government contracts; o the availability of government funding and customer requirements; o economic conditions, competitive environment, international business and political conditions, timing of international awards and contracts; o our extensive use of fixed price contracts as compared to cost plus contracts; o our ability to identify future acquisition candidates or to integrate acquired operations; o the rapid change of technology in the communication equipment industry; o the high level of competition in the communications equipment industry; o our introduction of new products into commercial markets or our investments in commercial products or companies; o the significant amount of our debt and the restrictions contained in our debt agreements; o collective bargaining agreements and labor disputes; and o pension, environmental or legal matters or proceedings and various other market, competition and industry factors, many of which are beyond our control. Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes or circumstances or changes in expectations or the occurrence of anticipated events. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Data regarding quantitative and qualitative disclosures related to the Company's market risk sensitive financial instruments are presented in "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources -- Market Risks" included herein under Item 7 and in Note 8 to the consolidated financial statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Financial Statements beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 33 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information concerning the directors and executive officers of the Registrants as of March 7, 2001.
NAME AGE POSITION - ----------------------------------- ----- ------------------------------------------------ Frank C. Lanza .................... 69 Chairman, Chief Executive Officer and Director Robert V. LaPenta ................. 55 President, Chief Financial Officer and Director Michael T. Strianese .............. 44 Vice President -- Finance Christopher C. Cambria ............ 42 Vice President -- General Counsel and Secretary David T. Butler III ............... 44 Vice President -- Planning Lawrence W. O'Brien ............... 51 Vice President -- Treasurer Joseph S. Paresi .................. 45 Vice President -- Product Development Lawrence H. Schwartz .............. 63 Vice President -- Business Development Jimmie V. Adams ................... 64 Vice President -- Washington D.C. Operations Robert W. RisCassi ................ 64 Vice President -- Washington D.C. Operations Charles J. Schafer ................ 53 Vice President -- Business Operations Ralph G. D'Ambrosio ............... 33 Controller David J. Brand(1) ................. 39 Director Thomas A. Corcoran ................ 56 Director Alberto M. Finali ................. 46 Director Robert B. Millard(2) .............. 50 Director John E. Montague(2) ............... 46 Director John M. Shalikashvili(1) .......... 64 Director Arthur L. Simon(1) ................ 69 Director Alan H. Washkowitz(2) ............. 60 Director
- ---------- (1) Member of the Audit Committee. (2) Member of the Compensation Committee. All Executive Officers serve at the discretion of the Board of Directors. The remaining information called for by Item 10 is incorporated herein by reference to the definitive proxy statement relating to Annual Meeting of Shareholders of L-3 Holdings, to be held on April 26, 2001. L-3 Holdings will file such definitive proxy statement with the Securities and Exchange Commission pursuant to regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by Item 12 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Item 13 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. 34 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:
PAGE NUMBER ------- Report of Independent Auditors ....................................................... F-2 Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999 ............ F-3 Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 ................................................................................ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998 ....................................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 ................................................................................ F-6 Notes to Consolidated Financial Statements ........................................... F-7
(a) 2. FINANCIAL STATEMENT SCHEDULES Not applicable (b) REPORTS FILED ON FORM 8-K. Report filed on November 16, 2000 regarding the planned offer of Convertible Senior Subordinated Notes due 2009 in a private placement. Report filed on November 17, 2000 regarding the sale of Convertible Senior Subordinated Notes due 2009 in a private placement. (c) EXHIBITS Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference to such previous filings.
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ------------- ---------------------- 3.1 Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement of Form S-1 No. 333-46975). 3.2 By laws of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 No. 333-46975) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.3 Indenture dated as of April 30, 1997 between L-3 Communications Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-31649). 10.6 Employment Agreement dated April 30, 1997 between Frank C. Lanza and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.7 Employment Agreement dated April 30, 1997 between Robert V. LaPenta and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.51 to the Registrant Statement on Form S-1 No. 333-46975). 10.10 Form of Stock Option Agreement of Employee Options (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.11 1997 Stock Option Plan for Key Employees (incorporated by reference to Exhibit 10.11 to Registrant's Registration Statement on Form S-1, No. 333-70125).
35
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------------- ---------------------- 10.12 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Frank C. Lanza (incorporated by reference to Exhibit 10.12 to Registrant" Registration Statement on Form S-1, No. 333-70125). 10.13 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Robert V. LaPenta (incorporated by reference to Exhibit 10.13 to Registrant's Registration Statement on Form S-1, No. 333-70125). 10.15 Option Plan for Non-Employee Directors of L-3 Communication's Holdings, Inc. (incorporated by reference to Exhibit 10.15 to Registrant's annual report on Form 10-K filed on March 31, 1999). 10.16 1999 Long Term Performance Plan dated as of April 27, 1999 (incorporated by reference to Exhibit 10.16 to the Registrant's annual report on Form 10-K filed on March 30, 2000). 10.20 L-3 Communications Corporation Pension Plan (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.31 Indenture dated as of May 22, 1998 between L-3 Communications Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.6 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-70199). 10.32 Indenture dated as of December 11, 1998 among L-3 Communications Corporation, the Guarantors named therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.32 to Registrant's Registration Statement on Form S-1, No. 333-70125). **10.33 Indenture dated as of November 21, 2000 among L-3 Communications Holdings, Inc., the Guarantors named therein and the Bank of New York, as Trustee. **10.34 Purchase Agreement dated as of November 21, 2000 between L-3 Communications Holdings, Inc. and Lehman Brothers Inc. **10.35 Registration Rights Agreement dated as of November 21, 2000 among L-3 Communications Holdings, Inc., the Guarantors included therein and Lehman Brothers Inc. **10.40 Consent, Waiver and First Amendment to Amended and Restated 364 Day Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.41 Consent, Waiver and First Amendment to Second Amended and Restated Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.42 Consent, Waiver and First Amendment to New 364 Day Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.43 New 364 Day Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.44 Amended and Restated 364 Day Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.45 Second Amended and Restated Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.46 Consent and Third Amendment to Amended and Restated 364 Day Credit Agreement dated as of November 16, 2000 among L-3 Communications Corporation and lenders named therein. **10.47 Consent and Second Amendment to New 364 Day Credit Agreement dated as of November 16, 2000 among L-3 Communications Corporation and lenders named therein. **10.48 Consent and Second Amendment to Second Amended and Restated Credit Agreement dated as of November 16, 2000 among L-3 Communications Corporation and lenders named therein. **10.91 Asset Purchase Agreement relating to the Honeywell TCAS Business by and among Honeywell Inc., L-3 Communications Corporation and, solely in respect of the Guaranty in Article XIV, Honeywell International Inc. dated as of February 10, 2000. **10.92 Asset Purchase and Sale Agreement, dated January 7, 2000 by and between L-3 Communications Corporation and Raytheon Company. *11 L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share. **12 Ratio of Earnings to Fixed Charges. **21 Subsidiaries of the Registrant. **23.1 Consent of PricewaterhouseCoopers LLP.
36 - ---------- * The information required in this exhibit is presented on Note 10 to the Consolidated Financial Statements as of December 31, 2000 in accordance with the provisions of SFAS No. 128, Earnings Per Share. ** Filed herewith 37 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized, on March 9, 2001. L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION By: /s/ Robert V. LaPenta ------------------------------------ Name: Robert V. LaPenta Title: President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrants on March 9, 2001 and in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ Frank C. Lanza Chairman, Chief Executive Officer (Principal - --------------------------------- Executive Officer) and Director Frank C. Lanza /s/ Robert V. LaPenta President, Chief Financial Officer (Principal Financial - --------------------------------- Officer) and Director Robert V. LaPenta /s/ Michael T. Strianese Vice President -- Finance (Principal Accounting - --------------------------------- Officer) Michael T. Strianese /s/ David J. Brand Director - --------------------------------- David J. Brand /s/ Thomas A. Corcoran Director - --------------------------------- Thomas A. Corcoran /s/ Alberto M. Finali Director - --------------------------------- Alberto M. Finali /s/ Robert B. Millard Director - --------------------------------- Robert B. Millard /s/ John E. Montague Director - --------------------------------- John E. Montague /s/ John M. Shalikashvili Director - --------------------------------- John M. Shalikashvili /s/ Arthur L. Simon Director - --------------------------------- Arthur L. Simon /s/ Alan H. Washkowitz Director - --------------------------------- Alan H. Washkowitz
38 INDEX TO FINANCIAL STATEMENTS Consolidated Financial Statements as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998. Report of Independent Auditors ....................................................... F-2 Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999 ............ F-3 Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 ................................................................................ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998 ....................................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 ................................................................................ F-6 Notes to Consolidated Financial Statements ........................................... F-7
F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of L-3 Communications Holdings, Inc. We have audited the accompanying consolidated balance sheets of L-3 Communications Holdings, Inc. ("L-3 Holdings") and L-3 Communications Corporation ("L-3 Communications") and subsidiaries (collectively, the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of L-3 Holdings and L-3 Communications as of December 31, 2000 and 1999, their respective consolidated results of operations and cash flows for each of the three years ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York February 6, 2001 F-2 L-3 COMMUNICATIONS HOLDINGS , INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, ------------------------------ 2000 1999 -------------- ------------- ASSETS Current assets: Cash and cash equivalents ................................. $ 32,680 $ 42,788 Contracts in process ...................................... 700,133 479,143 Deferred income taxes ..................................... 89,732 32,985 Other current assets ...................................... 7,025 7,761 ---------- ---------- Total current assets .................................... 829,570 562,677 ---------- ---------- Property, plant and equipment, net ......................... 156,128 140,971 Intangibles, primarily goodwill ............................ 1,371,368 821,552 Deferred income taxes ...................................... 57,111 56,858 Other assets ............................................... 49,367 46,683 ---------- ---------- Total assets ............................................ $2,463,544 $1,628,741 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade ................................... $ 159,901 $ 98,693 Accrued employment costs .................................. 102,606 70,618 Accrued expenses .......................................... 55,576 29,030 Customer advances ......................................... 55,203 56,738 Accrued interest .......................................... 16,335 12,683 Income taxes .............................................. 7,251 2,715 Other current liabilities ................................. 71,797 36,680 ---------- ---------- Total current liabilities ............................... 468,669 307,157 ---------- ---------- Pension and postretirement benefits ........................ 105,523 110,262 Other liabilities .......................................... 101,783 23,147 Long-term debt ............................................. 1,095,000 605,000 Commitments and contingencies Shareholders' equity: L-3 Holdings' common stock; $.01 par value; authorized 100,000,000 shares, issued and outstanding 33,606,645 and 32,794,547 shares (L-3 Communications' common stock; $.01 par value, 100 shares authorized, issued and outstanding) ............................................ 515,926 483,694 Retained earnings ......................................... 186,272 103,545 Unearned compensation ..................................... (2,457) (1,661) Accumulated other comprehensive loss ...................... (7,172) (2,403) ---------- ---------- Total shareholders' equity ................................. 692,569 583,175 ---------- ---------- Total liabilities and shareholders' equity .............. $2,463,544 $1,628,741 ========== ==========
See notes to consolidated financial statements. F-3 L-3 COMMUNICATIONS HOLDINGS , INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, --------------------------------------------------- 2000 1999 1998 --------------- --------------- --------------- Sales ...................................... $ 1,910,061 $ 1,405,462 $ 1,037,045 Costs and expenses ......................... 1,687,343 1,254,976 936,696 ----------- ----------- ----------- Operating income ........................... 222,718 150,486 100,349 Interest and other income .................. 4,393 5,534 2,659 Interest expense ........................... 93,032 60,590 49,558 ----------- ----------- ----------- Income before income taxes ................. 134,079 95,430 53,450 Provision for income taxes ................. 51,352 36,741 20,899 ----------- ----------- ----------- Net income ................................. $ 82,727 $ 58,689 $ 32,551 =========== =========== =========== L-3 Holdings' earnings per common share: Basic ..................................... $ 2.48 $ 1.83 $ 1.32 =========== =========== =========== Diluted ................................... $ 2.37 $ 1.75 $ 1.26 =========== =========== =========== L-3 Holdings' weighted average common shares outstanding: Basic ..................................... 33,355 32,107 24,679 =========== =========== =========== Diluted ................................... 34,953 33,516 25,900 =========== =========== ===========
See notes to consolidated financial statements. F-4 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
L-3 HOLDINGS' COMMON STOCK ACCUMULATED ------------------ ADDITIONAL OTHER SHARES PAR PAID-IN RETAINED UNEARNED COMPREHENSIVE ISSUED VALUE CAPITAL EARNINGS COMPENSATION INCOME (LOSS) TOTAL -------- ------- ----------- ---------- -------------- -------------- ----------- Balance December 31, 1997 ...... 17,056 $171 $101,191 $ 12,305 $113,667 Comprehensive income: Net income .................... 32,551 32,551 Minimum pension liability adjustment, net of tax ....... $ (9,514) (9,514) Foreign currency translation adjustment ................... (137) (137) -------- 22,900 Shares issued: Sale of common stock .......... 6,900 69 139,431 139,500 Employee benefit plans ........ 22 -- 967 967 Exercise of stock options ..... 480 5 3,887 3,892 Conversion of common stock subject to repurchase agreement ......... 2,944 29 19,019 19,048 ------ ---- -------- ------- -------- -------- -------- Balance December 31, 1998 ...... 27,402 274 264,495 44,856 (9,651) 299,974 Comprehensive income: Net income .................... 58,689 58,689 Minimum pension liability adjustment, net of tax ....... 9,443 9,443 Unrealized loss on securities, net of tax ....... (970) (970) Foreign currency translation adjustment ................... (1,225) (1,225) -------- 65,937 Shares issued: Sale of common stock .......... 5,000 50 201,763 201,813 Employee benefit plans ........ 163 2 6,991 6,993 Acquisition consideration ..... 151 2 6,432 6,434 Exercise of stock options ..... 79 -- 1,764 1,764 Grant of restricted stock ...... 1,921 $ (1,921) -- Amortization of unearned compensation .................. 260 260 ------ ---- -------- ------- -------- -------- -------- Balance December 31, 1999 ...... 32,795 328 483,366 103,545 (1,661) (2,403) 583,175 Comprehensive income: Net income .................... 82,727 82,727 Minimum pension liability adjustment, net of tax ....... (819) (819) Foreign currency translation adjustment ................... (1,222) (1,222) Unrealized loss on securities, net of tax ....... (2,728) (2,728) -------- 77,958 Shares issued: Employee benefit plans ........ 235 2 12,640 12,642 Exercise of stock options ..... 577 6 18,056 18,062 Grant of restricted stock ...... 1,512 (1,512) -- Amortization of unearned compensation .................. 716 716 Other .......................... 16 16 ------ ---- -------- ------- -------- -------- -------- Balance December 31, 2000 ...... 33,607 $336 $515,590 $186,272 $ (2,457) $ (7,172) $692,569 ====== ==== ======== ======== ======== ======== ========
See notes to consolidated financial statements. F-5 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, -------------------------------------------- 2000 1999 1998 ------------ ------------- ------------- OPERATING ACTIVITIES: Net income ...................................................... $ 82,727 $ 58,689 $ 32,551 Goodwill amortization ........................................... 35,327 20,970 13,966 Depreciation and other amortization ............................. 38,927 32,748 26,389 Amortization of deferred debt issue costs ....................... 5,724 3,904 2,564 Deferred income tax provision ................................... 25,103 28,831 19,786 Other noncash items ............................................. 12,517 6,617 967 Changes in operating assets and liabilities, net of amounts acquired: Contracts in process ........................................... (66,402) (61,670) (23,807) Other current assets ........................................... (2,599) (70) 48 Other assets ................................................... (416) 552 (376) Accounts payable ............................................... 38,065 2,896 23,480 Accrued employment costs ....................................... 6,239 2,052 8,653 Accrued expenses ............................................... 2,274 (6,280) (90) Customer advances .............................................. (17,087) 5,766 (12,132) Accrued interest ............................................... 3,637 5,985 2,279 Income taxes ................................................... 13,161 3,917 331 Other current liabilities ...................................... (59,286) (13,554) (12,281) Pension and postretirement benefits ............................ (7,214) 1,788 18 Other liabilities .............................................. 1,959 7,102 2,873 All other operating activities ................................. 1,149 (1,225) (137) ---------- ---------- ---------- Net cash from operating activities .............................. 113,805 99,018 85,082 ---------- ---------- ---------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired ................. (599,608) (272,195) (447,988) Proceeds from net assets held for sale .......................... -- -- 6,653 Capital expenditures ............................................ (33,580) (23,456) (23,429) Disposition of property, plant and equipment .................... 18,060 6,713 970 Other investing activities ...................................... 6,905 4,136 (9,069) ---------- ---------- ---------- Net cash (used in) investing activities ......................... (608,223) (284,802) (472,863) ---------- ---------- ---------- FINANCING ACTIVITIES: Repayment of borrowings under term loan facilities .............. -- -- (172,000) Borrowings under revolving credit facility ...................... 858,500 74,700 367,000 Repayment of borrowings under revolving credit facility ......... (668,500) (74,700) (367,000) Proceeds from sale of senior subordinated notes ................. -- -- 380,000 Proceeds from sale of convertible senior subordinated notes 300,000 -- -- Proceeds from sale of L-3 Holdings' common stock, net ........... -- 201,582 139,500 Debt issuance costs ............................................. (12,916) (323) (14,173) Proceeds from exercise of stock options ......................... 8,954 658 3,110 Other financing activities ...................................... (1,728) 525 -- ---------- ---------- ---------- Net cash from financing activities .............................. 484,310 202,442 336,437 ---------- ---------- ---------- Net increase (decrease) in cash ................................. (10,108) 16,658 (51,344) Cash and cash equivalents, beginning of period .................. 42,788 26,130 77,474 ---------- ---------- ---------- Cash and cash equivalents, end of period ........................ $ 32,680 $ 42,788 $ 26,130 ========== ========== ==========
See notes to consolidated financial statements. F-6 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. DESCRIPTION OF BUSINESS L-3 Communications Holdings, Inc. derives all its operating income and cash flow from its wholly-owned subsidiary L-3 Communications Corporation ("L-3 Communications"). L-3 Communications Holdings, Inc. ("L-3 Holdings", and together with its subsidiaries, "L-3" or "the Company") is a merchant supplier of sophisticated secure communication systems and specialized communication products. The Company produces secure, high data rate communication systems, training and simulation systems avionics and ocean products, telemetry, instrumentation and space products and microwave components. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. The Company's systems and specialized products are used to connect a variety of airborne, space, ground- and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems. The Company's customers include the U.S. Department of Defense ("DoD"), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other U.S. Government agencies. The Company has two reportable segments, Secure Communication Systems and Specialized Communication Products. Secure Communication Systems. This segment provides secure, high data rate communications systems for military and other U.S. Government reconnaissance and surveillance applications. The major secure communication programs and systems include: o secure data links for airborne, satellite, ground- and sea-based remote platforms for real time information collection and dissemination to users; o strategic and tactical signal intelligence systems that detect, collect, identify, analyze and disseminate information; o secure telephone and network equipment and encryption management; o communication software support services; and o communication systems for surface and undersea vessels and manned space flights. The Secure Communication Systems segment includes the training and simulation business, which produces advanced simulation and training products, with high-fidelity representations of cockpits and operator stations for aircraft and vehicle system simulation. This segment also provides a full range of teaching, training, logistic and training device support services to domestic and international military customers, and ballistic targets for the DoD. Specialized Communication Products. This segment supplies products to military and commercial customers, and focuses on niche markets in which the Company believes it can achieve a market leadership position. This reportable segment includes three product categories: o avionics and ocean products including aviation recorders, airborne collision avoidance products, displays, antennas, acoustic undersea warfare products and naval power distribution, conditioning, switching and protection equipment; o telemetry, instrumentation and space products including commercial off-the-shelf, real-time data collection and transmission products and components for missile, aircraft and space-based electronic systems; and o microwave components including commercial off-the-shelf, high-performance microwave components and frequency monitoring equipment. F-7 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying financial statements comprise the consolidated financial statements of L-3 Holdings and L-3 Communications. L-3 Holdings' only asset is its investment in L-3 Communications. The only debt obligation of L-3 Holdings are the 5.25% Convertible Senior Subordinated Notes. L-3 Holdings has also guaranteed the borrowings under the senior credit facilities of L-3 Communications. Because the 5.25% Convertible Senior Subordinated Notes of L-3 Holdings have been jointly, severally, fully and unconditionally guaranteed by L-3 Communications and certain of its domestic subsidiaries, such debt has been reflected as debt of L-3 Communications in its consolidated financial statement in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 54. In addition, all issuances of equity securities including grants of stock options and restricted stock by L-3 Holdings to employees of L-3 Communications have been reflected in the consolidated financial statements of L-3 Communications. As a result, the consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the Company include all wholly owned and significant majority-owned subsidiaries. Investments over which the Company has significant influence but does not have voting control are accounted for by the equity method. CASH AND CASH EQUIVALENTS: Cash equivalents consist of highly liquid investments with a maturity of three months or less at time of purchase. REVENUE RECOGNITION: Sales on production-type contracts which are within the scope of the American Institute of Certified Public Accountants Statement of Position 81-1 Accounting for Performance of Construction-Type and Certain Production-Type Contracts ("SOP 81-1") are recorded as units are shipped and profits applicable to such shipments are recorded pro rata based upon estimated total profit at completion of the contract. Sales and profits on cost reimbursable contracts which are within the scope of SOP 81-1 are recognized as costs are incurred. Sales and estimated profits under other long-term contracts which are within the scope of SOP 81-1 are recognized under the percentage of completion method of accounting using the cost-to-cost method. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. Losses on contracts are recognized when determined. The impact of revisions in profit estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. Sales which are not within the scope of SOP 81-1 are recognized in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 101. CONTRACTS IN PROCESS: Costs accumulated on contracts in process include direct costs and manufacturing overhead costs, and for U.S. Government contracts and contracts with prime contractors or subcontractors of the U.S. Government, general and administrative costs, independent research and development costs and bid and proposal costs. Contracts in process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. Unbilled contract receivables represent accumulated recoverable costs and earned profits on contracts in process that have been recorded as sales, but have not yet been billed to customers. Inventoried contract costs represent recoverable costs incurred on contracts in process. Inventories other than inventoried contract costs are stated at the lower of cost or market primarily using the average cost method. Under the contractual arrangements on certain contracts with the U.S. Government, the Company receives progress payments as it incurs costs. The U.S. Government has a security interest in the unbilled contract receivables and inventoried contract costs to which progress payments have been applied, and such progress payments are reflected as an offset against the related unbilled contract receivables and inventoried contract costs. Other customer advances are classified as current liabilities. F-8 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range substantially from 10 to 40 years for buildings and improvements and 3 to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. DEBT ISSUANCE COSTS: Costs incurred to issue debt are deferred and amortized as interest expense over the term of the related debt using a method that approximates the effective interest method. INTANGIBLES: Intangibles consist primarily of the excess of the purchase cost of acquired businesses over the fair value of net assets acquired ("goodwill") and are amortized on a straight-line basis over periods ranging from 15 to 40 years. Accumulated goodwill amortization was $76,001 at December 31, 2000 and $40,147 at December 31, 1999. The carrying amount of goodwill is evaluated on a recurring basis. Current and estimated future profitability and undiscounted cash flows excluding financing costs of the acquired businesses are the primary indicators used to assess the recoverability of goodwill. For the years ended December 31, 2000 and 1999, there were no material adjustments to the carrying amounts of goodwill resulting from these evaluations. INCOME TAXES: The Company provides for income taxes using the liability method prescribed by the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Under the liability method, deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. RESEARCH AND DEVELOPMENT: Research and development costs sponsored by the Company include bid and proposal costs related to government products and services. These costs generally are allocated among all contracts in progress under U.S. Government contractual arrangements. Customer-funded research and development costs incurred pursuant to contracts are accounted for as direct contract costs. STOCK OPTIONS: In accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and related interpretations, compensation expense for stock options is recognized in income based on the excess, if any, of L-3 Holdings' fair value of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. When the exercise price for stock options granted to employees equals or exceeds the fair value of the L-3 Holdings common stock at the date of grant, the Company does not recognize compensation expense. The Company has adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs and expenses during the reporting period. The most significant of these estimates and assumptions relate to contract estimates of sales and costs, estimated costs in excess of billings to complete contracts in process, estimates of pension and postretirement benefit obligations, recoverability of recorded amounts of fixed assets and goodwill, income taxes, litigation and environmental obligations. Actual results could differ from these estimates. RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and F-9 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Hedging Activities ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value and is effective for all quarters of fiscal years beginning after June 15, 2000. The Company does not expect SFAS 133 to have a material impact on the consolidated results of operations or financial position. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"), which replaces SFAS 125. SFAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS 125's provisions without reconsideration. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company does not expect SFAS 140 to have a material impact on the consolidated results of operations or financial position. In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation -- An Interpretation of APB Opinion No. 25 ("FIN 44"). FIN 44 clarifies the definition of an employee for purposes of calculating stock-based compensation, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of previously fixed stock options or awards, and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is primarily effective July 1, 2000, with some provisions effective earlier. The Company adopted the accounting and disclosures required by FIN 44 for all periods presented. RECLASSIFICATIONS: Certain reclassifications have been made to confirm prior-year amounts to the current-year presentation. 3. ACQUISITIONS AND DIVESTITURES On January 8, 1999 the Company acquired all of the outstanding common stock of Microdyne Corporation ("Microdyne") for $94,228 in cash including expenses and the repayment of assumed debt, net of cash acquired. On April 16, 1999 the Company acquired all of the outstanding common stock of Aydin Corporation ("Aydin") for $60,034 in cash including expenses, net of cash acquired. On June 30, 1999 the Company acquired all the outstanding common stock of Interstate Electronics Corporation ("IEC") from Scott Technologies Inc. for $40,610 in cash including expenses. On December 31, 1999, the Company acquired the assets of the Space and Navigation Systems business ("SNS") of Honeywell International Inc. ("Honeywell") for $55,000 in cash, plus expenses, subject to adjustment based on closing date net assets, as defined. On February 10, 2000, the Company acquired the assets of the Training Devices and Training Services ("TDTS") business of Raytheon Company for $160,000 in cash plus expenses, subject to adjustment based on closing date net working capital, as defined. Following the acquisition, the Company changed TDTS's name to L-3 Communications Link Simulation and Training ("Link Simulation and Training"). On February 14, 2000, the Company acquired the assets of Trex Communications Corporation ("TrexCom") for $50,210 in cash, plus expenses, subject to adjustment based on closing date net worth, as defined. On April 28, 2000, the Company acquired the Traffic Alert and Collision Avoidance System ("TCAS") product line from Honeywell for a purchase price of $239,594 in cash, including expenses. In F-10 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) anticipation of the TCAS acquisition, on February 25, 2000, the Company entered into a Memorandum of Agreement with Thomson-CSF Sextant S.A. ("Sextant"), a subsidiary of Thomson-CSF, under which L-3 agreed to create a limited liability corporation for TCAS, contribute 100% of the TCAS assets to be acquired from Honeywell to the TCAS LLC, and sell a 30% interest in the TCAS LLC to Sextant for a cash purchase price equal to 30% of the final purchase price paid to Honeywell for TCAS (which is expected to be approximately $71,738). L-3 will consolidate the financial statements of the TCAS LLC. The Company expects to complete this transaction during the first half 2001. On June 30, 2000, the Company acquired all the outstanding stock of MPRI Inc. ("MPRI") for $35,686 in cash including expenses, subject to additional consideration not to exceed $4,000 based on the financial performance of MPRI for the year ending June 30, 2001. On July 11, 2000, the Company acquired 53.5% of the outstanding common stock of LogiMetrics, Inc. ("LogiMetrics") for $15,000, of which $8,500 of the purchase price was paid in cash at closing, and the balance was paid in installments that were completed in the first quarter of 2001. The Company also agreed to invest an additional $5,000 in cash during 2001 for additional common stock. On December 29, 2000, the Company acquired all of the outstanding common stock of Coleman Research Corporation ("Coleman"), a subsidiary of Thermo Electron Corporation for $60,000 in cash, subject to adjustment based on closing date net working capital, and additional consideration not to exceed $5,000 based on the financial performance of Coleman for the year ending December 31, 2001. All of the acquisitions were financed with cash on hand or borrowings on bank credit facilities. All of the Company's acquisitions have been accounted for as purchase business combinations and are included in the Company's results of operations from their respective effective dates. The assets and liabilities recorded in connection with the acquisitions of SNS, TDTS, TrexCom, TCAS, and LogiMetrics were $763,845 and $247,943. The assets and liabilities recorded in connection with the purchase price allocations for the acquisitions of MPRI and Coleman are based upon preliminary estimates of fair values for contracts in process, estimated costs in excess of billings to complete contracts in process, inventories, and deferred taxes. Actual adjustments will be based on the final purchase prices and final appraisals and other analyses of fair values which are in process. The Company has valued acquired contracts in process at contract price, less the estimated costs to complete and an allowance for normal profit on the Company's effort to complete such contracts. The preliminary assets and liabilities recorded in connection with the acquisitions of MPRI and Coleman were $118,611 and $22,855. The Company does not expect the differences between the preliminary and final purchase price allocations for the acquisitions to be material. Goodwill is amortized on a straight-line basis over periods of 40 years for SNS, TDTS, TCAS, Coleman and MPRI and 20 years for LogiMetrics and TrexCom. Had the acquisitions of TDTS, TCAS and Coleman and the related financing transactions occurred on January 1, 2000, the unaudited pro forma sales, net income and diluted earnings per share for the year ended December 31, 2000 would have been $2,072,300, $80,000 and $2.29. Had the acquisitions of Microdyne, Aydin, IEC, SNS, TDTS, TCAS and Coleman and related financing transactions occurred on January 1, 1999 the unaudited pro forma sales, net income and diluted earnings per share for the year ended December 31, 1999 would have been $2,058,900, $43,200 and $1.29. The pro forma results are based on various assumptions and are not necessarily indicative of the result of operations that would have occurred had the acquisitions and the related financing transactions occurred on January 1, 1999 and 2000. Interest and other income for the year ended December 31, 2000 includes gains of $14,940 from the sales of our interests in certain businesses. These gains were largely offset by losses of $12,456 on the write-down in the carrying value of certain investments and intangible assets. The net proceeds from the sales were $19,638, and are included in Other Investing Activities on the Statement of Cash Flows. F-11 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 4. CONTRACTS IN PROCESS The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments are principally related to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government. DECEMBER 31, ------------------------- 2000 1999 ----------- ----------- Billed receivables ............................. $ 319,780 $ 258,054 --------- --------- Unbilled contract receivables, gross ........... 279,474 123,969 Less: unliquidated progress payments ........... (52,153) (10,351) --------- --------- Unbilled contract receivables, net ............ 227,321 113,618 --------- --------- Inventoried contract costs, gross .............. 72,504 65,967 Less: unliquidated progress payments ........... (23,061) (19,273) --------- --------- Inventoried contract costs, net ............... 49,443 46,694 Inventories at lower of cost or market ......... 103,589 60,777 --------- --------- Total contracts in process .................... $ 700,133 $ 479,143 ========= ========= The Company believes that approximately $203,000 of the unbilled contract receivables at December 31, 2000 will be billed and collected within one year. The selling, general and administrative ("SG&A") cost data presented in the table below have been used in the determination of the costs and expenses presented on the statements of operations.
YEAR ENDED DECEMBER 31 ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- SG&A costs included in inventoried contract costs ..... $ 24,396 $ 23,637 $ 16,550 SG&A incurred costs ................................... 350,561 265,136 189,507 Independent research and development, including bid and proposal costs included in SG&A incurred costs .................................. 101,883 76,134 59,897
5. OTHER CURRENT LIABILITIES AND OTHER LIABILITIES At December 31, 2000, other current liabilities include $31,737 of estimated costs in excess of billings to complete contracts in process principally related to contracts assumed as part of the TDTS business that was acquired from Raytheon in February 2000, including the U.S. Army Aviation Combined Arms Tactical Trainer ("AVCATT") contract. At December 31, 2000, other liabilities include $59,641 for the non-current portion of estimated costs in excess of billings to complete contracts in process, principally for the AVCATT contract. At December 31, 1999, other current liabilities did not include any items in excess of 5% of total current liabilities. At December 31, 2000 and 1999, other liabilities did not include any items in excess of 5% of total liabilities. F-12 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 6. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ------------------------ 2000 1999 ---------- ----------- Land .................................................... $ 11,242 $ 9,658 Buildings and improvements .............................. 25,942 30,071 Machinery, equipment, furniture and fixtures ............ 178,603 137,665 Leasehold improvements .................................. 23,852 14,015 -------- -------- Gross property, plant and equipment .................... 239,639 191,409 Less: accumulated depreciation and amortization ......... 83,511 50,438 -------- -------- Property, plant and equipment, net ..................... $156,128 $140,971 ======== ========
Depreciation and amortization expense for property, plant and equipment was $36,158 for 2000, $29,554 for 1999, and $22,463 for 1998. 7. DEBT The components of long-term debt are presented in the table below.
DECEMBER 31, -------------------------- 2000 1999 ------------- ---------- Borrowings under Senior Credit Facilities .................... $ 190,000 $ -- 10 3/8% Senior Subordinated Notes due 2007 ................... 225,000 225,000 8 1/2% Senior Subordinated Notes due 2008 .................... 180,000 180,000 8% Senior Subordinated Notes due 2008 ........................ 200,000 200,000 5.25% Convertible Senior Subordinated Notes due 2009 ......... 300,000 -- ---------- -------- Total long-term debt ........................................ $1,095,000 $605,000 ========== ========
The borrowings under the Senior Credit Facilities, 10 3/8% Senior Subordinated Notes due 2007, 8 1/2% Senior Subordinated Notes due 2008 and 8% Senior Subordinated Notes due 2008 are the indebtedness of L-3 Communications. The 5.25% Convertible Senior Subordinated Notes due 2009 are the indebtedness of L-3 Holdings. Details on all of the outstanding debt of both L-3 Communications and L-3 Holdings are discussed below. L-3 Communications has three bank credit facilities that comprise Senior Credit Facilities and permit borrowings of up to $700,000, of which $400,946 is available after reductions for outstanding borrowing of $190,000 and letters of credit of $109,054. One facility for $200,000 expires on March 31, 2003 (the "Revolving Credit Facility"), a second facility for $200,000 expires August 9, 2001 (the "Revolving 364 Day Facility"), and a third facility for $300,000 expires on April 27, 2001 (the "New Revolving 364 Day Facility"). A portion of the Revolving 364 Day Facility may be extended, with the consent of the lenders for a period of 364 days following August 9, 2001 and L-3 Communications may convert the outstanding principal amount of any or all of the loans outstanding under the Revolving 364 Day Facility to term loans. In the event that any or all of the outstanding principal amount under the Revolving 364 Day Facility is converted, L-3 Communications would have to repay 20% of the resulting terms loans by August 16, 2001. L-3 Communications would have to repay the remaining 80% of the term loans in six consecutive quarterly installments commencing on September 30, 2001. During the first half of 2001, L-3 Communications intends to restructure the Revolving 364 Day Facility together with all of the Senior Credit Facilities to extend their maturities. F-13 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Borrowings under the Senior Credit Facilities bear interest, at L-3 Communications' option, at either: (i) a "base rate" equal to the higher of 0.50% per annum above the latest federal funds rate and the Bank of America "reference rate" (as defined) plus a spread ranging from 1.75% to 0.375% per annum depending on L-3 Communications' ratio of debt to EBITDA, as defined (the "Debt to EBITDA Ratio") at the time of determination or (ii) a "LIBOR rate" (as defined) plus a spread ranging from 2.75% to 1.25% per annum depending on L-3 Communications' Debt to EBITDA Ratio at the time of determination. At December 31, 2000 the weighted average interest rate on the borrowings outstanding under the Senior Credit Facilities was 8.5%. L-3 Communications pays commitment fees calculated on the daily amounts of the available unused commitments under the Senior Credit Facilities at a rate ranging from 0.50% to 0.20% per annum, depending on L-3 Communications' Debt to EBITDA Ratio in effect at the time of determination. L-3 Communications pays letter of credit fees calculated at a rate ranging from 1.375% to 0.625% per annum for performance letters of credit and 2.75% to 1.25% for all other letters of credit, in each case depending on L-3 Communications' Debt to EBITDA Ratio at the time of determination. In April 1997, L-3 Communications sold $225,000 of 10 3/8% Senior Subordinated Notes due May 1, 2007 (the "1997 Notes") with interest payable semi-annually on May 1 and November 1 of each year commencing November 1, 1997. The 1997 Notes are general unsecured obligations of L-3 Communications and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The 1997 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after May 1, 2002 at redemption prices (plus accrued and unpaid interest) starting at 105.188% of principal (plus accrued and unpaid interest) during the 12-month period beginning May 1, 2002 and declining annually to 100% of principal (plus accrued and unpaid interest) on May 1, 2005 and thereafter. In May 1998, L-3 Communications sold $180,000 of 8 1/2% Senior Subordinated Notes due May 15, 2008 (the "May 1998 Notes") with interest payable semi- annually on May 15 and November 15 of each year commencing November 15, 1998. The May 1998 Notes are general unsecured obligations of L-3 Communications and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The May 1998 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after May 15, 2003 at redemption prices (plus accrued and unpaid interest) starting at 104.250% of principal (plus accrued and unpaid interest) during the 12-month period beginning May 15, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on May 15, 2006 and thereafter. In addition, prior to May 15, 2001, L-3 Communications may redeem up to 35% of the aggregate principal amount of the May 1998 Notes with the net proceeds of one or more equity offerings, at a price equal to 108.500% of the principal (plus accrued and unpaid interest) to the extent such proceeds are contributed (within 120 days of any such offering) to L-3 Communications as common equity, provided that at least 65% of the original aggregate principal amount of the May 1998 Notes remains outstanding thereafter. In December 1998, L-3 Communications sold $200,000 of 8% Senior Subordinated Notes due August 1, 2008 (the "December 1998 Notes") with interest payable semi-annually on February 1 and August 1 of each year commencing February 1, 1999. The December 1998 Notes are general unsecured obligations of L-3 Communications and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The December 1998 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after August 1, 2003 at redemption prices (plus accrued and unpaid interest) starting at 104% of principal (plus accrued and unpaid interest) during the 12-month period beginning August 1, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on August 1, 2006 and thereafter. In addition, prior to August 1, 2001, L-3 Communications may redeem up to 35% of the aggregate principal amount of December 1998 Notes F-14 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) with the net proceeds of one or more equity offerings, at a price equal to 108% of the principal (plus accrued and unpaid interest) and to the extent such proceeds are contributed (within 120 days of any such offering) to L-3 Communications as common equity, provided that at least 65% of the original aggregate principal amount of the December 1998 Notes remains outstanding. In the fourth quarter of 2000, L-3 Holdings sold $300,000 of 5.25% Convertible Senior Subordinated Notes (the "Convertible Notes") due June 1, 2009 in a private placement. Interest is payable semi-annually on June 1 and December 1 of each year commencing June 1, 2001. The Convertible Notes may be converted at any time into L-3 Holdings common stock at a conversion price of $81.50 per share. If all the Convertible Notes were converted, an additional 3,680,982 shares of L-3 Holdings common stock would have been outstanding at December 31, 2000. The Convertible Notes are general unsecured obligations of L-3 Holdings and are subordinated in right of payment to all existing and future senior debt of L-3 Holdings and L-3 Communications. The Convertible Notes are subject to redemption at any time, at the option of L-3 Holdings, in whole or in part, on or after December 1, 2003 at redemption prices (plus accrued and unpaid interest) starting at 102.625% of principal (plus accrued and unpaid interest) during the 12-month period beginning December 1, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on December 1, 2005 and thereafter. Collectively the 1997 Notes, May 1998 Notes, December 1998 Notes comprise the "Senior Subordinated Notes". The maturities on the Senior Subordinated Notes and Convertible Notes are, $225,000 in 2007, $380,000 in 2008 and $300,000 in 2009. The Senior Credit Facilities, Senior Subordinated Notes and Convertible Notes agreements contain financial and other restrictive covenants that limit, among other things, the ability of the Company to borrow additional funds, dispose of assets, or pay cash dividends. The Senior Credit Facilities contain the most restrictive financial covenants which require that (i) the Company's Debt to EBITDA Ratio be less than or equal to 4.50 for the quarter ended December 31, 2000, and that the maximum allowable debt ratio, as defined, thereafter declining over time to less than or equal to 3.25 for the quarters ending September 30, 2002 and thereafter, and (ii) the Company's interest coverage ratio, as defined, be greater than or equal to 2.50 for the quarter ended December 31, 2000, and that the minimum allowable interest coverage ratio, as defined, thereafter increasing over time to greater than or equal to at least 3.00 for the quarters ending September 30, 2002 and thereafter. For purposes of calculating the financial covenants under the Senior Credit Facilities, the Convertible Notes are considered debt of L-3 Communications. The Senior Credit Facilities also limit the payment of dividends by L-3 Communications to L-3 Holdings except for payment of franchise taxes, fees to maintain L-3 Communications legal existence, interest accrued on the Convertible Notes or to provide for operating costs of up to $1,000 annually. Under the covenant, L-3 Communications may pay permitted dividends to L-3 Holdings from its excess cash flow, as defined, a cumulative amount of $5,000, provided that the debt ratio is less than 3.5 to 1 as of the most recent fiscal quarter. As a result, at December 31, 2000, $5,000 of L-3 Communications net assets were available for payment of dividends to L-3 Holdings. Through December 31, 2000 the Company was in compliance with these covenants at all times. In connection with the Senior Credit Facilities, the Company has granted the lenders a first priority lien on the stock of L-3 Communications and substantially all of its domestic subsidiaries. The borrowings under the Senior Credit Facilities are guaranteed by L-3 Holdings and by substantially all of the domestic subsidiaries of L-3 Communications. The payment of principal and premium, if any, and interest on the Senior Subordinated Notes is unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by all of L-3 Communications' restricted subsidiaries other than its foreign subsidiaries. Additionally, the Convertible Notes are jointly and severally guaranteed (the "Guarantees") F-15 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) by certain existing and future domestic subsidiaries of L-3 Holdings, including L-3 Communications (the "Guarantors"). The Guarantees are subordinated in right of payment to all existing and future senior debt of the Guarantors and rank pari passu with the other senior subordinated indebtedness of the Guarantors. Pursuant to a registration rights agreement that L-3 Holdings entered into with the initial purchaser of the Convertible Notes, L-3 Holdings agreed to file a registration statement with the SEC within 135 days after the original issuance of the Convertible Notes to cover resales by holders of the Convertible Notes and the Guarantees and the L-3 Holdings common stock issuable upon conversion of the Convertible Notes. If L-3 Holdings does not file the registration statement with the SEC on or before April 5, 2001, liquidated damages, in the form of additional interest, will accrue on the Convertible Notes from April 5, 2001 to but excluding the day on which the registration statement is filed. In no event will liquidated damages exceed 0.50% per annum of the principal amount outstanding under the Convertible Notes. L-3 Holdings expects to file the registration statement with the SEC by the end of March 2001. 8. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments. The Company's financial instruments consist primarily of cash and cash equivalents, billed receivables, investments, trade accounts payable, customer advances, Senior Credit Facilities, Senior Subordinated Notes, Convertible Notes, foreign currency forward contracts and interest rate cap and interest rate floor contracts. The carrying amounts of cash and cash equivalents, billed receivables, trade accounts payable, Senior Credit Facilities, and customer advances are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The fair value of the Company's investments are based on quoted market prices, as available, and historical costs which approximate fair value. The Senior Subordinated Notes are registered, unlisted public debt which are traded in the over-the-counter market and their fair values are based on quoted trading activity. The fair value of the Convertible Notes are based on quoted prices for the same or similar issues. The fair value of foreign currency forward contracts were estimated based on exchange rates at December 31, 2000 and 1999. The fair values of the interest rate caps and floor contracts were estimated by discounting expected cash flows using quoted market interest rates. The carrying amounts and estimated fair value of the Company's financial instruments are as follows:
DECEMBER 31, ---------------------------------------------- 2000 1999 ----------------------- ---------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ---------- ------------ ---------- ----------- Investments ................................. $ 8,985 $ 8,985 $ 12,068 $ 12,068 Senior Subordinated Notes ................... 605,000 586,300 605,000 582,000 Convertible Notes ........................... 300,000 331,350 -- -- Borrowings under Senior Credit Facilities ... 190,000 190,000 -- -- Interest rate caps .......................... 431 2 800 435 Interest rate floor ......................... (74) 104 (137) 49 Foreign currency forward contracts .......... -- 392 -- 264
Interest Rate Risk Management. To mitigate risks associated with changing interest rates on borrowings under the Senior Credit Facilities, the Company entered into interest rate caps and interest rate floors (collectively, the "interest rate agreements"). The interest rate agreements are denominated in U.S. dollars and have designated maturities which occur every three months until the interest rate agreements expire in March 2002. Cash payments received from or paid to the counterparties on the interest rate agreements are the difference between the amount that the reference interest rates are greater than or less than the contract rates on the designated maturity dates, multiplied by the notional F-16 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) amounts underlying the respective interest rate agreements. Cash payments or receipts between the Company and counterparties are recorded as a component of interest expense. The initial cost or receipt of these arrangements are deferred and amortized as a component interest expense over the term of the interest rate agreement. The Company manages exposure to counterparty credit risk by entering into the interest rate agreements only with major financial institutions that are expected to fully perform under the terms of such agreements. The notional amounts are used to measure the volume of these agreements and do not represent exposure to credit loss. The impact of the interest rate agreements was not material to interest expense or cash flows for 2000, 1999 and 1998. Foreign Currency Exchange Risk Management. Some of the Company's U.S. operations have contracts with foreign customers which are denominated in foreign currencies. To mitigate the risk associated with certain of these contracts denominated in foreign currency, the Company has entered into foreign currency forward contracts. The Company's activities involving foreign currency forward contracts are designed to hedge the foreign denominated cash paid or received, primarily Euro, Spanish Peseta and Italian Lira. The Company manages exposure to counterparty credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the term of such contracts. The notional amounts are used to measure the volume of these contracts and do not represent exposure to foreign currency losses. Information with respect to the interest rate agreements and foreign currency forward contracts is presented in the table below.
DECEMBER 31, ------------------------------------------------------------ 2000 1999 ----------------------------- ---------------------------- NOTIONAL UNREALIZED NOTIONAL UNREALIZED AMOUNT GAINS (LOSSES) AMOUNT GAINS (LOSSES) ---------- ---------------- ---------- --------------- Interest rate caps ......................... $100,000 $ (429) $100,000 $ (365) Interest rate floor ........................ 50,000 (30) 50,000 88 Foreign currency forward contracts ......... 6,863 (392) 7,290 (264)
9. L-3 HOLDINGS COMMON STOCK On February 4, 1999, L-3 Holdings sold 5.0 million shares of common stock in a public offering for $42.00 per share (the "February 1999 Common Stock Offering"); the net proceeds amounted to 201,582 and were contributed by L-3 Holdings to L-3 Communications. In addition, 6.5 million shares were also sold in the February 1999 Common Stock Offering by the Lehman Partnership and Lockheed Martin. In October 1999, Lockheed Martin sold its remaining interest in L-3 Holdings' common stock. In December 1999, the Lehman Partnership distributed to its partners approximately 3.8 million shares of L-3 Holdings common stock. At December 31, 2000 the Lehman Partnership owned approximately 16.4% of the L-3 Holdings common stock. On May 19, 1998, L-3 Holdings sold 6.9 million shares of its common stock in an initial public offering ("IPO"). The net proceeds of the IPO amounted to $139,500 and were contributed by L-3 Holdings to L-3 Communications. Prior to the IPO, the common stock of L-3 Holdings consisted of three classes Class A, Class B, and Class C common stock. Immediately prior to the IPO, each authorized share of L-3 Holdings Class A common stock, Class B common stock and Class C common stock was converted into one class of common stock and the authorized L-3 Holdings common stock was increased to 100 million shares. F-17 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. L-3 HOLDINGS EARNINGS PER SHARE A reconciliation of basic and diluted earnings per share ("EPS") is presented in the table below.
YEAR ENDED DECEMBER 31, ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Basic: Net income ......................................... $ 82,727 $ 58,689 $ 32,551 --------- --------- --------- Weighted average common shares outstanding ......... 33,355 32,107 24,679 --------- --------- --------- Basic earnings per share ........................... $ 2.48 $ 1.83 $ 1.32 ========= ========= ========= Diluted: Net income ......................................... $ 82,727 $ 58,689 $ 32,551 --------- --------- --------- Common and potential shares: Weighted average common shares outstanding ......... 33,355 32,107 24,679 Assumed exercise of stock options .................. 3,940 3,376 2,824 Assumed purchase of common shares for treasury ..... (2,342) (1,967) (1,603) --------- --------- --------- Common and potential common shares .................. 34,953 33,516 25,900 ========= ========= ========= Diluted earnings per share .......................... $ 2.37 $ 1.75 $ 1.26 ========= ========= =========
The 3,680,982 shares of L-3 Holdings common stock that are issuable upon conversion of the Convertible Notes were not included in the computation of diluted EPS for the year ended December 31, 2000 because, after the assumed after-tax interest savings, the effect on conversion would have been anti-dilutive. 11. INCOME TAXES Pretax income of the Company was $134,079 for 2000, $95,430 for 1999 and $53,450 for 1998 substantially all of which was derived from domestic operations. The components of the Company's provision for income taxes were:
YEAR ENDED DECEMBER 31, ---------------------------------- 2000 1999 1998 ---------- --------- --------- Current income tax provision, primarily federal . ......... $26,249 $ 7,910 $ 1,113 Deferred income tax provision: Federal .................................................. 23,130 27,881 18,203 State and local .......................................... 1,973 950 1,583 ------- ------- ------- Subtotal ............................................... 25,103 28,831 19,786 ------- ------- ------- Total provision for income taxes .......................... $51,352 $36,741 $20,899 ======= ======= =======
F-18 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) A reconciliation of the statutory federal income tax rate to the effective income tax rate of the Company follows:
YEAR ENDED DECEMBER 31, ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- Statutory federal income tax rate . ..................... 35.0% 35.0% 35.0% State and local income taxes, net of federal income tax benefit ............................................ 4.4 4.6 4.7 Foreign sales corporation benefit ....................... (2.6) -- -- Nondeductible goodwill amortization and other expenses ............................................... 6.8 5.2 4.6 Research and experimentation and other tax credits ...... (6.1) (7.1) (6.8) Other, net .............................................. 0.8 0.8 1.6 ---- ---- ---- Effective income tax rate ............................... 38.3% 38.5% 39.1% ==== ==== ====
The provision for income taxes excludes current tax benefits related to the exercise of stock options credited directly to shareholders' equity of $9,108 for 2000 and $1,011 for 1999, and $782 for 1998. The significant components of the Company's net deferred tax assets and liabilities are:
DECEMBER 31, --------------------------- 2000 1999 ------------ ------------ Deferred tax assets: Inventoried costs ...................................... $ 14,868 $ 11,033 Compensation and benefits .............................. 10,461 1,873 Pension and postretirement benefits .................... 39,486 31,768 Property, plant and equipment .......................... 9,081 17,149 Income recognition on contracts in process ............. 55,942 8,617 Accrued warranty costs . ............................... 3,349 2,401 Net operating loss carryforwards ....................... 9,660 12,749 Tax credit carryforwards ............................... 18,444 16,576 Other, net ............................................. 11,081 4,492 --------- --------- Total deferred tax assets ............................ 172,372 106,658 --------- --------- Deferred tax liabilities: Goodwill ............................................... (18,903) (9,656) Other, net ............................................. (6,626) (7,159) --------- --------- Total deferred tax liabilities ....................... (25,529) (16,815) --------- --------- Net deferred tax assets ............................. $ 146,843 $ 89,843 ========= ========= The net deferred tax assets are classified as follows: Current deferred tax assets . ........................... $ 89,732 $ 32,985 Long-term deferred tax assets ........................... 57,111 56,858 --------- --------- Total net deferred tax assets ........................ $ 146,843 $ 89,843 ========= =========
F-19 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) At December 31, 2000 and 1999 the Company had $28,104 and $29,325 of tax carryforwards primarily related to U.S. federal net operating losses, alternative minimum tax credits, research and experimentation tax credits, and various state and local tax credits which primarily will expire, subject to various limitations and restrictions, if unused beginning in 2011. The Company believes that these carryforwards will be available to reduce future income tax liabilities and has recorded these carryforwards as non-current deferred tax assets. 12. STOCK OPTIONS The Company adopted the 1999 Long Term Performance Plan in April 1999, and adopted the 1997 Option Plan in April 1997. As of December 31, 2000 and 1999, the number of shares authorized for grant of options or awards under these plans was 5,255,815 of L-3 Holdings common stock. The grants may be awarded to employees of the Company in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock or other incentive awards. The price at which options may be granted shall not be less than 100% of the fair market value of L-3 Holdings common stock on the date of grant. In general, options expire after 10 years and are exercisable ratably over a 3 year period. As of December 31, 2000 the Company had 420,395 shares of L-3 Holdings' common stock available for awards under the these plans. On January 1, 2000 and May 19, 1999, the Company awarded 42,896 and 40,339 shares of restricted stock of L-3 Holdings to employees which vest January 1, 2005 and 2004, respectively. On April 5, 1999, the Company amended the performance options granted to Mr. Lanza and Mr. LaPenta on April 30, 1997 to purchase at $6.47, 1,142,857 shares of L-3 Holdings common stock. Such amendment eliminated the performance target acceleration provisions and provided that the unvested portion of the performance options, which aggregated 914,286 options at April 5, 1999, became exercisable as of April 30, 2000. These performance options would have originally vested nine years after the grant date, but would have become exercisable with respect to 25% of the shares subject to such performance options on each of April 30, 1999, 2000, 2001 and 2002, to the extent certain targets for the Company's EBITDA were achieved. The table below presents the Company's stock option activity.
WEIGHTED AVERAGE NUMBER OF EXERCISE OPTIONS PRICE --------------- --------- (IN THOUSANDS) Balance at December 31, 1997 ......... 2,971 $ 6.47 Options granted ...................... 425 25.60 Options exercised .................... (481) 6.47 Options canceled ..................... (37) 8.19 ----- Balance at December 31, 1998 ......... 2,878 9.27 Options granted ...................... 1,004 39.10 Options exercised .................... (79) 8.37 Options canceled ..................... (43) 29.99 ----- Balance at December 31, 1999 ......... 3,760 17.02 Options granted ...................... 656 47.74 Options exercised .................... (577) 15.52 Options canceled ..................... (221) 39.82 ----- Balance at December 31, 2000 ......... 3,618 $ 21.42 =====
F-20 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following table summarizes information about stock options outstanding at December 31, 2000.
OUTSTANDING EXERCISABLE ------------------------------------------ ----------------------------------------- WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED RANGE OF REMAINING AVERAGE REMAINING AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER CONTRACTUAL EXERCISE PRICES OF OPTIONS LIFE (YEARS) PRICE OF OPTIONS LIFE (YEARS) PRICE - ------------------------- ------------ -------------- ---------- ------------ -------------- --------- $6.47 ................... 2,006 6.4 $ 6.47 1,549 6.4 $ 6.47 $22.00 .................. 179 7.3 $ 22.00 109 7.3 $ 22.00 $32.75 - $39.99 ......... 574 8.7 $ 37.27 184 8.6 $ 36.69 $40.00 - $47.00 ......... 643 8.6 $ 41.51 87 8.0 $ 40.50 Over $47.01 ............. 216 9.6 $ 58.00 -- -- -- ----- ----- Total .................. 3,618 7.4 $ 21.42 1,929 6.7 $ 11.77 ===== =====
The weighted average fair values of stock options at their grant date during 2000, 1999 and 1998, where the exercise price equaled the market price (estimated fair value) on the grant date were $20.19, $14.60 and $8.86, respectively. In accordance with APB 25, no compensation expense was recognized. The following table reflects pro forma net income and L-3 Holdings EPS had the Company elected to adopt the fair value approach of SFAS 123: YEAR ENDED DECEMBER 31, ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Net income: As reported ............ $ 82,727 $ 58,689 $ 32,551 Pro forma .............. 75,064 54,625 31,246 L-3 Holdings Basic EPS: As reported ............ $ 2.48 $ 1.83 $ 1.32 Pro forma .............. 2.25 1.70 1.27 L-3 Holdings Diluted EPS: As reported ............ $ 2.37 $ 1.75 $ 1.26 Pro forma .............. 2.15 1.63 1.21 The estimated fair value of options granted were calculated using the Black-Scholes option-pricing valuation model. The weighted average assumptions used in the valuation models were as follows: YEAR ENDED DECEMBER 31, ------------------- 2000 1999 -------- -------- Expected option term ............ 5.0 4.8 Expected volatility ............. 35.8% 31.0% Expected dividend yield ......... -- -- Risk-free interest rate ......... 6.4% 4.7% F-21 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 13. COMMITMENTS AND CONTINGENCIES The Company leases certain facilities and equipment under agreements expiring at various dates through 2018. At December 31, 2000, future minimum payments under noncancellable operating leases with initial or remaining terms in excess of one year were: OPERATING LEASES ---------------------------------------- REAL ESTATE EQUIPMENT TOTAL ------------- ----------- ---------- 2001 ............... $ 26,612 $2,754 $ 29,366 2002 ............... 24,079 2,107 26,186 2003 ............... 19,207 1,111 20,318 2004 ............... 16,591 318 16,909 2005 ............... 19,812 34 19,846 Thereafter ......... 160,427 -- 160,427 -------- ------ -------- Total ............. $266,728 $6,324 $273,052 ======== ====== ======== Real estate lease commitments have been reduced by minimum sublease rental income of $15,434 due in the future under noncancellable subleases. Leases covering major items of real estate and equipment contain renewal and or purchase options. Rent expense, net of sublease income was $34,123 for 2000, $22,452 for 1999, and $15,290 for 1998. On March 30, 1998 and June 30, 1999, the Company entered into two separate real estate lease agreements, as lessee, with unrelated lessors which expire on March 30, 2001 and June 30, 2002, respectively, and are accounted for as operating leases. On or before each lease expiration date, the Company can exercise options under each lease agreement to either renew the lease, purchase the properties for $12,500 and $15,500, respectively, or sell the property on behalf of the lessor (the "Sale Option"). If the Company exercises the Sale Option, the Company must pay the lessor a residual guarantee amount of $10,894 and $13,524, respectively, on or before the lease expiration date, and at the time the property is sold, the Company must pay the lessor a supplemental rent in the amount of $1,606 and $1,976, respectively, to the extent that the sales proceeds exceeds the respective residual guarantee amount by the supplemental rent amounts. In the event that the sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent, the Company is required to pay a supplemental rent to the extent that the reduction in the fair value of the property is demonstrated by an independent appraisal to have been caused by the Company's failure to properly maintain the property. Accordingly, the aggregate residual guarantee amounts of $24,418 have been included in the noncancellable real estate operating lease payments relating to the expiration of such leases. On December 28, 2000, the Company entered into a sale-leaseback transaction on its facility located in Hauppauge, NY. The facility was sold for $13,650. The lease agreement which is accounted for as an operating lease, has an initial term of 14 years with a fixed annual rent that increases 2.5% annually. The Company has the option to extend the lease term for an additional 3 terms of 5 years each. The gain of $4,110 on the sale of the facility has been deferred and will be recognized ratably over the term of the lease. The Company has a contract to provide and operate for the U.S. Air Force ("USAF") a full-service training facility including simulator systems near a USAF base. The Company expects to lease the simulator systems from unrelated third parties, and has entered into agreements with the owner-lessors of the simulator systems, under which the Company is acting as the construction agent on behalf of F-22 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) owner-lessors for procurement and construction for the simulator systems. The estimated project costs to construct the simulator systems is approximately $48,360. During the construction period, if certain events occur that are caused by the Company's actions or failures to act, these agreements may obligate the Company to make payments to the owner-lessors which may be equal to 89.9% of the incurred project costs for the simulator systems at the time of such defaults. At December 30, 2002, the estimated completion date of the construction, pursuant to these agreements, the Company, as lessee, will enter into leases each with a term of 15 years with the owner-lessors for the use of the simulator systems. These leases are expected to be accounted for as operating leases and the aggregate noncancellable rental payments under such leases are estimated to be $89,241. The Company is engaged in providing products and services under contracts with the U.S. Government and to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under U.S. Government procurement regulations, an indictment of the Company by a federal grand jury could result in the Company being suspended for a period of time from eligibility for awards of new government contracts. A conviction could result in debarment from contracting with the federal government for a specified term. Additionally, in the event that U.S. Government expenditures for products and services of the type manufactured and provided by the Company are reduced, and not offset by greater commercial sales or other new programs or products, or acquisitions, there may be a reduction in the volume of contracts or subcontracts awarded to the Company. The Company has been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to its business. Management continually assesses the Company's obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company's consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to those investigative actions, items of litigation, claims or assessments of which it is aware, management of the Company is of the opinion that the probability is remote that, after taking into account certain provisions that have been made with respect to these matters, the ultimate resolution of any such investigative actions, items of litigation, claims or assessments will have a material adverse effect on the financial position or results of operations of the Company. On December 27, 2000, the Company filed a complaint against Raytheon and Raytheon Technical Services Company in the Court of Chancery for the State of Delaware in and for New Castle County, alleging that Raytheon failed to disclose material liabilities in connection with the sale of TDTS to the Company in February 2000. Specifically, the complaint alleges that Raytheon misrepresented the financial liabilities associated with the AVCATT contract which will cause the Company to incur damages of approximately $100,000. The Company assumed the AVCATT contract as part of the acquisition of TDTS which was completed in February 2000. The complaint seeks rescission of the TDTS Asset Purchase and Sale Agreement and alternatively, rescission of the AVCATT contract, rescissory damages and breach of contract. F-23 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 14. PENSIONS AND OTHER EMPLOYEE BENEFITS The Company maintains a number of pension plans, both contributory and noncontributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant's compensation and/or years of service. The Company's funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. Plan assets are invested primarily in U.S. government and agency obligations and listed stocks and bonds. The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions. The following table summarizes the balance sheet impact, as well as the benefit obligations, assets, funded status and rate assumptions associated with the pension and postretirement benefit plans.
POSTRETIREMENT PENSION PLANS BENEFIT PLANS --------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------- ------------ CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year ...... $ 328,541 $ 340,483 $ 65,554 $ 75,262 Service cost ................................. 16,343 13,513 1,670 1,595 Interest cost ................................ 28,029 23,092 4,754 4,175 Participants' contributions .................. 36 20 -- -- Amendments ................................... 853 3,564 -- (1,429) Actuarial loss (gain) ........................ 8,867 (41,372) (1,271) (11,201) Acquisitions ................................. 48,187 -- 1,879 753 Benefits paid ................................ (15,373) (10,759) (4,048) (3,601) --------- --------- --------- --------- Benefit obligation at end of year ............ $ 415,483 $ 328,541 $ 68,538 $ 65,554 --------- --------- --------- --------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year ........................................ $ 367,451 $ 288,502 $ -- $ -- Actual return on plan assets ................. (21,905) 81,800 -- -- Acquisitions ................................. 49,709 -- -- -- Employer contributions ....................... 11,345 7,888 4,048 3,601 Participants contributions ................... 36 20 -- -- Benefits paid ................................ (15,373) (10,759) (4,048) (3,601) --------- --------- --------- --------- Fair value of plan assets at end of year ..... $ 391,263 $ 367,451 $ -- $ -- --------- --------- --------- --------- FUNDED STATUS OF THE PLANS ................... $ (24,220) $ 38,910 $ (68,538) $ (65,554) Unrecognized actuarial loss (gain) ........... (5,044) (76,592) (9,401) (8,924) Unrecognized prior service cost .............. 3,777 3,275 (1,207) (1,306) --------- --------- --------- --------- Net amount recognized ........................ $ (25,487) $ (34,407) $ (79,146) $ (75,784) ========= ========= ========= ========= AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSIST OF: Accrued benefit liability .................... $ (26,377) $ (34,478) $ (79,146) $ (75,784) Accumulated other comprehensive income........ 890 71 -- -- --------- --------- --------- --------- Net amount recognized ........................ $ (25,487) $ (34,407) $ (79,146) $ (75,784) ========= ========= ========= =========
F-24 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
POSTRETIREMENT PENSION PLANS BENEFIT PLANS ----------------------- ----------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- RATE ASSUMPTIONS: Discount rate ............................... 7.50% 7.75% 7.50% 7.75% Rate of return on plan assets ............... 9.50% 9.50% n.a.% n.a. Salary increases ............................ 4.50% 4.50% 4.50% 4.50% Annual increase in cost of benefits ......... n.a. n.a. 6.25% 6.50%
The annual increase in cost of benefits ("health care cost trend rate") is assumed to be 5.0% in 2000 and decreases to a rate of 4.5% for 2001 and thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point decrease in the assumed health care cost trend rates would have the effect of decreasing the aggregate service and interest cost components and the postretirement medical obligations by $668 and $7,392, respectively. A one percentage point increase in the assumed health care cost trend rate would have the effect of increasing the aggregate service and interest cost components and the postretirement medical obligations by $736 and $5,738, respectively. The following table summarizes the components of net periodic pension and postretirement medical costs.
POSTRETIREMENT PENSION PLANS PENSION PLANS --------------------------- --------------------- 2000 1999 2000 1999 ------------ ------------ --------- --------- COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost ............................... $ 16,343 $ 13,513 $1,670 $1,595 Interest cost .............................. 28,029 23,092 4,754 4,175 Amortization of prior service cost ......... 351 289 (99) (123) Expected return on plan assets ............. (39,109) (26,251) -- -- Recognized actuarial (gain) loss ........... (3,981) (30) (865) (112) Recognition due to settlement .............. 307 -- -- -- --------- --------- ------ ------ Net periodic benefit cost ................. $ 1,940 $ 10,613 $5,460 $5,535 ========= ========= ====== ======
The accumulated benefit obligation, projected benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $86,426, $92,180, and $78,773 respectively, as of December 31, 2000 and $4,459, $5,307 and $893 respectively, as of December 31, 1999. In connection with the Company's assumption of certain plan obligations pursuant to the Company's acquisition of the predecessor company, Lockheed Martin has provided the Pension Benefit Guaranty Corporation ("PBGC") with commitments to assume sponsorship or other forms of financial support under certain circumstances of the Company's pension plans for Communication Systems - -- West and Aviation Recorders (the "Subject Plans"). Upon the occurrence of certain events, Lockheed Martin, at its option, has the right to decide whether to cause the Company to transfer sponsorship of any or all of the Subject Plans to Lockheed Martin, even if the PBGC has not sought to terminate the Subject Plans. Such a triggering event occurred in 1998, but reversed in 1999, relating to a decrease in the PBGC-mandated discount rate in 1998 that had resulted in an increase in the underlying liability. The Company notified Lockheed Martin of the 1998 triggering event, and in February 1999, Lockheed Martin informed the Company that it had no present intention to exercise its right to cause the Company to transfer F-25 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) sponsorship of the Subject Plans. If Lockheed Martin did assume sponsorship of these plans, it would be primarily liable for the costs associated with funding the Subject Plans or any costs associated with the termination of the Subject Plans but L-3 Communications would be required to reimburse Lockheed Martin for these costs. To date, the impact on pension expense and funding requirements resulting from this arrangement has not been significant. However, should Lockheed Martin assume sponsorship of the Subject Plans or if these plans were terminated, the impact of any increased pension expenses or funding requirements could be material to the Company. The Company has performed its obligations under the letter agreement with Lockheed Martin and the Lockheed Martin Commitment and has not received any communications from the PBGC concerning actions which the PBGC contemplates taking in respect of the Subject Plans. Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company's matching contributions in L-3 Holdings common stock and cash was $15,201 for 2000, $8,798 for 1999, and $6,366 for 1998. 15. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31, ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- Interest paid .......................................... $81,390 $50,532 $42,908 Income taxes paid ...................................... 10,052 6,317 496 Noncash transactions: Common stock issued related to acquisition ............ -- 6,432 -- Contribution in common stock to savings plans ......... 12,642 6,993 967
F-26 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 16. SEGMENT INFORMATION The Company has two reportable segments, Secure Communication Systems and Specialized Communication Products, which are described in Note 1. The Company evaluates the performance of its operating divisions and reportable segments based on sales and operating income. All corporate expenses are allocated to the Company's divisions using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, all costs and expenses are included in the Company's measure of segment profitability.
SECURE SPECIALIZED ELIMINATION OF COMMUNICATION COMMUNICATION INTERSEGMENT CONSOLIDATED SYSTEMS PRODUCTS CORPORATE SALES TOTAL --------------- --------------- ----------- --------------- ------------- 2000 - ---- Sales ............................... $856,970 $1,065,136 $ (12,045) $1,910,061 Operating income .................... 91,310 131,408 222,718 Total assets ........................ 792,949 1,480,790 $189,805 2,463,544 Capital expenditures ................ 10,750 22,830 33,580 Depreciation and amortization ....... 26,417 47,837 74,254 1999 - ---- Sales ............................... $544,418 $ 867,495 $ (6,451) $1,405,462 Operating income .................... 46,955 103,531 150,486 Total assets ........................ 370,918 1,065,236 $192,587 1,628,741 Capital expenditures . .............. 6,980 16,476 23,456 Depreciation and amortization ....... 18,451 35,267 53,718 1998 - ---- Sales ............................... $493,188 $ 561,393 $ (17,536) $1,037,045 Operating income .................... 39,885 60,464 100,349 Total assets ........................ 368,891 797,469 $119,036 1,285,396 Capital expenditures . .............. 5,755 17,674 23,429 Depreciation and amortization ....... 17,325 23,030 40,355
Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, deferred income tax assets and deferred debt issuance costs. Substantially all of the Company's operations are domestic. The Company's foreign operations are not material to the Company's results of operations, cash flows or financial position. Sales to principal customers are summarized in the table below.
YEAR ENDED DECEMBER 31, --------------------------------------------- 2000 1999 1998 ------------- ------------- ------------- U.S. government agencies . .................. $1,284,379 $ 924,006 $ 716,234 Foreign governments ......................... 144,274 127,637 100,911 Commercial export . ......................... 172,101 144,274 85,331 Other (principally U.S. commercial) ......... 309,307 209,545 134,569 ---------- ---------- ---------- Consolidated sales ......................... $1,910,061 $1,405,462 $1,037,045 ========== ========== ==========
F-27 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 17. UNAUDITED QUARTERLY FINANCIAL DATA Unaudited summarized financial data by quarter for the years ended December 31, 2000 and 1999 is presented in the table below.
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------- ------------- -------------- ------------ 2000 Sales .................... $ 377,052 $ 460,976 $ 514,415 $ 557,618 Operating income ......... 34,669 49,653 62,815 75,581 Net income ............... 10,929 16,459 24,110 31,229 Basic EPS ................ $ 0.33 $ 0.49 $ 0.72 $ 0.93 Diluted EPS .............. $ 0.32 $ 0.47 $ 0.69 $ 0.89 1999 Sales .................... $ 275,562 $ 314,432 $ 382,356 $ 433,112 Operating income ......... 26,167 31,149 42,840 50,330 Net income ............... 7,199 11,086 17,349 23,055 Basic EPS . .............. $ 0.24 $ 0.34 $ 0.53 $ 0.70 Diluted EPS .............. $ 0.23 $ 0.33 $ 0.51 $ 0.68
18. FINANCIAL INFORMATION OF L-3 COMMUNICATIONS AND ITS SUBSIDIARIES The shareholders' equity of L-3 Communications equals that of L-3 Holdings but its components of the common stock and additional paid-in capital accounts are different. The table below presents information regarding changes in common stock and additional paid-in capital of L-3 Communications for each of the three years ended December 31, 2000.
L-3 COMMUNICATIONS COMMON STOCK ------------------ ADDITIONAL SHARES PAR PAID-IN ISSUED VALUE CAPITAL TOTAL -------- ------- ------------- ------------- Balance at December 31, 1997 ............. 100 $-- $ 120,410 $ 120,410 Contributions from L-3 Holdings ......... 144,359 144,359 --- --- ---------- ---------- Balance at December 31, 1998 ............. 100 -- 264,769 264,769 Contributions from L-3 Holdings ......... 218,925 218,925 --- --- ---------- ---------- Balance at December 31, 1999 ............. 100 -- 483,694 483,694 Contributions from L-3 Holdings ......... 322,732 322,732 Push down of Convertible Notes .......... (290,500) (290,500) --- --- ---------- ---------- Balance at December 31, 2000 ............. 100 $-- $ 515,926 $ 515,926 === === ========== ==========
The net proceeds received by L-3 Holdings from the sale of its common stock, exercise of L-3 Holdings employee stock options and L-3 Holdings common stock contributed to the Company's savings plans are contributed to L-3 Communications. The net proceeds from the sale of the Convertible Notes by L-3 Holdings were also contributed to L-3 Communications and are reflected as indebtedness of L-3 Communications. See Notes 2 and 7. F-28 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The debt of L-3 Communications, including the Senior Subordinated Notes and borrowings under amounts drawn against the Senior Credit Facilities are guaranteed, on a joint and several, full and unconditional basis, by certain of its wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries"). See Note 7. The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the "Non-Guarantor Subsidiaries") do not guarantee the debt of L-3 Communications. None of the debt of L-3 Communications has been issued by its subsidiaries. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L-3 Communications. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statement based on Rule 3-10 of SEC Regulation S-X . The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements. The following condensed combining financial information present the results of operations, financial position and cash flows of (i) L-3 Communications excluding its consolidated subsidiaries (the "Parent") (ii) the Guarantor Subsidiaries, (iii) the Non-Guarantor Subsidiaries and (iv) the eliminations to arrive at the information for L-3 Communications on a consolidated basis. F-29 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR NON-GUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS ------------- -------------- --------------- -------------- ------------------- CONDENSED COMBINING BALANCE SHEETS: - ----------------------------------- AS OF DECEMBER 31, 2000: - ------------------------ Current assets: Cash and cash equivalents $ 18,708 $ 4,911 $ 9,061 $ -- $ 32,680 Contracts in process 437,425 206,575 56,133 -- 700,133 Other current assets 74,539 18,045 4,173 -- 96,757 ---------- -------- --------- ---------- ---------- Total current assets 530,672 229,531 69,367 -- 829,570 ---------- -------- --------- ---------- ---------- Property, plant and equipment, net 115,678 27,583 12,867 -- 156,128 Intangibles, net 914,747 398,461 58,160 -- 1,371,368 Other assets 79,657 7,719 19,102 -- 106,478 Investment in and amounts due from (to) consolidated subsidiaries 613,153 55,805 (27,022) (641,936) -- ---------- -------- --------- ---------- ---------- Total assets $2,253,907 $719,099 $ 132,474 $ (641,936) $2,463,544 ========== ======== ========= ========== ========== Current liabilities: Accounts payable and accrued expenses $ 256,282 $ 63,283 $ 22,104 $ -- $ 341,669 Customer advances 50,550 2,216 2,437 -- 55,203 Other current liabilities 58,291 6,449 7,057 -- 71,797 ---------- -------- --------- ---------- ---------- Total current liabilities 365,123 71,948 31,598 -- 468,669 ---------- -------- --------- ---------- ---------- Other liabilities 101,215 103,173 2,918 -- 207,306 Long-term debt 1,095,000 -- -- -- 1,095,000 Shareholders' equity 692,569 543,978 97,958 (641,936) 692,569 ---------- -------- --------- ---------- ---------- Total liabilities and shareholders' equity $2,253,907 $719,099 $ 132,474 $ (641,936) $2,463,544 ========== ======== ========= ========== ========== AS OF DECEMBER 31, 1999: - ------------------------ Current assets: Cash and cash equivalents $ 34,037 $ 5,164 $ 3,587 $ -- $ 42,788 Contracts in process 259,628 162,088 57,427 -- 479,143 Other current assets 24,616 10,455 5,675 -- 40,746 ---------- -------- --------- ---------- ---------- Total current assets 318,281 177,707 66,689 -- 562,677 ---------- -------- --------- ---------- ---------- Property, plant and equipment, net 104,087 25,005 11,879 -- 140,971 Intangibles, net 399,746 377,177 44,629 -- 821,552 Other assets 67,820 10,337 25,384 -- 103,541 Investment in and amounts due from (to) consolidated subsidiaries 644,560 23,591 (25,423) (642,728) -- ---------- -------- --------- ---------- ---------- Total assets $1,534,494 $613,817 $ 123,158 $ (642,728) $1,628,741 ========== ======== ========= ========== ========== Current liabilities: Accounts payable and accrued expenses $ 136,808 $ 57,924 $ 19,007 $ -- $ 213,739 Customer advances 53,345 543 2,850 -- 56,738 Other current liabilities 12,550 17,230 6,900 -- 36,680 ---------- -------- --------- ---------- ---------- Total current liabilities 202,703 75,697 28,757 -- 307,157 ---------- -------- --------- ---------- ---------- Other liabilities 85,353 47,961 95 -- 133,409 Long-term debt 605,000 -- -- -- 605,000 Shareholders' equity 641,438 490,159 94,306 (642,728) 583,175 ---------- -------- --------- ---------- ---------- Total liabilities and shareholders' equity $1,534,494 $613,817 $ 123,158 $ (642,728) $1,628,741 ========== ======== ========= ========== ==========
F-30 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR NON-GUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS ------------- -------------- --------------- -------------- ------------------- CONDENSED COMBINING STATEMENTS OF - --------------------------------- OPERATIONS: - ------------ FOR THE YEAR ENDED DECEMBER 31, 2000: - ------------------------------------- Sales $1,313,998 $441,677 $159,735 $ (5,349) $1,910,061 ---------- -------- -------- --------- ---------- Operating income 206,680 5,755 10,283 -- 222,718 Interest and other income 3,061 264 1,068 -- 4,393 Interest expense 92,633 149 250 -- 93,032 Provision for income taxes 44,852 2,248 4,252 -- 51,352 Equity in net income (loss) of consolidated subsidiaries 10,471 -- -- (10,471) -- ---------- -------- -------- --------- ---------- Net income $ 82,727 $ 3,622 $ 6,849 $ (10,471) $ 82,727 ========== ======== ======== ========= ========== FOR THE YEAR ENDED DECEMBER 31, 1999: - ------------------------------------- Sales $ 837,924 $440,160 $130,122 $ (2,744) $1,405,462 ---------- -------- -------- --------- ---------- Operating income (loss) 103,753 52,016 (5,283) -- 150,486 Interest and other income 4,738 469 327 -- 5,534 Interest expense 60,307 -- 283 -- 60,590 Provision (benefit) for income taxes 18,238 20,091 (1,588) -- 36,741 Equity in net income (loss) of consolidated subsidiaries 28,743 -- -- (28,743) -- ---------- -------- -------- --------- ---------- Net income (loss) $ 58,689 $ 32,394 $ (3,651) $ (28,743) $ 58,689 ========== ======== ======== ========= ========== FOR THE YEAR ENDED DECEMBER 31, 1998: - ------------------------------------- Sales $ 833,471 $172,333 $ 33,777 $ (2,536) $1,037,045 ---------- -------- -------- --------- ---------- Operating income 82,852 16,137 1,360 -- 100,349 Interest and other income 2,546 422 -- (309) 2,659 Interest expense 49,503 -- 364 (309) 49,558 Provision for income taxes 14,158 6,375 366 -- 20,899 Equity in net income (loss) of consolidated subsidiaries 10,814 -- -- (10,814) -- ---------- -------- -------- --------- ---------- Net income $ 32,551 $ 10,184 $ 630 $ (10,814) $ 32,551 ========== ======== ======== ========= ==========
F-31 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR PARENT SUBSIDIARIES ------------- -------------- CONDENSED COMBINING STATEMENTS OF CASH FLOWS: - --------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 2000: - ------------------------------------- OPERATING ACTIVITIES: Net income $ 82,727 $ 3,622 Depreciation, amortization, deferred taxes and noncash items 94,389 18,269 Equity in net (income) loss of consolidated subsidiaries (10,471) -- Changes in operating assets and liabilities (57,919) (32,395) ----------- ----------- Net cash from (used in) operating activities 108,726 (10,504) ----------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (570,270) (15,624) Investment in consolidated subsidiaries (29,338) -- Capital expenditures, net of dispositions (7,971) (6,195) Other investing activities -- -- ----------- ----------- Net cash from (used in) investing activities (607,579) (21,819) ----------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net 190,000 -- Contribution from L-3 Holdings 299,454 -- Intercompany financing activities, net (786) 32,070 Other financing activities (5,144) -- ----------- ----------- Net cash from (used in) financing activities 483,524 32,070 ----------- ----------- Net increase (decrease) in cash (15,329) (253) Cash and cash equivalents, beginning of period 34,037 5,164 ----------- ----------- Cash and cash equivalents, end of period $ 18,708 $ 4,911 =========== =========== FOR THE YEAR ENDED DECEMBER 31, 1999: - ------------------------------------- OPERATING ACTIVITIES: Net income (loss) $ 58,689 $ 32,394 Depreciation, amortization, deferred taxes and noncash items 57,147 32,703 Equity in net (income) loss of consolidated subsidiaries (28,743) -- Changes in operating assets and liabilities (11,356) (33,782) ----------- ----------- Net cash from (used in) operating activities 75,737 31,315 ----------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (58,864) (156,196) Investment in consolidated subsidiaries (213,331) -- Capital expenditures, net of dispositions (12,572) (1,686) Other investing activities 4,649 2,275 ----------- ----------- Net cash (used in) investing activities (280,118) (155,607) ----------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net -- -- Contribution from L-3 Holdings 201,582 -- Intercompany financing activities, net 12,995 130,330 Other financing activities 104 (1,333) ----------- ----------- Net cash from (used in) financing activities 214,681 128,997 ----------- ----------- Net increase in cash 10,300 4,705 Cash and cash equivalents, beginning of period 23,737 459 ----------- ----------- Cash and cash equivalents, end of period $ 34,037 $ 5,164 =========== =========== NON-GUARANTOR CONSOLIDATED SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS --------------- -------------- ------------------- CONDENSED COMBINING STATEMENTS OF CASH FLOWS: - --------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 2000: - --------------------------------------------- OPERATING ACTIVITIES: Net income $ 6,849 $ (10,471) $ 82,727 Depreciation, amortization, deferred taxes and noncash items 4,940 -- 117,598 Equity in net (income) loss of consolidated subsidiaries -- 10,471 -- Changes in operating assets and liabilities 3,794 -- (86,520) --------- ----------- ----------- Net cash from (used in) operating activities 15,583 -- 113,805 --------- ----------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (13,714) -- (599,608) Investment in consolidated subsidiaries -- 29,338 -- Capital expenditures, net of dispositions (1,354) -- (15,520) Other investing activities 6,905 -- 6,905 --------- ----------- ----------- Net cash from (used in) investing activities (8,163) 29,338 (608,223) --------- ----------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net -- -- 190,000 Contribution from L-3 Holdings -- -- 299,454 Intercompany financing activities, net (1,946) (29,338) -- Other financing activities -- -- (5,144) --------- ----------- ----------- Net cash from (used in) financing activities (1,946) (29,338) 484,310 --------- ----------- ----------- Net increase (decrease) in cash 5,474 -- (10,108) Cash and cash equivalents, beginning of period 3,587 -- 42,788 --------- ----------- ----------- Cash and cash equivalents, end of period $ 9,061 $ -- $ 32,680 ========= =========== =========== FOR THE YEAR ENDED DECEMBER 31, 1999: - ------------------------------------- OPERATING ACTIVITIES: Net income (loss) $ (3,651) (28,743) $ 58,689 Depreciation, amortization, deferred taxes and noncash items 3,220 93,070 Equity in net (income) loss of consolidated subsidiaries -- 28,743 -- Changes in operating assets and liabilities (7,603) -- (52,741) --------- ----------- ----------- Net cash from (used in) operating activities (8,034) -- 99,018 --------- ----------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (57,135) -- (272,195) Investment in consolidated subsidiaries -- 213,331 -- Capital expenditures, net of dispositions (2,485) -- (16,743) Other investing activities (2,788) -- 4,136 --------- ----------- ----------- Net cash (used in) investing activities (62,408) 213,331 (284,802) --------- ----------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net -- -- -- Contribution from L-3 Holdings -- -- 201,582 Intercompany financing activities, net 70,006 (213,331) -- Other financing activities 2,089 -- 860 --------- ----------- ----------- Net cash from (used in) financing activities 72,095 (213,331) 202,442 --------- ----------- ----------- Net increase in cash 1,653 -- 16,658 Cash and cash equivalents, beginning of period 1,934 -- 26,130 --------- ----------- ----------- Cash and cash equivalents, end of period $ 3,587 -- $ 42,788 ========= =========== ===========
F-32 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR PARENT SUBSIDIARIES ------------- -------------- FOR THE YEAR ENDED DECEMBER 31, 1998: - ------------------------------------- OPERATING ACTIVITIES: Net income $ 32,551 $ 10,184 Depreciation, amortization, deferred taxes and noncash items 50,372 12,273 Equity in net (income) loss of consolidated subsidiaries (10,814) -- Changes in operating assets and liabilities 4,861 (13,026) ----------- ----------- Net cash from (used in) operating activities 76,970 9,431 ----------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (82,704) (320,218) Investment in consolidated subsidiaries (365,284) -- Capital expenditures, net of dispositions (19,003) (2,806) Other investing activities 6,653 -- ----------- ----------- Net cash from (used in) investing activities (460,338) (323,024) ----------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net (172,000) -- Proceeds from sale of senior subordinated notes 380,000 -- Contribution from L-3 Holdings 139,500 -- Intercompany financing activities, net (6,806) 314,052 Other financing activities (11,063) -- ----------- ----------- Net cash from (used in) financing activities 329,631 314,052 ----------- ----------- Net increase (decrease) in cash (53,737) 459 Cash and cash equivalents, beginning of period 77,474 -- ----------- ----------- Cash and cash equivalents, end of period $ 23,737 $ 459 =========== =========== NON-GUARANTOR CONSOLIDATED SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS --------------- -------------- ------------------- FOR THE YEAR ENDED DECEMBER 31, 1998: - ------------------------------------- OPERATING ACTIVITIES: Net income $ 630 (10,814) $ 32,551 Depreciation, amortization, deferred taxes and noncash items 1,027 -- 63,672 Equity in net (income) loss of consolidated subsidiaries -- 10,814 -- Changes in operating assets and liabilities (2,976) (11,141) ---------- ----------- Net cash from (used in) operating activities (1,319) -- 85,082 ---------- ------- ----------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (45,066) -- (447,988) Investment in consolidated subsidiaries -- 365,284 -- Capital expenditures, net of dispositions (650) -- (22,459) Other investing activities (9,069) -- (2,416) ---------- ------- ----------- Net cash from (used in) investing activities (54,785) 365,284 (472,863) ---------- ------- ----------- FINANCING ACTIVITIES: Borrowings (repayments) under senior credit facilities, net -- -- (172,000) Proceeds from sale of senior subordinated notes -- -- 380,000 Contribution from L-3 Holdings -- -- 139,500 Intercompany financing activities, net 58,038 (365,284) -- Other financing activities -- -- (11,063) ---------- -------- ----------- Net cash from (used in) financing activities 58,038 (365,284) 336,437 ---------- -------- ----------- Net increase (decrease) in cash 1,934 -- (51,344) Cash and cash equivalents, beginning of period -- -- 77,474 ---------- -------- ----------- Cash and cash equivalents, end of period $ 1,934 -- $ 26,130 ========== ======== ===========
F-33 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------------- ---------------------------------------------------------------------------------------- 3.1 Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement of Form S-1 No. 333-46975). 3.2 By laws of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 No. 333-46975) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.3 Indenture dated as of April 30, 1997 between L-3 Communications Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-31649). 10.6 Employment Agreement dated April 30, 1997 between Frank C. Lanza and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.7 Employment Agreement dated April 30, 1997 between Robert V. LaPenta and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.51 to the Registrant Statement on Form S-1 No. 333-46975). 10.10 Form of Stock Option Agreement of Employee Options (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.11 1997 Stock Option Plan for Key Employees (incorporated by reference to Exhibit 10.11 to Registrant's Registration Statement on Form S-1, No. 333-70125).
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------------- ---------------------------------------------------------------------------------------- 10.12 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Frank C. Lanza (incorporated by reference to Exhibit 10.12 to Registrant" Registration Statement on Form S-1, No. 333-70125). 10.13 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Robert V. LaPenta (incorporated by reference to Exhibit 10.13 to Registrant's Registration Statement on Form S-1, No. 333-70125). 10.15 Option Plan for Non-Employee Directors of L-3 Communication's Holdings, Inc. (incorporated by reference to Exhibit 10.15 to Registrant's annual report on Form 10-K filed on March 31, 1999). 10.16 1999 Long Term Performance Plan dated as of April 27, 1999 (incorporated by reference to Exhibit 10.16 to the Registrant's annual report on Form 10-K filed on March 30, 2000). 10.20 L-3 Communications Corporation Pension Plan (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.31 Indenture dated as of May 22, 1998 between L-3 Communications and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.6 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-70199). 10.32 Indenture dated as of December 11, 1998 among L-3 Communications Corporation, the Guarantors named therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.32 to Registrant's Registration Statement on Form S-1, No. 333-70125). **10.33 Indenture dated as of November 21, 2000 among L-3 Communications Holdings, Inc. the Guarantors named therein and the Bank of New York, as Trustee. **10.34 Purchase Agreement dated as of November 21, 2000 between L-3 Communications Holdings, Inc. and Lehman Brothers Inc. **10.35 Registration Rights Agreement dated as of November 21, 2000 between L-3 Communications Holdings, Inc. and Lehman Brothers. **10.40 Consent, Waiver and First Amendment to Amended and Restated 364 Day Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.41 Consent, Waiver and First Amendment to Second Amended and Restated Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.42 Consent, Waiver and First Amendment to New 364 Day Credit Agreement dated as of April 28, 2000 among L-3 Communications Corporation and lenders named therein. **10.43 New 364 Day Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.44 Amended and Restated 364 Day Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.45 Second Amended and Restated Credit Agreement dated as of April 24, 2000 among L-3 Communications Corporation and lenders named therein. **10.91 Asset Purchase Agreement relating to the Honeywell TCAS Business by and among Honeywell Inc., L-3 Communications Corporation and, solely in respect of the Guaranty in Article XIV, Honeywell International Inc. dated as of February 10, 2000. **10.92 Asset Purchase and Sale Agreement, dated January 7, 2000 by and between L-3 Communications Corporation and Raytheon Company. *11 L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share. **12 Ratio of Earnings to Fixed Charges. **21 Subsidiaries of the Registrant. **23.1 Consent of PricewaterhouseCoopers LLP.
- ---------- * The information required in this exhibit is presented on Note 10 to the Consolidated Financial Statements as of December 31, 2000 in accordance with the provisions of SFAS No. 128, Earnings Per Share. ** Filed herewith EX-10.33 2 0002.txt INDENTURE DATED NOVEMBER 21, 2000 EXECUTION COPY ================================================================================ INDENTURE AMONG L-3 COMMUNICATIONS HOLDINGS, INC., THE COMPANY AND L-3 COMMUNICATIONS CORPORATION, HYGIENETICS ENVIRONMENTAL SERVICES, INC., L-3 COMMUNICATIONS ILEX SYSTEMS, INC., L-3 COMMUNICATIONS AYDIN CORPORATION, MPRI, INC., L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC., SPD HOLDINGS, INC., SPD ELECTRICAL SYSTEMS, INC., SPD SWITCHGEAR, INC., PAC ORD, INC., HENSCHEL, INC., POWER PARAGON, INC., L-3 COMMUNICATIONS ESSCO, INC., ELECTRODYNAMICS, INC., INTERSTATE ELECTRONICS CORPORATION, SOUTHERN CALIFORNIA MICROWAVE INC., L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., L-3 COMMUNICATIONS DBS MICROWAVE, INC. AND MICRODYNE CORPORATION, AS GUARANTORS AND THE BANK OF NEW YORK, AS TRUSTEE 5.25% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2009 DATED AS OF NOVEMBER 21, 2000 =============================================================================== CROSS-REFERENCE TABLE* Trust Indenture Indenture Act Section Section - ----------- -------- 310(a)(1) .................................................. 5.11 (a)(2) .................................................. 5.11 (a)(3) .................................................. n/a (a)(4) .................................................. n/a (a)(5) .................................................. 5.11 (b) ..................................................... 5.3; 5.11 (c) ..................................................... n/a 311(a) ..................................................... 5.12 (b)...................................................... 5.12 (c)...................................................... n/a 312(a)...................................................... 2.10 (b)...................................................... 15.3 (c)...................................................... 15.3 313(a)...................................................... 5.7 (b)(1)................................................... n/a (b)(2)................................................... 5.7 (c)...................................................... 5.7; 15.2 (d)...................................................... 5.7 314(a)(1), (2), (3)......................................... 9.6; 15.6 (a)(4)................................................... 9.6; 9.7; 15.6 (b)...................................................... n/a (c)(1)................................................... 15.5 (c)(2)................................................... 15.5 (c)(3)................................................... n/a (d)...................................................... n/a (e)...................................................... 15.6 (f)...................................................... n/a 315(a)...................................................... 5.1(a) (b)...................................................... 5.6; 15.2 (c)...................................................... 5.1(b) (d)...................................................... 5.1(c) (e)...................................................... 4.14 316(a)(last sentence)....................................... 2.13 (a)(1)(A)................................................ 4.5 (a)(1)(B)................................................ 4.4 (a)(2)................................................... n/a (b)...................................................... 4.7 (c)...................................................... 7.4 i 317(a)(1)................................................... 4.8 (a)(2)................................................... 4.9 (b)...................................................... 2.5 318(a)...................................................... 15.1 (b)...................................................... n/a (c)...................................................... 15.1 - ------------ "n/a" means not applicable. *This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE..............................................................1 Section 1.1 Definitions.....................................................................................1 Section 1.2 Incorporation by Reference of Trust Indenture Act..............................................13 Section 1.3 Rules of Construction..........................................................................14 ARTICLE 2 THE SECURITIES.........................................................................................14 Section 2.1 Title and Terms................................................................................14 Section 2.2 Form of Securities.............................................................................15 Section 2.3 Legends........................................................................................16 Section 2.4 Execution, Authentication, Delivery and Dating.................................................21 Section 2.5 Registrar and Paying Agent.....................................................................22 Section 2.6 Paying Agent to Hold Assets in Trust...........................................................23 Section 2.7 General Provisions Relating to Transfer and Exchange...........................................23 Section 2.8 Book-Entry Provisions for the Global Securities................................................24 Section 2.9 Special Transfer Provisions....................................................................25 Section 2.10 Holder Lists...................................................................................27 Section 2.11 Persons Deemed Owners..........................................................................27 Section 2.12 Mutilated, Destroyed, Lost or Stolen Securities................................................27 Section 2.13 Treasury Securities............................................................................28 Section 2.14 Temporary Securities...........................................................................28 Section 2.15 Cancellation...................................................................................29 Section 2.16 CUSIP Numbers..................................................................................29 Section 2.17 Defaulted Interest.............................................................................29 ARTICLE 3 SATISFACTION AND DISCHARGE.............................................................................29 Section 3.1 Satisfaction and Discharge of Indenture........................................................29 Section 3.2 Deposited Monies to be Held in Trust...........................................................31 Section 3.3 Return of Unclaimed Monies.....................................................................31 ARTICLE 4 DEFAULTS AND REMEDIES..................................................................................31 Section 4.1 Events of Default..............................................................................31 Section 4.2 Acceleration of Maturity; Rescission and Annulment.............................................32 Section 4.3 Other Remedies.................................................................................33 Section 4.4 Waiver of Past Defaults........................................................................33 Section 4.5 Control by Majority............................................................................33 Section 4.6 Limitation on Suit.............................................................................34 Section 4.7 Unconditional Rights of Holders to Receive Payment and to Convert..............................34 Section 4.8 Collection of Indebtedness and Suits for Enforcement by the Trustee............................35 Section 4.9 Trustee May File Proofs of Claim...............................................................35 Section 4.10 Restoration of Rights and Remedies.............................................................36 Section 4.11 Rights and Remedies Cumulative.................................................................36 Section 4.12 Delay or Omission Not Waiver...................................................................36 Section 4.13 Application of Money Collected.................................................................36 Section 4.14 Undertaking for Costs..........................................................................37 Section 4.15 Waiver of Stay or Extension Laws...............................................................37 ARTICLE 5 THE TRUSTEE............................................................................................37 Section 5.1 Certain Duties and Responsibilities............................................................37 Section 5.2 Certain Rights of Trustee......................................................................39 Section 5.3 Individual Rights of Trustee...................................................................40 Section 5.4 Money Held in Trust............................................................................40 Section 5.5 Trustee's Disclaimer...........................................................................40 Section 5.6 Notice of Defaults.............................................................................40 Section 5.7 Reports by Trustee to Holders..................................................................41
iii Section 5.8 Compensation and Indemnification...............................................................41 Section 5.9 Replacement of Trustee.........................................................................41 Section 5.10 Successor Trustee by Merger, Etc...............................................................42 Section 5.11 Corporate Trustee Required; Eligibility........................................................42 Section 5.12 Collection of Claims Against the Company.......................................................43 ARTICLE 6 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...................................................43 Section 6.1 Company May Consolidate, Etc., Only on Certain Terms...........................................43 Section 6.2 Successor Corporation Substituted..............................................................44 ARTICLE 7 AMENDMENTS, SUPPLEMENTS AND WAIVERS....................................................................44 Section 7.1 Without Consent of Holders of Securities.......................................................44 Section 7.2 With Consent of Holders of Securities..........................................................45 Section 7.3 Compliance with Trust Indenture Act............................................................46 Section 7.4 Revocation of Consents and Effect of Consents or Votes.........................................46 Section 7.5 Notation on or Exchange of Securities..........................................................46 Section 7.6 Trustee to Sign Amendment, Etc.................................................................47 ARTICLE 8 MEETING OF HOLDERS OF SECURITIES.......................................................................47 Section 8.1 Purposes for Which Meetings May Be Called......................................................47 Section 8.2 Call Notice and Place of Meetings..............................................................47 Section 8.3 Persons Entitled to Vote at Meetings...........................................................47 Section 8.4 Quorum; Action.................................................................................48 Section 8.5 Determination of Voting Rights; Conduct and Adjournment of Meetings............................48 Section 8.6 Counting Votes and Recording Action of Meetings................................................49 ARTICLE 9 COVENANTS..............................................................................................49 Section 9.1 Payment of Principal, Premium and Interest.....................................................49 Section 9.2 Maintenance of Offices or Agencies.............................................................49 Section 9.3 Corporate Existence............................................................................50 Section 9.4 Maintenance of Properties......................................................................50 Section 9.5 Payment of Taxes and Other Claims..............................................................50 Section 9.6 Reports........................................................................................51 Section 9.7 Compliance Certificate.........................................................................51 Section 9.8 Resale of Certain Securities...................................................................51 Section 9.9 Liquidated Damages.............................................................................51 ARTICLE 10 REDEMPTION OF SECURITIES..............................................................................52 Section 10.1 [Reserved].....................................................................................52 Section 10.2 Optional Redemption............................................................................52 Section 10.3 Notice to Trustee..............................................................................52 Section 10.4 Selection of Securities to Be Redeemed.........................................................52 Section 10.5 Notice of Redemption...........................................................................53 Section 10.6 Effect of Notice of Redemption.................................................................54 Section 10.7 Deposit of Redemption Price....................................................................54 Section 10.8 Securities Redeemed in Part....................................................................54 ARTICLE 11 REPURCHASE AT THE OPTION OF A HOLDER UPON A CHANGE OF CONTROL.........................................55 Section 11.1 Repurchase Right...............................................................................55 Section 11.2 Conditions to the Company's Election to Pay the Repurchase Price in Common Stock...............55 Section 11.3 Notices; Method of Exercising Repurchase Right, Etc............................................56 ARTICLE 12 CONVERSION OF SECURITIES..............................................................................59 Section 12.1 Conversion Right and Conversion Price..........................................................59
iv Section 12.2 Exercise of Conversion Right...................................................................59 Section 12.3 Fractions of Shares............................................................................60 Section 12.4 Adjustment of Conversion Price.................................................................60 Section 12.5 Notice of Adjustments of Conversion Price......................................................69 Section 12.6 Notice Prior to Certain Actions................................................................69 Section 12.7 Company to Reserve Common Stock................................................................70 Section 12.8 Taxes on Conversions...........................................................................70 Section 12.9 Covenant as to Common Stock....................................................................70 Section 12.10 Cancellation of Converted Securities...........................................................70 Section 12.11 Effect of Reclassification, Consolidation, Merger or Sale......................................71 Section 12.12 Responsibility of Trustee for Conversion Provisions............................................72 ARTICLE 13 SUBORDINATION.........................................................................................72 Section 13.1 Agreement to Subordinate.......................................................................72 Section 13.2 Liquidation; Dissolution; Bankruptcy...........................................................72 Section 13.3 Default on Designated Senior Debt..............................................................73 Section 13.4 Acceleration of Securities.....................................................................73 Section 13.5 When Distribution Must Be Paid Over............................................................73 Section 13.6 Notice by Company..............................................................................74 Section 13.7 Subrogation....................................................................................74 Section 13.8 Relative Rights................................................................................74 Section 13.9 Subordination May Not Be Impaired by Company...................................................75 Section 13.10 Distribution or Notice to Representative.......................................................75 Section 13.11 Rights of Trustee and Paying Agent.............................................................75 Section 13.12 Authorization to Effect Subordination..........................................................75 Section 13.13 Antilayering Provision.........................................................................76 Section 13.14 Amendments.....................................................................................76 ARTICLE 14 SUBSIDIARY GUARANTEES.................................................................................76 Section 14.1 Agreement to Guarantee.........................................................................76 Section 14.2 Execution and Delivery of Guarantees...........................................................77 Section 14.3 Guarantors May Consolidate, Etc. on Certain Terms..............................................78 Section 14.4 Releases.......................................................................................79 Section 14.5 No Recourse Against Others.....................................................................79 Section 14.6 Subordination of Subsidiary Guarantees; Anti-layering..........................................80 Section 14.7 Future Subsidiary Guarantees...................................................................80 ARTICLE 15 OTHER PROVISIONS OF GENERAL APPLICATION...............................................................80 Section 15.1 Trust Indenture Act Controls...................................................................80 Section 15.2 Notices........................................................................................80 Section 15.3 Communication by Holders with Other Holders....................................................81 Section 15.4 Acts of Holders of Securities..................................................................81 Section 15.5 Certificate and Opinion as to Conditions Precedent.............................................82 Section 15.6 Statements Required in Certificate or Opinion..................................................82 Section 15.7 Effect of Headings and Table of Contents.......................................................83 Section 15.8 Successors and Assigns.........................................................................83 Section 15.9 Separability Clause............................................................................83 Section 15.10 Benefits of Indenture..........................................................................83 Section 15.11 Section Governing Law..........................................................................83 Section 15.12 Counterparts...................................................................................83 Section 15.13 Legal Holidays.................................................................................84 Section 15.14 Recourse Against Others........................................................................84
v EXHIBITS EXHIBIT A: Form of Security vi This INDENTURE dated as of November 21, 2000, among L-3 Communications Holdings, Inc, a Delaware corporation (the "Company"), and L-3 Communications Corporation, a Delaware corporation ("L-3 Communications"), Hygienetics Environmental Services, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, MPRI, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Switchgear, Inc., a Delaware corporation, Pac Ord, Inc., a Delaware corporation, Henschel, Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, Electrodynamics, Inc., an Arizona Corporation, Interstate Electronics Corporation, a California Corporation, Southern California Microwave Inc, a California corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, L-3 Communications DBS Microwave, Inc., a California corporation and Microdyne Corporation, a Maryland corporation (collectively, including L-3 Communications, the "Guarantors"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 5.25% Convertible Senior Subordinated Notes due 2009 guaranteed by the Guarantors (herein called the "Securities") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company and the Guarantors have duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when the Securities are executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company and the Guarantors, and to make this Indenture a valid agreement of the Company and the Guarantors, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS. For all purposes of this Indenture and the Securities, the following terms are defined as follows: "Act," when used with respect to any Holder of a Security, has the meaning specified in Section 15.4(a). "Adjusted Interest Rate" means, with respect to any Reset Transaction, the rate per annum that is the arithmetic average of the rates quoted by two Reference Dealers selected by the Company or its successor as the rate at which interest on the Securities should accrue so that the fair market value, expressed in Dollars, of a Security immediately after the later of: (1) the public announcement of such Reset Transaction; or (2) the public announcement of a change in dividend policy in connection with such Reset Transaction; will most closely equal the average Trading Price of a Security for the 20 Trading Days preceding the date of public announcement of such Reset Transaction; provided that the Adjusted Interest Rate shall not be less than 5.25% per annum. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" has the meaning stated in Section 2.8. "Bankruptcy Law" means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" shall mean any person who is considered a beneficial owner of a security in accordance with Rule 13(d)(3) promulgated by the SEC under the Exchange Act. "Board of Directors" means either the board of directors of the Company or, except with respect to paragraph (3) under the definition of "Change of Control," any committee of that board empowered to act for it with respect to this Indenture. "Board Resolution" means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the Company to be in full force and effect on the date of such certification, shall have been delivered to the Trustee. "Business Day," when used with respect to any Place of Payment or Place of Conversion, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in that Place of Payment or Place of Conversion, as the case may be, are authorized or obligated by law to close. "Change of Control" means the occurrence of any of the following after the date of this Indenture: (1) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries (other than the Excluded Subsidiaries) taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties; (2) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner," directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); 2 (3) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (4) the consolidation or merger of the Company with or into any other person, any merger of another person into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the properties and assets of the Company and its subsidiaries (other than the Excluded Subsidiaries) taken as a whole to another person, other than: (a) any transaction: (i) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of the Company's capital stock; and (ii) pursuant to which holders of the Company's capital stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of the Company's capital stock entitled to vote generally in elections of directors of the continuing or surviving person immediately after giving effect to such issuance; and (b) any merger solely for the purpose of changing the Company's jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity. Notwithstanding the foregoing, a Change of Control will be deemed not to have occurred if: (1) the Trading Price per share of the Company's Common Stock for any five Trading Days within: (a) the period of 10 consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of the Change of Control, in the case of a Change of Control under clause (1) above; or (b) the period of 10 consecutive Trading Days ending immediately before the Change of Control, in the case of a Change of Control under clause (2) above, equals or exceeds 110% of the conversion price of the Securities in effect on each such Trading Day; or (2) at least 90% of the consideration in the transaction or transactions constituting a Change of Control consists of shares of common stock traded or to be traded immediately following such Change of Control on a national securities exchange or the Nasdaq National Market and, as a result of the transaction or transactions, the Securities become convertible solely into such common stock (and any rights attached thereto). 3 "Clearstream" means Clearstream Banking, societe anonyme (formerly Cedelbank). "Common Stock" means any stock of any class of the Company that has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and that is not subject to redemption by the Company. However, subject to the provisions of Section 12.11, shares issuable on conversion of Securities shall include only shares of the class designated as Common Stock, par value $0.01 per share, of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and that are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the corporation named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Notice" has the meaning specified in Section 11.3. "Company Order" means a written order signed in the name of the Company by both (1) the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and (2) so long as not the same as the officer signing pursuant to clause (1), the Chief Financial Officer, the Controller, the Treasurer or the Secretary of the Company, and delivered to the Trustee. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of the Board of Directors on May 22, 1998; or (2) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board at the time of the new director's nomination or election. "Conversion Agent" means any Person authorized by the Company to convert Securities in accordance with Article 12. "Conversion Price" has the meaning specified in Section 12.1. "Corporate Trust Office" means for purposes of presentation or surrender of Securities for payment, registration, transfer, exchange or conversion or for service of notices or demands upon the Company or for any other purpose of this Indenture, the principal office of the Trustee located at 101 Barclay Street, Floor 21 West, New York, New York 10286, attention: Corporate Trust Administration. "corporation" means corporations, associations, limited liability companies, companies and business trusts. 4 "Current Market Price" has the meaning set forth in Section 12.4(g). "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means an event which is, or after notice or lapse of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 2.17. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Designated Senior Debt" means: (1) any Senior Debt outstanding under any credit facility; and (2) any other Senior Debt permitted under this Indenture, the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Dividend Yield" on any security for any period means the dividends paid or proposed to be paid pursuant to an announced dividend policy on such security for such period divided by, if with respect to dividends paid on such security, the average Trading Price of such security during such period and, if with respect to dividends proposed to be paid on such security, the Trading Price of such security on the effective date of the related Reset Transaction. "Dollar," "U.S. Dollar" or "U.S. $" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System. "Event of Default" has the meaning specified in Section 4.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Subsidiary" means any Subsidiary of the Company or of L-3 Communications that has been designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary has been designated as, or, if the indentures governing the Outstanding Senior Subordinated Notes are no longer in effect, could have been designated as, an "Unrestricted Subsidiary" pursuant to the terms of the indentures governing any of the Outstanding Senior Subordinated Notes as the same are in effect on the date of this Indenture (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of those Notes continue to be outstanding). "Expiration Time" has the meaning specified in Section 12.4(f). "fair market value" has the meaning set forth in Section 12.4(g). 5 "Global Security" has the meaning specified in Section 2.2(b). "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtednes. "Guarantees" means the obligations of the Guarantors described herein. "Guarantors" means each person listed in the preamble to this Indenture as a Guarantor, each Subsidiary of the Company that executes a Guarantee in accordance with the provisions of this Indenture, their respective successors and assigns and any and all future domestic Subsidiaries of the Company, other than any Subsidiary that are properly designated an "Excluded Subsidiary" by the Company in accordance with the terms of that definition. "Holder," when used with respect to any Security, including any Global Security, means the Person in whose name the Security is registered in the Register. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect to borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing capital lease obligations or the balance deferred and unpaid of the purchase price of any property or representing any hedging obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and hedging obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a lien on any assets of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the guarantee by such person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Purchaser" means Lehman Brothers Inc. "Interest Payment Date" means each of June 1 and December 1; provided, however, that if any such date is not a Business Day, the Interest Payment Date shall be the next succeeding Business Day. "Interest Rate" means, (a) if a Reset Transaction has not occurred, 5.25% per annum, or (b) following the occurrence of a Reset Transaction, the Adjusted Interest Rate related to such Reset Transaction to, but not including the effective date of any succeeding Reset Transaction. 6 "Liquidated Damages" means all amounts, if any, payable pursuant to Section 3 of the Registration Rights Agreement. "L-3 Communications" means L-3 Communications Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company. "Maturity" means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by acceleration, conversion, call for redemption, exercise of a Repurchase Right or otherwise. "Nasdaq National Market" means the National Association of Securities Dealers Automated Quotation National Market or any successor national securities exchange or automated over-the-counter trading market in the United States. "Non-Electing Share" has the meaning specified in Section 12.11. "Obligations" means any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Liquidated Damages), guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto. "Officer" of the Company or any Guarantor means the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer, the Controller, any Vice President or the Secretary of the Company or such Guarantor. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 15.5 hereof. "Opinion of Counsel" means a written opinion of counsel, who may be counsel to the Company (and may include directors or employees of the Company) and who is acceptable to the Trustee, which acceptance shall not be unreasonably withheld. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except Securities: (1) previously canceled by the Trustee or delivered to the Trustee for cancellation; (2) for the payment or redemption of which money in the necessary amount has been previously deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, however, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture; and 7 (3) that have been paid in exchange for or in lieu of other Securities which have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company. "Outstanding Senior Subordinated Notes" means the 10% Senior Subordinated Notes due 2007, 8 1/2% Senior Subordinated Notes due 2008 and 8% Senior Subordinated Notes due 2008 issued by L-3 Communications and guaranteed by certain of its subsidiaries. "Paying Agent" has the meaning specified in Section 2.5. "Payment Blockage Notice" has the meaning specified in Section 13.3(ii). "Permitted Junior Securities" means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt of the Company and the Guarantors (and any debt securities issued in exchange for such Senior Debt) to substantially the same extent as, or to a greater extent than, the Securities and the Guarantees are subordinated to such Senior Debt pursuant to this Indenture. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof, and shall include any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act. "Physical Securities" means Securities issued in definitive, fully registered form without interest coupons, substantially in the form of Exhibit A hereto, with the applicable legends as provided in Section 2.3. "Place of Conversion" means any city in which any Conversion Agent is located. "Place of Payment" means any city in which any Paying Agent is located. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.12 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principals" means Lehman Brothers Holding Inc. and any of its affiliates, Lockheed Martin, Frank C. Lanza and Robert V. LaPenta. "Purchase Agreement" means the Purchase Agreement, dated November 16, 2000, between the Company and the Initial Purchaser. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Record Date" means either a Regular Record Date or a Special Record Date, as the case may be; provided that, for purposes of Section 12.4, Record Date has the meaning specified in 12.4(g). 8 "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which such Security is to be redeemed pursuant to this Indenture. "Reference Dealer" means a dealer engaged in the trading of convertible securities. "Reference Period" has the meaning set forth in Section 12.4(d). "Register" has the meaning specified in Section 2.5. "Registrar" has the meaning specified in Section 2.5. "Registration Rights Agreement" means the Resale Registration Rights Agreement dated as of November 21, 2000, among the Company, the Guarantors and the Initial Purchaser. "Registration Statement" has the meaning specified in the Registration Rights Agreement. "Regular Record Date" for the interest on the Securities (including Liquidated Damages, if any) means the May 15 (whether or not a Business Day) next preceding an Interest Payment Date on June 1 and the November 15 (whether or not a Business Day) next preceding an Interest Payment Date on December 1. "Regulation S" means Regulation S under the Securities Act. "Related Party" with respect to any Principal means: (1) any controlling stockholder, 50% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a more than 50% controlling interest of which consist of such Principal and/or such other Persons referred to in clause (1) above. "Repurchase Date" has the meaning specified in Section 11.1. "Repurchase Price" has the meaning specified in Section 11.1. "Repurchase Right" has the meaning specified in Section 11.1. "Reset Transaction" means (i) a merger, consolidation or statutory share exchange to which the entity that is the issuer of the Common Stock into which the Securities are then convertible is a party, (ii) a sale of all or substantially all the assets of that entity, (iii) a recapitalization of that Common Stock or (iv) a distribution described in Section 12.4(d), in each case if after the effective date of the transaction or distribution the Securities would be convertible into: 9 (1) shares of an entity the common stock of which had a Dividend Yield for the four fiscal quarters of such entity immediately preceding the public announcement of such transaction or distribution that was more than 2.5% higher then the Dividend Yield on the Common Stock (or other common stock then issuable upon conversion of the Securities) for the four fiscal quarters preceding the public announcement of such transaction or distribution; or (2) shares of an entity that announces a dividend policy prior to the effective date of such transaction or distribution which policy, if implemented, would result in a Dividend Yield on such entity's common stock for the next four fiscal quarters that would result in such a 2.5% increase. "Responsible Officer," when used with respect to the Trustee, means any officer in the Corporate Trust Office of the Trustee and also means, with respect to a particular corporate trust matter, any other officer of the Trustee whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Securities" means the Securities defined as such in Section 2.3. "Restricted Securities Legend" has the meaning set forth in Section 2.3(a). "Rule 144" means Rule 144 under the Securities Act (including any successor rule thereof), as the same may be amended from time to time. "Rule 144A" means Rule 144A as promulgated under the Securities Act (including any successor rule thereof), as the same may be amended from time to time. "SEC" means the Securities and Exchange Commission. "Securities" has the meaning ascribed to it in the first paragraph under the caption "Recitals of the Company." "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means : (1) all Indebtedness of the Company outstanding under credit facilities and all hedging obligations with respect thereto; (2) any other Indebtedness permitted to be incurred by the Company under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Securities; and (3) all principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnification, reimbursement obligations, damages, guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness referred to in either clause (1) or clause (2) above. 10 Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include: (1) any liability for federal, state, local or other taxes owed or owing by the Company; (2) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates (other than Lehman Brothers Inc. and its affiliates); (3) any trade payables; or (4) any Indebtedness that is incurred in violation of this Indenture. "Senior Debt of a Guarantor" means: (1) all Indebtedness of the Guarantors outstanding under credit facilities and all hedging obligations with respect thereto; (2) any other Indebtedness permitted to be incurred by the Guarantors under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Guarantees of the Securities; and (3) all principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnification, reimbursement obligations, damages, guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness referred to in either clause (1) or clause (2) above. Notwithstanding anything to the contrary in the foregoing, Senior Debt of a Guarantor will not include: (1) any liability for federal, state, local or other taxes owed or owing by that Guarantor; (2) any Indebtedness of that Guarantor to any of its Subsidiaries or other Affiliates; (3) any trade payables; or (4) any obligations with respect to the Outstanding Senior Subordinated Notes of L-3 Communications (and the related guarantees). "Significant Subsidiary" means any Subsidiary which is a "significant subsidiary" within the meaning of Rule 405 under the Securities Act. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 2.17. 11 "Stated Maturity" means the date specified in any Security as the fixed date for the payment of principal on such Security or on which an installment of interest (including Liquidated Damages, if any) on such Security is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition only, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code Section 77aaa-77bbbb), as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, "TIA" means, to the extent such amendment is applicable to this Indenture, the Trust Indenture Act of 1939, as so amended, or any successor statute. "Trading Day" means: (1) if the applicable security is listed or admitted for trading on the New York Stock Exchange or another national security exchange, a day on which the New York Stock Exchange or such other national security exchange is open for business; (2) if the applicable security is quoted on the Nasdaq National Market, a day on which trades may be made thereon; or (3) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Trading Price" of a security on any date of determination means: (1) the closing sale price (or, if no closing sale price is reported, the last reported sale price) of such security (regular day) on the New York Stock Exchange on such date; (2) if such security is not listed for trading on the New York Stock Exchange on any such date, the closing sale price as reported in the composite transactions for the principal U.S. securities exchange on which such security is so listed; (3) if such security is not so listed on a U.S. national or regional securities exchange, the closing sale price as reported by the Nasdaq National Market; (4) if such security is not so reported, the last price quoted by Interactive Data Corporation for such security or, if Interactive Data Corporation is not quoting such price, a similar quotation service selected by the Company; (5) if such security is not so quoted, the average of the mid-point of the last bid and ask prices for such security from at least two dealers recognized as market-makers for such security; or 12 (6) if such security is not so quoted, the average of the last bid and ask prices for such security from a Reference Dealer. "Transfer Agent" means any Person, which may be the Company, authorized by the Company to exchange or register the transfer of Securities. "Trigger Event" has the meaning specified in Section 12.4(d). "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" means: (1) direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (2) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America and which in either case, are non-callable at the option of the issuer thereof. "Vice President," when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Voting Stock" means, at any time, the capital stock that is entitled to vote in the election of the Board of Directors at that time. SECTION 1.2 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. 13 SECTION 1.3 RULES OF CONSTRUCTION. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with accounting principles generally accepted in the United States prevailing at the time of any relevant computation hereunder; and (3) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE 2 THE SECURITIES SECTION 2.1 TITLE AND TERMS. (a) The Securities shall be known and designated as the "5.25% Convertible Senior Subordinated Notes due 2009" of the Company. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $250,000,000 (or $300,000,000 if the over-allotment option set forth in Section 2 of the Purchase Agreement is exercised in full), except for Securities authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of other Securities pursuant to Section 2.7, 2.8, 2.9, 2.12, 7.5, 10.7, 11.1 or 12.2. The Securities shall be issuable in denominations of $1,000 or integral multiples thereof. (b) The Securities shall mature on June 1, 2009. (c) Interest shall accrue from and including November 21, 2000 at the Interest Rate until the principal thereof is paid or made available for payment. Interest shall be payable semiannually in arrears on June 1 and December 1 in each year, commencing June 1, 2001. (d) Interest on the Securities shall be computed (i) for any full semi-annual period for which a particular Interest Rate is applicable, on the basis of a 360-day year of twelve 30-day months and (ii) for any period for which a particular Interest Rate is applicable shorter than a full semiannual period for which interest is calculated, on the basis of a 30-day month and, for such periods of less than a month, the actual number of days elapsed over a 30-day month. For purposes of determining the Interest Rate, the Trustee may assume that a Reset Transaction has not occurred unless the Trustee has received an Officers' Certificate stating that a Reset Transaction has occurred and specifying the Adjusted Interest Rate then in effect. (e) A Holder of any Security at the close of business on a Regular Record Date shall be entitled to receive interest (including Liquidated Damages, if any) on such Security on the corresponding Interest Payment Date. A Holder of any Security which is converted after the close of business on a Regular Record Date and prior to the corresponding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date) shall be entitled to receive interest on the 14 principal amount of such Security, notwithstanding the conversion of such Security prior to such Interest Payment Date. However, any such Holder which surrenders any such Security for conversion during the period between the close of business on such Regular Record Date and ending with the opening of business on the corresponding Interest Payment Date shall be required to pay the Company an amount equal to the interest on the principal amount of such Security so converted, which is payable by the Company to such Holder on such Interest Payment Date, at the time such Holder surrenders such Security for conversion. Notwithstanding the foregoing, any such Holder which surrenders for conversion any Security which has been called for redemption by the Company on a date that is after a Record Date but prior to the corresponding Interest Payment Date in a notice of redemption given by the Company pursuant to Section 10.5 shall be entitled to receive (and retain) such interest and need not pay the Company an amount equal to the interest on the principal amount of such Security so converted at the time such Holder surrenders such Security for conversion. (f) Principal of, and premium, if any, and interest (including Liquidated Damages, if any) on, Global Securities shall be payable to the Depositary in immediately available funds. (g) Principal and premium, if any, on Physical Securities shall be payable in immediately available funds or, at the option of the Company, at the office or agency of the Company maintained for such purpose, initially the Corporate Trust Office of the Trustee. Interest (including Liquidated Damages, if any) on Physical Securities will be payable (i) to Holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the holders of these notes and (ii) to Holders having an aggregate principal amount of more than $5,000,000, either by check mailed to each Holder or, upon application by a Holder to the Registrar not later than the relevant Record Date, by wire transfer in immediately available funds to that Holder's account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary. (h) The Securities shall be redeemable at the option of the Company as provided in Article 10. (i) The Securities shall be repurchaseable by the Company at the option of Holders as provided in Article 11. (j) The Securities shall be convertible at the option of the Holders as provided in Article 12. (k) The Securities shall be subordinated in right of payment to Senior Debt of the Company as provided in Article 13. (l) The Securities shall be jointly and severally guaranteed by the Guarantors as provided in Article 14. SECTION 2.2 FORM OF SECURITIES. (a) Except as otherwise provided pursuant to this Section 2.2, the Securities are issuable in fully registered form without coupons in substantially the form of Exhibit A hereto, with such applicable legends as are provided for in Section 2.3. The Securities are not issuable in bearer form. The terms and provisions contained in the form of Security shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Any of the Securities may have such letters, numbers or other marks of identification and such notations, legends 15 and endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Securities may be listed or designated for issuance, or to conform to usage. (b) The Securities are being offered and sold by the Company pursuant to the Purchase Agreement. Securities offered and sold (A) to QIBs in accordance with Rule 144A and (B) in reliance on Regulation S, each as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in fully registered form without interest coupons, substantially in the form of Exhibit A hereto, with the applicable legends as provided in Section 2.3 (each a "Global Security" and collectively the "Global Securities"). Each Global Security shall be duly executed by the Company and authenticated and delivered by the Trustee, and shall be registered in the name of the Depositary or its nominee and retained by the Trustee, as Custodian, at its Corporate Trust Office, for credit to the accounts of the Agent Members holding the Securities evidenced thereby (or in the case of Securities held for purchasers who acquired such Securities in accordance with Regulation S, registered with the Depositary for credit to the accounts of the Agent Members then holding such Securities on behalf of Euroclear or Clearstream, as the case may be). The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Custodian, and of the Depositary or its nominee, as hereinafter provided. (c) Physical Securities acquired by QIBs in accordance with Rule 144A or in reliance on Regulation S may be exchanged for interests in Global Securities pursuant to Section 2.9(b). SECTION 2.3 LEGENDS. (A) RESTRICTED SECURITIES LEGENDS. Each Security issued hereunder shall, upon issuance, bear the legend set forth in Section 2.3(a)(i), and each stock certificate representing shares of the Common Stock issued upon conversion of any Security issued hereunder, shall, upon issuance, bear the legend set forth in Section 2.3(a)(ii)(each such legend, a "Restricted Securities Legend"), and such legend shall not be removed except as provided in Section 2.3(a)(iii). Each Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.3(a)(i) (together with each stock certificate representing shares of the Common Stock issued upon conversion of such Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.3(a)(ii), collectively, the "Restricted Securities") shall be subject to the restrictions on transfer set forth in this Section 2.3(a) (including the Restricted Securities Legend set forth below), and the Holder of each such Restricted Security, by such Holder's acceptance thereof, shall be deemed to have agreed to be bound by all such restrictions on transfer. As used in Section 2.3(a), the term "transfer" encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security. (i) RESTRICTED SECURITIES LEGEND FOR SECURITIES. Except as provided in Section 2.3(a)(iii), any certificate evidencing such Security (and all Securities issued in exchange therefor or substitution thereof, other than stock certificates representing shares of the Common Stock, if any, issued upon conversion thereof which shall bear the legend set forth 16 in Section 2.3(a)(ii), if applicable) shall bear a Restricted Securities Legend in substantially the following form: "THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS PURCHASING AT LEAST $100,000 IN AGGREGATE PRINCIPAL AMOUNT OF NOTES OR AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(4), (5) OR (6) UNDER THE SECURITIES ACT (A "NON-INSTITUTIONAL ACCREDITED INVESTOR") THAT IS PURCHASING AT LEAST $250,000 IN AGGREGATE PRINCIPAL AMOUNT OF NOTES OR (C) IT IS A NON-U.S. PERSON OUTSIDE THE UNITED STATES ACQUIRING THIS SECURITY IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT AND IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS WITH RESPECT TO THE SECURITIES OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OR; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS PURCHASING NOTES IN AN AGGREGATE PRINCIPAL AMOUNT OF AT LEAST $100,000 OR TO A NON-INSTITUTIONAL ACCREDITED INVESTOR THAT IS PURCHASING NOTES IN AN AGGREGATE PRINCIPAL AMOUNT OF AT LEAST $250,000, AND THAT, IN EITHER CASE, PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND WARRANTIES RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) TO A NON-U.S. PERSON OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATIONS S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND 17 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) OR 2(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE DATE SUCH SECURITY WAS LAST HELD BY AN AFFILIATE OF THE COMPANY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) OR 2(F) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C) OR 2(E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE DATE THAT IS TWO YEARS AFTER THE DATE SUCH SECURITY WAS LAST HELD BY AN AFFILIATE OF THE COMPANY OR UPON THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(E) OR 2(F) ABOVE. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (ii) RESTRICTED SECURITIES LEGEND FOR THE COMMON STOCK ISSUED UPON CONVERSION OF THE SECURITIES. Each stock certificate representing Common Stock issued upon conversion of the Securities will bear the following legend (unless such Common Stock has been sold pursuant to Rule 144A or pursuant to a registration statement that has been declared effective under the Securities Act): "THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE LATER OF TWO YEARS AFTER THE DATE SUCH SECURITY WAS LAST HELD BY AN AFFILIATE OF THE COMPANY AND TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY EXCEPT: (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A NON-U.S. PERSON OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATIONS S UNDER THE SECURITIES ACT AND THAT IT WILL NOT 18 ENGAGE IN HEDGING TRANSACTIONS WITH RESPECT TO THE SECURITY, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT TO AN INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT IS PURCHASING A NUMBER OF SHARES OF COMMON STOCK AT LEAST EQUAL TO $100,000 DIVIDED BY $81.50 (THE INITIAL CONVERSION PRICE) OR TO A NON-INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE 501 (a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iii) REMOVAL OF THE RESTRICTED SECURITIES LEGENDS. Each Security and each stock certificate representing shares of the Common Stock issued upon conversion of any Security (other than a stock certificate representing shares of the Common Stock issued upon conversion of a Security that previously has been sold pursuant to a registration statement that has been declared effective under the Securities Act and which continues to be effective at the time of 19 such sale) shall bear the applicable Restricted Securities Legend set forth in Section 2.3(a)(i) or 2.3(a)(ii), as the case may be, until the earlier of: (2) the date which is the later of two years after the original issuance date of such Security and two years after the date such Security was last held by an affiliate of the Company; and (3) the date such Security has, or such shares of the Common Stock have been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such sale). The Holder must give notice thereof to the Trustee and any transfer agent for the Common Stock, as applicable. Notwithstanding the foregoing, the Restricted Securities Legend may be removed from any Security or any stock certificate representing shares of the Common Stock issued upon conversion of any Security if there is delivered to the Company such satisfactory evidence, which may include an opinion of independent counsel, as may be reasonably required by the Company, that neither such legend nor the restrictions on transfer set forth therein are required to ensure that transfers of such Security or shares of the Common Stock issued upon conversion of Securities, as the case may be, will not violate the registration requirements of the Securities Act or the qualification requirements under any state securities laws. Upon provision of such satisfactory evidence, at the written direction of the Company, (i) in the case of a Security, the Trustee shall authenticate and deliver in exchange for such Security another Security or Securities having an equal aggregate principal amount that does not bear such legend or (ii) in the case of a stock certificate representing shares of the Common Stock, the transfer agent for the Common Stock shall authenticate and deliver in exchange for the stock certificate or stock certificates representing such shares of Common Stock bearing such legend, one or more new stock certificates representing a like aggregate number of shares of Common Stock that do not bear such legend. If the Restricted Securities Legend has been removed from a Security or stock certificates representing shares of the Common Stock issued upon conversion of any Security as provided above, no other Security issued in exchange for all or any part of such Security or stock certificates representing shares of the Common Stock issued upon conversion of such Security shall bear such legend, unless the Company has reasonable cause to believe that such other Security is a "restricted security" (or such shares of Common Stock are "restricted securities") within the meaning of Rule 144 or Regulation S and instructs the Trustee in writing to cause a Restricted Securities Legend to appear thereon. Any Security (or Security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.3(a)(i) as set forth therein have been satisfied may, upon surrender of such Security for exchange to the Registrar in accordance with the provisions of Section 2.7, be exchanged for a new Security or Securities, of like tenor and aggregate principal amount, which shall not bear the Restricted Securities Legend required by Section 2.3(a)(i). Any stock certificate representing shares of the Common Stock issued upon conversion of any Security as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.3(a)(ii) as set forth therein have been satisfied may, upon surrender of the stock certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new stock certificate or stock certificates 20 representing a like aggregate number of shares of Common Stock, which shall not bear the Restricted Securities Legend required by Section 2.3(a)(ii). (b) GLOBAL SECURITY LEGEND. Each Global Security shall also bear the following legend on the face thereof: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREIN. THIS GLOBAL SECURITY MAY NOT BE EXCHANGED OR TRANSFERRED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THE INDENTURE. BENEFICIAL INTERESTS IN THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE INDENTURE. (c) LEGEND FOR PHYSICAL SECURITIES. Physical Securities, in addition to the legend set forth in Section 2.3(a)(i), will also bear a legend substantially in the following form: THIS SECURITY WILL NOT BE ACCEPTED IN EXCHANGE FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY UNLESS THE HOLDER OF THIS SECURITY, SUBSEQUENT TO SUCH EXCHANGE, WILL HOLD NO NOTES. SECTION 2.4 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. Two Officers of the Company shall execute the Securities on behalf of the Company by manual or facsimile signature. If an Officer of the Company whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall be valid nevertheless. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture, or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee may appoint an authenticating agent or agents reasonably acceptable to the Company with respect to the Securities. The Company agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. 21 The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture Dated: The Bank of New York, As Trustee By /s/ Kisha A. Holder ----------------------------- Authorized Signatory SECTION 2.5 REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities (the "Register") and of their transfer and exchange. The Company may appoint one or more co-Registrars and one or more additional Paying Agents for the Securities. The term "Paying Agent" includes any additional paying agent and the term "Registrar" includes any additional registrar. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of and premium, if any, or interest (including Liquidated Damages, if any) on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as provided in this Indenture; (2) give the Trustee notice of any Default by the Company in the making of any payment of principal and premium, if any, or interest (including Liquidated Damages, if any); and (3) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company shall give prompt written notice to the Trustee of the name and address of any Agent who is not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent or Registrar; provided, however, that none of the Company, its subsidiaries or the Affiliates of the foregoing shall act: 22 (i) as Paying Agent in connection with redemptions, offers to purchase and discharges, except as otherwise specified in this Indenture, and (ii) as Paying Agent or Registrar if a Default or Event of Default has occurred and is continuing. The Company hereby initially appoints The Bank of New York as Registrar and Paying Agent for the Securities. SECTION 2.6 PAYING AGENT TO HOLD ASSETS IN TRUST. Not later than 11:00 a.m. (New York City time) on each due date of the principal, premium, if any, and interest (including Liquidated Damages, if any) on any Securities, the Company shall deposit with one or more Paying Agents money in immediately available funds in an aggregate amount sufficient to pay the principal, premium, if any, and interest (including Liquidated Damages, if any) due on such date. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money so paid over to the Trustee. If the Company shall act as a Paying Agent, it shall, prior to or on each due date of the principal of and premium, if any, or interest (including Liquidated Damages, if any) on any of the Securities, segregate and hold in trust for the benefit of the Holders a sum sufficient with monies held by all other Paying Agents, to pay the principal and premium, if any, or interest (including Liquidated Damages, if any) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as provided in this Indenture, and shall promptly notify the Trustee of its action or failure to act. SECTION 2.7 GENERAL PROVISIONS RELATING TO TRANSFER AND EXCHANGE. The Securities are issuable only in registered form. A Holder may transfer a Security only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Furthermore, any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent) and that ownership of a beneficial interest in the Global Security shall be required to be reflected in a book-entry. Notwithstanding the foregoing, in the case of a Restricted Security, a beneficial interest in a Global Security being transferred in reliance on an exemption from the registration requirements of the Securities Act other than in accordance with Rule 144, Regulation S or Rule 144A may only be transferred for a Physical Security. When Securities are presented to the Registrar with a request to register the transfer or to exchange them for an equal aggregate principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met (including that such Securities are duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder). Subject to Section 2.4, to permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange or redemption of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar 23 governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.14, 7.5 or 10.7). Neither the Company nor the Registrar shall be required to exchange or register a transfer of any Securities: (1) for a period of 15 Business Days prior to the making of a Notice of Redemption of Securities selected for redemption under Article 10; (2) so selected for redemption or, if a portion of any Security is selected for redemption, the portion thereof selected for redemption; or (3) surrendered for conversion or, if a portion of any Security is surrendered for conversion, the portion thereof surrendered for conversion. Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States Federal or state securities law. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between beneficial owners of any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.8 BOOK-ENTRY PROVISIONS FOR THE GLOBAL SECURITIES. (a) The Global Securities initially shall: (i) be registered in the name of the Depositary (or a nominee thereof); (ii) be delivered to the Trustee as custodian for such Depositary; (iii) bear the Restricted Securities Legend set forth in Section 2.3(a)(i); and (iv) the Global Securities Legend set forth in Section 2.3(b). Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing contained herein shall prevent the Company, the Trustee or any agent of the Company or Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and the Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. With respect to any Global Security deposited on behalf of the subscribers for the Securities represented thereby with the Trustee as custodian for the Depositary for credit to their respective accounts (or to such other accounts as they may direct) at Euroclear or 24 Clearstream, the provisions of the "Operating Procedures of the Euroclear System" and the "Terms and Conditions Governing Use of Euroclear" and the "Management Regulations" and "Instructions to Participants" of Clearstream, respectively, shall be applicable to the Global Securities. (b) The Holder of a Global Security may grant proxies and otherwise authorize any Person, including DTC Participants and Persons that may hold interests through DTC Participants, to take any action which a Holder is entitled to take under this Indenture or the Securities. (c) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary (or a nominee thereof), and no such transfer to any such other Person may be registered. Beneficial interests in a Global Security may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.9. (d) If at any time: (i) the Depositary notifies the Company in writing that it is no longer willing or able to continue to act as Depositary for the Global Securities, or the Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary for the Global Securities is not appointed by the Company within 120 days of such notice or cessation; (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Physical Securities under this Indenture in exchange for all or any part of the Securities represented by a Global Security or Global Securities; or (iii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary for the issuance of Physical Securities in exchange for such Global Security or Global Securities; the Depositary shall surrender such Global Security or Global Securities to the Trustee for cancellation and the Company shall execute, and the Trustee, upon receipt of an Officers' Certificate and Company Order for the authentication and delivery of Securities, shall authenticate and deliver in exchange for such Global Security or Global Securities, Physical Securities in an aggregate principal amount equal to the aggregate principal amount of such Global Security or Global Securities. Such Physical Securities shall be registered in such names as the Depositary shall identify in writing as the beneficial owners of the Securities represented by such Global Security or Global Securities (or any nominee thereof). (e) Notwithstanding the foregoing, in connection with any transfer of beneficial interests in a Global Security to the beneficial owners thereof pursuant to Section 2.8(d), the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interests in such Global Security to be transferred. SECTION 2.9 SPECIAL TRANSFER PROVISIONS. Unless a Security is (i) transferred after the time period referred to in Rule 144(k) under the Securities Act or (ii) sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such sale), the following provisions shall apply to any sale, pledge or other transfer of Securities: 25 (a) TRANSFER OF SECURITIES TO A QIB OR TO A NON-U.S. PERSON IN ACCORDANCE WITH REGULATION S. The following provisions shall apply with respect to the registration of any proposed transfer of Securities to (x) a QIB or (y) a Non-U.S. Person in Accordance with Regulation S: (i) If the Securities to be transferred consist of a beneficial interest in the Global Securities, the transfer of such interest may be effected only through the book-entry systems maintained by Euroclear and Clearstream, if applicable, and the Depositary. (ii) If the Securities to be transferred consist of Physical Securities, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating (or has otherwise advised the Company and the Registrar in writing) that the sale has been made: (A) in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Security stating or has otherwise advised the Company and the Registrar in writing that: (1) it is purchasing the Securities for its own account or an account with respect to which it exercises sole investment discretion, in each case for investment and not with a view to distribution; (2) it and any such account is a QIB within the meaning of Rule 144A; (3) it is aware that the sale to it is being made in reliance on Rule 144A; (4) it acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information; and (5) it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A, or (B) in compliance with Regulation S to a transferee who has signed a certification provided for on the form of Security stating (or has otherwise advised the Company and the Registrar in writing) that it is not a "U.S. person" as defined in Regulation S. In addition, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Securities in an amount equal to the aggregate principal amount of the Physical Securities to be transferred, and the Trustee shall cancel the Physical Securities so transferred. (b) OTHER EXCHANGES. In the event that Global Securities are exchanged for Securities in definitive registered form pursuant to Section 2.8 prior to the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with the provisions of clause (a) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. 26 (c) GENERAL. By its acceptance of any Security bearing the Restricted Securities Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall not register a transfer of any Security unless such transfer complies with the restrictions on transfer of such Security set forth in this Indenture. The Registrar shall be entitled to receive and rely on written instructions from the Company verifying that such transfer complies with such restrictions on transfer. In connection with any transfer of Securities, each Holder agrees by its acceptance of the Securities to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information. The Registrar shall retain copies of all certifications, letters, notices and other written communications received pursuant to Section 2.8 hereof or this Section 2.9. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.10 HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with Section 312(a) of the TIA. If the Trustee is not the Registrar, the Company shall furnish to the Trustee prior to or on each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders relating to such Interest Payment Date or request, as the case may be. SECTION 2.11 PERSONS DEEMED OWNERS. The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and interest (including Liquidated Damages, if any) on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and notwithstanding any notice of ownership or writing thereon, or any notice of previous loss or theft or other interest therein. SECTION 2.12 MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there is delivered to the Company and the Trustee (1) evidence to their satisfaction of the destruction, loss or theft of any Security, and (2) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company 27 or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and, upon request, the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion, but subject to any conversion rights, may, instead of issuing a new Security, pay such Security, upon satisfaction of the condition set forth in the preceding paragraph. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.12 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.13 TREASURY SECURITIES. In determining whether the Holders of the requisite principal amount of Outstanding Securities are present at a meeting of Holders for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such determination as to the presence of a quorum or upon any such request, demand, authorization, direction, notice, consent or waiver, only such Securities of which the Trustee has received written notice and are so owned shall be so disregarded. SECTION 2.14 TEMPORARY SECURITIES. Pending the preparation of Securities in definitive form, the Company may execute and the Trustee shall, upon written request of the Company, authenticate and deliver temporary Securities (printed or lithographed). Temporary Securities shall be issuable in any authorized denomination, and substantially in the form of the Securities in definitive form but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Company. Every such temporary Security shall be executed by the Company and authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the Securities in definitive form. Without unreasonable delay, the Company will execute and deliver to the Trustee Securities in definitive form (other than in the case of Securities in global form) and thereupon any or all temporary Securities (other than any such Securities in global form) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 9.2 and the Trustee shall authenticate and deliver in exchange for such temporary Securities an equal aggregate principal 28 amount of Securities in definitive form. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as Securities in definitive form authenticated and delivered hereunder. SECTION 2.15 CANCELLATION. All securities surrendered for payment, redemption, repurchase, conversion, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered shall be canceled promptly by the Trustee, and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of all cancelled Securities in accordance with its customary procedures. If the Company shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless the same are delivered to the Trustee for cancellation. SECTION 2.16 CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any such notice and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers. SECTION 2.17 DEFAULTED INTEREST. If the Company fails to make a payment of interest (including Liquidated Damages, if any) on any Security when due and payable ("Defaulted Interest"), it shall pay such Defaulted Interest plus (to the extent lawful) any interest payable on the Defaulted Interest, in any lawful manner. It may elect to pay such Defaulted Interest, plus any such interest payable on it, to the Persons who are Holders of such Securities on which the interest is due on a subsequent Special Record Date. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security. The Company shall fix any such Special Record Date and payment date for such payment. At least 15 days before any such Special Record Date, the Company shall mail to Holders affected thereby a notice that states the Special Record Date, the Interest Payment Date, and amount of such interest (and such Liquidated Damages, if any) to be paid. ARTICLE 3 SATISFACTION AND DISCHARGE SECTION 3.1 SATISFACTION AND DISCHARGE OF INDENTURE. When: (1) the Company shall deliver to the Trustee for cancellation all Securities previously authenticated (other than any Securities which have been destroyed, lost 29 or stolen and in lieu of, or in substitution for which, other Securities shall have been authenticated and delivered) and not previously canceled; or (2) all the Securities not previously canceled or delivered to the Trustee for cancellation will become due and payable or are by their terms scheduled to become due and payable, within one year or have been called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption; (3) the Company shall deposit with the Trustee, in trust, cash in U.S. Dollars and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof, in accordance with their terms, will provide (and without reinvestment and assuming no tax liability will be imposed on such Trustee), not later than one day before the due date of any payment of money, an amount in cash, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay principal of, premium, if any, or interest (including Liquidated Damages, if any) on all of the Securities (other than any Securities which shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not previously canceled or delivered to the Trustee for cancellation, on the dates such payments of principal, premium, if any, or interest (including Liquidated Damages, if any) are due to such date of Maturity or redemption, as the case may be; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of execution of this Indenture, there has been a change in the applicable federal income tax law, in the case of either clause (x) or (y) to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and discharge had not occurred; and if, in the case of either clause (3) or (4), the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to: (i) remaining rights of registration of transfer, substitution and exchange and conversion of Securities; (ii) rights hereunder of Holders to receive payments of principal of and premium, if any, and interest (including Liquidated Damages, if any) on, the Securities and the other rights, duties and obligations of Holders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee; and (iii) the rights, obligations and immunities of the Trustee hereunder); and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; provided, however, that the Company shall reimburse the Trustee for all amounts due the Trustee under Section 5.8 and for any costs or expenses thereafter 30 reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Securities. SECTION 3.2 DEPOSITED MONIES TO BE HELD IN TRUST. Subject to Section 3.3, all monies deposited with the Trustee pursuant to Section 3.1 shall be held in trust and applied by it to the payment, notwithstanding the provisions of Article 13, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the Holders of the particular Securities for the payment or redemption of which such monies have been deposited with the Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest (including Liquidated Damages, if any). All monies deposited with the Trustee pursuant to Section 3.1 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon the earlier of the request of the Company and the date on which there are no Securities outstanding. SECTION 3.3 RETURN OF UNCLAIMED MONIES. The Trustee and the Paying Agent shall pay to the Company any money held by them for the payment of principal or premium, if any, or interest (including Liquidated Damages, if any) that remains unclaimed for two years after the date upon which such payment shall have become due. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. ARTICLE 4 DEFAULTS AND REMEDIES SECTION 4.1 EVENTS OF DEFAULT. An "Event of Default" with respect to the Securities occurs when any of the following occurs (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article 13 or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default for 30 days in the payment when due of interest or Liquidated Damages on the Securities, whether or not prohibited by the subordination provisions of this Indenture; (2) default in payment when due of the principal of or premium, if any, on the Securities, whether or not prohibited by the subordination provisions of this Indenture; (3) failure by the Company to comply with any of its other agreements in this Indenture or the Securities (other than a default specified in clause (1) or (2) above) and such default or breach continues for a period of 60 consecutive days after written notice of such breach or default shall have been given to the Company by the Trustee or to the Company and the Trustee by the Holders of 25% or more in aggregate principal amount of the Outstanding Securities; 31 (4) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries (other than the Excluded Subsidiaries) for money borrowed (or the payment of which is guaranteed by the Company or any of those Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10.0 million or more; (5) failure by the Company or any of its Subsidiaries (other than the Excluded Subsidiaries) to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (6) the commencement by the Company of a voluntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable U.S. federal or state law, or the consent by the Company to the filing of such petition or to the appointment of or the taking possession by a Custodian of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company expressly in furtherance of any such action; and (7) except as permitted by this Indenture, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid. SECTION 4.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default with respect to Outstanding Securities other than the Event of Default specified in Section 4.1(6) above occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities, by written notice to the Company, may declare due and payable 100% of the principal amount of all Outstanding Securities plus any accrued and unpaid interest (including Liquidated Damages, if any) to the date of payment. Upon a declaration of acceleration, such principal and accrued and unpaid interest (including Liquidated Damages, if any) to the date of payment shall be immediately due and payable. The Holders either (a) through notice to the Trustee of not less than a majority in aggregate principal amount of the Outstanding Securities, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least a majority in aggregate principal amount of the Outstanding Securities represented at such meeting, may, on behalf of the Holders of all of the Securities, rescind and annul an acceleration and its consequences if: (1) all existing Events of Default, other than the nonpayment of principal of or interest on the Securities which have become due solely because of the acceleration, have been remedied, cured or waived, and 32 (2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. No such rescission or annulment shall affect any subsequent Default or impair any right consequent thereon. If an Event of Default under Section 4.1(6) occurs and is continuing with respect to the Company, then, without any further action by the Holders, the principal amount of all Outstanding Securities plus any accrued and unpaid interest (including Liquidated Damages, if any) shall become immediately due and payable. SECTION 4.3 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Security in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 4.4 WAIVER OF PAST DEFAULTS. The Holders, either (a) through the written consent of not less than a majority in aggregate principal amount of the Outstanding Securities, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least a majority in aggregate principal amount of the Outstanding Securities represented at such meeting, may, on behalf of the Holders of all of the Securities, waive an existing Default or Event of Default, except a Default or Event of Default: (1) in the payment of the principal of or premium, if any, or interest (including Liquidated Damages, if any) on any Security (provided, however, that subject to Section 4.7, the Holders of a majority in aggregate principal amount of the Outstanding Securities may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration); or (2) in respect of a covenant or provision hereof which, under Section 7.2, cannot be modified or amended without the consent of the Holders of each Outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; provided, however, that no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 4.5 CONTROL BY MAJORITY. The Holders of a majority in aggregate principal amount of the Outstanding Securities (or such lesser amount as shall have acted at a meeting pursuant to the provisions of this Indenture) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to 33 the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that: (1) conflicts with any law or with this Indenture; (2) the Trustee determines may be unduly prejudicial to the rights of the Holders not joining therein; or (3) may expose the Trustee to personal liability. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 4.6 LIMITATION ON SUIT. No Holder of any Security shall have any right to pursue any remedy with respect to this Indenture or the Securities (including, instituting any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee) unless: (1) such Holder has previously given written notice to the Trustee of an Event of Default that is continuing; (2) the Holders of at least 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to pursue the remedy; (3) such Holder or Holders have offered to the Trustee indemnity satisfactory to it against any costs, expenses and liabilities incurred in complying with such request; (4) the Trustee has failed to comply with the request for 60 days after its receipt of such notice, request and offer of indemnity; and (5) during such 60-day period, no direction inconsistent with such written request has been given to the Trustee by the Holders of a majority in aggregate principal amount of the Outstanding Securities (or such amount as shall have acted at a meeting pursuant to the provisions of this Indenture); provided, however, that no one or more of such Holders may use this Indenture to prejudice the rights of another Holder or to obtain preference or priority over another Holder. SECTION 4.7 UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and interest (including Liquidated Damages, if any) on such Security on the Stated Maturity expressed in such Security (or, in the case of redemption, on the Redemption Date, or in the case of the exercise of a Repurchase Right, on the Repurchase Date) and to convert such Security in accordance with Article 12, and to bring an action for the enforcement of any such payment on or after such respective dates and such right to convert, and such rights shall not be impaired or affected without the consent of such Holder. 34 SECTION 4.8 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY THE TRUSTEE. The Company covenants that if: (1) a Default or Event of Default is made in the payment of any interest (including Liquidated Damages, if any) on any Security when such interest (including Liquidated Damages, if any) becomes due and payable and such Default or Event of Default continues for a period of 30 days; or (2) a Default or Event of Default is made in the payment of the principal of or premium, if any, on any Security at the Maturity thereof; the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable (as expressed therein or as a result of any acceleration effected pursuant to Section 4.2) on such Securities for principal and premium, if any, and interest (including Liquidated Damages, if any) and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium, if any, and on any overdue interest (including Liquidated Damages, if any), calculated using the Interest Rate, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of the Company, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 4.9 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or its creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest (including Liquidated Damages, if any)) shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of principal and premium, if any, and interest (including Liquidated Damages, if any) owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders of Securities allowed in such judicial proceeding; and 35 (2) to collect and receive any monies or other property payable or deliverable on any such claim and to distribute the same; and any Custodian in any such judicial proceedings is hereby authorized by each Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 5.8. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept, or adopt on behalf of any Holder of a Security, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding. SECTION 4.10 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 4.11 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.12, no right or remedy conferred in this Indenture upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 4.12 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders of Securities may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities, as the case may be. SECTION 4.13 APPLICATION OF MONEY COLLECTED. Subject to Article 13, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest (including Liquidated Damages, if any), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: 36 FIRST: To the payment of all amounts due the Trustee; SECOND: To the payment of the amounts then due and unpaid for principal of and premium, if any, and interest (including Liquidated Damages, if any) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and premium, if any, and interest (including Liquidated Damages, if any), respectively; and THIRD: Any remaining amounts shall be repaid to the Company. SECTION 4.14 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the principal of or premium, if any, or interest (including Liquidated Damages, if any) on any Security on or after the Stated Maturity expressed in such Security (or, in the case of redemption or exercise of a Repurchase Right, on or after the Redemption Date) or for the enforcement of the right to convert any Security in accordance with Article 12. SECTION 4.15 WAIVER OF STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim to take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 5 THE TRUSTEE SECTION 5.1 CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture or the TIA, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 37 (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, however, that in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates or opinions to determine whether or not, on their face, they conform to the requirements to this Indenture (but need not investigate or confirm the accuracy of mathematical calculations or any facts stated therein). (b) In case an Event of Default actually known to a Responsible Officer of the Trustee has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section 5.1; (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with a direction received by it of the Holders of a majority in principal amount of the Outstanding Securities (or such lesser amount as shall have acted at a meeting pursuant to the provisions of this Indenture) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (d) Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 5.1. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability, cost or expense (including, without limitation, reasonable fees of counsel). (f) The Trustee shall not be obligated to pay interest on any money or other assets received by it unless otherwise agreed in writing with the Company. Assets held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, 38 direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice or actual knowledge of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact a Default is received by the Trustee pursuant to Section 15.2, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee hereunder, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each Paying Agent, authenticating agent, Conversion Agent or Registrar acting hereunder. SECTION 5.2 CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 5.1 and subject to Section 315(a) through (d) of the TIA: (1) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (3) The Trustee may act through attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care. (4) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith which it believed to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, unless the Trustee's conduct constitutes negligence. (5) The Trustee may consult with counsel of its selection and the advice of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (6) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficiently evidenced by a Company order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution. 39 (7) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. (8) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superceded. SECTION 5.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as such term is defined in Section 310(b) of the TIA), it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee (to the extent permitted under Section 310(b) of the TIA) or resign. Any agent may do the same with like rights and duties. The Trustee is also subject to Sections 5.11 and 5.12. SECTION 5.4 MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise expressly agreed with the Company. SECTION 5.5 TRUSTEE'S DISCLAIMER. The recitals contained herein and in the Securities (except for those in the certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity, sufficiency or priority of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 5.6 NOTICE OF DEFAULTS. Within 90 days after the occurrence of any Default or Event of Default hereunder of which the Trustee has received written notice, the Trustee shall give notice to Holders pursuant to Section 15.2, unless such Default or Event of Default shall have been cured or waived; provided, however, that, except in the case of a Default or Event of Default in the payment of the principal of or premium, if any, or interest (including Liquidated Damages, if any), or in the payment of any redemption or repurchase obligation on any Security, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. The Company will give the Trustee notice of any uncured Event of Default within 10 days after any Responsible Officer of the Company becomes aware of or receives actual notice of such Event of Default. 40 SECTION 5.7 REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required by Section 313 of the TIA at the times and in the manner provided by the TIA. A copy of each report at the time of its mailing to Holders shall be filed with the SEC, if required, and each stock exchange, if any, on which the Securities are listed. The Company shall promptly notify the Trustee when the Securities become listed on any stock exchange or any delisting thereof. SECTION 5.8 COMPENSATION AND INDEMNIFICATION. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation for all services rendered by it hereunder as the parties shall agree from time to time (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except to the extent that any such expense, disbursement or advance is due to its negligence or bad faith. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.1, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company also covenants to indemnify the Trustee and its officers, directors, employees and agents for, and to hold such Persons harmless against, any loss, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred by them, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder or the performance of their duties hereunder, including the costs and expenses of defending themselves against or investigating any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that any such loss, liability or expense was due to the negligence or willful misconduct of such Persons. The obligations of the Company under this Section 5.8 to compensate and indemnify the Trustee and its officers, directors, employees and agents and to pay or reimburse such Persons for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee. Such additional indebtedness shall be a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities, and the Securities are hereby subordinated to such senior claim. "Trustee" for purposes of this Section 5.8 shall include any predecessor Trustee, but the negligence or willful misconduct of any Trustee shall not affect the indemnification of any other Trustee. SECTION 5.9 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 5.9. 41 The Trustee may resign and be discharged from the trust hereby created by so notifying the Company in writing. The Holders of at least a majority in aggregate principal amount of Outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company must remove the Trustee if: (i) the Trustee fails to comply with Section 5.11 or Section 310 of the TIA; (ii) the Trustee becomes incapable of acting; (iii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; or (iv) a Custodian or public officer takes charge of the Trustee or its property. If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason, the Company shall promptly appoint a successor Trustee. The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee. Within one year after the successor Trustee takes office, the Holders of at least a majority in aggregate principal amount of Outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. Any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee if the Trustee fails to comply with Section 5.10. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation or removal, the resigning or removed Trustee, as the case may be, may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The Company shall issue a notice of the successor Trustee's succession to the Holders. Upon payment of its charges, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject nevertheless to its lien, if any, provided for in Section 5.8. Notwithstanding replacement of the Trustee pursuant to this Section 5.9, the Company's obligations under Section 5.8 shall continue for the benefit of the retiring Trustee with respect to expenses, losses and liabilities incurred by it prior to such replacement. SECTION 5.10 SUCCESSOR TRUSTEE BY MERGER, ETC. Subject to Section 5.11, if the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business (including the administration of this Indenture) to, another Person, corporation or national banking association, the successor entity without any further act shall be the successor Trustee as to the Securities. SECTION 5.11 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. The Trustee shall at all times satisfy the requirements of Section 310(a)(1), (2) and (5) of the TIA. The Trustee shall at all times have (or, in the case of a corporation included in a bank holding 42 company system, the related bank holding company shall at all times have), a combined capital and surplus of at least $25 million as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee is subject to Section 310(b) of the TIA. SECTION 5.12 COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee is subject to Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of the TIA. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the TIA to the extent indicated therein. ARTICLE 6 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 6.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge with or into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in the event that the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and, if the entity surviving such transaction or transferee entity is not the Company, then such surviving or transferee entity shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any and interest (including Liquidated Damages, if any), on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 12.11; (2) at the time of consummation of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. 43 SECTION 6.2 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger by the Company with or into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety to any Person, in accordance with Section 6.1, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter, except in the case of a lease to another Person, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE 7 AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 7.1 WITHOUT CONSENT OF HOLDERS OF SECURITIES. Without the consent of any Holders of Securities, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may amend this Indenture and the Securities to: (a) add to the covenants of the Company and/or the Guarantors for the benefit of the Holders of Securities; (b) surrender any right or power herein conferred upon the Company and/or the Guarantors; (c) make provision with respect to the conversion rights of Holders of Securities pursuant to Section 12.11; (d) provide for the assumption of the Company's obligations to the Holders of Securities in the case of a merger, consolidation, conveyance, transfer or lease pursuant to Article 6; (e) reduce the Conversion Price; provided, however, that such reduction in the Conversion Price shall not adversely affect the interest of the Holders of Securities (after taking into account tax and other consequences of such reduction); (f) comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (g) make any changes or modifications necessary in connection with the registration of any Securities under the Securities Act as contemplated in the Registration Rights Agreement; provided, however, that such action pursuant to this clause (g) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution) and the Trustee, adversely affect the interests of the Holders of Securities in any material respect; (h) cure any ambiguity, or correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective; provided, however, 44 that such action pursuant to this clause (h) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution) and the Trustee, adversely affect the interests of the Holders of Securities in any material respect; or (i) add or modify any other provisions with respect to matters or questions arising under this Indenture which the Company and the Trustee may deem necessary or desirable; provided, however, that such action pursuant to this clause (i) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution) and the Trustee, adversely affect the interests of the Holders of Securities in any material respect. SECTION 7.2 WITH CONSENT OF HOLDERS OF SECURITIES. Except as provided below in this Section 7.2, this Indenture or the Securities may be amended or supplemented, and noncompliance in any particular instance with any provision of this Indenture or the Securities may be waived, in each case (i) with the written consent of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of a majority in aggregate principal amount of the Outstanding Securities represented at such meeting. Without the written consent or the affirmative vote of each Holder of Securities affected thereby, an amendment or waiver under this Section 7.2 may not: (a) change the Stated Maturity of the principal of, or any installment of interest (including Liquidated Damages, if any) on, any Security; (b) reduce the principal amount of, or any premium or interest (including Liquidated Damages, if any), on any Security; (c) change the currency of payment of principal of, premium, if any, or interest (including Liquidated Damages, if any) on any Security; (d) impair the right of any Holder to institute suit for the enforcement of any payment in or with respect to any Security; (e) modify the obligation of the Company to maintain an office or agency in The City of New York pursuant to Section 9.2; (f) except as permitted by Section 12.11, adversely affect the Repurchase Right or the right to convert any Security as provided in Article 12; (g) modify the provisions in Article 13 or Article 14 relating to the subordination of the Securities in a manner adverse to the Holders of Securities; (h) modify the provisions in Article 10 relating to the redemption of the Securities in a manner adverse to the Holders of Securities; (i) modify any of the provisions of this Section 4.4 or Section 7.2, except to increase any percentage contained herein or therein or to provide that certain other provisions of this 45 Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (j) reduce the requirements of Section 8.4 for quorum or voting, or reduce the percentage in aggregate principal amount of the Outstanding Securities the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver provided for in this Indenture. It shall not be necessary for any Act of Holders of Securities under this Section 7.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 7.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect. SECTION 7.4 REVOCATION OF CONSENTS AND EFFECT OF CONSENTS OR VOTES. Until an amendment, supplement or waiver becomes effective, a written consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security; provided, however, that unless a record date shall have been established, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective on receipt by the Trustee of written consents from or affirmative votes by, as the case may be, the Holders of the requisite percentage of aggregate principal amount of the Outstanding Securities, and thereafter shall bind every Holder of Securities; provided, however, if the amendment, supplement or waiver makes a change described in any of the clauses (a) through (j) of Section 7.2, the amendment, supplement or waiver shall bind only each Holder of a Security which has consented to it or voted for it, as the case may be, and every subsequent Holder of a Security or portion of a Security that evidences the same indebtedness as the Security of the consenting or affirmatively voting Holder, as the case may be. SECTION 7.5 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security: (a) the Trustee may require the Holder of a Security to deliver such Securities to the Trustee, the Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Security thereafter authenticated; or (b) if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. 46 Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 7.6 TRUSTEE TO SIGN AMENDMENT, ETC. The Trustee shall sign any amendment authorized pursuant to this Article 7 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If the amendment does adversely affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may but need not sign it. In signing or refusing to sign such amendment, the Trustee shall be entitled to receive and shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment is authorized or permitted by this Indenture. ARTICLE 8 MEETING OF HOLDERS OF SECURITIES SECTION 8.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of Holders of Securities may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities. SECTION 8.2 CALL NOTICE AND PLACE OF MEETINGS. (a) The Trustee may at any time call a meeting of Holders of Securities for any purpose specified in Section 8.1, to be held at such time and at such place in The City of New York. Notice of every meeting of Holders of Securities, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 15.2, not less than 21 nor more than 180 days prior to the date fixed for the meeting. (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities shall have requested the Trustee to call a meeting of the Holders of Securities for any purpose specified in Section 8.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities in the amount specified, as the case may be, may determine the time and the place in The City of New York for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (a) of this Section 8.2. SECTION 8.3 PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled to vote at any meeting of Holders of Securities, a Person shall be (a) a Holder of one or more Outstanding Securities, or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. 47 SECTION 8.4 QUORUM; ACTION. The Persons entitled to vote a majority in principal amount of the Outstanding Securities shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities, be dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2(a), except that such notice need be given only once and not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the principal amount of the Outstanding Securities which shall constitute a quorum. Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum, the Persons entitled to vote 25% in aggregate principal amount of the Outstanding Securities at the time shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by the proviso to Section 7.2) shall be effectively passed and decided if passed or decided by the Persons entitled to vote not less than a majority in principal amount of Outstanding Securities represented and voting at such meeting. Any resolution passed or decisions taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities, whether or not present or represented at the meeting. SECTION 8.5 DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS. (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 1.3 and the appointment of any proxy shall be proved in the manner specified in Section 1.3. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 1.3 or other proof. (b) The Trustee shall, by an instrument in writing, appoint a temporary chairman (which may be the Trustee) of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 8.2(b), in which case the Company or the Holders of Securities calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities represented at the meeting. 48 (c) At any meeting, each Holder of a Security or proxy shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy. (d) Any meeting of Holders of Securities duly called pursuant to Section 8.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities represented at the meeting, and the meeting may be held as so adjourned without further notice. SECTION 8.6 COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote upon any resolution submitted to any meeting of Holders of Securities shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 8.2 and, if applicable, Section 8.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. ARTICLE 9 COVENANTS SECTION 9.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company will duly and punctually pay the principal of and premium, if any, and interest (including Liquidated Damages, if any) in respect of the Securities in accordance with the terms of the Securities and this Indenture. SECTION 9.2 MAINTENANCE OF OFFICES OR AGENCIES. The Company hereby appoints the Corporate Trust Office of the Trustee, where Securities may be: (i) presented or surrendered for payment; (ii) surrendered for registration of transfer or exchange; (iii) surrendered for conversion; 49 and where notices and demands to or upon the Company in respect of the Securities and this Indenture maybe served. The Company may at any time and from time to time vary or terminate the appointment of any such office or appoint any additional offices for any or all of such purposes; provided, however, that until all of the Securities have been delivered to the Trustee for cancellation, or monies sufficient to pay the principal of and premium, if any, and interest (including Liquidated Damages, if any) on the Securities have been made available for payment and either paid or returned to the Company pursuant to the provisions of Section 9.3, the Company will maintain in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee, and notice to the Holders in accordance with Section 15.2, of the appointment or termination of any such agents and of the location and any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency in The City of New York, or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at, and notices and demands may be served on, the Corporate Trust Office of the Trustee. SECTION 9.3 CORPORATE EXISTENCE. Subject to Article 6, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 9.4 MAINTENANCE OF PROPERTIES. The Company will maintain and keep its properties and every part thereof in such repair, working order and condition, and make or cause to be made all such needful and proper repairs, renewals and replacements thereto, as in the judgment of the Company are necessary in the interests of the Company; provided, however, that nothing contained in this Section shall prevent the Company from selling, abandoning or otherwise disposing of any of its properties or discontinuing a part of its business from time to time if, in the judgment of the Company, such sale, abandonment, disposition or discontinuance is advisable and does not materially adversely affect the interests or business of the Company. SECTION 9.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will, and will cause any Significant Subsidiary to, promptly pay and discharge or cause to be paid and discharged all material taxes, assessments and governmental charges or levies lawfully imposed upon it or upon its income or profits or upon any of its property, real or personal, or upon any part thereof, as well as all material claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon its property; provided, however, that neither the Company nor any Significant Subsidiary shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge, levy, or claim if the amount, applicability or validity thereof shall currently 50 be contested in good faith by appropriate proceedings and if the Company or such Significant Subsidiary, as the case may be, shall have set aside on its books reserves deemed by it adequate with respect thereto. SECTION 9.6 REPORTS. (a) The Company shall deliver to the Trustee within 15 days after it files them with the SEC copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act; provided, however, the Company shall not be required to deliver to the Trustee any materials for which the Company has sought and received confidential treatment by the SEC. The Company also shall comply with the other provisions of Section 314(a) of the TIA. (b) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any informational contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on Officers' Certificates). (c) If at any time the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder of a Security, the Company will promptly furnish or cause to be furnished to such Holder or to a prospective purchaser of such Security designated by such Holder, as the case may be, the information, if any, required to be delivered by it pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with the resale of such Security. SECTION 9.7 COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company (which as of the date hereof is December 31), an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company, they would normally have knowledge of any failure by the Company to comply with all conditions, or any Default by the Company with respect to any covenants, under this Indenture, and further stating whether or not they have knowledge of any such failure or Default and, if so, specifying each such failure or Default and the nature thereof. In the event an Officer of the Company comes to have actual knowledge of a Default, regardless of the date, the Company shall deliver an Officers' Certificate to the Trustee specifying such Default and the nature and status thereof. SECTION 9.8 [RESERVED]. SECTION 9.9 LIQUIDATED DAMAGES. If Liquidated Damages are payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee an Officers' Certificate to that effect stating (i) the amount of such Liquidated Damages that are payable and (ii) the date on which such Liquidated Damages are payable. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Liquidated Damages are payable. If the Company has paid Liquidated Damages directly to the persons entitled to them, the Company shall deliver to the Trustee an Officers' Certificate setting forth the particulars of such payment. 51 ARTICLE 10 REDEMPTION OF SECURITIES SECTION 10.1 [RESERVED]. SECTION 10.2 OPTIONAL REDEMPTION. On or after December 1, 2003, the Company may, at its option, redeem the Securities in whole at any time or in part from time to time, on any date prior to Maturity, upon notice as set forth in Section 10.5, at the Redemption Price (expressed as percentages of the principal amount) set forth below if redeemed on a Redemption Date occurring during the 12-month period beginning December 1 of the years indicated and ending November 30 of the following year: Year Redemption Price ---- ---------------- 2003....................................... 102.625% 2004....................................... 101.313% 2005, and thereafter....................... 100.0% plus any interest (including Liquidated Damages, if any) accrued and unpaid to, but excluding, the Redemption Date. SECTION 10.3 NOTICE TO TRUSTEE. If the Company elects to redeem Securities pursuant to the provisions of Section 10.2, it shall notify the Trustee at least 45 days (unless a shorter period is reasonably acceptable to the Trustee) prior to the intended Redemption Date of (i) such intended Redemption Date, (ii) the principal amount of Securities to be redeemed and (iii) the CUSIP numbers of the Securities to be redeemed. SECTION 10.4 SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all the Securities are to be redeemed, the Trustee shall select the particular Securities to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 from the Outstanding Securities by a method that complies with the requirements of any exchange on which the Securities are listed, or, if the Securities are not listed on an exchange, on a pro rata basis or by lot or in accordance with any other method the Trustee considers fair and appropriate. Securities and portions thereof that the Trustee selects shall be in amounts equal to the minimum authorized denominations for Securities to be redeemed or any integral multiple thereof. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed to be the portion selected for redemption; provided, however, that the Holder of such Security so converted and deemed redeemed shall not be entitled to any additional interest payment as a result of such deemed redemption than such Holder would have otherwise been entitled to receive upon conversion of such Security. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as Outstanding for the purpose of such selection. 52 The Trustee shall promptly notify the Company and the Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 10.5 NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided in Section 15.2 to the Holders of Securities to be redeemed. Such notice shall be given not less than 20 nor more than 60 days prior to the intended Redemption Date. All notices of redemption shall state: (1) such intended Redemption Date; (2) the Redemption Price and interest (including Liquidated Damages, if any) accrued and unpaid to, but excluding, the Redemption Date, if any; (3) if fewer than all the Outstanding Securities are to be redeemed, the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities which will be Outstanding after such partial redemption; (4) that on the Redemption Date the Redemption Price and interest accrued and unpaid to, but excluding, the Redemption Date, if any, will become due and payable upon each such Security to be redeemed, and that interest (including Liquidated Damages, if any) thereon shall cease to accrue on and after such date; (5) the Conversion Price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion; (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price, accrued and unpaid interest, if any; and (7) the CUSIP number of the Securities. The notice given shall specify the last date on which exchanges or transfers of Securities may be made pursuant to Section 2.7, and shall specify the serial numbers of Securities, if Physical Securities are selected for redemption, and the portions thereof called for redemption. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name of and at the expense of the Company. 53 SECTION 10.6 EFFECT OF NOTICE OF REDEMPTION. Notice of redemption having been given as provided in Section 10.5, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with such notice, such Security shall be paid by the Company at the Redemption Price; provided, however, the installments of interest on Securities whose Stated Maturity is prior to or on the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 2.7. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid, bear interest from the Redemption Date at the Interest Rate. SECTION 10.7 DEPOSIT OF REDEMPTION PRICE. Prior to 11:00 a.m. New York City time on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent an amount of money sufficient to pay the Redemption Price, and accrued and unpaid interest (including Liquidated Damages, if any), in respect of all the Securities to be redeemed on that Redemption Date, other than any Securities called for redemption on that date which have been converted prior to the date of such deposit, and accrued and unpaid interest, if any, on such Securities. If any Security called for redemption is converted, any money deposited with the Trustee or with a Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the fourth to last paragraph of Section 2.1) be paid to the Company on Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 10.8 SECURITIES REDEEMED IN PART. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 9.2 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or the Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. 54 ARTICLE 11 REPURCHASE AT THE OPTION OF A HOLDER UPON A CHANGE OF CONTROL SECTION 11.1 REPURCHASE RIGHT. In the event that a Change of Control shall occur, each Holder shall have the right (the "Repurchase Right"), at the Holder's option, but subject to the provisions of Section 11.2, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, all of such Holder's Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to any integral multiple of $1,000 (provided that no single Security may be repurchased in part unless the portion of the principal amount of such Security to be Outstanding after such repurchase is equal to an integral multiple of $1,000), on the date specified in the Company Notice given pursuant to Section 11.3 in connection with such Change of Control (the "Repurchase Date") that is no earlier than 30 days nor later than 60 days after the date of such Company Notice at a purchase price equal to 100% of the principal amount of the Securities to be repurchased (the "Repurchase Price"), plus, subject to Section 2.1(e), interest (including Liquidated Damages, if any) accrued and unpaid to, but excluding, the Repurchase Date; provided, however, that installments of interest on Securities whose Stated Maturity is prior to or on the Repurchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 2.1. Subject to the fulfillment by the Company of the conditions set forth in Section 11.2, in the event of a Change of Control the Company may elect to pay the Repurchase Price by delivering a number of shares of Common Stock equal to (i) the Repurchase Price divided by (ii) 95% of the average of the Trading Prices per share of Common Stock for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. Whenever in this Indenture (including Sections 2.2, 4.2(a) and 4.7) or Exhibit A annexed hereto there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect to such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Indenture shall not be construed as excluding the Repurchase Price in those provisions of this Indenture when such express mention is not made; provided, however, that, for the purposes of Article 13, such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash. SECTION 11.2 CONDITIONS TO THE COMPANY'S ELECTION TO PAY THE REPURCHASE PRICE IN COMMON STOCK. The Company may, at its option, pay the Repurchase Price payable to Holders pursuant to Section 11.1 upon redemption of the Securities, in shares of Common Stock, if the following conditions are satisfied: (a) The shares of Common Stock to be so issued: (i) shall not require registration under any federal securities law before such shares may be freely transferable without being subject to any transfer restrictions under 55 the Securities Act upon repurchase or redemption, as the case may be, or if such registration is required, such registration shall be completed and shall become effective prior to the Repurchase Date or the Redemption Date, as the case may be; and (ii) shall not require registration with, or approval of, any governmental authority under any state law or any other federal law before shares may be validly issued or delivered upon repurchase or redemption or if such registration is required or such approval must be obtained, such registration shall be completed or such approval shall be obtained prior to the Repurchase Date or Redemption Date, as the case may be. (b) The shares of Common Stock to be listed upon repurchase or redemption of Securities hereunder are, or shall have been, approved for listing on the Nasdaq National Market or the New York Stock Exchange or listed on another national securities exchange, in any case, prior to the Repurchase Date or the Redemption Date, as the case may be. (c) All shares of Common Stock which may be issued upon repurchase or redemption of Securities will be issued out of the Company's authorized but unissued Common Stock or treasury stock and will, upon issue, be duly and validly issued and fully paid and nonassessable and free of any preemptive or similar rights. (d) If any of the conditions set forth in clauses (a) through (c) of this Section 11.2 are not satisfied in accordance with the terms thereof, the Repurchase Price shall be paid by the Company only in cash. SECTION 11.3 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT, ETC. (a) Unless the Company shall have theretofore called for redemption all of the Outstanding Securities, prior to or on the 30th day after the occurrence of a Change of Control, the Company, or, at the written request and expense of the Company prior to or on the 30th day after such occurrence, the Trustee, shall give to all Holders of Securities notice, in the manner provided in Section 15.2, of the occurrence of the Change of Control and of the Repurchase Right set forth herein arising as a result thereof (the "Company Notice"). The Company shall also deliver a copy of such notice of a Repurchase Right to the Trustee. Each notice of a Repurchase Right shall state: (1) the Repurchase Date; (2) the date by which the Repurchase Right must exercised; (3) the Repurchase Price and accrued and unpaid interest (including Liquidated Damages, if any), if any; (4) whether the Repurchase Price shall be paid by the Company in cash or by delivery of shares of Common Stock; (5) a description of the procedure which a Holder must follow to exercise its Repurchase Right, and the place or places where such Securities, are to be surrendered for payment of the Repurchase Price and accrued and unpaid interest, if any; (6) that on the Repurchase Date the Repurchase Price and accrued and unpaid interest, if any, will become due and payable in cash upon each such Security designated 56 by the Holder to be repurchased, and that interest thereon shall cease to accrue on and after said date; (7) the Conversion Price then in effect, the date on which the right to convert the principal amount of the Securities to be repurchased will terminate and the place where such Securities may be surrendered for conversion; (8) the place or places where such Securities, together with the Option to Elect Repayment Upon a Change of Control certificate included in Exhibit A annexed hereto are to be delivered for payment of the Repurchase Price and accrued and unpaid interest, if any; and (9) the CUSIP number of the Securities. No failure of the Company to give the foregoing notices or defect therein shall limit any Holder's right to exercise a Repurchase Right or affect the validity of the proceedings for the repurchase of Securities. If any of the foregoing provisions or other provisions of this Article 11 are inconsistent with applicable law, such law shall govern. (b) To exercise its Repurchase Right, a Holder shall deliver to the Trustee prior to the close of business on the day immediately preceding the Repurchase Date: (1) written notice of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Securities to be repurchased (and, if any Security is to be repurchased in part, the serial number thereof, the portion of the principal amount thereof to be repurchased) and a statement that an election to exercise the Repurchase Right is being made thereby, and, in the event that the Repurchase Price shall be paid in shares of Common Stock, the name or names (with addresses) in which the certificate or certificates for shares of Common Stock shall be issued; and (2) the Securities with respect to which the Repurchase Right is being exercised. The right of the Holder to convert the Securities with respect to which the Repurchase Right is being exercised shall continue until the close of business on the Business Day immediately preceding the Repurchase Date provided that the Holder delivers notice to the Paying Agent prior to the close of business on the Business Day immediately preceding the Repurchase Date. (c) In the event a Repurchase Right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase Price in cash or shares of Common Stock, as provided above, for payment to the Holder on the Repurchase Date or, if shares of Common Stock are to be paid, as promptly after the Repurchase Date as practicable, together with accrued and unpaid interest to, but excluding, the Repurchase Date payable in cash with respect to the Securities as to which the Repurchase Right has been exercised; provided, however, that installments of interest that mature prior to or on the Repurchase Date shall be payable in cash to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Date. 57 (d) If any Security (or portion thereof) surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount of such Security (or portion thereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the Interest Rate, and each Security shall remain convertible into Common Stock until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for. (e) Any Security which is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. (f) Any issuance of shares of Common Stock in respect of the Repurchase Price shall be deemed to have been effected immediately prior to the close of business on the Repurchase Date and the Person or Persons in whose name or names any stock certificate or stock certificates representing shares of Common Stock shall be issuable upon such repurchase shall be deemed to have become on the Repurchase Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for repurchase on a date when the stock transfer books of the Company shall be closed shall constitute the Person or Persons in whose name or names the stock certificate or stock certificates representing such shares are to be issued as the holder or holders of record of the shares represented thereby for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Common Stock issued upon repurchase of any Security declared prior to the Repurchase Date. (g) No fractions of shares of Common Stock shall be issued upon repurchase of any Security or Securities. If more than one Security shall be repurchased from the same Holder and the Repurchase Price shall be payable in shares of Common Stock, the number of full shares which shall be issued upon such repurchase shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) to be so repurchased. Instead of any fractional share of Common Stock which would otherwise be issued on the repurchase of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Trading Price of the Common Stock as of the Trading Day preceding the Repurchase Date. (h) Any issuance and delivery of stock certificates representing shares of Common Stock on repurchase of Securities shall be made without charge to the Holder of Securities being repurchased for such stock certificates or for any tax or duty in respect of the issuance or delivery of such stock certificates or the Securities represented thereby; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of (i) income of the Holder or (ii) any transfer involved in the issuance or delivery of stock certificates representing shares of Common Stock in a name other than that of the Holder of the Securities being repurchased, and no such issuance or delivery shall be made unless the Person requesting such issuance or delivery has paid to the Company the amount of any such tax or duty or has established, to the satisfaction of the Company, that such tax or duty has been paid. (i) All Securities delivered for repurchase shall be delivered to the Trustee to be canceled at the direction of the Trustee, which shall dispose of the same as provided in Section 2.15. 58 (j) Prior to mailing the Company notice, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Debt or offer to repay all Senior Debt and terminate all commitments thereunder of each lender who has accepted such offer or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Securities required by this covenant. (k) The Company will publicly announce the results of the Repurchase Right offer on or as soon as practicable after it closes. ARTICLE 12 CONVERSION OF SECURITIES SECTION 12.1 CONVERSION RIGHT AND CONVERSION PRICE. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal amount thereof which is an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into duly authorized, fully paid and nonassessable shares of Common Stock, at the Conversion Price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on the Business Day immediately preceding June 1, 2009. In case a Security or portion thereof is called for redemption, such conversion right in respect of the Security or the portion so called, shall expire at the close of business on the Business Day preceding the Redemption Date, unless the Company defaults in making the payment due upon redemption. In the case of a Change of Control for which the Holder exercises its Repurchase Right with respect to a Security or portion thereof, such conversion right in respect of the Security or portion thereof shall expire at the close of business on the Business Day immediately preceding the Repurchase Date. The price at which shares of Common Stock shall be delivered upon conversion (the "Conversion Price") shall be initially equal to $81.50 per share of Common Stock. The Conversion Price shall be adjusted in certain instances as provided in paragraphs (a), (b), (c), (d), (e), (f), (h) and (1) of Section 12.4. SECTION 12.2 EXERCISE OF CONVERSION RIGHT. To exercise the conversion right, the Holder of any Security to be converted shall surrender such Security duly endorsed or assigned to the Company or in blank, at the office of any Conversion Agent, accompanied by a duly signed conversion notice substantially in the form attached to the Security, to the Company, with a copy to the Trustee, stating that the Holder elects to convert such Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. Securities surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date or that has been called for redemption by the Company on a date that falls on or after such Regular Record Date and on or prior to the related Interest Payment Date) shall be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest to be received on such Interest Payment Date on the principal amount of Securities being surrendered for conversion. 59 Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the provisions of this Article 12, including any required payments, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall cause to be issued and delivered to such Conversion Agent a stock certificate or stock certificates representing the number of full shares of Common Stock issuable upon conversion of such Securities, together with payment in lieu of any fraction of a share as provided in Section 12.3. In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Securities. If shares of Common Stock to be issued upon conversion of a Restricted Security, or Securities to be issued upon conversion of a Restricted Security in part only, are to be registered in a name other than that of the Holder of such Restricted Security, such Holder must deliver to the Conversion Agent a certificate in substantially the form set forth in the form of Security set forth in Exhibit A annexed hereto, dated the date of surrender of such Restricted Security and signed by such Holder, as to compliance with the restrictions on transfer applicable to such Restricted Security. Neither the Trustee nor any Conversion Agent, Registrar or Transfer Agent shall be required to register in a name other than that of the Holder shares of Common Stock or Securities issued upon conversion of any such Restricted Security not so accompanied by a properly completed certificate. The Company hereby initially appoints The Bank of New York as the Conversion Agent. SECTION 12.3 FRACTIONS OF SHARES. No fractional shares of Common Stock shall be issued upon conversion of any Security or Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issued upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Trading Price of the Common Stock as of the Trading Day preceding the date of conversion. SECTION 12.4 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be subject to adjustment, calculated by the Company, from time to time as follows: (a) In case the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction: 60 (i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 12.4(g)) fixed for such determination; and (ii) the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution. Such reduction shall become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 12.4(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (b) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (c) In case the Company shall issue rights or warrants (other than any rights or warrants referred to in Section 12.4(d)) to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into shares of Common Stock) at a price per share less than (or having a conversion price per share less than) the Current Market Price on the Record Date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record Date by a fraction: (i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Record Date, plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase (or the aggregate conversion price of the convertible securities so offered) would purchase at such Current Market Price; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the Record Date, plus the total number of additional shares of Common Stock so offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock (or securities convertible into Common Stock) are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock (or 61 securities convertible into Common Stock) actually delivered. In the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, the value of such consideration if other than cash, to be determined by the Board of Directors. (d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 12.4(a) applies) or evidences of its indebtedness, cash or other assets, including securities, but excluding (1) any rights or warrants referred to in Section 12.4(c), (2) any stock, securities or other property or assets (including cash) distributed in connection with a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.11 applies and (3) dividends and distributions paid exclusively in cash (the securities described in foregoing clauses (1), (2) and (3) hereinafter in this Section 12.4(d) called the "securities"), then, in each such case, subject to the second succeeding paragraph of this Section 12.4(d), the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date with respect to such distribution by a fraction: (i) the numerator of which shall be the Current Market Price on such date, less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) on such date of the portion of the securities so distributed applicable to one share of Common Stock (determined on the basis of the number of shares of the Common Stock outstanding on the Record Date); and (ii) the denominator of which shall be such Current Market Price. Such reduction shall become effective immediately prior to the opening of business on the day following the Record Date. However, in the event that the then fair market value (as so determined) of the portion of the securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of securities such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 12.4(d) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period (the "Reference Period") used in computing the Current Market Price pursuant to Section 12.4(g) to the extent possible, unless the Board of Directors in a Board Resolution determines in good faith that determining the fair market value during the Reference Period would not be in the best interest of the Holders. 62 Notwithstanding the foregoing, in the event that the Company shall make a distribution subject to this Section 12.4(d) the Company may, in lieu of making any adjustment required pursuant to this Section 12.4(d), make proper provision so that each holder of a Security who converts such Security (or any portion thereof) after the Record Date for such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the securities such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Record Date. Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock; shall be deemed not to have been distributed for purposes of this Section 12.4(d) (and no adjustment to the Conversion Price under this Section 12.4(d) will be required) until the occurrence of the earliest Trigger Event. If such right or warrant is subject to subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different securities, evidences of indebtedness or other assets or entitle the holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be deemed to be the date of issuance and record date with respect to a new right or warrant (and a termination or expiration of the existing right or warrant without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Conversion Price under this Section 12.4(d): (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase; and (2) in the case of such rights or warrants all of which shall have expired or been terminated without exercise, the Conversion Price shall be readjusted as if such rights and warrants had never been issued. For purposes of this Section 12.4(d) and Sections 12.4(a), 12.4(b) and 12.4(c), any dividend or distribution to which this Section 12.4(d) is applicable that also includes shares of Common Stock, a subdivision or combination of Common Stock to which Section 12.4(c) applies, or rights or warrants to subscribe for or purchase shares of 63 Common Stock to which Section 12.4(c) applies (or any combination thereof), shall be deemed instead to be: (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock, such subdivision or combination or such rights or warrants to which Sections 12.4(a), 12.4(b) and 12.4(c) apply, respectively (and any Conversion Price reduction required by this Section 12.4(d) with respect to such dividend or distribution shall then be made), immediately followed by (2) a dividend or distribution of such shares of Common Stock, such subdivision or combination or such rights or warrants (and any further Conversion Price reduction required by Sections 12.4(a), 12.4(b) and 12.4(c) with respect to such dividend or distribution shall then be made), except: (A) the Record Date of such dividend or distribution shall be substituted as (x) "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution," "Record Date fixed for such determinations" and "Record Date" within the meaning of Section 12.4(a), (y) "the day upon which such subdivision becomes effective" and "the day upon which such combination becomes effective" within the meaning of Section 12.4(b), and (z) as "the date fixed for the determination of stockholders entitled to receive such rights or warrants," "the Record Date fixed for the determination of the stockholders entitled to receive such rights or warrants" and such "Record Date" within the meaning of Section 12.4(c); and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of Section 12.4(a) and any reduction or increase in the number of shares of Common Stock resulting from such subdivision or combination shall be disregarded in connection with such dividend or distribution. (e) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.11 applies or as part of a distribution referred to in Section 12.4(d)), in an aggregate amount that, combined together with: (1) the aggregate amount of any other such distributions to all holders of Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to this Section 12.4(e) has been made; and (2) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) of consideration payable in respect of any tender offer by the Company or any of its subsidiaries for all or any portion of the Common Stock concluded within the 12 months preceding the date of such distribution, and in respect of which no adjustment pursuant to Section 12.4(f) has been made; 64 exceeds 10% of the product of the Current Market Price on the Record Date with respect to such distribution times the number of shares of Common Stock outstanding on such date, then and in each such case, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction: (i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) the excess of such combined amount over such 10% and (y) the number of shares of Common Stock outstanding on the Record Date, and (ii) the denominator of which shall be equal to the Current Market Price on such date. However, in the event that the then fair market value (as so determined) of the portion of the securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (f) In case a tender offer made by the Company or any of its Subsidiaries for all or any portion of the Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) that combined together with: (1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution), as of the expiration of such tender offer, of consideration payable in respect of any other tender offers, by the Company or any of its subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 12.4(f) has been made; (2) the aggregate amount of any distributions to all holders of the Company's Common Stock made exclusively in cash within 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to Section 12.4(e) has been made; and exceeds 10% of the product of the Current Market Price as of the last time (the "Expiration Time") tenders could have been made pursuant to such tender offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Price shall be adjusted so that the same 65 shall equal the price determined by multiplying the Conversion Price in effect immediately prior to close of business on the date of the Expiration Time by a fraction: (i) the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time; and (ii) the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time. Such reduction (if any) shall become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 12.4(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 12.4(f).1 (g) For purposes of this Section 12.4, the following terms shall have the meanings indicated: (1) "Current Market Price" shall mean the average of the daily Trading Prices per share of Common Stock for the ten consecutive Trading Days immediately prior to the date in question; provided, however, that if: (i) the "ex" date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs during such ten consecutive Trading Days, the Trading Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Trading Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event; (ii) the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the Trading Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Trading Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event; and 66 (iii) the "ex" date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (i) or (ii) of this proviso, the Trading Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 12.4(d) or (f), whose determination shall be conclusive and set forth in a Board Resolution) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For purposes of any computation under Section 12.4(f), the Current Market Price of the Common Stock on any date shall be deemed to be the average of the daily Trading Prices per share of Common Stock for such day and the next two succeeding Trading Days; provided, however, that if the "ex" date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the Trading Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Trading Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term "ex" date, when used: (A) with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Trading Price was obtained without the right to receive such issuance or distribution; (B) with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective; and (C) with respect to any tender or exchange offer, means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 12.4, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.4 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. (2) "fair market value" shall mean the amount which a willing buyer would pay a willing seller in an arm's length transaction which, in the absence of a current market for such transaction, shall be determined in good faith by the Board of Directors. (3) "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other 67 applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). (h) The Company may make such reductions in the Conversion Price, in addition to those required by Sections 12.4(a), (b), (c), (d), (e) or (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and the reduction is irrevocable during the period and the Board of Directors determines in good faith that such reduction would be in the best interests of the Company, which determination shall be conclusive and set forth in a Board Resolution. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the Trustee and each Holder at the address of such Holder as it appears in the Register a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect. (i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12.4(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 12 shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Common Stock. (j) In any case in which this Section 12.4 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Security converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 12.3. (k) For purposes of this Section 12.4, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (l) If the distribution date for the rights provided in the Company's rights agreement, if any, occurs prior to the date a Security is converted, and the Holder of the Security who converts such Security after the distribution date is not entitled to receive the rights that would otherwise be attached (but for the date of conversion) to the shares of Common Stock received upon such conversion, then an adjustment shall be made to the Conversion Price pursuant to clause 12.4(b) as if the rights were being distributed to the common stockholders of the Company immediately prior to such conversion. If such an adjustment is made and the rights are later 68 redeemed, invalidated or terminated, then a corresponding reversing adjustment shall be made to the Conversion Price, on an equitable basis, to take account of such event. SECTION 12.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the Conversion Price is adjusted as herein provided (other than in the case of an adjustment pursuant to the second paragraph of Section 12.4(h) for which the notice required by such paragraph has been provided), the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers' Certificate setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based. Unless and until the Trustee and any Conversion Agent other than the Trustee receive an Officers' Certificate setting forth an adjustment to the Conversion Price, the Trustee and such Conversion Agent may assume without inquiry that the Conversion Price has not and is not required to be adjusted and that the last Conversion Price of which the Trustee and such Conversion Agent have knowledge remains in effect. Promptly after delivery of such Officers' Certificate, the Company shall prepare a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective, and shall mail such notice to each Holder at the address of such Holder as it appears in the Register within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate or the information and calculations contained therein, except to exhibit the same to any Holder of Securities desiring inspection thereof at its office during normal business hours. SECTION 12.6 NOTICE PRIOR TO CERTAIN ACTIONS. In case at any time after the date hereof: (1) the Company shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its capital surplus or its consolidated retained earnings; (2) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class (or of securities convertible into shares of capital stock of any class) or of any other rights; (3) there shall occur any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, a change in par value, a change from par value to no par value or a change from no par value to par value), or any merger, consolidation, statutory share exchange or combination to which the Company is a party and for which approval of any shareholders of the Company is required, or the sale, transfer or conveyance of all or substantially all of the assets of the Company; or (4) there shall occur the voluntary or involuntary dissolution, liquidation or winding up of the Company; the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of securities pursuant to Section 9.2, and shall cause to be provided to the Trustee and all Holders in 69 accordance with Section 15.2, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record or effective date hereinafter specified, a notice stating: (A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined; or (B) the date on which such reclassification, merger, consolidation, statutory share exchange, combination, sale, transfer, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, merger, consolidation, statutory share exchange, sale, transfer, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings or actions described in clauses (1) through (4) of this Section 12.6. SECTION 12.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all times use its best efforts to reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of fully paid and nonassessable Common Stock then issuable upon the conversion of all Outstanding Securities. SECTION 12.8 TAXES ON CONVERSIONS. Except as provided in the next sentence, the Company will pay any and all taxes (other than taxes on income) and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. A Holder delivering a Security for conversion shall be liable for and will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid. SECTION 12.9 COVENANT AS TO COMMON STOCK. The Company covenants that all shares of Common Stock which may be issued upon conversion of Securities will upon issuance be fully paid and nonassessable and that the Company will pay all taxes, liens and charges with respect to the issuance thereof, except (1) as provided in Section 12.8 or (2) with respect to any liens or charges created by or imposed upon such Common Stock by the Holder of the Security or Securities to be converted. SECTION 12.10 CANCELLATION OF CONVERTED SECURITIES. All Securities delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 2.15. 70 SECTION 12.11 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any of following events occur, namely: (i) any reclassification or change of the outstanding shares of Common Stock (other than a change as a result of a subdivision or combination); (ii) any merger, consolidation, statutory share exchange or combination of the Company with or into another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; or (iii) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; the Company or the successor or purchasing corporation, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the TIA as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) providing that such Security shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) which such Holder would have been entitled to receive upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance had such Securities been converted into Common Stock immediately prior to such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance assuming such holder of Common Stock did not exercise its rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance (provided that, if the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised ("Non-Electing Share"), then for the purposes of this Section 12.11 the kind and amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance for each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 12. If, in the case of any such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent practicable the provisions providing for the Repurchase Rights set forth in Article 13. The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder, at the address of such Holder as it appears on the Register, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture. 71 The above provisions of this Section shall similarly apply to successive reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances. If this Section 12.11 applies to any event or occurrence, Section 12.4 shall not apply. SECTION 12.12 RESPONSIBILITY OF TRUSTEE FOR CONVERSION PROVISIONS. The Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or intent of any such adjustments when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be accountable with respect to the validity or value (of the kind or amount) of any Common Stock, or of any other securities or property, which may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any representation with respect thereto. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of stock or share certificates or other securities or property upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not be responsible or liable for any failure of the Company to comply with any of the covenants of the Company contained in this Article. ARTICLE 13 SUBORDINATION SECTION 13.1 AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 13, to the prior payment in full in cash of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. SECTION 13.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt, whether or not an allowable claim in any such proceeding) before the Holders of Securities will be entitled to receive any payment with respect to the Securities, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders of Securities would be entitled shall be made to the holders of Senior Debt (except, in each case, that Holders of Securities may receive Permitted Junior Securities and payments made from the trust described under Article 3). 72 SECTION 13.3 DEFAULT ON DESIGNATED SENIOR DEBT. The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Securities and may not acquire from the Trustee or any Holder any Securities for cash or property (other than (i) securities that are subordinated to at least the same extent as the Securities to (a) Senior Debt and (b) any securities issued in exchange for Senior Debt and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 3 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from the Company or a Representative with respect to such Designated Senior Debt. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (a) at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (b) all scheduled payments of principal, premium, if any, and interest on the Securities that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived or cured for a period of not less than 90 days. The Company may and shall resume payments on and distributions in respect of the Securities and may acquire them upon the earlier of: (1) the date upon which the default is cured or waived, or (2) in the case of a default referred to in Section 13.3(ii) hereof, 179 days pass after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. SECTION 13.4 ACCELERATION OF SECURITIES. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 13.5 WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Securities at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by this Article 13 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior 73 Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 13, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 13, except if such payment is made as a result of the willful misconduct or negligence of the Trustee. SECTION 13.6 NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Securities to violate this Article 13, but failure to give such notice shall not affect the subordination of the Securities to the Senior Debt as provided in this Article 13. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Debt (or a trustee or agent on behalf of such holder) to establish that such notice has been given by a holder of Senior Debt (or a trustee or agent on behalf of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as holder of Senior Debt to participate in any payment or distribution pursuant to this Article 13, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such person, the extent to which such person is entitled to participate in such evidence is not furnish, the Trustee may defer any payment which it may be required to make for the benefit of such person pursuant to the terms of this Indenture pending judicial determination as to the rights of such person to receive such payment. SECTION 13.7 SUBROGATION. After all Senior Debt is paid in full in cash and until the Securities are paid in full, Holders of Securities shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Securities) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Securities have been applied to the payment of Senior Debt. A distribution made under this Article 13 to holders of Senior Debt that otherwise would have been made to Holders of Securities is not, as between the Company and Holders, a payment by the Company on the Securities. SECTION 13.8 RELATIVE RIGHTS. This Article 13 defines the relative rights of Holders of Securities and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Securities, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; 74 (2) affect the relative rights of Holders of Securities and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Securities from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Securities. If the Company fails because of this Article 13 to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default. SECTION 13.9 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 13.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 13, the Trustee and the Holders of Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Securities for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 13. SECTION 13.11 RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 13 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Securities, unless the Trustee shall have received at its Corporate Trust Office at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Securities to violate this Article 13. Only the Company or a Representative may give the notice. Nothing in this Article 13 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 5.8 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 13.12 AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Securities, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 13, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 4.9 hereof at least 30 days before the expiration 75 of the time to file such claim, the credit agents are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities. SECTION 13.13 ANTILAYERING PROVISION. (1) The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Securities. (2) No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Guarantees. SECTION 13.14 AMENDMENTS. The provisions of this Article 13 shall not be amended or modified without the written consent of the holders of at least 75% in aggregate principal amount of the Securities then outstanding if such amendment would adversely affect the rights of Holders of Securities. ARTICLE 14 SUBSIDIARY GUARANTEES SECTION 14.1 AGREEMENT TO GUARANTEE. The Guarantors hereby agree as follows: (1) The Guarantors, jointly and severally with all other Guarantors, if any, unconditionally guarantee to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Securities or the Obligations of the Company under the Indenture or the Securities, that: (a) the principal of, premium, interest and additional amounts, if any, on the Securities will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, and premium, interest and Liquidated Damages, if any, on the Securities, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (b) in case of any extension of time for payment or renewal of any Securities or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (2) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Guarantors under this Indenture shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 76 SECTION 14.2 EXECUTION AND DELIVERY OF GUARANTEES. (1) To evidence their Guarantees set forth in this Indenture, the Guarantors hereby agree that a notation of such Guarantee shall be endorsed by an Officer of the Guarantors on each Security authenticated and delivered by the Trustee on or after the date hereof. The form of such notation is included in the Form of Security attached as Exhibit A to this Indenture. (2) Notwithstanding the foregoing, the Guarantors hereby agree that their Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. (3) If an Officer whose signature is on this Indenture or a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. (4) The delivery of any Security by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. (5) The Guarantors hereby agree that their obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Securities or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions of the Securities or the Indenture, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (6) The Guarantors hereby waive diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that their Guarantee made pursuant to this Indenture will not be discharged except by complete performance of the obligations contained in the Securities and the Indenture. (7) If any Holder or the Trustee is required by any court or otherwise to return to the Company or the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, the Guarantee made pursuant to this Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (8) The Guarantors agree that they shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. The Guarantors further agree that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand: (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 4 of the Indenture for the purposes of the Guarantee made pursuant to this Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; (b) in the event of any declaration of acceleration of such Obligations as provided in Article 4 of the Indenture, such Obligations (whether or not due and payable) 77 shall forthwith become due and payable by the Guarantors for the purpose of the Guarantee made pursuant to this Indenture; and (c) the Guarantors shall have the right to seek contribution from any other non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Guarantee made pursuant to this Indenture. SECTION 14.3 GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (1) Except as set forth in Articles 6 and 9 of the Indenture, nothing contained in this Indenture or in the Securities shall prevent (a) any consolidation or merger of any of the Guarantors with or into the Company or any other Guarantor, (b) any transfer, sale or conveyance of the property of any of the Guarantors as an entirety or substantially as an entirety, to the Company or any other Guarantor or (c) any merger of a Guarantor with or into with an Affiliate of that Guarantor that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating such Guarantor in another State of the United States so long as the amount of Indebtedness of the Company and the domestic non-Guarantor subsidiaries is not increased thereby. (2) Except as set forth in Article 9 of the Indenture, nothing contained in this Indenture or in the Securities shall prevent any consolidation or merger of any of the Guarantors with or into a corporation or corporations other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guarantor), or successive consolidations or mergers in which a Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guarantors) authorized to acquire and operate the same; provided, however, that the Guarantors hereby covenant and agree that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Guarantors, shall be expressly assumed (in the event that any of the Guarantors are not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which the Guarantors shall have been merged, or by the corporation which shall have acquired such property, (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists; and (iii) such transaction will only be permitted under this Indenture if it would be permitted under the terms of all of the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of these notes continue to be outstanding). (3) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Indenture and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantors, such successor corporation shall succeed to and be substituted for the Guarantors with the same effect as if it had been named herein as one of the Guarantors. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Securities issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this 78 Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. SECTION 14.4 RELEASES. (1) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of the Guarantors), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released. If the assets sold in such sale or other disposition include all or substantially all of the assets of the Guarantors or all of the Capital Stock of the Guarantors, then the Guarantors (in the event of a sale or other disposition of all of the Capital Stock of any of the Guarantors) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of any of the Guarantors) shall be released from and relieved of its obligations under this Indenture and its Subsidiary Guarantee made pursuant hereto. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such sale or other disposition was made by the Company or the Guarantors, as the case may be, in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guarantors from their obligations under this Indenture and their Subsidiary Guarantee made pursuant hereto. If the Guarantors are not released from their obligations under their Subsidiary Guarantee, they shall remain liable for the full amount of principal of and interest on the Securities and for the other obligations of the Guarantors under this Indenture. (2) Upon the designation of any of the Guarantors as an Excluded Subsidiary in accordance with the terms of this Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of those notes continue to be outstanding), such Guarantor shall be released and relieved of all of its obligations under this Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such designation of such Guarantor as an Excluded Subsidiary was made by the Company in accordance with the provisions of this Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of those notes continue to be outstanding), the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Guarantee. Any of the Guarantors not released from their obligations under the Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Securities and for the other obligations of any of the Guarantors under this Indenture as provided in this Section 14. SECTION 14.5 NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guarantors, as such, shall have any liability for any obligations of the Company or any Guarantor under the Securities, any Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Securities and Exchange Commission that such a waiver is against public policy. 79 SECTION 14.6 SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Guarantees. Notwithstanding the foregoing sentence, the Guarantee of each Guarantor shall be subordinated to the prior payment in full of all Senior Debt of that Guarantor, which shall include all guarantees of Senior Debt. SECTION 14.7 FUTURE SUBSIDIARY GUARANTEES. If the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date of this Indenture (other than a foreign Subsidiary or a domestic Subsidiary that has been properly designated as an "Excluded Subsidiary" in accordance with the provisions of that defined term), then such Subsidiary shall become a Guarantor and execute a Supplemental Indenture in form and substance satisfactory to the Trustee, and deliver an Opinion of Counsel to the Trustee as to the validity of such Guarantee. ARTICLE 15 OTHER PROVISIONS OF GENERAL APPLICATION SECTION 15.1 TRUST INDENTURE ACT CONTROLS. This Indenture is subject to the provisions of the TIA which are required to be part of this Indenture, and shall, to the extent applicable, be governed by such provisions. SECTION 15.2 NOTICES. Any notice or communication to the Company or the Trustee is duly given if in writing and delivered in person or mailed by first-class mail to the address set forth below: (a) If to the Company or any Guarantor: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, New York 10016 Attn: Vice President-Finance (Fax: 212-805-5470) with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Vincent Pagano Jr., Esq. (Fax: 212-455-2502) 80 (b) if to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attn: Corporate Trust Administration (Fax: 212-815-5915) The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first-class mail to his address shown on the Register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in such notice or communication shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed or sent in the manner provided above within the time prescribed, it is duly given as of the date it is mailed, whether or not the addressee receives it, except that notice to the Trustee shall only be effective upon receipt thereof by the Trustee. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee at the same time. SECTION 15.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under the Securities or this Indenture. The Company, the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the TIA. SECTION 15.4 ACTS OF HOLDERS OF SECURITIES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of Securities may be embodied in and evidenced by: (1) one or more instruments of substantially similar tenor signed by such Holders in person or by agent or proxy duly appointed in writing; (2) the record of Holders of Securities voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities duly called and held in accordance with the provisions of Article 8; or (3) a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders of Securities signing such instrument or instruments and so voting at such meeting. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 5.1) conclusive in favor of the Trustee 81 and the Company if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 8.6. (b) The fact and date of the execution by any Person of any such instrument or writing may be provided in any manner which the Trustee reasonably deems sufficient. (c) The principal amount and serial numbers of Securities held by any Person, and the date of such Person holding the same, shall be proved by the Register. (d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holders of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 15.5 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such officer knows, or in the exercise of reasonable care should know, that the Opinion of Counsel with respect to the matters upon which such certificate or opinion is based is erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such Counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. SECTION 15.6 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: 82 (1) a statement that each individual signing such certificate or opinion on behalf of the Company has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 15.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 15.8 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 15.9 SEPARABILITY CLAUSE. In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 15.10 BENEFITS OF INDENTURE. Nothing contained in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Debt and the Holders of Securities, any benefit or legal or equitable right, remedy or claim under this Indenture. SECTION 15.11 SECTION GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 15.12 COUNTERPARTS. This instrument may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original but all such counterparts shall together constitute but one and the same instrument. 83 SECTION 15.13 LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the last day on which a Holder of a Security has a right to convert such Security shall not be a Business Day at any Place of Payment or Place of Conversion, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest (including Liquidated Damages, if any) or principal or premium, if any, or conversion of the Securities, need not be made at such Place of Payment or Place of Conversion on such day, but may be made on the next succeeding Business Day at such Place of Payment or Place of Conversion with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repurchase Date or at the Stated Maturity or on such last day for conversion; provided, however, that in the case that payment is made on such succeeding Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity, as the case may be. SECTION 15.14 RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of or premium, if any, or interest (including Liquidated Damages, if any) on any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance thereof and as part of the consideration for the issue thereof, expressly waived and released. 84 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the day and year first above written. The Bank of New York, as trustee and not in its individual capacity By: /s/ Kisha A. Holder --------------------------------- Name: Kisha A. Holder Title: Assistant Treasurer Indenture IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the day and year first above written. L-3 COMMUNICATIONS HOLDINGS, INC., as the Company By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President HYGIENETICS ENVIRONMENTAL SERVICES, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ILEX SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President Indenture L-3 COMMUNICATIONS AYDIN CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President MPRI, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS SPD TECHNOLOGIES , INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SPD HOLDINGS, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SPD ELECTRICAL SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President Indenture SPD SWITCHGEAR, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President PAC ORD, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President HENSCHEL, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President POWER PARAGON, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ESSCO, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President Indenture ELECTRODYNAMICS, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President INTERSTATE ELECTRONICS CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SOUTHERN CALIFORNIA MICROWAVE, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS DBS MICROWAVE, INC., as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President MICRODYNE CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President Indenture EXHIBIT A L-3 Communications Holdings, Inc. 5.25% Convertible Senior Subordinated Note due 2009 (the "Notes") THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREIN. THIS GLOBAL SECURITY MAY NOT BE EXCHANGED OR TRANSFERRED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THE INDENTURE. BENEFICIAL INTERESTS IN THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE INDENTURE. THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS PURCHASING AT LEAST $100,000 IN AGGREGATE PRINCIPAL AMOUNT OF NOTES OR AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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o. 01 CUSIP: 502424 AA 2 Initial principal balance of this Note: $250,000,000 L-3 Communications Holdings, Inc., a Delaware corporation (the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or its registered assigns, the principal sum listed on the Schedule of Increases or Decreases in Global Security attached hereto on June 1, 2009. Interest Payment Dates: June 1 and December 1, commencing June 1, 2001. Regular Record Dates: May 15 and November 15. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. - ----------------------- Subject to increase or decrease as set forth in the attached schedule. 3 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed manually or by facsimile by its duly authorized officers. Dated: November 21, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: /s/ Christopher Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President By: /s/ Mike Strianese --------------------------------- Name: Mike Strianese Title: Trustee's Certificate of Authentication This is one of the Securities of the series designated therein referred to in the within-named Indenture. Dated: November 21, 2000 THE BANK OF NEW YORK as Trustee By: /s/ Kisha A. Holder --------------------------------- Authorized Signatory 4 L-3 COMMUNICATIONS HOLDINGS, INC. 5.25% Convertible Senior Subordinated Debenture due 2009 Capitalized terms used herein but not defined shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Principal and Interest. L-3 Communications Holdings, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the Interest Rate from November 21, 2000 until repayment at Maturity, redemption or repurchase. The Company will pay interest on this Security semiannually in arrears on June 1 and December 1 of each year (each an "Interest Payment Date"), commencing June 1, 2001. Interest on the Securities shall be computed (i) for any full semiannual period for which a particular Interest Rate is applicable on the basis of a 360-day year of twelve 30-day months and (ii) for any period for which a particular Interest Rate is applicable shorter than a full semiannual period for which interest is calculated, on the basis of a 30-day month and, for such periods of less than a month, the actual number of days elapsed over a 30-day month. A Holder of any Security at the close of business on a Regular Record Date shall be entitled to receive interest (including Liquidated Damages, if any) on such Security on the corresponding Interest Payment Date. A Holder of any Security which is converted after the close of business on a Regular Record Date and prior to the corresponding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date) shall be entitled to receive interest on the principal amount of such Security, notwithstanding the conversion of such Security prior to such Interest Payment Date. However, any such Holder which surrenders any such Security for conversion during the period between the close of business on such Regular Record Date and ending with the opening of business on the corresponding Interest Payment Date shall be required to pay the Company an amount equal to the interest on the principal amount of such Security so converted, which is payable by the Company to such Holder on such Interest Payment Date, at the time such Holder surrenders such Security for conversion. Notwithstanding the foregoing, any such Holder which surrenders for conversion any Security which has been called for redemption by the Company on a date that is after a Record Date but prior to the corresponding Interest Payment Date in a notice of redemption given by the Company pursuant to Section 10.5 of the Indenture shall be entitled to receive (and retain) such interest and need not pay the Company an amount equal to the interest on the principal amount of such Security so converted at the time such Holder surrenders such Security for conversion. In accordance with the terms of the Resale Registration Rights Agreement, dated November 21, 2000 (the "Registration Rights Agreement"), among the Company, the Guarantors named therein and Lehman Brothers Inc., the Holder of any Transfer Restricted Securities (as defined in the Registration Rights Agreement) shall be entitled to Liquidated Damages during the continuance of a Registration Default (as defined therein). 1 Any Liquidated Damages will be payable in cash semiannually, in arrears, on each Interest Payment Date and will cease to accrue on the earlier of (i) the date the Registration Default is cured and (ii) the day immediately prior to the date on which this Security ceases to be a Transfer Restricted Security. The Holder of this Security is entitled to the benefits of the Registration Rights Agreement. In the event of a conflict between the terms of this Security and the terms of the Registration Rights Agreement, the Registration Rights Agreement shall prevail to the extent permitted by applicable law. 2. Method of Payment. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Principal of, and premium, if any, and interest (including Liquidated Damages, if any) on, Global Securities will be payable to the Depositary in immediately available funds. Principal and premium, if any, on Physical Securities will be payable in immediately available funds or, at the option of the Company, at the office or agency of the Company maintained for such purpose, initially the Corporate Trust Office of the Trustee. Interest (including Liquidated Damages) will be payable, in the case of Securities having a principal amount of less than $5.0 million, at the option of the Company, by mailing a check to the Holders or at the office or agency of the Company maintained for such purpose, initially the Corporate Trust Office of the Trustee. Interest (including Liquidated Damages, if any) on Physical Securities having an aggregate principal amount of more than $5.0 million will be paid: (a) by check mailed to each Holder, or (b) upon application to the Registrar by any such Holder not later than the relevant Record Date, by wire transfer in immediately available funds to an account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary. 3. Paying Agent and Registrar. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without notice to any Holder. 4. Indenture; Guarantees. The Company issued this Security under an Indenture, dated as of November 21, 2000 (the "Indenture"), among the Company, the Guarantors named therein and The Bank of New York, as trustee (the "Trustee"). The terms of the Security include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended ("TIA"). This Security is subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of all such terms. To the extent permitted by applicable 2 law, in the event of any inconsistency between the terms of this Security and the terms of the Indenture, the terms of the Indenture shall control. The Obligations of the Company under the Indenture and the Securities have been jointly and severally guaranteed on a senior subordinated basis by certain of the Company's subsidiaries, all as provided in the Indenture. 5. Optional Redemption. This Security may be redeemed in whole or in part, upon not less than 20 nor more than 60 days' notice, at any time on or after December 1, 2003, at the option of the Company, at the Redemption Prices (expressed as percentages of the principal amount) set forth below, plus any interest accrued but unpaid to the Redemption Date. During the Twelve Months Commencing Redemption Prices ----------------- ----------------- December 1, 2003............................ 102.625% December 1, 2004............................ 101.313% December 1, 2005 and thereafter............. 100.000% Securities in original denominations larger than $1,000 may be redeemed in part. On and after the Redemption Date, interest ceases to accrue on Securities or portions of Securities called for redemption, unless the Company defaults in the payment of the Redemption Price. Notice of redemption will be given by the Company to the Holders as provided in the Indenture. 6. Repurchase Right Upon a Change of Control or a Termination of Trading. If a Change of Control occurs, the Holder of Securities, at the Holder's option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase the Securities (or any portion of the principal amount hereof that is at least an integral multiple of $1,000, provided that the portion of the principal amount of this Security to be Outstanding after such repurchase is at least equal to $1,000) at the Repurchase Price in cash, plus any interest accrued and unpaid to the Repurchase Date. Subject to the conditions provided in the Indenture, if a Change of Control occurs, the Company may elect to pay the Repurchase Price by delivering a number of shares of Common Stock equal to (i) a Repurchase Price divided by (ii) 95% of the average of the Closing Prices per share for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. 3 No fractional shares of Common Stock will be issued upon repurchase of any Securities. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of such Securities, the Company shall pay a cash adjustment as provided in the Indenture. In the event of a Change of Control, a Company Notice will be given by the Company to the Holders as provided in the Indenture. To exercise a Repurchase Right, a Holder must deliver to the Trustee a written notice as provided in the Indenture. 7. Conversion Rights. Subject to and upon compliance with the provisions of the Indenture, the Holder of Securities is entitled, at such Holder's option, at any time before the close of business on the Business Day immediately preceding June 1, 2009, to convert the Holder's Securities (or any portion of the principal amount hereof which is an integral multiple of $1,000), at the principal amount thereof or of such portion, into duly authorized, fully paid and nonassessable shares of Common Stock of the Company at the Conversion Price in effect at the time of conversion. In the case of a Security (or a portion thereof) called for redemption, the conversion right in respect of the Security (or such portion thereof) so called, shall expire at the close of business on the second Business Day preceding the Redemption Date, unless the Company defaults in making the payment due upon redemption. In the case of a Change of Control for which the Holder exercises its Repurchase Right with respect to a Security (or a portion thereof), the conversion right in respect of the Security (or portion thereof) shall expire at the close of business on the Business Day preceding the Repurchase Date. The Conversion Price shall be initially equal to $81.50 per share of Common Stock. The Conversion Price shall be adjusted under certain circumstances as provided in the Indenture. To exercise the conversion right, the Holder must surrender the Security (or portion thereof) duly endorsed or assigned to the Company or in blank, at the office of the Conversion Agent, accompanied by a duly signed conversion notice to the Company, with a copy to the Trustee. Any Security surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the corresponding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date or that has been called for redemption on a date that falls on or after such Regular Record Date and on or before the related Interest Payment Date), shall also be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of the Securities being surrendered for conversion. No fractional shares of Common Stock will be issued upon conversion of any Securities. Instead of any fractional share of Common Stock which would otherwise be issued 4 upon conversion of such Securities, the Company shall pay a cash adjustment as provided in the Indenture. 8. Subordination. The Indebtedness evidenced by this Security is, to the extent and in the manner provided in the Indenture, subordinated and subject in right of payment to the prior payment in full of all amounts then due on all Senior Debt of the Company, and this Security is issued subject to such provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. 9. Denominations; Transfer; Exchange. The Securities are issuable in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. In the event of a redemption in part, the Company will not be required (a) to register the transfer of, or exchange, Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption, or (b) to register the transfer of, or exchange, any such Securities, or portion thereof, called for redemption. In the event of redemption, conversion or repurchase of the Securities in part only, a new Security or Securities for the unredeemed, unconverted or unrepurchased portion thereof will be issued in the name of the Holder hereof. 10. Persons Deemed Owners. The registered Holder of this Security shall be treated as its owner for all purposes. 11. Unclaimed Money. The Trustee and the Paying Agent shall pay to the Company any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years after the date upon which such payment shall have become due. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 5 12. Discharge Prior to Redemption or Maturity. Subject to certain conditions contained in the Indenture, the Company may discharge its obligations under the Securities and the Indenture if (1) (a) all of the Outstanding Securities shall become due and payable at their scheduled Maturity within one year or (b) all of the Outstanding Securities are scheduled for redemption within one year, and (2) the Company shall have deposited with the Trustee money and/or U.S. Government Obligations sufficient to pay the principal of, and premium, if any, and interest on, all of the Outstanding Securities on the date of Maturity or redemption, as the case may be. 13. Amendment; Supplement; Waiver. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Outstanding Securities (or such lesser amount as shall have acted at a meeting pursuant to the provisions of the Indenture). The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security or such other Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest (including Additional Amounts, if any) on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security (or pay cash in lieu of conversion) as provided in the Indenture. 14. Defaults and Remedies. The Indenture provides that an Event of Default with respect to the Securities occurs when any of the following occurs: (1) default for 30 days in the payment when due of interest or Liquidated Damages on the Securities, whether or not prohibited by the subordination provisions of this Indenture; (2) default in payment when due of the principal of or premium, if any, on the Securities, whether or not prohibited by the subordination provisions of this Indenture; 6 (3) failure by the Company to comply with any of its other agreements in this Indenture or the Securities (other than a default specified in clause (1) or (2) above) and such default or breach continues for a period of 60 consecutive days after written notice of such breach or default shall have been given to the Company by the Trustee or to the Company and the Trustee by the Holders of 25% or more in aggregate principal amount of the Outstanding Securities. (4) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries (other than the Excluded Subsidiaries) for money borrowed (or the payment of which is guaranteed by the Company or any of those Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10.0 million or more; (5) failure by the Company or any of its Subsidiaries (other than the Excluded Subsidiaries) to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (6) certain events of bankruptcy, insolvency or reorganization of the Company. (7) except as permitted by this Indenture, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. 15. Authentication. This Security shall not be valid until the Trustee (or authenticating agent) executes the certificate of authentication on the other side of this Security. 7 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Transfer Restricted Securities. In addition to the rights provided to Holders under the Indenture, Holders of Transfer Restricted Securities shall have all the rights set forth in the Registration Rights Agreement. 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on this Security and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on this Security or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. Governing Law. The Indenture and this Security shall be governed by, and construed in accordance with, the law of the State of New York. 20. Successor Corporation. In the event a successor corporation assumes all the obligations of the Company under this Security, pursuant to the terms hereof and of the Indenture, the Company will be released from all such obligations. 21. Counterparts. This Security may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original but all such counterparts shall together constitute but one and the same instrument. 8 FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Pursuant to the Indenture each Guarantor (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, and premium, interest and Liquidated Damages on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest and Liquidated Damages on the Notes, and (c) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Guarantee. Notwithstanding the foregoing, in the event that the Guarantee of any Guarantor would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guarantor under its Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Guarantee, the Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guarantor or any Guarantees, or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. This Guarantee shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. L-3 COMMUNICATIONS CORPORATION By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SOUTHERN CALIFORNIA MICROWAVE, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President 2 L-3 COMMUNICATIONS ESSCO, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS DBS MICROWAVE, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SPD ELECTRICAL SYSTEMS, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SPD SWITCHGEAR, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President 3 PAC ORD, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President HENSCHEL, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President SPD HOLDINGS, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President POWER PARAGON, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS AYDIN CORPORATION By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President 4 MPRI, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President ELECTRODYNAMICS, INC. By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President INTERSTATE ELECTRONICS CORPORATION By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President MICRODYNE CORPORATION By: /s/ Christopher C. Cambria --------------------------------- Name: Christopher C. Cambria Title: Vice President 5 ASSIGNMENT FORM To assign this Security, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Security to: - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Your Name:_____________________________________________________ (Print your name exactly as it appears on the face of this Security) Your Signature:________________________________________________ (Sign exactly as your name appears on the face of this Security) Signature Guarantee*:__________________________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). In connection with any transfer of this Security occurring prior to the date which is the earlier of the end of the period referred to in Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act"), the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder, and that the transfer has been effected pursuant to and in accordance with Rule 144A under the Securities Act and, accordingly, the undersigned does hereby further certify that the Securities are being transferred to a transferee that the undersigned reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such transferee exercises sole investment discretion, and such transferee and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States. or [ ] (b) this Security is being transferred in compliance with the exemption from registration under the Securities Act provided by Regulation S thereunder, and (A) the offer of the Securities was not made to a person in the United States; (B) either: (i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or (ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (C) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (D) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. or [ ] (c) this Security is being transferred other than in accordance with (a) or (b) above and documents are being furnished which comply with the conditions of transfer set forth in this Security and the Indenture. 2 If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Security in the name of any Person other than the Holder hereof unless the conditions to any such transfer of registration set forth herein and in Sections 2.7, 2.8 and 2.9 of the Indenture shall have been satisfied. Dated:_______________ ________________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: --------------------------------------------------------- Signature must be guaranteed by a participant in a recognized signature guarantee medallion program or other signature guarantor acceptable to the Trustee. 3 TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that: (a) it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion, in each case for investment and not with a view to distribution; (b) it and any such account is a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act of 1933; (c) it is aware that the sale to it is being made in reliance on Rule 144A; (d) it acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information; and (e) it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:________________________ ________________________________________________ NOTICE: To be executed by an executive officer TO BE COMPLETED BY PURCHASER IF (b) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing the Securities for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account are not "U.S. persons" as defined in Regulation S under the Securities Act. Dated:________________________ ________________________________________________ NOTICE: To be executed by an executive officer 4 CONVERSION NOTICE TO: L-3 COMMUNICATIONS HOLDINGS, INC. 600 Third Avenue, 34th Floor New York, New York 10016 Attn: Vice President-Finance COPY TO: THE BANK OF NEW YORK 101 Barclay Street, Floor 21 West New York, New York 10286 Attn: Corporate Trust Administration (L-3 Communications Holdings, Inc. 5.25% Convertible Senior Subordinated Notes due 2009) The undersigned registered owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion hereof (the principal amount of which is an integral multiple of $1,000) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Security not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest (including Additional Amounts, if any) accompanies this Security. Dated:_______________ Your Name:______________________________________________ (Print your name exactly as it appears on the face of this Security) Your Signature:________________________________________ (Sign exactly as your name appears on the face of this Security) Signature Guarantee*:__________________________________ Social Security or other Taxpayer Identification Number:_________________________________ Principal amount to be converted (if less than all): $ 5 * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). 6 Fill in for registration of shares (if to be issued) and Securities (if to be delivered) other than to and in the name of the registered holder: ________________________________________ (Name) ________________________________________ (Street Address) ________________________________________ (City, State and Zip Code) 7 NOTICE OF EXERCISE OF REPURCHASE RIGHT TO: L-3 COMMUNICATIONS HOLDINGS, INC. 600 Third Avenue, 34th Floor New York, New York 10016 Attn: Vice President-Finance The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from L-3 Communications Holdings, Inc. (the "Company") as to the occurrence of a Change of Control with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Security, or the portion thereof (the principal amount of which is an integral multiple of $1,000) below designated, in accordance with the terms of the Indenture referred to in this Security, together with interest (including Additional Amounts, if any) accrued and unpaid to, but excluding, such date, to the registered holder hereof, in cash. Dated:_______ Your Name:______________________________________________ (Print your name exactly as it appears on the face of this Security) Your Signature:_________________________________________ (Sign exactly as your name appears on the face of this Security) Signature Guarantee:* __________________________________ Social Security or other Taxpayer Identification Number:__________________________________ Principal amount to be repaid (if less than all): $ - --------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee) 8 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $250,000,000. The following increases or decreases of a part of this Global Security have been made:
Principal Amount of this Signature of Amount of decrease in Amount of increase in Global Security Authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Date of Exchange this Global Security this Global Security (or increase) Securities Coordinator - ---------------- -------------------- -------------------- ------------- ----------------------
9 EX-10.34 3 0003.txt PURCHASE AGREEMENT Exh 10.34 Purchase Agreement dated November 21, 2000 $250,000,000 L-3 COMMUNICATIONS HOLDINGS, INC. 5 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2009 PURCHASE AGREEMENT November 16, 2000 LEHMAN BROTHERS INC. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: L-3 Communications Holdings, Inc., a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell $250,000,000 in aggregate principal amount of its 5 1/4% Convertible Senior Subordinated Notes due 2009 (the "Firm Notes") to Lehman Brothers Inc. (the "Initial Purchaser"). In addition, the Company proposes to grant to the Initial Purchaser an option (the "Option") to purchase up to an additional $50,000,000 in aggregate principal amount of 5 1/4% Convertible Senior Subordinated Notes due 2009 to cover over-allotments, if any (the "Optional Notes" and, together with the Firm Notes, the "Notes"). The Notes will be convertible into fully paid, nonassessable shares of common stock of the Company, par value $0.01 per share (the "Common Stock"), on the terms, and subject to the conditions, set forth in the Indenture. As used herein, "Conversion Shares" means the shares of Common Stock into which the Notes are convertible. The Notes will be issued pursuant to an indenture (the "Indenture") to be dated as of the First Delivery Date (as defined in Section 2(a)), between the Company and The Bank of New York, as Trustee (the "Trustee"). The Company's obligations under the Notes, including the due and punctual payment of interest on the Notes, will be unconditionally guaranteed (the "Guarantees") by certain of the present domestic subsidiaries of the Company, including, as of this date, L-3 Communications Corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, MPRI, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Switchgear, Inc., a Delaware corporation, Pac Ord, Inc., a Delaware corporation, Henschel, Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, L-3 Communications ESSCO, Inc., a Delaware corporation (individually a "Delaware Guarantor" and collectively, the "Delaware Guarantors"), and Electrodynamics, Inc., an Arizona Corporation, Interstate Electronics Corporation, a California Corporation, Southern California Microwave Inc, a California corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, L-3 Communications DBS Microwave, Inc., a California corporation and Microdyne Corporation, a Maryland corporation (individually a "Non-Delaware Guarantor," collectively the "Non-Delaware Guarantors" and, together with the Delaware Guarantors, the "Guarantors"). As used herein, the term "Notes" shall include the Guarantees thereof by the Guarantors, unless the context otherwise requires. The Notes will be offered and sold to the Initial Purchaser without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. Holders of the Notes (including the Initial Purchaser and its direct and indirect transferees) will be entitled to the benefits of a Resale Registration Rights Agreement, dated the First Delivery Date, between the Company and the Initial Purchaser (the "Registration Rights Agreement"), pursuant to which the Company will agree to file with the Securities and Exchange Commission (the "Commission") a registration statement pursuant to Rule 415 under the Securities Act (the "Registration Statement") covering the resale of the Notes and the Conversion Shares, and to use its best efforts to cause the Registration Statement to be declared effective. This Agreement, the Indenture, the Notes and the Registration Rights Agreement are referred to herein collectively as the "Operative Documents." This is to confirm the agreement between the Company and the Initial Purchaser concerning the issue, offer and sale of the Notes. 1. Representations, Warranties and Agreements of the Company and the Guarantors. The Company and the Guarantors represent, warrant to and agree with, the Initial Purchaser that: (a) The Company and the Guarantors have prepared an offering memorandum dated November 16, 2000 (the "Offering Memorandum") setting forth information concerning the Company, the Notes, the Guarantees, the Registration Rights Agreement and the Common Stock. Copies of the Offering Memorandum will be delivered by the Company to the Initial Purchaser pursuant to the terms of this Agreement. As used in this Agreement, "Offering Memorandum" means the Offering Memorandum as amended or supplemented. The Offering Memorandum did not as of its date, and will not as of a Delivery Date (as defined in Section 2(b)), contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by Lehman Brothers Inc. specifically for inclusion therein; (b) Assuming the accuracy of the representations and warranties of the Initial Purchaser contained in Section 6 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Notes to the Initial Purchaser and the offer, resale and delivery of the Notes by the Initial Purchaser in the manner contemplated by this Agreement, the Indenture, the Registration Rights Agreement and the Offering Memorandum, to register the Notes or the Conversion Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act; 2 (c) The market-related and customer-related data and estimates included in the Offering Memorandum are based on or derived from sources which the Company believes to be reliable and accurate; (d) The Company and each of its subsidiaries (as defined in Section 14) have been duly organized and are validly existing as corporations or limited liability companies, as applicable, in good standing under the laws of their respective jurisdictions of organization, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification except for such qualification and good standing the failure of which, individually or in the aggregate, would not result in a material adverse effect on the condition (financial or other), business, prospects, properties, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"), and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged; (e) The Company has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Offering Memorandum; and 100% of the issued shares of capital stock of each Guarantor of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, other than (A) liens, encumbrances, equities or claims described in the Offering Memorandum, (B) a pledge of such shares to secure the Senior Credit Facilities (as described in the Offering Memorandum) and (C) such other liens, encumbrances, equities or claims as are not, individually or in the aggregate, material to the Company and its subsidiaries, taken as a whole; (f) The Conversion Shares which are authorized on the date hereof have been duly and validly authorized and reserved for issuance upon conversion of the Notes and are free of preemptive rights; and all Conversion Shares, when so issued and delivered upon such conversion in accordance with the terms of the Indenture, will be duly and validly authorized and issued, fully paid and non-assessable and free and clear of all liens, encumbrances, equities or claims; (g) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantors; (h) Except as disclosed in the Offering Memorandum under the heading "Description of the Notes--Interest Rate Adjustments," the execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Indenture by the Company and the Guarantors and the consummation of the transactions contemplated hereby and thereby, and the 3 issuance and delivery of the Notes and the Conversion Shares will not conflict with, constitute or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the properties or assets of the Company or any of its subsidiaries is subject that is material to the financial condition or prospects of the Company and its subsidiaries, taken as a whole (collectively, the "Material Agreements"), except for breach of which, individually, or in the aggregate, would not result in a Material Adverse Effect, nor will such actions result in any violation of the provisions of the charter, by-laws or other organizational documents of the Company or any of its subsidiaries or any material law, statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, provided that the provisions for indemnification and contribution hereunder and thereunder may be limited by equitable principles and public policy consideration; and except (i) with respect to the transactions contemplated by the Registration Rights Agreement as may be required under the Securities Act, the Trust Indenture Act and the rules and regulations promulgated thereunder, (ii) as required by state securities or "blue sky" laws, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of the Operative Documents by the Company, and the consummation of the transactions contemplated hereby and thereby. No qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act"), is required in connection with the sale of the Notes by the Initial Purchaser; (i) The Company and the Guarantors have all necessary corporate right, power and authority to execute and deliver this Agreement and perform their obligations hereunder; and this Agreement and the transactions contemplated hereby have been duly authorized, executed and delivered by the Company and the Guarantors; (j) The Company has all necessary corporate right, power and authority to execute and deliver the Indenture and perform its obligations thereunder; the Indenture has been duly authorized by the Company, and upon the effectiveness of the Registration Statement, will be qualified under the Trust Indenture Act; on the First Delivery Date (as defined below in Section 2(a)), the Indenture will have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of the Indenture by the Trustee, will constitute a legally valid and binding agreement of the Company enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, subject to general principles of equity and to limitations on availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Indenture will conform in all material respects to the description thereof contained in the Offering Memorandum; 4 (k) The Company has all necessary corporate right, power and authority to execute and deliver the Registration Rights Agreement and perform its obligations thereunder; the Registration Rights Agreement and the transactions contemplated thereby have been duly authorized by the Company; when the Registration Rights Agreement is duly executed and delivered by the Company (assuming due authorization, execution and delivery by the Initial Purchaser), it will be a legally valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, subject to general principles of equity and to limitations on availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing, and except with respect to the rights of indemnification and contribution thereunder, where enforcement thereof may be limited by federal or state securities laws or the policies underlying such laws; and the Registration Rights Agreement will conform in all material respects to the description thereof contained in the Offering Memorandum; (l) The Company has all necessary corporate right, power and authority to execute, issue and deliver the Notes and perform its obligations thereunder; the Notes have been duly and validly authorized by the Company and when duly executed by the Company in accordance with the terms of the Indenture and, assuming due authentication of the Notes by the Trustee, upon delivery to the Initial Purchaser against payment therefor in accordance with the terms hereof, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing; and the Notes, when issued and delivered, will conform in all material respects to the description thereof contained in the Offering Memorandum; (m) The Guarantees have been duly and validly authorized by the Guarantors and when duly endorsed on the Notes in accordance with the terms of the Indenture and, assuming due authentication of the Notes by the Trustee, upon delivery to the Initial Purchaser against payment therefor in accordance with the terms hereof, will constitute valid and binding obligations of each of the Guarantors entitled to the benefits of the Indenture and enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principals (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing; (n) Except (1) as described in the Offering Memorandum, (2) as provided in the Registration Rights Agreement dated the First Delivery Date, (3) in respect of the obligation to deliver freely "tradable shares" to the sellers in connection with the acquisition of the ILEX Systems, Inc. business and (4) other than the Registration Rights Agreement, dated December 11, 5 1998, among the L-3 Communications Corporation and the parties named therein, there are no contracts, agreements or understandings between the Company and any person granting such person the right (other than rights which have been waived or satisfied or rights not exercisable in connection with the Offering Memorandum) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in any securities being registered pursuant to any registration statement filed by the Company under the Securities Act; (o) Except as described in the Offering Memorandum, the Company and the Guarantors have not sold or issued any Securities with terms that are substantially similar to the Notes and the Guarantees during the six-month period preceding the date of the Offering Memorandum, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants; (p) Neither the Company nor any of its subsidiaries has incurred, since the date of the latest audited financial statements included or incorporated by reference in the Offering Memorandum, any liability or obligation, direct or contingent, or entered into any transaction, in each case not in the ordinary course of business, that is material to the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum; and, since such date, there has not been any material change in the capital stock or material increase in the short-term or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving or which would reasonably be expected to involve a Material Adverse Effect, otherwise than as described or contemplated in the Offering Memorandum; (q) The historical and pro forma financial statements, together with the related notes, set forth or incorporated by reference in the Offering Memorandum comply as to form in all material respects with the requirements of Regulation S-X under the Securities Act, except as disclosed in the Offering Memorandum. The historical financial statements of the Company present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved; (r) PricewaterhouseCoopers LLP, who have certified certain financial statements of the Company, whose report appears in the Offering Memorandum or is incorporated by reference therein and who have delivered the initial letter referred to in Section 5(n) hereof, are independent public accountants as required by the Securities Act and the Rules and Regulations promulgated thereunder during the periods covered by the financial statements on which they reported contained or incorporated in the Offering Memorandum; 6 (s) The Company and each of its subsidiaries have good and marketable title to all property (real and personal) described in the Offering Memorandum as being owned by them, free and clear of all liens, claims, security interests or other encumbrances except such as are described in the Offering Memorandum or, to the extent that any such liens, claims, security interests or other encumbrances would not have a Material Adverse Effect (individually or in the aggregate) and all the material property described in the Offering Memorandum as being held under lease by the Company and its subsidiaries is held by them under valid, subsisting and enforceable leases, with only such exceptions as would not have a Material Adverse Effect (individually or in the aggregate); (t) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, trademarks, service marks, trade names, copyrights, licenses, inventions, trade secrets and other rights, and all registrations or applications relating thereto, described in the Offering Memorandum as being owned by them or necessary for the conduct of their business, except as such would not have a Material Adverse Effect (individually or in the aggregate), and the Company is not aware of any pending or threatened claim to the contrary or any pending or threatened challenge by any other person to the rights of the Company and its subsidiaries with respect to the foregoing which, if determined adversely to the Company and its subsidiaries, would have a Material Adverse Effect (individually or in the aggregate); (u) Except as described in the Offering Memorandum, there are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of its subsidiaries or to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, are reasonably likely to cause a Material Adverse Effect; (v) No material relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company on the other hand, except as described in the Offering Memorandum; (w) The Company is not involved in any strike, job action or labor dispute with any group of employees that would have a Material Adverse Effect, and, to the Company's knowledge, no such action or dispute is threatened; (x) Except as disclosed in the Offering Memorandum, the Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) subject to Title IV of ERISA for which the Company would have any material liability; the Company has not incurred and does not expect to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any such "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue 7 Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code") (other than contributions in the normal course which are not in default); and each such "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would reasonably be expected to cause the loss of such qualification; (y) The Company and its subsidiaries have filed all federal, state and local income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company and its subsidiaries, might have a Material Adverse Effect; (z) Except as disclosed in the Offering Memorandum under the heading "Description of the Notes--Interest Rate Adjustments," neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws or other organizational documents, (ii) is in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any Material Agreement or (iii) is in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, except as would not, individually or in the aggregate, have a Material Adverse Effect; (aa) To the best of the Company's knowledge, neither the Company nor any of its subsidiaries, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds or violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; except as such that would not have a Material Adverse Effect; (bb) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or would not be reasonably likely to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding 8 such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company has knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection; (cc) Neither the Company nor any subsidiary is an "investment company" within the meaning of such term under the United States Investment Company Act of 1940 and the rules and regulations of the Commission thereunder; (dd) When the Notes are issued and delivered pursuant to this Agreement, such Notes will not be of the same class (within the meaning of Rule 144A under the Securities Act) as securities of the Company that are listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or that are quoted in a U.S. automated inter-dealer quotation system; (ee) Neither the Company nor any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) (other than the Initial Purchaser, about which no representation is made by the Company), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with the offering of the Notes (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Notes except for this Agreement and the Company will not enter into any such arrangement; (ff) Neither the Company nor any of its affiliates (other than the Initial Purchaser, about which no representation is made by the Company), has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) which is or will be integrated with the sale of the Notes in a manner that would require the registration under the Securities Act of the Notes; and (gg) The Company has not taken, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Notes. 9 2. Purchase, Sale and Delivery of the Notes. (a) The Company and the Guarantors hereby agree, on the basis of the representations, warranties and agreements of the Initial Purchaser contained herein and subject to all the terms and conditions set forth herein, to issue and sell to the Initial Purchaser and, upon the basis of the representations, warranties and agreements of the Company and the Guarantors herein contained and subject to all the terms and conditions set forth herein, each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.25% of the principal amount thereof, the principal amount of Notes set forth opposite the name of the Initial Purchaser in Schedule I hereto. The Company and the Guarantors shall not be obligated to deliver any of the securities to be delivered hereunder except upon payment for all of the securities to be purchased as provided herein. Delivery of and payment for the Firm Notes shall be made at the office of Latham & Watkins, 885 Third Avenue, New York, New York 10022, at 10:00 a.m. (New York time) on November 21, 2000, or such later date as the Initial Purchaser shall designate, which date and time may be postponed by agreement between the Initial Purchaser and the Company or as provided in Section 8 (such date and time of delivery and payment for the Firm Notes being herein called the "First Delivery Date"). Delivery of the Firm Notes shall be made to the Initial Purchaser against payment of the purchase price by the Initial Purchaser. Payment for the Firm Notes shall be effected either by wire transfer of immediately available funds to an account with a bank in The City of New York, the account number and the ABA number for such bank to be provided by the Company to the Initial Purchaser at least two business days in advance of the First Delivery Date, or by such other manner of payment as may be agreed by the Company and the Initial Purchaser. (b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants the Option to the Initial Purchaser to purchase the Optional Notes at the same price as the Initial Purchaser shall pay for the Firm Notes and the principal amount of the Optional Notes to be sold to the Initial Purchaser shall be that principal amount which bears the same ratio to the aggregate principal amount of Optional Notes being purchased as the principal amount of Firm Notes set forth opposite the name of the Initial Purchaser in Schedule I hereto (or such number increased as set forth in Section 8). The Option may be exercised only to cover over-allotments in the sale of the Firm Notes by the Initial Purchaser. The Option may be exercised once in whole or in part at any time not more than 30 days subsequent to the date of this Agreement upon notice in writing or by facsimile by the Initial Purchaser to the Company setting forth the amount (which shall be an integral multiple of $1,000) of Optional Notes as to which the Initial Purchaser is exercising the Option. The date for the delivery of and payment for the Optional Notes, being herein referred to as an "Optional Delivery Date," which may be the First Delivery Date (the First Delivery Date and the Optional Delivery Date, if any, being sometimes referred to as a "Delivery 10 Date"), shall be determined by the Initial Purchaser but shall not be later than five full business days after written notice of election to purchase Optional Notes is given. Delivery of the Optional Notes shall be made to the Initial Purchaser against payment of the purchase price by the Initial Purchaser. Payment for the Optional Notes shall be effected either by wire transfer of immediately available funds to an account with a bank in the City of New York, the account number and the ABA number for such bank to be provided by the Company to the Initial Purchaser at least two business days in advance of the Optional Delivery Date, or by such other manner of payment as may be agreed by the Company and the Initial Purchaser. (c) The Company will deliver against payment of the purchase price (a) the Notes initially sold to qualified institutional buyers ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A") in the form of one or more permanent global certificates (the "Global Notes"), registered in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC") and (b) the Notes initially sold to "non-U.S. persons" outside the United States in compliance with Regulation S under the Securities Act, in the form of one or more Global Notes, registered in the name of Cede & Co., as nominee for DTC. Beneficial interests in the Notes initially sold to QIBs will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by DTC and its participants. The Global Notes will be made available, at the request of the Initial Purchaser, for inspection at least 24 hours prior to such Delivery Date. The Certificated Notes will be made available, at the request of the Initial Purchaser, for checking at least 48 hours prior to such Delivery Date. (d) Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchaser hereunder. 3. Further Agreements of the Company. The Company agrees with the Initial Purchaser as follows: (a) To advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum and not to effect any such amendment or supplement without the consent of the Initial Purchaser. If, at any time prior to completion of the resale of the Notes by the Initial Purchaser, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, to promptly notify the Initial Purchaser and prepare, subject to the first sentence of this Section 3(a), such amendment or supplement as may be necessary to correct such untrue statement or omission; 11 (b) To furnish to the Initial Purchaser and to Latham & Watkins, counsel to the Initial Purchaser, copies of the Offering Memorandum and the Offering Memorandum (and all amendments and supplements thereto) in each case as soon as available and in such quantities as the Initial Purchaser reasonably requests for internal use and for distribution to prospective purchasers; and to furnish to the Initial Purchaser on the date hereof four copies of the Offering Memorandum signed by duly authorized officers of the Company, one of which will include the independent auditors' reports therein manually signed by such independent auditors. The Company will pay the expenses of printing and distributing to the Initial Purchaser all such documents; (c) To use its reasonable efforts to take such action as the Initial Purchaser may reasonably request from time to time, to qualify the Notes for offering and sale under the securities laws of such jurisdictions as the Initial Purchaser may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions in the United States for as long as may be necessary to complete the resale of the Notes; provided that in connection therewith, the Company shall not be required to qualify as a foreign corporation or otherwise subject itself to taxation in any jurisdiction in which it is not otherwise so qualified or subject; (d) To apply the proceeds from the sale of the Notes as set forth under "Use of Proceeds" in the Offering Memorandum; (e) For a period of 90 days from the date of the Offering Memorandum, not to, directly or indirectly, (1) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock (other than the Notes and shares issued pursuant to currently outstanding options, warrants, rights or convertible securities), or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case without the prior written consent of Lehman Brothers Inc.; and to cause the Lehman Partnership (as defined in the Offering Memorandum), Mr. Frank C. Lanza and Mr. Robert V. LaPenta to furnish to the Initial Purchaser, prior to the First Delivery Date, a "lock-up" letter or letters, in the form affixed hereto and substance and form satisfactory to counsel for the Initial Purchaser; (f) For so long as any of the Notes are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to provide to any holder of the Notes or to any prospective purchaser of the Notes designated by any holder, upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act; 12 (g) Each of the Notes will bear, to the extent applicable, the legend contained in "Notice to Investors" in the Offering Memorandum for the time period and upon the other terms stated therein, except after the Notes are resold pursuant to a registration statement effective under the Securities Act; (h) To take such steps as shall be necessary to ensure that neither the Company nor any subsidiary shall become an "investment company" within the meaning of such term under the United States Investment Company Act of 1940, and the rules and regulations of the Commission thereunder; (i) To execute and deliver the Registration Rights Agreement (in form and substance satisfactory to the Initial Purchaser; (j) To use its best efforts to assist the Initial Purchaser in arranging to cause the Notes to be accepted to trade in the PORTAL market ("PORTAL") of the National Association of Securities Dealers, Inc. ("NASD"); (k) To use its best efforts to cause the Notes to be accepted for clearance and settlement through the facilities of DTC; (l) To use its best efforts to have the Conversion Shares approved by the New York Stock Exchange ("NYSE") for inclusion prior to the effectiveness of the Registration Statement; (m) Neither the Company, any of its affiliates nor any persons acting on its or their behalf has engaged or will engage, during the Restricted Period (as defined herein), in any directed selling efforts within the meaning of Rule 901(b) of Regulation S with respect to the Notes, and it, its affiliates, and all persons acting on its behalf have complied and will comply with the offering restrictions requirements of Regulation S. 4. Expenses. The Company agrees to pay: (a) the costs incident to the authorization, issuance, sale and delivery of the Notes, and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Offering Memorandum and any amendment or supplement to the Offering Memorandum, as provided in this Agreement; (c) the costs of delivering and distributing the Operative Documents; (d) the fees and expenses of Simpson Thacher & Bartlett and PricewaterhouseCoopers, LLP; 13 (e) the costs of distributing the terms of agreement relating to the organization of the underwriting syndicate and selling group to the members thereof by mail, telex or other means of communication; (f) the fees and expenses of qualifying the Notes under the securities laws of the several jurisdictions as provided in Section 3(c) and of preparing, printing and distributing a Blue Sky Memorandum (including reasonable related fees and expenses of counsel to the Initial Purchaser); (g) all other costs and expenses incident to (i) the preparation of the Company's "net road show" presentation materials and (ii) the road show travelling expenses of the Company; (h) all fees and expenses incurred in connection with any rating of the Notes; (i) the costs of preparing the Notes; (j) all expenses and fees in connection with the application for inclusion of the Notes in the PORTAL market and the inclusion of the Conversion Shares on the NYSE; and (k) all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement; provided that, except as provided in this Section 4 and in Section 7, the Initial Purchaser shall pay its own costs and expenses, including the costs and expenses of its counsel and any transfer taxes on the Notes which it may sell. 5. Conditions of the Initial Purchaser's Obligations. The several obligations of the Initial Purchaser hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company and the Guarantors contained herein, to the performance by the Company and the Guarantors of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Initial Purchaser shall not have discovered and disclosed to the Company prior to or on such Delivery Date that the Offering Memorandum or any amendment or supplement thereto contains any untrue statement of a fact which, in the opinion of Latham & Watkins, is material or omits to state any fact which is material and necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (b) All corporate proceedings and other legal matters incident to the authorization, form and validity of the Operative Documents and the Offering Memorandum or 14 any amendment or supplement thereto, and all other legal matters relating to the Operative Documents and the transactions contemplated thereby shall be satisfactory in all material respects to counsel to the Initial Purchaser, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters; (c) Simpson Thacher & Bartlett shall have furnished to the Initial Purchaser its written opinion, as counsel to the Company, addressed to the Initial Purchaser and dated such Delivery Date, in form and substance reasonably satisfactory to the Initial Purchaser, to the effect that: (i) The Company and each of the Delaware Guarantors have been duly organized and are validly existing as corporations in good standing under the laws of Delaware, and have all corporate power and authority necessary to conduct their respective businesses as described in the Offering Memorandum; (ii) All of the outstanding shares of Common Stock of the Company have been duly authorized, validly issued, fully paid and non-assessable; and all of the issued shares of capital stock of each Delaware Guarantor of the Company have been duly and validly authorized and issued, are fully paid and non-assessable (except for directors' qualifying shares) and, based solely on our examination of each such subsidiary's stock ledger and minute book, all such shares are held of record by the Company and/or a subsidiary of the Company; (iii) The Indenture has been duly authorized, executed and delivered by the Company and, assuming the Indenture is a valid and legally binding obligation of the Trustee, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing; (iv) The Notes have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the terms of the Purchase Agreement, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an 15 implied covenant of good faith and fair dealing; and the Notes, when issued and delivered, will conform to the description thereof contained in the Offering Memorandum; (v) The Conversion Shares that are authorized on the date hereof have been duly authorized and validly reserved for issuance upon conversion of the Notes; and the Conversion Shares, when so issued and delivered upon such conversion in accordance with the terms of the Indenture, will be duly and validly authorized and issued, fully paid and nonassessable; (vi) The Guarantees have been duly authorized, executed and issued by the Delaware Guarantors and, assuming due authentication of the Notes by the Trustee, upon payment and delivery in accordance with the terms of the Purchase Agreement will constitute valid and legally binding obligations of each of the Delaware Guarantors enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing; (vii) Assuming that the Guarantees have been duly authorized and issued by each of the Non-Delaware Guarantors and, assuming due authentication of the Notes by the Trustee, upon payment and delivery of the Notes in accordance with the terms of the Purchase Agreement, the Guarantees will constitute valid and legally binding obligations of the Non-Delaware Guarantors enforceable against the Non-Delaware Guarantors. (viii) The statements contained in the Offering Memorandum under the captions "Risk Factors-The notes are subordinated to all our existing and future senior indebtedness, which may inhibit our ability to repay you," "Risk Factors-The terms of our senior indebtedness could restrict our flexibility and limit our ability to satisfy obligations under the Notes," "Risk Factors--Future sales of common stock of L-3 Holdings in public market could lower the stock price," "Risk Factors--Delaware Law and the charter documents of L-3 Holdings may impede or discourage a takeover, which could cause the market price of its shares to decline," "Certain Relationships and Related Transactions," "Description of Other Indebtedness," and "Description of the Notes," insofar as they describe charter documents, contracts, statutes, rules and regulations and other legal matters, constitute an accurate summary thereof in all material respects; 16 (ix) The statements made in the Offering Memorandum under the caption "Certain United States Federal Tax Considerations," insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects; (x) This Agreement has been duly authorized, executed and delivered by the Company and the Delaware Guarantors; and (xi) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Delaware Guarantors and, assuming that the Registration Rights Agreement is the valid and legally binding obligation of the Initial Purchaser and Non-Delaware Guarantors, constitutes a valid and legally binding obligation of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms. (xii) Except as specifically disclosed in the Offering Memorandum, the issue and sale of the Notes and Guarantees being delivered on such Delivery Date by the Company and the Guarantors and the compliance by the Company and the Guarantors, as applicable, with all of the provisions of this Agreement and the Indenture and the consummation of the transactions contemplated hereby and thereby will not breach or result in a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed as an exhibit to a document incorporated by reference in the Offering Memorandum ("Exchange Act Documents") nor will such actions violate the Certificate of Incorporation or By-Laws or other organizational documents of the Company or the Delaware Guarantors, or any federal or New York statute, the Delaware Limited Liability Company Act or the Delaware General Corporation Law or any rule or regulation that has been issued pursuant to any federal or New York statute, the Delaware Limited Liability Company Act or the Delaware General Corporation Law or any order known to such counsel issued pursuant to any federal or New York statute, the Delaware Limited Liability Company Act or the Delaware General Corporation Law by any court or governmental agency or body or court having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization, order, registration or qualification of or with any federal or New York governmental agency or body or any Delaware governmental agency or body acting pursuant to the Delaware Limited Liability Company Act or Delaware General Corporation Law or, to such counsel's knowledge, any federal or New York court or any Delaware court acting pursuant to the Delaware Limited Liability Company Act or the Delaware General Corporation Law is required for the issue and sale of the Notes by the 17 Company (and the guarantees of such Notes by the Guarantors), except for such consents, approvals, authorizations, registrations or qualifications as may be required state securities or Blue Sky laws in connection with the purchase and distribution of the Notes and Guarantees by the Initial Purchaser. The opinions set forth in this paragraph are based upon our consideration of only those statutes, rules and regulations which, in such counsel's experience, are normally applicable to securities underwriting transactions. (xiii) No registration of the Notes under the Securities Act and no qualification of the Indenture under the Trust Indenture Act is required for the offer and sale of the Notes by the Company to the Initial Purchaser or the reoffer and resale of the Notes by the Initial Purchaser to the Initial Purchaser thereform solely in the manner contemplated by the Offering Memorandum, the Purchase Agreement and the Indenture. In rendering such opinion, such counsel may state that its opinion is limited to matters governed by the federal laws of the United States and the laws of the State of New York and the Delaware General Corporation Law. Such counsel shall also have furnished to the Initial Purchaser a written statement, addressed to the Initial Purchaser and dated the Delivery Date. Such counsel has not independently verified the accuracy, completeness or fairness of the statements made or included in the Offering Memorandum and take no responsibility therefor, except as and to the extent set forth in paragraphs (viii) and (ix) above. In the course of the preparation by the Company of the Offering Memorandum (excluding the Exchange Act Documents), such counsel participated in conferences with certain officers and employees of the Company, with representatives of PricewaterhouseCoopers, LLP and with counsel to the Company. Based upon such counsel's examination of the Offering Memorandum (including the Exchange Act Documents), such counsel's investigations made in connection with the preparation of the Offering Memorandum (excluding the Exchange Act Documents) and such counsel's participation in the conferences referred to above, such counsel has no reason to believe that the Offering Memorandum, including the Exchange Act Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that in each case such counsel need not express belief with respect to the financial statements or other financial data contained in the Offering Memorandum or incorporated therein by reference. (d) Christopher C. Cambria, General Counsel of the Company, shall have furnished to the Initial Purchaser his written opinion, as General Counsel to the 18 Company, addressed to the Initial Purchaser and dated such Delivery Date, in form and substance reasonably satisfactory to the Initial Purchaser, to the effect that: (i) Other than as set forth in the Prospectus, there are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Stock pursuant to the Company's charter or by-laws or any agreement or other instrument known to such counsel; (ii) To such counsel's knowledge, the Company and each of its subsidiaries have good and marketable title to all property (real and personal) described in the Offering Memorandum as being owned by them, free and clear of all liens, claims, security interests or other encumbrances except such as are described in the Offering Memorandum or, to the extent that any such liens, claims, security interests or other encumbrances would not have a Material Adverse Effect (individually or in the aggregate) and all the material property described in the Offering Memorandum as being held under lease by the Company and its subsidiaries is held by them under valid, subsisting and enforceable leases, with only such exceptions as would not have a Material Adverse Effect (individually or in the aggregate); (iii) To such counsel's knowledge and except as otherwise disclosed in the Offering Memorandum, except (1) as described in the Offering Memorandum, (2) as provided in the Registration Rights Agreement, (3) in respect of the obligation to deliver freely "tradable shares" to the sellers in connection with the acquisition of the ILEX Systems, Inc. business and (4) other than the Registration Rights Agreement, dated December 11, 1998, among the L-3 Communications Corporation and the parties named therein; there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to include such person's securities in the securities registered pursuant to Registration Statement; (iv) To such counsel's knowledge and except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental proceedings pending or threatened, against the Company or any of its subsidiaries or to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, are reasonably likely to cause a Material Adverse Effect; and (v) None of the issue and sale of the Notes and Guarantees being delivered on such Delivery Date by the Company and the Guarantors and the 19 compliance by the Company and the Guarantors, as applicable, with all of the provisions of this Agreement and the consummation of the transactions contemplated hereby requires any consent, approval, authorization or other order of, or registration or filing with, any federal court, federal regulatory body, federal administrative agency or other federal governmental official having authority over government procurement matters (provided, that the opinion contained in this paragraph (v) may be delivered by other counsel reasonably satisfactory to the Initial Purchaser). (e) The Initial Purchaser shall have received from Latham & Watkins, counsel for the Initial Purchaser, such opinion or opinions, dated the Delivery Date, with respect to the issuance and sale of the Notes and Guarantees, the Offering Memorandum and other related matters as the Initial Purchaser may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters; (f) At the time of the First Delivery Date, the Initial Purchaser shall have received from PricewaterhouseCoopers, LLP a letter, in form and substance satisfactory to the Initial Purchaser, addressed to the Initial Purchaser and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and under Rule 101 of AICPA's Code of Professional Conduct and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings; (g) With respect to the letter of PricewaterhouseCoopers, LLP referred to in the preceding paragraph and delivered to the Initial Purchaser (the "initial letter"), on any subsequent Optional Delivery Date, the Company shall have furnished to the Initial Purchaser a letter (the "bring-down letter") of such accountants, addressed to the Initial Purchaser and dated such Delivery Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and Code of Professional Conduct are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter; (h) The Company shall have furnished to the Initial Purchaser a certificate, dated such Delivery Date and delivered on behalf of the Company, of its Chairman of the Board, 20 its President or a Vice President and its chief financial officer, in form and substance satisfactory to the Initial Purchaser, to the effect that: (i) The representations, warranties and agreements of the Company in Section 1 are true and correct as of the date given and as of such Delivery Date; and the Company has complied with all its agreements contained herein to be performed prior to or on such Delivery Date; and (ii) Such officer has carefully examined the Offering Memorandum and, in such officer's opinion (A) the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (B) since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum. (i) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; (j) The Indenture shall have been duly executed and delivered by the Company and the Trustee and the Notes shall have been duly executed and delivered by the Company and duly authenticated by the Trustee; (k) The Company and the Initial Purchaser shall have executed and delivered the Registration Rights Agreement (in form and substance satisfactory to the Initial Purchaser) and the Registration Rights Agreement shall be in full force and effect; (l) The NASD shall have accepted the Notes for trading on PORTAL; (m)(i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Memorandum any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, except (A) as set forth or contemplated in the Offering Memorandum and (B) for operating losses incurred in the ordinary course of business, or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company and its subsidiaries (except for issuances of shares of Common Stock upon exercise of outstanding options described in the Offering Memorandum or pursuant to Authorized Grants), or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial 21 position, stockholders' equity or results of operations of the Company and its subsidiaries, except as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii), is, in the reasonable judgment of the Initial Purchaser, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Notes being delivered on such Delivery Date on the terms and in the manner contemplated in the Offering Memorandum; (n) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the NYSE, the American Stock Exchange, the NASDAQ or the over-the-counter market, or trading in any securities of the Company on any exchange shall have been suspended or minimum prices shall have been established on any such exchange or market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction; (ii) a banking moratorium shall have been declared by United States federal or New York State authorities; (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States, or there shall have been a declaration of a national emergency or war by the United States; or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the sole judgment of the Initial Purchaser, impracticable or inadvisable to proceed with the offering or delivery of the Notes being delivered on such Delivery Date on the terms and in the manner contemplated in the Offering Memorandum. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance satisfactory to counsel to the Initial Purchaser. 6. Representations, Warranties and Agreements of the Initial Purchaser. The Initial Purchaser represents and warrants that it is a QIB and is not acquiring the Notes with a view to any distribution thereof or with any present intention of offering or selling any of the Notes in a transaction that would violate the Securities Act or the securites laws of any State of the United States or any applicable jurisdiction. In connection with the sale of the Notes by the 22 Initial Purchaser, the Initial Purchaser will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, the Eligible Purchasers (defined as: (i) persons whom the Initial Purchaser reasonably believes are "qualified institutional buyers" as defined in Rule 144A under the Securities Act and (ii) outside the United States to persons other than U.S. persons in offshore transactions meeting the requirements of Rule 904 of Regulation S under the Securities Act) in accordance with this Agreement and on the terms contemplated by the Offering Memorandum. The Initial Purchaser agrees with the Company that: (a) The Notes and the Conversion Shares have not been and will not be registered under the Securities Act in connection with the initial offering of the Notes; (b) The Initial Purchaser is purchasing the Notes pursuant to a private sale exemption from registration under the Securities Act; (c) The Notes have not been and will not be offered or sold by the Initial Purchaser or its affiliates acting on its behalf within the United States or to, or for the account or benefit of, United States persons except in accordance with Rule 144A; (d) The Initial Purchaser will not offer or sell the Notes in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising in the United States; and (e) The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with an exemption from the registration requirements of the Securities Act. The Initial Purchaser represents that it has been offered, sold or delivered the Notes, and will not offer, sell or deliver the Notes (i) as a part of its distribution at any time or (ii) otherwise until one year after the later of the commencement of the Offering of the Notes and the Closing Date (such period, the "Restricted Period"), within the United States or to, or for the account or benefit of U.S. Persons except in accordance with Rule 144A under the Securities Act. Accordingly, the Initial Purchaser represents and agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage, during the Restricted Period, in any directed selling efforts within the meaning of Rule 901(b) of Regulation S with respect to the Notes, and it, its affiliates and all persons acting on its behalf have complied and will comply with the offering restrictions requirements of Regulation S. (f) The Initial Purchaser agrees that, at or prior to confirmation of a sale of Notes (other than a sale pursuant to Rule 144A in transactions that are exempt from the registration requirements of the Securities Act), it will have sent to each distributor, dealer or 23 person receiving a selling concession, fee or other renumeration that purchases Notes form it during the Restricted Period a confirmation or notice substantially to the following effect: "The Notes covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of U.S. persons (i) as part of their distribution at any time or (ii) otherwise until one year after the later of the commencement of the offering or the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings assigned to them in Regulation S." Such Initial Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Notes, except with its affiliates or with the prior written consent of the Company. (g) The Initial Purchaser further represents and agrees that (i) it has not offered or sold and will not offer or sell any Notes to persons in the United Kingdom prior to the expiry of the period of six months from the issue date of the Notes, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (s principal or agent) for the purpose of their businesses or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom), and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any documents received by it in connection with the issuance of the Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the document may otherwise be lawfully issued or passed on. (h) The Initial Purchaser agrees not to cause any advertisement of the Notes to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Notes, except such advertisements as include the statements required by Regulation S. (i) The sales of the Notes pursuant to Regulation S are "offshore transactions" and are not part of a plan or scheme to evade the registration provisions of the Securities Act. (j) The Initial Purchaser understands that the Company and, for purposes of the opinions to be delivered to you pursuant to Section 5 hereof, counsel to the Company, General Counsel to the Company and counsel to the Initial Purchaser, will rely upon the accuracy and truth of the foregoing representations and the Initial Purchaser hereby consent to such reliance. 24 The terms used in this Section 7 that have meanings assigned to them in Regulation S are used herein as so defined. The Initial Purchaser further agrees that, in connection with the sale of the Notes by the Initial Purchaser, it will solicit offers to buy the Notes only from, and will offer to sell the Notes only to Eligible Purchasers. 7. Indemnification and Contribution. (a) The Company and the Guarantors shall jointly and severally indemnify and hold harmless the Initial Purchaser, its officers and employees and each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Notes), to which the Initial Purchaser, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in the Offering Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by the Initial Purchaser in connection with, or relating in any manner to, the Notes or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the Guarantors shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by the Initial Purchaser through its gross negligence or willful misconduct), and shall reimburse the Initial Purchaser and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by the Initial Purchaser, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Memorandum, or in any such amendment or supplement, in reliance upon and in conformity with written information concerning the Initial Purchaser furnished to the Company by the Initial Purchaser specifically for inclusion therein, which information consists solely of the information. The foregoing indemnity agreement is in addition to any liability which the Company or the Significant Subsidiary may otherwise have to any Initial Purchaser or to the officer, employee or controlling person of the Initial Purchaser. (b) The Initial Purchaser shall indemnify and hold harmless the Company, the Guarantors, their officers and employees and the Guarantors, each of their directors and each person, 25 if any, who controls the Company and the Guarantors within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person, the Guarantors, may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in the Offering Memorandum or in any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in the Offering Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company by the Initial Purchaser specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person of the Company for any legal or other expenses reasonably incurred by the Company, such Guarantor or any such director, officer or controlling person of the Company in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which the Initial Purchaser may otherwise have to the Company, the Guarantors or any such director, officer, employee, or controlling person of the Company. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel, it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party 26 notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to one local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by Lehman Brothers Inc., if the indemnified parties under this Section 7 consist of the Initial Purchaser or any of its respective officers, employees or controlling persons, or by the Company, if the indemnified parties under this Section 7 consist of the Company, the Guarantors or any of the Company's or the Guarantors' directors, officers, employees or controlling persons. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 7 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchaser on the other from the offering of the Notes and Guarantees or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand and the Initial Purchaser on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand and the Initial Purchaser on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes purchased under this Agreement (before deducting expenses) received by the Company and the Guarantors, on the one hand, and the total underwriting discounts and commissions received by the Initial Purchaser with respect to the shares of the Notes and Guarantees purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Notes under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, and the Guarantors or the Initial Purchaser, the intent of the parties and 27 their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and the Initial Purchaser agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(d), the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Notes purchased by it exceeds the amount of any damages which the Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchaser's obligations to contribute as provided in this Section 7(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Initial Purchaser confirms and the Company and the Guarantors acknowledge that the statements with respect to the offering of the Notes by the Initial Purchaser and the third, sixth, seventh, eighth, ninth, twelfth, fourteenth, fifteenth, sixteenth and eighteenth third paragraphs under the caption "Plan of Distribution" in the Offering Memorandum are correct and constitute the only information concerning the Initial Purchaser furnished in writing to the Company by or on behalf of the Initial Purchaser specifically for inclusion in the Offering Memorandum. Nothing contained herein shall relieve the Initial Purchaser of any liability it may have to the Company for damages caused by its default. If other purchasers are obligated or agree to purchase the Notes of a defaulting or withdrawing Initial Purchaser, either the remaining non-defaulting Initial Purchaser or the Company may postpone the Delivery Date for up to seven full business days in order to effect any changes in the Offering Memorandum or in any other document or arrangement that, in the opinion of counsel to the Company or counsel to the Initial Purchaser, may be necessary. 8. Termination. The obligations of the Initial Purchaser hereunder may be terminated by the Initial Purchaser by notice given to and received by the Company prior to delivery of and payment for the Notes if, prior to that time, any of the events described in Sections 5(k) and (l) shall have occurred or if the Initial Purchaser shall decline to purchase the Notes for any reason permitted under this Agreement. 9. Reimbursement of Initial Purchaser's Expenses. If the Company and the Guarantors shall fail to tender the Notes and the Guarantees for delivery to the Initial Purchaser by reason of any failure, refusal or inability on the part of the Company and the Guarantors to perform any agreement on its part to be performed, or because any other condition of the Initial Purchaser's obligations hereunder required to be fulfilled by the Company and the Guarantors is 28 not fulfilled, the Company and the Guarantors will reimburse the Initial Purchaser for all out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Initial Purchaser in connection with this Agreement and the proposed purchase of the Notes and the Guarantees, and upon demand the Company and the Guarantors shall pay the full amount thereof to Lehman Brothers Inc. 10. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchaser, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Fax: 212-528-8822), with a copy, in the case of any notice pursuant to Section 10(d), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., Three World Financial Center, 10th Floor, New York, NY 10285; and (b) if to the Company or to the Gurantors, shall be delivered or sent by mail, telex or facsimile transmission to L-3 Communications, 600 Third Avenue, 34th Floor, New York, NY 10016, Attention: Christopher C. Cambria (Fax: 212-805-5494). Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made by Lehman Brothers Inc. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser, the Company, the Guarantors and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representations, warranties, indemnities and agreements of the Company and the Guarantors contained in this Agreement shall also be deemed to be for the benefit of the officers and employees of the Initial Purchaser and the person or persons, if any, who control the Initial Purchaser within the meaning of Section 15 of the Securities Act and (B) any indemnity agreement of the Initial Purchaser contained in Section 7(b) of this Agreement shall be deemed to be for the benefit of directors and officers of the Company and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing contained in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Survival. The respective indemnities, representations, warranties and agreements of the Company, the Guarantors and the Initial Purchaser contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Notes and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any person controlling any of them. 29 13. Definition of the Terms "Business Day" and "Subsidiary." For purposes of this Agreement, (a) "business day" means each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Securities Act Rules and Regulations. 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 15. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 16. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. [Signature pages follow] If the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchaser, please indicate your acceptance in the space provided for that purpose below. Very truly yours, L-3 COMMUNICATIONS HOLDINGS, INC. as the Company By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President HYGIENETICS ENVIRONMENTAL SERVICES, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ILEX SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS AYDIN CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President MPRI, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President SPD HOLDINGS, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President SPD ELECTRICAL SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President SPD SWITCHGEAR, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President PAC ORD, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President HENSCHEL, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President POWER PARAGON, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ESSCO, INC., as a Guarantor By: /s/ Christopher C. Cambria ------------------------------ Name: Christopher C. Cambria Title: Vice President SOUTHERN CALIFORNIA MICROWAVE, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS DBS MICROWAVE, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President MICRODYNE CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President ELECTRODYNAMICS, INC., as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President INTERSTATE ELECTRONICS CORPORATION, as a Guarantor By: /s/ Christopher C. Cambria ----------------------------- Name: Christopher C. Cambria Title: Vice President If the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchaser, please indicate your acceptance in the space provided for that purpose below. Accepted and agreed by: LEHMAN BROTHERS INC. By: /s/ David J. Brand --------------------- Name: David J. Brand Title: Managing Director SCHEDULE 1 Principal Amount Initial Purchaser of Firm Notes - ----------------- ---------------- Lehman Brothers Inc. ............................... $250,000,000 FORM OF LOCK-UP LETTER AGREEMENT LEHMAN BROTHERS INC. Three World Financial Center New York, NY 10285 Dear Sirs: The undersigned understands that you propose to enter into a purchase agreement (the "Purchase Agreement") providing for the purchase by you the "Initial Purchaser" of 5 1/4% Convertible Senior Subordinated Notes due 2009 (the "Notes"), convertible into shares of Common Stock, par value $.01 per share (the "Common Stock"), of L-3 Communications Holdings, Inc. (the "Company") and that the Initial Purchaser proposes to reoffer the Notes (the "Offering") in reliance on an exemption from registration under the Securities Act of 1933. In consideration of the execution of the Purchase Agreement by the Initial Purchaser, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Lehman Brothers Inc., the undersigned will not, directly or indirectly, (1) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any option or warrant) or securities convertible into or exchangeable or exercisable for Common Stock owned by the undersigned on the date of execution of this Lock-Up Letter Agreement or on the date of the completion of the Offering, or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, for a period of 90 days after the date of the final Offering Memorandum relating to the Offering except in each case for transactions by any person other than the Company relating to shares of Common Stock or other securities convertible into or exchangeable or exercisable for Common Stock acquired in open market transactions after the completion of the Offering. In furtherance of the foregoing, the Company and its Transfer Agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement. It is understood that, if the Company notifies you that it does not intend to proceed with the Offering, if the Purchase Agreement does not become effective, or if the Purchase Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Notes, we will be released from our obligations under this Lock-Up Letter Agreement. It is further understood that the Company and the Initial Purchaser have represented to the undersigned that certain officers and directors of the Company shall be required to execute a Lock-Up Letter Agreement the terms of which are identical to those contained herein. The Initial Purchaser and/or the Company will immediately notify the undersigned if any such Lock-Up Letter Agreement is modified, amended, waived or terminated in a manner so as to impose less stringent restrictions upon the person to which such Lock-Up Letter Agreement applies as well as the nature of any such modification, amendment, waiver or termination and this Lock-Up Letter Agreement shall be deemed to have been modified, amended, waived or terminated in the same manner as of the same effective date and time. The undersigned understands that the Company and the Initial Purchaser will proceed with the Offering in reliance on this Lock-Up Letter Agreement. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal Initial Purchaser, successors and assigns of the undersigned. Very truly yours, By: /s/ David J. Brand ----------------------- Name: David J. Brand Title: Managing Director Dated: EX-10.35 4 0004.txt REGISTRATION RIGHTS AGREEMENT DATED NOVEMBER 21, 2000 EXECUTION COPY RESALE REGISTRATION RIGHTS AGREEMENT AMONG L-3 COMMUNICATIONS HOLDINGS, INC., THE COMPANY AND L-3 COMMUNICATIONS CORPORATION, HYGIENETICS ENVIRONMENTAL SERVICES, INC., L-3 COMMUNICATIONS ILEX SYSTEMS, INC., L-3 COMMUNICATIONS AYDIN CORPORATION, MPRI, INC., L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC., SPD HOLDINGS, INC., SPD ELECTRICAL SYSTEMS, INC., SPD SWITCHGEAR, INC., PAC ORD, INC., HENSCHEL, INC., POWER PARAGON, INC., L-3 COMMUNICATIONS ESSCO, INC., ELECTRODYNAMICS, INC., INTERSTATE ELECTRONICS CORPORATION, SOUTHERN CALIFORNIA MICROWAVE INC., L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., L-3 COMMUNICATIONS DBS MICROWAVE, INC. and MICRODYNE CORPORATION AS GUARANTORS AND LEHMAN BROTHERS INC. DATED AS OF NOVEMBER 21, 2000 RESALE REGISTRATION RIGHTS AGREEMENT, dated as of November 21, 2000 between L-3 Communications Holdings, Inc., a Delaware corporation (together with any successor entity, herein referred to as the "Company"), and L-3 Communications Corporation, a Delaware corporation ("L-3 Communications"), Hygienetics Environmental Services, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, MPRI, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Switchgear, Inc., a Delaware corporation, Pac Ord, Inc., a Delaware corporation, Henschel, Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, Electrodynamics, Inc., an Arizona Corporation, Interstate Electronics Corporation, a California Corporation, Southern California Microwave Inc, a California corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, L-3 Communications DBS Microwave, Inc., a California corporation and Microdyne Corporation, a Maryland corporation (collectively, including L-3 Communications, the "Guarantors"), and Lehman Brothers Inc. (the "Initial Purchaser"). Pursuant to the Purchase Agreement, dated November 16, 2000, among the Company, the Guarantors and the Initial Purchaser (the "Purchase Agreement"), the Initial Purchaser has agreed to purchase from the Company up to $250,000,000 ($300,000,000 if the Initial Purchaser exercises the over-allotment option in full) in aggregate principal amount of the Company's 5.25% Convertible Senior Subordinated Notes due 2009 (the "Notes"). The Notes will be convertible into fully paid, nonassessable shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") on the terms, and subject to the conditions, set forth in the Indenture (as defined herein). To induce the Initial Purchaser to purchase the Notes, the Company and the Guarantors have agreed to provide the registration rights set forth in this Agreement pursuant to Section 3(i) of the Purchase Agreement. The parties hereby agree as follows: 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Advice: As defined in Section 4(c)(ii) hereof. Affiliate: As such term is defined in Rule 405 under the Securities Act. Agreement: This Resale Registration Rights Agreement. Blue Sky Application: As defined in Section 6(a) hereof. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Business Day: A day other than a Saturday or Sunday or any federal holiday in the United States Closing Date: The date of this Agreement. Commission: Securities and Exchange Commission. Common Stock: As defined in the preamble hereto. Company: As defined in the preamble hereto. Damages Payment Date: Each Interest Payment Date. For purposes of this Agreement, if no Notes are outstanding, "Damages Payment Date" shall mean each June 1 and December 1. Effectiveness Period: As defined in Section 2(a)(iii) hereof. Effectiveness Target Date: As defined in Section 2(a)(ii) hereof. Exchange Act: Securities Exchange Act of 1934, as amended. Filing Deadline: As defined in Section 2(a)(i) hereof. Holder: A Person who owns, beneficially or otherwise, Transfer Restricted Securities. Indemnified Holder: As defined in Section 6(a) hereof. Indenture: The Indenture, dated as of November 21, 2000, among the Company, the Guarantors (as defined therein) and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended, modified or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: As defined in the preamble hereto. Interest Payment Date: As defined in the Indenture. Liquidated Damages: As defined in Section 3(a) hereof. Majority of Holders: Holders holding 50% in aggregate principal amount of the Notes outstanding at the time of determination of the Majority of Holders; provided, however, that, for purposes of this definition, a holder of shares of Common Stock which constitute Transfer Restricted Securities that were previously issued upon conversion of Notes shall be deemed to hold an aggregate principal amount of Notes (in addition to the principal amount of Notes held by such holder) equal to the product of (x) the number of such shares of Common Stock held by such holder and (y) the prevailing conversion price, such prevailing conversion price as determined in accordance with Section 12 of the Indenture. NASD: National Association of Securities Dealers, Inc. Notes: As defined in the preamble hereto. Registration Rights Agreement Notice and Questionnaire: The Notice of Registration Statement and Selling Security Holder Election and Questionnaire in substantially the form attached or Exhibit A hereto. Person: An individual, partnership, corporation, unincorporated organization, trust, joint venture or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Questionnaire Deadline: As defined in Section 2(b) hereof. Record Holder: With respect to any Damages Payment Date, each Person who is a Holder on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. In the case of a Holder of shares of Common Stock issued upon conversion of the Notes, "Record Holder" shall mean each Person who is a Holder of shares of Common Stock which constitute Transfer Restricted Securities on the May 15 or November 15 immediately preceding the Damages Payment Date. Registration Default: As defined in Section 3(a) hereof. Registration Statement: As defined in Section 2(a)(i) hereof. Sale Notice: As defined in Section 4(e) hereof. Securities Act: Securities Act of 1933, as amended. Suspension Period. As defined in Section 4(b)(i) hereof. TIA: Trust Indenture Act of 1939, as in effect on the date the Indenture is qualified under the TIA. Transfer Restricted Securities: Each Note and each share of Common Stock issued upon conversion of Notes until the earliest to occur of: (i) the date on which such Note or such share of Common Stock issued upon conversion has been effectively registered under the Securities Act and disposed of in accordance with the Registration Statement; (ii) the date on which such Note or such share of Common Stock issued upon conversion (A) has been transferred in compliance with Rule 144 under the Securities Act or (B) may be sold or transferred pursuant to Rule 144 under the Securities Act without regard to the volume limitations thereof (or any other similar provision then in force); and Registration Rights Agreement (iii) the date on which such Note or such share of Common Stock issued upon conversion ceases to be outstanding (whether as a result of redemption, repurchase and cancellation, conversion or otherwise). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Registration. (a) The Company and the Guarantors shall: (i) not later than 135 days after the earliest date of original issuance of any of the Notes (the "Filing Deadline"), cause a registration statement to be filed pursuant to Rule 415 under the Securities Act (the "Registration Statement"), which Registration Statement shall provide for resales of all Transfer Restricted Securities held by Holders that have provided the information required pursuant to the terms of Section 2(b) hereof; (ii) use all commercially reasonable efforts to cause the Registration Statement to be declared effective by the Commission as promptly as is practicable, but in no event later than 195 days after the earliest date of original issuance of any of the Notes (the "Effectiveness Target Date"); and (iii) use all commercially reasonable efforts to keep the Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 4(b) hereof to the extent necessary to ensure that: (A) it is available for resales by the Holders of Transfer Restricted Securities entitled to the benefit of this Agreement and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced from time to time, for a period (the "Effectiveness Period") of: (1) two years following the last date of original issuance of Notes; or (2) such shorter period that will terminate when (x) all of the Holders of Transfer Restricted Securities (other than the Company and its Affiliates) are able to sell all Transfer Restricted Securities without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act or any successor rule thereto, (y) when all Transfer Restricted Securities have ceased to be outstanding (whether as a result of redemption, repurchase and cancellation, conversion or otherwise) or (z) all Transfer Restricted Securities registered under the Registration Statement have been sold. Registration Rights Agreement (b) No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in the Registration Statement pursuant to this Agreement unless such Holder furnishes to the Company in writing, prior to or on the 20th Business Day after the date the Notice and Questionnaire is given to Holders (the "Questionnaire Deadline"), such information as the Company may reasonably request for use in connection with the Registration Statement or Prospectus or preliminary Prospectus included therein and in any application to be filed with or under state securities laws. In connection with all such requests for information from Holders of Transfer Restricted Securities, the Company shall notify such Holders of the requirements set forth in the preceding sentence. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 3 hereof unless such Holder shall have provided all such reasonably requested information prior to or on the Questionnaire Deadline. Each Holder as to which the Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make information previously furnished to the Company by such Holder not materially misleading. 3. Liquidated Damages. (a) If: (i) the Registration Statement is not filed with the Commission prior to or on the Filing Deadline; (ii) the Registration Statement has not been declared effective by the Commission prior to or on the Effective Target Date; (iii) subject to the provisions of Section 4(b)(i) hereof, the Registration Statement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within five Business Days by a post-effective amendment to the Registration Statement or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure and, in the case of a post-effective amendment, is itself immediately declared effective; or (iv) prior to or on the 45th or 60th day, as the case may be, of any Suspension Period, such suspension has not been terminated, (each such event referred to in foregoing clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors jointly and severally hereby agree to pay liquidated damages ("Liquidated Damages") with respect to the Transfer Restricted Securities from and including the day following the Registration Default to but excluding the day on which the Registration Default has been cured which shall accrue as follows: (A) in respect of the Notes, to each holder of Notes, (x) during the first 90-day period during which a Registration Default shall have occurred and be continuing, at the rate of an additional 0.25% of the principal amount of the Notes per year, and (y) during the period Registration Rights Agreement commencing on the 91st day following the day the Registration Default shall have occurred and be continuing, at the rate of an additional 0.50% of the principal amount of the Notes per year; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the principal amount of the Notes; and (B) in respect of any shares of Common Stock issued upon conversion of Notes, to each holder of such shares of Common Stock, (x) during the first 90-day period in which a Registration Default shall have occurred and be continuing, at the rate of an additional 0.25% of the principal amount of the Notes converted into such shares of Common Stock per year, and (y) during the period commencing the 91st day following the day the Registration Default shall have occurred and be continuing, at the rate of an additional 0.50% of the principal amount of the Notes converted into such shares of Common Stock per year; provided, however, that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the principal amount of the Notes converted into such shares of Common Stock. (b) All accrued Liquidated Damages shall be paid in arrears to Record Holders by the Company or the Guarantors on each Damages Payment Date by wire transfer of immediately available funds. Following the cure of all Registration Defaults relating to any particular Note or share of Common Stock issued upon conversion of Notes, the accrual of Liquidated Damages with respect to such Note or such share of Common Stock shall cease. All obligations of the Company and the Guarantors to pay Liquidated Damages set forth in this Section 3 with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full provided, however, that the Liquidated Damages shall cease to accrue on the day immediately prior to the date such Transfer Restricted Securities cease to be Transfer Restricted Securities. The Liquidated Damages set forth above shall be the exclusive monetary remedy available to the Holders of Transfer Restricted Securities for Registration Defaults. 4. Registration Procedures. (a) In connection with the Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 4(b) hereof and shall use all reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto, shall prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act. (b) In connection with the Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities, the Company and the Guarantors shall: Registration Rights Agreement (i) Subject to any notice by the Company and the Guarantors in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), use its reasonable efforts to keep the Registration Statement continuously effective during the Effectiveness Period; upon the occurrence of any event that would cause any the Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not be effective and usable for the resale of Transfer Restricted Securities during the Effectiveness Period, the Company and the Guarantors shall file promptly an appropriate amendment to the Registration Statement or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use all reasonable efforts to cause such amendment to be declared effective and the Registration Statement and the related Prospectus to become usable for their intended purposes as soon as practicable thereafter. Notwithstanding the foregoing, the Company and the Guarantors may suspend the effectiveness of the Registration Statement by written notice to the Holders for a period not to exceed an aggregate of 45 days in any 90-day period (each such period, a "Suspension Period") if: (x) an event occurs and is continuing as a result of which the Registration Statement would, in the Company's and the Guarantors' reasonable judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (y) the Company and the Guarantors reasonably determine that the disclosure of such event at such time would have a material adverse effect on the business of the Company and the Guarantors (and their subsidiaries, if any, taken as a whole); provided, however, that in the event the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Company's and the Guarantors' ability to consummate such transaction, the Company and the Guarantors may extend a Suspension Period from 45 days to 60 days; provided, however, that Suspension Periods shall not exceed an aggregate of 90 days in any 360-day period. (ii) Prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective during the Effectiveness Period; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement during the applicable period in accordance with the Registration Rights Agreement intended method or methods of distribution by the sellers thereof set forth in the Registration Statement or supplement to the Prospectus. (iii) Advise the underwriter(s), if any, and selling Holders promptly (but in any event within five Business Days) and, if requested by such Persons, to confirm such advice in writing: (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, or (D) of the existence of any fact or the happening of any event, during the Effectiveness Period, that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. Each Holder of this Security, by accepting the same, agrees to hold any communication from the Company and the Guarantors pursuant to this paragraph 4(b)(iii) in confidence. (iv) If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, use its reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (v) Furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, a copy of the Registration Statement and copies of any Prospectus included therein (other than documents incorporated by reference after the initial filing of the Registration Statement), which documents will be subject to the review of such Holders and Registration Rights Agreement underwriter(s), if any, for a period of at least ten Business Days, and the Company and the Guarantors will not file the Registration Statement or Prospectus (other than documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by the Registration Statement or the underwriter(s), if any, shall reasonably object within five Business Days after the receipt thereof. The Company and the Guarantors shall also furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, if reasonably practicable, or otherwise promptly after filing with the Commission, copies of any amendments to the Registration Statement or supplements to the Prospectus (other than documents incorporated by reference after the initial filing of the Registration Statement), and to make the Company's and the Guarantors' representatives available for discussion of such amendments or supplements and make such changes in such amendments or supplements prior to the filing thereof, if reasonably practicable, or prepare and file further amendments or supplements, as the selling Holders or underwriter(s), if any, may reasonably request. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if the Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission. (vi) Make available at reasonable times for inspection by one or more representatives of the selling Holders, designated in writing by a Majority of Holders whose Transfer Restricted Securities are included in the Registration Statement, any underwriter participating in any distribution pursuant to the Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the Company's and the Guarantors' officers, directors, managers and employees to supply all information reasonably requested by any such representative or representatives of the selling Holders, underwriter, attorney or accountant in connection with the Registration Statement after the filing thereof and before its effectiveness; provided, however, that any information designated by the Company as confidential at the time of delivery of such information shall be kept confidential by the recipient thereof; provided further, that in no event shall the Company be required to furnish any material nonpublic information pursuant to this subsection (vi). (vii) If reasonably requested by any selling Holders or the underwriter(s), if any, promptly incorporate in the Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may request to have included therein, including, without limitation: (A) information relating to the "Plan of Distribution" of the Transfer Restricted Securities, (B) information with respect to the principal amount of Notes or number of shares of Common Stock being sold to such underwriter(s), (C) the purchase price being paid therefor Registration Rights Agreement and (D) any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; provided, however, that with respect to any information requested for inclusion by a selling Holder, this clause (vii) shall apply only to such information that relates to the Transfer Restricted Securities to be sold by such selling Holder; and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (viii) Furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto (and any documents incorporated by reference therein or exhibits thereto (or exhibits incorporated in such exhibits by reference) as such Person may request). (ix) Deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; subject to any notice by the Company in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto. (x) If an underwriting agreement is entered into and the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) upon request, furnish to each underwriter and, in the case of clause (1), to each selling Holder, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of closing of any sale of Transfer Restricted Securities in an Underwritten Registration: (1) a certificate, dated the date of such closing, signed by the Chief Financial Officer of the Company and each of the Guarantors confirming, as of the date thereof, the matters set forth in Section 5(h) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) opinions, each dated the date of such closing, of counsel to the Company covering such of the matters as are customarily covered in legal opinions to underwriters in connection with primary underwritten offerings of securities; and Registration Rights Agreement (3) customary comfort letters, dated the date of such closing, from the Company's independent accountants (and from any other accountants whose report is contained or incorporated by reference in the Registration Statement), in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings of securities; (B) set forth in full in the underwriting agreement, if any, indemnification provisions and procedures which provide rights no less protective than those set forth in Section 6 hereof with respect to all parties to be indemnified by the Company and the Guarantors; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the selling Holders pursuant to this clause (x). (xi) Before any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Registration Statement; provided, however, that the Company and the Guarantors shall not be required (A) to register or qualify as a foreign corporation or a dealer of securities where it is not now so qualified or to take any action that would subject it to the service of process in any jurisdiction where it is not now so subject or (B) to subject themselves to taxation in any such jurisdiction if they are not now so subject. (xii) Cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws) and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two Business Days before any sale of Transfer Restricted Securities made by such underwriter(s). (xiii) Use all reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other U.S. governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities. Registration Rights Agreement (xiv) Subject to Section 4(b)(i) hereof, if any fact or event contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred, use all reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an 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 not misleading. (xv) Provide CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with certificates for the Notes that are in a form eligible for deposit with The Depository Trust Company. (xvi) Cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter that is required to be retained in accordance with the rules and regulations of the NASD. (xvii) Otherwise use their best efforts to comply with all applicable rules and regulations of the Commission and all reporting requirements under the rules and regulations of the Exchange Act. (xviii) Cause the Indenture to be qualified under the TIA not later than the effective date of the Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA, and execute and use all reasonable efforts to cause the Trustee thereunder to execute all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. (xix) Cause all Transfer Restricted Securities covered by the Registration Statement to be listed or quoted, as the case may be, on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed or quoted. (xx) Provide promptly to each Holder upon written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act after the effective date of the Registration Statement. (xxi) If reasonably requested by the underwriters, if any, make appropriate officers of the Company and the Guarantors reasonably available to the underwriters for meetings with prospective purchasers of the Transfer Restricted Securities and prepare and present to potential investors customary Registration Rights Agreement "road show" material in a manner consistent with other new issuances of other securities similar to the Transfer Restricted Securities. (c) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will, and will use its reasonable efforts to cause any underwriter(s) in an Underwritten Offering to, forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Registration Statement until: (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 4(b)(xv) hereof; or (ii) such Holder is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice of suspension. (d) Each Holder who intends to be named as a selling Holder in the Registration Statement shall furnish to the Company in writing, no later than the Questionnaire Deadline, such information regarding such Holder and the proposed distribution by such Holder of its Transfer Restricted Securities as the Company may reasonably request for use in connection with the Registration Statement or Prospectus or preliminary Prospectus included therein. Holders that do not complete the questionnaire and deliver it to the Company shall not be named as selling securityholders in the Prospectus or preliminary Prospectus included in the Registration Statement and therefore shall not be permitted to sell any Transfer Restricted Securities pursuant to the Registration Statement. Each Holder who intends to be named as a selling Holder in the Registration Statement shall promptly furnish to the Company in writing such other information as the Company may from time to time reasonably request in writing. (e) Upon the effectiveness of the Registration Statement, each Holder shall notify the Company at least three Business Days prior to any intended distribution of Transfer Restricted Securities pursuant to the Registration Statement (a "Sale Notice"), which notice shall be effective for five Business Days. Each Holder of this Security, by accepting the same, agrees to hold any communication by the Company in response to a Sale Notice in confidence. 5. Registration Expenses. (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement shall be borne by the Company regardless of whether a Registration Statement becomes effective, including, without limitation: Registration Rights Agreement (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holders with the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing of Prospectuses and certificates for the Common Stock to be issued upon conversion of the Notes), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel to the Company and the Guarantors and, subject to Section 5(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing (or authorizing for quotation) the Common Stock on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company shall bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal, accounting or other duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with the Registration Statement required by this Agreement, the Company shall reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities being registered pursuant to the Registration Statement, as applicable, for the reasonable fees and disbursements not to exceed the amount of $50,000 of not more than one counsel, which shall be Latham & Watkins, or such other counsel as may be chosen by a Majority of Holders for whose benefit the Registration Statement is being prepared. 6. Indemnification and Contribution. (a) The Company shall indemnify and hold harmless each Holder, such Holder's officers and employees and each person, if any, who controls such Holder within the meaning of the Securities Act (each, an "Indemnified Holder"), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to resales of the Transfer Restricted Securities), to which such Indemnified Holder may become subject, insofar as any such loss, claim, damage, liability or action arises out of, or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement or Prospectus or any amendment or supplement thereto or (B) any blue sky application or other document or any Registration Rights Agreement amendment or supplement thereto prepared or executed by the Company (or based upon written information furnished by or on behalf of the Company expressly for use in such blue sky application or other document or amendment on supplement) filed in any jurisdiction specifically for the purpose of qualifying any or all of the Transfer Restricted Securities under the securities law of any state or other jurisdiction (such application or document being hereinafter called a "Blue Sky Application"); or (ii) the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Indemnified Holder promptly upon demand for any legal or other expenses reasonably incurred by such Indemnified Holder in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or Prospectus or amendment or supplement thereto or Blue Sky Application in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Holder (or its related Indemnified Holder) specifically for use therein or out of the failure by the Indemnified Holder to furnish to any purchaser of its Restricted Transfer Security of the Prospectus and any supplement or amendment thereto in the form provided to such Indemnified Holder by the Company. The foregoing indemnity agreement is in addition to any liability which the Company and the Guarantors may otherwise have to any Indemnified Holder. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless the Company and the Guarantors, their respective officers and employees, their respective directors and each person, if any, who controls the Company or the Guarantors within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Guarantors or any such director, officer, employee or controlling person may become subject, insofar as any such loss, claim, damage or liability or action arises out of, or is based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or Prospectus or any amendment or supplement thereto or any Blue Sky Application; or (ii) the omission or the alleged omission to state therein 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, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder (or its related Indemnified Registration Rights Agreement Holder) specifically for use therein, and shall reimburse the Company, the Guarantors and any such directors, officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by the Company, the Guarantors or any such director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company, the Guarantors or any of their respective directors, officers, employees or controlling persons and any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent it has been materially prejudiced by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that a Majority of Holders shall have the right to employ a single counsel to represent jointly a Majority of Holders and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by a Majority of Holders against the Company, the Guarantors or any of their respective directors, officers, employees or controlling persons under this Section 7; and provided, further, that if a Majority of Holders shall have reasonably concluded that there may be one or more legal defenses available to them and their respective officers, employees and controlling persons that are different from or additional to those available to the Company, the Guarantors and any of their respective directors, officers, employees and controlling persons, the fees and expenses of a single separate counsel shall be paid by the Company and the Guarantors. No indemnifying party shall: (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld) settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party seeking indemnification hereunder from all liability arising out of such claim, action, suit or proceeding, or Registration Rights Agreement (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 6 shall for any reason be unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability (or action in respect thereof) referred to therein, each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability (or action in respect thereof): (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering and sale of the Transfer Restricted Securities on the one hand and a Holder with respect to the sale by such Holder of the Transfer Restricted Securities on the other, or (ii) if the allocation provided by clause (6)(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 6(d)(i) but also the relative fault of the Company on the one hand and the Holder on the other in connection with the statements or omissions or alleged statements or alleged omissions that resulted in such loss, claim, damage or liability (or action in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes purchased under the Purchase Agreement (before deducting expenses) received by the Company and the Guarantors as set forth in the table on Schedule 1 hereto, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Transfer Restricted Securities on the other. The relative fault of the parties shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantors on the one hand or the Holders on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and each Holder agree that it would not be just and equitable if the amount of contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 6 shall be deemed to include, for purposes of this Section 6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 6, no Holder shall be required to Registration Rights Agreement contribute any amount in excess of the amount by which the total price at which the Transfer Restricted Securities purchased by it were resold exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute as provided in this Section 6(d) are several and not joint. 7. Rule 144A. In the event the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company and each of the Guarantors hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 8. Participation in Underwritten Registrations. No Holder may participate in any Underwritten Registration hereunder unless such Holder: (i) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements; and (ii) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. 9. Selection of Underwriters. The Holders of Transfer Restricted Securities covered by the Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by a Majority of Holders whose Transfer Restricted Securities are included in such offering; provided, however, that such investment bankers and managers must be reasonably satisfactory to the Company. Registration Rights Agreement 10. Miscellaneous. (a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company or the Guarantors to comply with its obligations under Section 2 hereof may result in material irreparable injury to the Initial Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) Adjustments Affecting Transfer Restricted Securities. The Company and the Guarantors shall not, directly or indirectly, take any action with respect to the Transfer Restricted Securities as a class that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities in a registration undertaken pursuant to this Agreement. (c) No Inconsistent Agreements. The Company and the Guarantors will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that interferes with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. In addition, the Company and the Guarantors shall not grant to any of its security holders (other than the holders of Transfer Restricted Securities in such capacity) the right to include any of its securities in the Registration Statement provided for in this Agreement other than the Transfer Restricted Securities. Except for the obligation described in the Purchase Agreement to the sellers of the ILEX Systems, Inc. business, the Company and the Guarantors have not previously entered into any agreement (which has not expired or been terminated) granting any registration rights with respect to its securities to any Person which rights conflict with the provisions hereof. (d) Amendments and Waivers. This Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of a Majority of Holders. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the registrar under the Indenture or the transfer agent of the Common Stock, as the case may be; and (ii) if to the Company or the Guarantors: L-3 Communications Holdings, Inc. 600 Third Avenue, 36th Floor New York, New York 10016 Attn: Christopher Cambria Registration Rights Agreement With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Vincent Pagano, Jr. All such notices and communications shall be deemed to have been duly given at: the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that (i) this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder and (ii) nothing contained herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities, in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Securities Held by the Company or its' Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its Affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (i) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (j) Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. (k) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, Registration Rights Agreement legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. Registration Rights Agreement IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. L-3 COMMUNICATIONS HOLDINGS, INC., as the Company By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS CORPORATION, as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President HYGIENETICS ENVIRONMENTAL SERVICES, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ILEX SYSTEMS, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President Registration Rights Agreement L-3 COMMUNICATIONS AYDIN CORPORATION, as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President MPRI, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President SPD HOLDINGS, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President SPD ELECTRICAL SYSTEMS, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President Registration Rights Agreement SPD SWITCHGEAR, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President PAC ORD, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President HENSCHEL, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President POWER PARAGON, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS ESSCO, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President Registration Rights Agreement SOUTHERN CALIFORNIA MICROWAVE, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS DBS MICROWAVE, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President MICRODYNE CORPORATION, as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President ELECTRODYNAMICS, INC., as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President Registration Rights Agreement INTERSTATE ELECTRONICS CORPORATION, as a Guarantor By:/s/ Christopher C. Cambria ----------------------------------- Name: Christopher C. Cambria Title: Vice President Registration Rights Agreement IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. LEHMAN BROTHERS INC. By /s/ David J. Brand --------------------------------- NAME: David J. Brand TITLE: Managing Director Registration Rights Agreement SCHEDULE 1 NET PROCEEDS
PER NOTE TOTAL ---- ------------ Offering Price.................................................... 100% $250,000,000 Discounts and Commissions......................................... 2.75% $6,875,000 Net Proceeds to the Company (before deducting expenses)........... 97.25% $243,125,000
EXHIBIT A L-3 COMMUNICATIONS HOLDINGS, INC. NOTICE OF REGISTRATION STATEMENT AND SELLING SECURITYHOLDER ELECTION AND QUESTIONNAIRE - ------------------------------------------------------------------------------- NOTICE L-3 Communications Holdings, Inc. (the "Company") has filed, or intends to file, with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 or such other Form as may be available (the "Registration Statement"), for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 5.25% Convertible Senior Subordinated Notes due 2009 (CUSIP No. 502424 AA 2 for Rule 144A purchasers and CUSIP No. U50219 AC 5 for Reg S purchasers) (the "Notes"), and common stock, par value $0.01 per share, issuable upon conversion thereof (the "Shares" and together with the Notes, the "Transfer Restricted Securities") in accordance with the terms of the Registration Rights Agreement, dated as of November 21, 2000 (the "Registration Rights Agreement") between the Company and Lehman Brothers Inc. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein have the meaning ascribed thereto in the Registration Rights Agreement. In order to sell or otherwise dispose of any Transfer Restricted Securities pursuant to the Registration Statement, a beneficial owner of Transfer Restricted Securities generally will be required to be named as a selling securityholder in the related Prospectus, deliver a Prospectus to purchasers of Transfer Restricted Securities, be subject to certain civil liability provisions of the Securities Act and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification rights and obligations, as described below). In order to be included in the Registration Statement, this Election and Questionnaire must be completed, executed and delivered to the Company at the address set forth herein for receipt PRIOR TO OR ON [insert here date that is 20 business days from the date of this notice] (the "Election and Questionnaire Deadline"). BENEFICIAL OWNERS THAT DO NOT COMPLETE THIS NOTICE AND QUESTIONNAIRE PRIOR TO THE ELECTION AND QUESTIONNAIRE DEADLINE AND DELIVER IT TO THE COMPANY AS PROVIDED BELOW WILL NOT BE NAMED AS SELLING SECURITYHOLDERS IN THE PROSPECTUS AND THEREFORE WILL NOT BE PERMITTED TO SELL ANY TRANSFER RESTRICTED SECURITIES PURSUANT TO THE REGISTRATION STATEMENT. Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related Prospectus. Accordingly, holders and beneficial owners of Transfer Restricted Securities are advised to consult their own securities law counsel A-1 regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related Prospectus. ELECTION The undersigned Holder (the "Selling Securityholder") of Transfer Restricted Securities hereby elects to include in the Registration Statement the Transfer Restricted Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3) pursuant to the Registration Statement. The undersigned, by signing and returning this Election and Questionnaire, understands that it will be bound by the terms and conditions of this Election and Questionnaire and the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Selling Securityholder has agreed to indemnify and hold harmless the Company, the Company's directors, the Company's officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against certain losses arising in connection with statements concerning the Selling Securityholder made in the Registration Statement or the related Prospectus in reliance upon the information provided in this Election and Questionnaire. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: QUESTIONNAIRE 1. (a) Full legal name of Selling Securityholder: (b) Full legal name of registered holder (if not the same as (a) above) through which Transfer Restricted Securities listed in (3) below are held: (c) Full legal name of DTC participant (if applicable and if not the same as (b) above) through which Transfer Restricted Securities listed in (3) are held: 2. Address for notices to Selling Securityholders: Telephone: Fax: Contact Person: 3. Beneficial ownership of Transfer Restricted Securities: (a) Type of Transfer Restricted Securities beneficially owned, and principal amount of Notes or number of shares of Common Stock, as the case may be, beneficially owned: A-2 (b) CUSIP No(s). of such Transfer Restricted Securities beneficially owned: 4. Beneficial ownership of the Company's securities owned by the Selling Securityholder: Except as set forth below in this Item (4), the undersigned is not the beneficial or registered owner of any securities of the Company other than the Transfer Restricted Securities listed above in Item (3) ("Other Securities"). (a) Type and amount of Other Securities beneficially owned by the Selling Securityholder: (b) CUSIP No(s). of such Other Securities beneficially owned: 5. Relationship with the Company Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or their predecessors or affiliates) during the past three years. State any exceptions here: 6. Plan of Distribution Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Transfer Restricted Securities listed above in Item (3) pursuant to the Registration Statement only as follows (if at all). Such Transfer Restricted Securities may be sold from time to time directly by the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Transfer Restricted Securities are sold through underwriters or broker-dealers, the Selling Securityholder will be responsible for underwriting discounts or commissions or agent's commissions. Such Transfer Restricted Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions): (i) on any national securities exchange or quotation service on which the Transfer Restricted Securities may be listed or quoted at the time of sale; A-3 (ii) in the over-the-counter market; (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market; or (iv) through the writing of options. In connection with sales of the Transfer Restricted Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Transfer Restricted Securities and deliver Transfer Restricted Securities to close out such short positions, or loan or pledge Transfer Restricted Securities to broker-dealers that in turn may sell such securities. State any exceptions here: NOTE: IN NO EVENT WILL SUCH METHOD(S) OF DISTRIBUTION TAKE THE FORM OF AN UNDERWRITTEN OFFERING OF THE TRANSFER RESTRICTED SECURITIES WITHOUT THE PRIOR AGREEMENT OF THE COMPANY. By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees it will comply, with the provisions of the prospectus delivery and other provisions of the Securities Act and the Exchange Act and the respective rules and regulations promulgated thereunder, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Transfer Restricted Securities pursuant to the Registration Statement. If the Selling Securityholder transfers all or any portion of the Transfer Restricted Securities listed in Item 3 above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Election and Questionnaire and the Registration Rights Agreement. By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to items (1) through (6) above and the inclusion of such information in the Registration Statement and the related Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related Prospectus. In accordance with the Selling Securityholder's obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below. A-4 Once this Election and Questionnaire is executed by the Selling Securityholder and received by the Company, the terms of this Election and Questionnaire and the representations and warranties contained herein shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Securityholder with respect to the Transfer Restricted Securities beneficially owned by such Selling Securityholder and listed in Item 3 above. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. A-5 IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Election and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: Beneficial Owner By:___________________________________ Name: Title: Please return the completed and executed Election and Questionnaire for receipt prior to or on deadline for response to L-3 Communications Holdings, Inc. at: L-3 Communications Holdings, Inc. 600 Third Avenue New York, New York 10016 Attn: Chris Cambria, Esq. General Counsel and Vice President A-6 EXHIBIT 1 TO ANNEX A NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT L-3 Communications Holdings, Inc. 600 Third Avenue New York, New York 10016 Attn: Chris Cambria First Chicago Trust Company of New York Mall Suite 4691 P.O. Box 2536 Jersey City, New Jersey 07303-2536 Attn: George McIntyre Tel. (201) 222-4115 Fax (201) 222-4679 Re: L-3 Communications Holdings, Inc.'s 5.25% Convertible Senior Subordinated Notes due 2009 (the "Notes") Dear Sirs: Please be advised that has transferred $ aggregate principal amount of the above-referenced Notes or shares of the Company's Common Stock issued on conversion or repurchase of Notes, pursuant to the Registration Statement on Form S-3 (File No. 333- ) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied with respect to the transfer described above and that the above named beneficial owner of the Notes or Common Stock is named as a selling securityholder in the Prospectus dated , or in amendments or supplements thereto, and that the aggregate principal amount of the Notes or number of shares of Common Stock transferred are [all or a portion of] the Notes or Common Stock listed in such Prospectus, as amended or supplemented, opposite such owner's name. Very truly yours, [name] By:_______________________________________ (Authorized signature) Dated: _____________________________ A-7 EX-10.40 5 0005.txt CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT This CONSENT, WAIVER AND FIRST AMENDMENT TO THE AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of April 28, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Amended and Restated 364 Day Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to a waiver and amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Borrower to capitalize a new Subsidiary by contributing the assets and delegating the liabilities of the Acquired Company to such new Subsidiary (the "TCAS Subsidiary"), (ii) exempt the TCAS Subsidiary from becoming a party to a Subsidiary Guarantee or Subsidiary Pledge Agreement so long as it is not a Wholly Owned Subsidiary, (iii) permit the issuance by Holdings and the guarantee by Borrower of Permitted Convertible Securities and (iv) make certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. LIMITED CONSENTS AND WAIVERS. 1.1 Permitted Convertible Securities. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Requisite Class Lenders hereby consent to an amendment to the Parent Guarantee to permit Holdings to issue the Permitted Convertible Securities. 1.2 TCAS Contribution. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Required Lenders hereby consent to the contribution and delegation by Borrower of all of the assets and liabilities related to the Acquired Company (the "TCAS CONTRIBUTION") to a new Subsidiary of Borrower (the "TCAS SUBSIDIARY") and, solely for the purposes of permitting such TCAS Contribution, waive compliance with the provisions of Subsection 7.6 and 7.9 of the Credit Agreement which would otherwise limit such a contribution. SECTION 2. GENERAL AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 5 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 2.1 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined terms in alphabetical order: "Acquired Company": Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. "Convertible Securities": (i) unsecured convertible debt securities issued by Holdings having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility C Credit Agreement on terms and conditions acceptable to the Agents and/or (ii) unsecured debt securities issued by Holdings to a trust (the "Trust") having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility C Credit Agreement on terms and conditions acceptable to the Agents which Trust, in turn, issues preferred stock securities to investors which are convertible at the option of the holder thereof into shares of common stock of Holdings. "Required Class Lenders": at any time, (a) for the Lenders having Loan Exposure, Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders, (b) for the Facility A Lenders having Facility A Loan Exposure, Facility A Lenders having or holding more than 50% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) for the Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding more than 50% of the aggregate Facility C Loan Exposure of all Facility C Lenders. 2 "TCAS Subsidiary": a Subsidiary of Borrower organized as a Delaware limited liability company which will hold and operate the assets and business of the Acquired Company. "Wholly Owned Subsidiary": a Subsidiary of Borrower, the Capital Stock of which is 100% owned and controlled, directly or indirectly, by Borrower. 2.2 Subsections 2.6(b)(i), (ii), (iii) and (iv) of the Credit Agreement are hereby amended and restated in their entirety to read as follows: (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2(a) through and including subsection 7.2(k)), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the earlier to occur of (A) the date of receipt of such Net Proceeds if the Termination Date (as defined in the Facility C Credit Agreement) has occurred and (B) the 60th day following the date of receipt of such Net Proceeds (the earlier to occur of (A) and (B), herein, the "Debt Prepayment Waiting Period"), the Commitments, the Facility A Commitments and the Facility C Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the Debt Prepayment Waiting Period. During the term of any Debt Prepayment Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility C Commitments equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility C Loans, as applicable, from the issuance and/or incurrence of such Indebtedness shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility C Lender's "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility C Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale (other than in respect of a sale of all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower (a "Final TCAS Sale")), such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales (other than in respect of a Final TCAS Sale) shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined 3 below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. If Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from a Final TCAS Sale, such Net Proceeds shall be applied on or prior to the third Business Day after receipt thereof toward prepayment of the Loans, the Facility A Loans and the Facility C Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the earlier of (A) the date of receipt of such Net Proceeds if the Termination Date (as defined in the Facility C Credit Agreement) has occurred and (B) the 60th day following the date of such Final TCAS Sale (the earlier to occur of (A) and (B), herein, the "TCAS Waiting Period"), the Commitments, the Facility A Commitments and the Facility C Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the TCAS Waiting Period. During the term of any TCAS Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility C Commitments equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility C Loans from such Final TCAS Sale shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility C Lender's "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility C Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales (other than a Final TCAS Sale) occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) [Intentionally Omitted] (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Facility A Loans, Facility C Loans and Loans, with a corresponding ratable permanent reduction of the Facility A Commitments, the Facility C Commitments and the Commitments as and when required by subsection 2.6(b)(i) and (ii). Commitment, Facility A Commitment and Facility C Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) (and the 4 corresponding subsections of the Facility A Credit Agreement and the Facility C Credit Agreement) hereof shall be applied to each Lender's respective Commitment, each Facility A Lender's Facility A Commitment and/or each Facility C Lender's Facility C Commitment, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility A Commitments and Facility C Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility A Credit Agreement and the Facility C Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. 2.3 Subsection 7.2(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (d) additional Indebtedness of the Borrower and its Subsidiaries not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); 2.4 Subsection 9.5 of the Credit Agreement is hereby amended by (i) deleting the term "Required Lenders" appearing therein and inserting the term "Required Class Lenders" in place thereof and (ii) adding the language ", the Facility A Lenders and the Facility C Lenders taken as a whole" immediately prior to the period "." appearing at the end thereof. SECTION 3. AMENDMENTS GENERALLY RELATING TO PERMITTED CONVERTIBLE SECURITIES. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Borrower and the Requisite Class Lenders hereby agree to amend the Credit Agreement as follows: 3.1 The definition of "Permitted Stock Payments" in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Permitted Stock Payments": (A) dividends by Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing, provided that the aggregate amount paid under this clause (B) does not exceed the amount that Borrower would be required to pay in respect of the income of Borrower and its Subsidiaries if Borrower were a stand alone entity that was not owned by Holdings, (C) from and after May 1, 1999, dividends by Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000 and (D) dividends by Borrower to Holdings to fund 5 interest expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such dividends under this clause (D) shall not, in any fiscal year, exceed an amount equal to the interest actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all intercompany advances funded pursuant to subsection 7.9(l) hereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. 3.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined terms in alphabetical order: "Permitted Convertible Securities": as defined in subsection 7.4(h). 3.3 Subsection 7.4 of the Credit Agreement is hereby amended by (i) deleting the period "." appearing at the end of subsection 7.4(g) and inserting the language "; and" in place thereof and (ii) adding the following new subsection 7.4(h) at the end thereof: (h) Guarantee Obligations in respect of up to $400,000,000 principal amount of Convertible Securities issued by Holdings having an annual interest or dividend rate not in excess of 7% per annum (the "Permitted Convertible Securities"). 3.4 Subsection 7.9 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of subsection 7.9(j), (ii) deleting the period "." at the end of subsection 7.9(k) and inserting the language "; and" in place thereof and (iii) adding the following new subsection 7.9(l) at the end thereof: (l) Investments consisting of intercompany advances by Borrower to Holdings to fund interest or dividend expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such intercompany advances shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all Permitted Stock Payments funded pursuant to clause (D) of the definition thereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. SECTION 4. AMENDMENTS GENERALLY RELATING TO THE TCAS SUBSIDIARY. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows 4.1 Section 1 of the Credit Agreement is hereby amended by adding the following new Subsection 1.5: 1.5 Accounting for Interests in TCAS Subsidiary. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, for purposes of computing the amount of any financial terms and/or computing compliance with any of the financial tests and/or covenants set forth in this Agreement or any other 6 Credit Document in respect of the TCAS Subsidiary at any time it is not a Wholly Owned Subsidiary, Borrower shall (i) only be permitted to include that portion of any assets and/or liabilities attributable to the TCAS Subsidiary which corresponds directly with the percentage of Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower and (ii) eliminate depreciation and amortization expenses of the TCAS Subsidiary included in the consolidated financial statements of the Borrower that are applicable to the minority interests owned by Persons other than Borrower or its Subsidiaries in the TCAS Subsidiary in determining Borrower's Consolidated EBITDA. 4.2 Subsection 6.10(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary, Foreign Subsidiary or TCAS Subsidiary (except as provided below) of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder; provided, that if, after the consummation of the sale of a portion of Capital Stock of the TCAS Subsidiary to Thomson - CSF Sextant S.A. and/or an Affiliate thereof, the TCAS Subsidiary thereafter becomes a Wholly Owned Subsidiary, then the TCAS Subsidiary shall become a party to the Subsidiary Guarantee and Subsidiary Pledge Agreement and Borrower shall promptly (and in any event within 30 days after such event occurs) comply with the requirements of this subsection 6.10(b) with respect to the TCAS Subsidiary. 4.3 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.15: 6.15 TCAS Subsidiary. The Borrower shall at all times own, directly or indirectly, at least fifty-one percent (51%) of the Capital Stock of the TCAS Subsidiary; provided, that Borrower shall be permitted to sell all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower without violating the terms of this subsection so long as the Net Proceeds resulting therefrom are applied in accordance with the terms of subsection 2.6(b)(ii) and (iv) hereof. 7 4.4 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.16: 6.16 Required Distributions for TCAS Subsidiary. To the extent not prohibited under applicable law, cause the TCAS Subsidiary to distribute to the holders of Capital Stock of the TCAS Subsidiary not later than the 50th day after each fiscal quarter of Borrower for the immediately preceding fiscal quarter (i) all amounts necessary to fund tax obligations arising by virtue of the ownership of such Capital Stock ("Tax Distributions") and (ii) after giving effect to the funding of such quarterly Tax Distributions, all unrestricted cash on hand not needed to fund the anticipated working capital and capital expenditure needs of the TCAS Subsidiary. 4.5 Subsection 7.4(f) to the Credit Agreement is hereby amended by deleting the word "and" appearing at the end thereof and inserting in place thereof the following additional language: "provided, that so long as the TCAS Subsidiary is not a Wholly Owned Subsidiary, no guarantee obligations by Borrower or any Subsidiary in respect of obligations of the TCAS Subsidiary shall be permitted under this clause (f) in excess of $3,000,000 at any time;" 4.6 Subsection 7.9(e) of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "provided, that solely with respect to the TCAS Subsidiary at any time the TCAS Subsidiary is not a Wholly Owned Subsidiary, the aggregate amount of Investments by Borrower or any other Subsidiaries in the TCAS Subsidiary at any time (other than and in addition to the contribution to the TCAS Subsidiary by Borrower of (x) the assets related to the Acquired Company distributed on, or within 6 months after, the date of acquisition of the Acquired Company in an amount not to exceed the product of (a) the final purchase price paid by Borrower for the Acquired Company pursuant to the Acquisition Documents, after giving effect to any post-closing purchase price adjustments required pursuant to such Acquisition Documents and (b) the Borrower's percentage ownership interest in the TCAS Subsidiary and (y) subject to the written consent of the Agents, which shall not be unreasonably withheld or delayed, cash for the ongoing operating needs of the TCAS Subsidiary funded within 6 months after the date of acquisition of the Acquired Company), do not at any time exceed the greater of (i) $17,000,000 or (ii) the sum of $10,000,000 plus an amount equal to ten percent (10%) of the aggregate cash distributions received by Borrower from the TCAS Subsidiary during the immediately preceding 12-month period;" SECTION 5. CONDITIONS TO EFFECTIVENESS FOR SECTION 2. The provisions of Sections 2 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT EFFECTIVE DATE"): 8 5.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 5.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 5.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 5.4 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 5.5 All conditions to effectiveness set forth in Subsections 5.1-5.4 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 6. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.1 AND SECTION 3. The provisions of Sections 1.1 and 3 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "PERMITTED CONVERTIBLE SECURITIES EFFECTIVE DATE"): 6.1 The Requisite Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 6.2 All conditions to the First Amendment Effective Date shall have been satisfied; 6.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 6.4 Holdings shall have executed and delivered to the Administrative Agent an amendment to the Parent Guarantee in form and substance reasonably satisfactory to the Administrative Agent permitting Holdings to issue the Permitted Convertible Securities; 6.5 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 6.6 All conditions to effectiveness set forth in Subsections 6.1-6.5 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit 9 Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 7. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.2 AND SECTION 4. The provisions of Sections 1.2 and 4 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "TCAS EFFECTIVE DATE"): 7.1 All conditions to the First Amendment Effective Date shall have been satisfied; 7.2 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 7.3 Thomson - CFS Sextant S.A. and/or an Affiliate thereof ("SEXTANT") shall have purchased for cash no less than 30% of the Capital Stock of the TCAS Subsidiary for a reciprocal percentage of the purchase price of the final purchase price paid by the Borrower for the Acquired Company; 7.4 The Administrative Agent shall have received a perfected first priority pledge of the Capital Stock of the TCAS Subsidiary owned by Borrower in favor of the Administrative Agent for the ratable benefit of the Lenders, the Facility A Lenders and the Facility C Lenders pursuant to a LLC pledge agreement and related financing statement (collectively, the "LLC PLEDGE DOCUMENTS") in form and substance reasonably satisfactory to the Administrative Agent; 7.5 The Administrative Agent shall have received an opinion of counsel to the Borrower in form and substance reasonably satisfactory to the Administrative Agent; 7.6 The Administrative Agent shall have received a final executed copy of the limited liability company operating agreement of the TCAS Subsidiary which shall be in form and substance reasonably satisfactory to the Administrative Agent; 7.7 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying the board resolutions authorizing the execution, delivery and performance of this Amendment and the LLC Pledge Documents; 7.8 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; 7.9 The Administrative Agent shall have received a certificate of a Responsible Officer of Borrower certifying and confirming the consummation of the Sextant investment described in Subsection 5.3 above and satisfaction of all other conditions to effectiveness set forth in this Section 5; and 10 7.10 All conditions to effectiveness set forth in Subsections 7.1-7.9 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 8. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 8.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and the LLC Pledge Documents and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and the LLC Pledge Documents, (b) the execution and delivery of this Amendment and the LLC Pledge Documents has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment, the Amended Agreement and the LLC Pledge Documents have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 8.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and the TCAS Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 8.3 Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default. SECTION 9. MISCELLANEOUS. 9.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 11 9.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 9.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 9.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Sections 1, 2, 3 and 4 hereof (which shall only become effective on the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and/or the TCAS Effective Date, as applicable), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower, the Required Lenders, the Syndication Agent, the Documentation Agent and the Administrative Agent and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 12 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ----------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: ----------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: ----------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent -------------------------------------- Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: _____ ___, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE BANK OF NEW YORK By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BANK ONE, NA By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BANKBOSTON, N.A. By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] CREDIT LYONNAIS By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FLEET NATIONAL BANK By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] HSBC BANK USA By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SOCIETE GENERALE By: -------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] EX-10.41 6 0006.txt CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT This CONSENT, WAIVER AND FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of April 28, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Second Amended and Restated Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to a waiver and amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Borrower to capitalize a new Subsidiary by contributing the assets and delegating the liabilities of the Acquired Company to such new Subsidiary (the "TCAS Subsidiary"), (ii) exempt the TCAS Subsidiary from becoming a party to a Subsidiary Guarantee or Subsidiary Pledge Agreement so long as it is not a Wholly Owned Subsidiary, (iii) permit the issuance by Holdings and the guarantee by Borrower of Permitted Convertible Securities and (iv) make certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. LIMITED CONSENTS AND WAIVERS. 1.1 Permitted Convertible Securities. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Requisite Class Lenders hereby consent to an amendment to the Parent Guarantee to permit Holdings to issue the Permitted Convertible Securities. 1.2 TCAS Contribution. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Required Lenders hereby consent to the contribution and delegation by Borrower of all of the assets and liabilities related to the Acquired Company (the "TCAS CONTRIBUTION") to a new Subsidiary of Borrower (the "TCAS SUBSIDIARY") and, solely for the purposes of permitting such TCAS Contribution, waive compliance with the provisions of Subsection 7.6 and 7.9 of the Credit Agreement which would otherwise limit such a contribution. SECTION 2. GENERAL AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 5 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 2.1 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined terms in alphabetical order: "Acquired Company": Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. "Convertible Securities": (i) unsecured convertible debt securities issued by Holdings having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility B Credit Agreement and the Facility C Credit Agreement on terms and conditions acceptable to the Agents and/or (ii) unsecured debt securities issued by Holdings to a trust (the "Trust") having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility B Credit Agreement and the Facility C Credit Agreement on terms and conditions acceptable to the Agents which Trust, in turn, issues preferred stock securities to investors which are convertible at the option of the holder thereof into shares of common stock of Holdings. "Required Class Lenders": at any time, (a) for the Lenders having Loan Exposure, Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders, (b) for the Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding more than 50% of the aggregate Facility B Loan Exposure of all Facility B Lenders and (c) for the Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding more than 50% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "TCAS Subsidiary": a Subsidiary of Borrower organized as a Delaware limited liability company which will hold and operate the assets and business of the Acquired Company. "Wholly Owned Subsidiary": a Subsidiary of Borrower, the Capital Stock of which is 100% owned and controlled, directly or indirectly, by Borrower. 2.2 Subsections 2.6(b)(i), (ii), (iii) and (iv) of the Credit Agreement are hereby amended and restated in their entirety to read as follows: 2 (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2(a) through and including subsection 7.2(k)), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility B Loans and the Facility C Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the earlier to occur of (A) the date of receipt of such Net Proceeds if the Termination Date (as defined in the Facility C Credit Agreement) has occurred and (B) the 60th day following the date of receipt of such Net Proceeds (the earlier to occur of (A) and (B), herein, the "Debt Prepayment Waiting Period"), the Commitments, the Facility B Commitments and the Facility C Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the Debt Prepayment Waiting Period. During the term of any Debt Prepayment Waiting Period, a portion of the Commitments, the Facility B Commitments and the Facility C Commitments equal to the amount of prepayments received in respect of the Loans, the Facility B Loans and the Facility C Loans, as applicable, from the issuance and/or incurrence of such Indebtedness shall be unavailable to Borrower and deemed excluded from each Lender's, Facility B Lender's and Facility C Lender's "Available Commitment" (as such term is defined herein and in each of the Facility B Credit Agreement and Facility C Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale (other than in respect of a sale of all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower (a "Final TCAS Sale")), such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility B Loans and the Facility C Loans and permanent reduction of the Commitments, the Facility B Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales (other than in respect of a Final TCAS Sale) shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. If Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from a Final TCAS Sale, such Net Proceeds shall be applied on or prior to the third Business Day after receipt thereof toward prepayment of the Loans, the Facility B Loans and the Facility C Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the earlier of (A) the date of receipt of such Net Proceeds if the Termination Date (as defined in the Facility C Credit Agreement) has occurred and (B) the 60th day following the date of such Final TCAS Sale (the earlier to occur of (A) and (B), herein, the "TCAS Waiting 3 Period"), the Commitments, the Facility B Commitments and the Facility C Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the TCAS Waiting Period. During the term of any TCAS Waiting Period, a portion of the Commitments, the Facility B Commitments and the Facility C Commitments equal to the amount of prepayments received in respect of the Loans, the Facility B Loans and the Facility C Loans from such Final TCAS Sale shall be unavailable to Borrower and deemed excluded from each Lender's, Facility B Lender's and Facility C Lender's "Available Commitment" (as such term is defined herein and in each of the Facility B Credit Agreement and Facility C Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales (other than a Final TCAS Sale) occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) [Intentionally Omitted] (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Facility B Loans, Facility C Loans and Loans, with a corresponding ratable permanent reduction of the Facility B Commitments, the Facility C Commitments and the Commitments as and when required by subsection 2.6(b)(i) and (ii). Commitment, Facility B Commitment and Facility C Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) (and the corresponding subsections of the Facility B Credit Agreement and the Facility C Credit Agreement) hereof shall be applied to each Lender's respective Commitment, each Facility B Lender's Facility B Commitment and/or each Facility C Lender's Facility C Commitment, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility B Commitments and Facility C Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility B Credit Agreement and the Facility C Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. 2.3 Subsection 7.2(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (d) additional Indebtedness of the Borrower and its Subsidiaries not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of 4 which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); 2.4 Subsection 9.5 of the Credit Agreement is hereby amended by (i) deleting the term "Required Lenders" appearing therein and inserting the term "Required Class Lenders" in place thereof and (ii) adding the language ", the Facility B Lenders and the Facility C Lenders taken as a whole" immediately prior to the period "." appearing at the end thereof. SECTION 3. AMENDMENTS GENERALLY RELATING TO PERMITTED CONVERTIBLE SECURITIES. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Borrower and the Requisite Class Lenders hereby agree to amend the Credit Agreement as follows: 3.1 The definition of "Permitted Stock Payments" in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Permitted Stock Payments": (A) dividends by Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing, provided that the aggregate amount paid under this clause (B) does not exceed the amount that Borrower would be required to pay in respect of the income of Borrower and its Subsidiaries if Borrower were a stand alone entity that was not owned by Holdings, (C) from and after May 1, 1999, dividends by Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000 and (D) dividends by Borrower to Holdings to fund interest expense or dividends in respect of the Permitted Convertible Securities issued by Holdings, provided that such dividends under this clause (D) shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all intercompany advances funded pursuant to subsection 7.9(l) hereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. 3.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined terms in alphabetical order: "Permitted Convertible Securities": as defined in subsection 7.4(h). 3.3 Subsection 7.4 of the Credit Agreement is hereby amended by (i) deleting the period "." appearing at the end of subsection 7.4(g) and inserting the language "; and" in place thereof and (ii) adding the following new subsection 7.4(h) at the end thereof: (h) Guarantee Obligations in respect of up to $400,000,000 principal 5 amount of Convertible Securities issued by Holdings having an annual interest or dividend rate not in excess of 7% per annum (the "Permitted Convertible Securities"). 3.4 Subsection 7.9 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of subsection 7.9(j), (ii) deleting the period "." at the end of subsection 7.9(k) and inserting the language "; and" in place thereof and (iii) adding the following new subsection 7.9(l) at the end thereof: (l) Investments consisting of intercompany advances by Borrower to Holdings to fund interest or dividend expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such intercompany advances shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all Permitted Stock Payments funded pursuant to clause (D) of the definition thereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. SECTION 4. AMENDMENTS GENERALLY RELATING TO THE TCAS SUBSIDIARY. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows 4.1 Section 1 of the Credit Agreement is hereby amended by adding the following new Subsection 1.5: 1.5 Accounting for Interests in TCAS Subsidiary. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, for purposes of computing the amount of any financial terms and/or computing compliance with any of the financial tests and/or covenants set forth in this Agreement or any other Credit Document in respect of the TCAS Subsidiary at any time it is not a Wholly Owned Subsidiary, Borrower shall (i) only be permitted to include that portion of any assets and/or liabilities attributable to the TCAS Subsidiary which corresponds directly with the percentage of Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower and (ii) eliminate depreciation and amortization expenses of the TCAS Subsidiary included in the consolidated financial statements of the Borrower that are applicable to the minority interests owned by Persons other than Borrower or its Subsidiaries in the TCAS Subsidiary in determining Borrower's Consolidated EBITDA. 4.2 Subsection 6.10(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) 6 immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary, Foreign Subsidiary or TCAS Subsidiary (except as provided below) of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder; provided, that if, after the consummation of the sale of a portion of Capital Stock of the TCAS Subsidiary to Thomson - CSF Sextant S.A. and/or an Affiliate thereof, the TCAS Subsidiary thereafter becomes a Wholly Owned Subsidiary, then the TCAS Subsidiary shall become a party to the Subsidiary Guarantee and Subsidiary Pledge Agreement and Borrower shall promptly (and in any event within 30 days after such event occurs) comply with the requirements of this subsection 6.10(b) with respect to the TCAS Subsidiary. 4.3 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.15: 6.15 TCAS Subsidiary. The Borrower shall at all times own, directly or indirectly, at least fifty-one percent (51%) of the Capital Stock of the TCAS Subsidiary; provided, that Borrower shall be permitted to sell all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower without violating the terms of this subsection so long as the Net Proceeds resulting therefrom are applied in accordance with the terms of subsection 2.6(b)(ii) and (iv) hereof. 4.4 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.16: 6.16 Required Distributions for TCAS Subsidiary. To the extent not prohibited under applicable law, cause the TCAS Subsidiary to distribute to the holders of Capital Stock of the TCAS Subsidiary not later than the 50th day after each fiscal quarter of Borrower for the immediately preceding fiscal quarter (i) all amounts necessary to fund tax obligations arising by virtue of the ownership of such Capital Stock ("Tax Distributions") and (ii) after giving effect to the funding of such quarterly Tax Distributions, all unrestricted cash on hand not needed to fund the anticipated working capital and capital expenditure needs of the TCAS Subsidiary. 4.5 Subsection 7.4(f) to the Credit Agreement is hereby amended by deleting the word "and" appearing at the end thereof and inserting in place thereof the following additional language: "provided, that so long as the TCAS Subsidiary is not a Wholly Owned Subsidiary, no guarantee obligations by Borrower or any Subsidiary in respect of obligations of the TCAS Subsidiary shall be permitted under this clause (f) in excess of $3,000,000 at any time;" 7 4.6 Subsection 7.9(e) of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "provided, that solely with respect to the TCAS Subsidiary at any time the TCAS Subsidiary is not a Wholly Owned Subsidiary, the aggregate amount of Investments by Borrower or any other Subsidiaries in the TCAS Subsidiary at any time (other than and in addition to the contribution to the TCAS Subsidiary by Borrower of (x) the assets related to the Acquired Company distributed on, or within 6 months after, the date of acquisition of the Acquired Company in an amount not to exceed the product of (a) the final purchase price paid by Borrower for the Acquired Company pursuant to the Acquisition Documents, after giving effect to any post-closing purchase price adjustments required pursuant to such Acquisition Documents and (b) the Borrower's percentage ownership interest in the TCAS Subsidiary and (y) subject to the written consent of the Agents, which shall not be unreasonably withheld or delayed, cash for the ongoing operating needs of the TCAS Subsidiary funded within 6 months after the date of acquisition of the Acquired Company), do not at any time exceed the greater of (i) $17,000,000 or (ii) the sum of $10,000,000 plus an amount equal to ten percent (10%) of the aggregate cash distributions received by Borrower from the TCAS Subsidiary during the immediately preceding 12-month period;" SECTION 5. CONDITIONS TO EFFECTIVENESS FOR SECTION 2. The provisions of Section 2 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT EFFECTIVE DATE"): 5.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 5.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 5.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 5.4 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 5.5 All conditions to effectiveness set forth in Subsections 5.1-5.4 in each of the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 6. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.1 AND SECTION 3. The provisions of Sections 1.1 and 3 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "PERMITTED 8 CONVERTIBLE SECURITIES EFFECTIVE DATE"): 6.1 The Requisite Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 6.2 All conditions to the First Amendment Effective Date shall have been satisfied; 6.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 6.4 Holdings shall have executed and delivered to the Administrative Agent an amendment to the Parent Guarantee in form and substance reasonably satisfactory to the Administrative Agent permitting Holdings to issue the Permitted Convertible Securities; 6.5 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 6.6 All conditions to effectiveness set forth in Subsections 6.1-6.5 in each of the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 7. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.2 AND SECTION 4. The provisions of Sections 1.2 and 4 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "TCAS EFFECTIVE DATE"): 7.1 All conditions to the First Amendment Effective Date shall have been satisfied; 7.2 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 7.3 Thomson - CFS Sextant S.A. and/or an Affiliate thereof ("SEXTANT") shall have purchased for cash no less than 30% of the Capital Stock of the TCAS Subsidiary for a reciprocal percentage of the purchase price of the final purchase price paid by the Borrower for the Acquired Company; 7.4 The Administrative Agent shall have received a perfected first priority pledge of the Capital Stock of the TCAS Subsidiary owned by Borrower in favor of the Administrative Agent for the ratable benefit of the Lenders, the Facility B Lenders and the Facility C Lenders pursuant to a LLC pledge agreement and related financing statement (collectively, the "LLC PLEDGE DOCUMENTS") in form and substance reasonably satisfactory to the Administrative Agent; 9 7.5 The Administrative Agent shall have received an opinion of counsel to the Borrower in form and substance reasonably satisfactory to the Administrative Agent; 7.6 The Administrative Agent shall have received a final executed copy of the limited liability company operating agreement of the TCAS Subsidiary which shall be in form and substance reasonably satisfactory to the Administrative Agent; 7.7 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying the board resolutions authorizing the execution, delivery and performance of this Amendment and the LLC Pledge Documents; 7.8 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; 7.9 The Administrative Agent shall have received a certificate of a Responsible Officer of Borrower certifying and confirming the consummation of the Sextant investment described in Subsection 7.3 above and satisfaction of all other conditions to effectiveness set forth in this Section 7; and 7.10 All conditions to effectiveness set forth in Subsections 7.1-7.9 in each of the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement and the Consent, Waiver and First Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 8. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 8.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and the LLC Pledge Documents and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and the LLC Pledge Documents, (b) the execution and delivery of this Amendment and the LLC Pledge Documents has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment, the Amended Agreement and the LLC Pledge Documents have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 8.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and the TCAS Effective Date to the 10 same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 8.3 Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default. SECTION 9. MISCELLANEOUS. 9.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 9.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 9.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 9.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Sections 1, 2, 3 and 4 hereof (which shall only become effective on the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and/or the TCAS Effective Date, as applicable), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower, the Required Lenders, the Syndication Agent, the Documentation Agent and the Administrative Agent and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ---------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: ---------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: ---------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: ---------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent -------------------------------------- Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: April ___, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: ----------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NEW YORK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] BANK ONE, NA By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] FLEET NATIONAL BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT LYONNAIS By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] HSBC BANK USA By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] SOCIETE GENERALE By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.42 7 0007.txt CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT This CONSENT, WAIVER AND FIRST AMENDMENT TO THE NEW 364 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of April 28, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the New 364 Day Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to a waiver and amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Borrower to capitalize a new Subsidiary by contributing the assets and delegating the liabilities of the Acquired Company to such new Subsidiary (the "TCAS Subsidiary"), (ii) exempt the TCAS Subsidiary from becoming a party to a Subsidiary Guarantee or Subsidiary Pledge Agreement so long as it is not a Wholly Owned Subsidiary, (iii) permit the issuance by Holdings and the guarantee by Borrower of Permitted Convertible Securities and (iv) make certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. LIMITED CONSENTS AND WAIVERS. 1.1 Permitted Convertible Securities. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Requisite Class Lenders hereby consent to an amendment to the Parent Guarantee to permit Holdings to issue the Permitted Convertible Securities. 1.2 TCAS Contribution. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Required Lenders hereby consent to the contribution and delegation by Borrower of all of the assets and liabilities related to the Acquired Company (the "TCAS CONTRIBUTION") to a new Subsidiary of Borrower (the "TCAS SUBSIDIARY") and, solely for the purposes of permitting such TCAS Contribution, waive compliance with the provisions of Subsection 7.6 and 7.9 of the Credit Agreement which would otherwise limit such a contribution. SECTION 2. GENERAL AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 5 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 2.1 Subsection 1.1 of the Credit Agreement is hereby amended to add the following new defined terms in alphabetical order: "Convertible Securities": at any time, (i) unsecured convertible debt securities issued by Holdings having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility B Credit Agreement on terms and conditions acceptable to the Agents and/or (ii) unsecured debt securities issued by Holdings to a trust (the "Trust") having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility B Credit Agreement on terms and conditions acceptable to the Agents which Trust, in turn, issues preferred stock securities to investors which are convertible at the option of the holder thereof into shares of common stock of Holdings. "Required Class Lenders": at any time, (a) for the Lenders having Loan Exposure, Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders, (b) for the Facility A Lenders having Facility A Loan Exposure, Facility A Lenders having or holding more than 50% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) for the Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding more than 50% of the aggregate Facility B Loan Exposure of all Facility B Lenders. "TCAS Subsidiary": a Subsidiary of Borrower organized as a Delaware limited liability company which will hold and operate the assets and business of the Acquired Company. "Wholly Owned Subsidiary": a Subsidiary of Borrower, the Capital Stock of which is 100% owned and controlled, directly or indirectly, by Borrower. 2.2 Subsections 2.6(b)(i), (ii), (iii) and (iv) of the Credit Agreement are hereby amended and restated in their entirety to read as follows: 2 (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2(a) through and including subsection 7.2(k)), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility B Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of receipt of such Net Proceeds (such 60 day period, herein, the "Debt Prepayment Waiting Period"), the Commitments, the Facility A Commitments and the Facility B Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the Debt Prepayment Waiting Period. During the term of any Debt Prepayment Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility B Commitments equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility B Loans, as applicable, from the issuance and/or incurrence of such Indebtedness shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility B Lender's "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility B Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale (other than in respect of a sale of all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower (a "Final TCAS Sale")), such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility B Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility B Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales (other than in respect of a Final TCAS Sale) shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 3 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. If Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from a Final TCAS Sale, such Net Proceeds shall be applied on or prior to the third Business Day after receipt thereof toward prepayment of the Loans, the Facility A Loans and the Facility B Loans and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of such Final TCAS Sale (such 60 day period, herein, the "TCAS Waiting Period"), the Commitments, the Facility A Commitments and the Facility B Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the TCAS Waiting Period. During the term of any TCAS Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility B Commitments equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility B Loans from such Final TCAS Sale shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility B Lender's "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility B Credit Agreement) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales (other than a Final TCAS Sale) occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) If, subsequent to the Closing Date, any Capital Stock (other than any Convertible Securities which shall for all purposes under this Agreement be deemed Indebtedness for borrowed money) shall be issued by Holdings, the Borrower or any of its Subsidiaries, an amount equal to 50% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans on the date of issuance and, unless the Required Lenders shall have waived such requirement in writing, on or before the 60th day following the date of receipt of such Net Proceeds (such 60 day period, herein, the "Equity Issuance Waiting Period"), the Commitments shall be permanently reduced as set forth in clause (iv) of this subsection 2.6(b) by the amount so prepaid on the last day of the Equity Issuance Waiting Period. During the term of any Equity Issuance Waiting Period, a portion of the Commitments equal to the amount of prepayments received in respect of the Loans from the issuance of such Capital Stock shall be unavailable to Borrower for Loans and deemed excluded from each Lender's Available Commitment unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Lenders. Nothing in this paragraph (b) shall be deemed to permit any issuance of Capital Stock not permitted by subsection 7.6. (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Facility A Loans, Facility B Loans and Loans, with a corresponding ratable permanent reduction of the Facility A Commitments, the Facility B Commitments and the Commitments as and when required by subsection 2.6(b)(i) and (ii). Commitment, Facility A Commitment and Facility B Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) (and 4 the corresponding subsections of the Facility A Credit Agreement and the Facility B Credit Agreement) hereof shall be applied to each Lender's respective Commitment, each Facility A Lender's Facility A Commitment and/or each Facility B Lender's Facility B Commitment, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility A Commitments and Facility B Commitments. In addition, except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(iii) shall be applied ratably to the outstanding principal amount of Loans, with a corresponding permanent reduction of the Commitments as and when required by subsection 2.6(b)(iii). The Commitment reductions made pursuant to subsection 2.6(b)(iii) hereof shall be applied to each Lender's respective Commitment and shall reduce permanently such Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility A Credit Agreement and the Facility B Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. 2.3 Subsection 7.2(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (d) additional Indebtedness of the Borrower and its Subsidiaries not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); 2.4 Subsection 9.5 of the Credit Agreement is hereby amended by (i) deleting the term "Required Lenders" appearing therein and inserting the term "Required Class Lenders" in place thereof and (ii) adding the language ", the Facility A Lenders and the Facility B Lenders taken as a whole" immediately prior to the period "." appearing at the end thereof. SECTION 3. AMENDMENTS GENERALLY RELATING TO PERMITTED CONVERTIBLE SECURITIES. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 6 of this Amendment, the Borrower and the Requisite Class Lenders hereby agree to amend the Credit Agreement as follows: 3.1 The definition of "Permitted Stock Payments" in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Permitted Stock Payments": (A) dividends by Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing, provided that the aggregate amount paid under this clause (B) does not exceed the amount that Borrower would be required to pay in respect of the income of Borrower and its Subsidiaries if Borrower were a stand alone entity that was not owned by Holdings, (C) from and after May 1, 1999, dividends by 5 Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000 and (D) dividends by Borrower to Holdings to fund interest expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such dividends under this clause (D) shall not, in any fiscal year, exceed an amount equal to the interest actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all intercompany advances funded pursuant to subsection 7.9(l) hereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. 3.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined terms in alphabetical order: "Permitted Convertible Securities": as defined in subsection 7.4(h). 3.3 Subsection 7.4 of the Credit Agreement is hereby amended by (i) deleting the period "." appearing at the end of subsection 7.4(g) and inserting the language "; and" in place thereof and (ii) adding the following new subsection 7.4(h) at the end thereof: (h) Guarantee Obligations in respect of up to $400,000,000 principal amount of Convertible Securities issued by Holdings having an annual interest rate not in excess of 7% per annum (the "Permitted Convertible Securities"). 3.4 Subsection 7.9 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of subsection 7.9(j), (ii) deleting the period "." at the end of subsection 7.9(k) and inserting the language "; and" in place thereof and (iii) adding the following new subsection 7.9(l) at the end thereof: (l) Investments consisting of intercompany advances by Borrower to Holdings to fund interest expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such intercompany advances shall not, in any fiscal year, exceed an amount equal to the interest actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all Permitted Stock Payments funded pursuant to clause (D) of the definition thereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. SECTION 4. AMENDMENTS GENERALLY RELATING TO THE TCAS SUBSIDIARY. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 7 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows 4.1 Section 1 of the Credit Agreement is hereby amended by adding the following new Subsection 1.3: 6 1.3 Accounting for Interests in TCAS Subsidiary. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, for purposes of computing the amount of any financial terms and/or computing compliance with any of the financial tests and/or covenants set forth in this Agreement or any other Credit Document in respect of the TCAS Subsidiary at any time it is not a Wholly Owned Subsidiary, Borrower shall (i) only be permitted to include that portion of any assets and/or liabilities attributable to the TCAS Subsidiary which corresponds directly with the percentage of Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower and (ii) eliminate depreciation and amortization expenses of the TCAS Subsidiary included in the consolidated financial statements of the Borrower that are applicable to the minority interests owned by Persons other than Borrower or its Subsidiaries in the TCAS Subsidiary in determining Borrower's Consolidated EBITDA. 4.2 Subsection 6.10(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary, Foreign Subsidiary or TCAS Subsidiary (except as provided below) of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder; provided, that if, after the consummation of the sale of a portion of Capital Stock of the TCAS Subsidiary to Thomson - CSF Sextant S.A. and/or an Affiliate thereof, the TCAS Subsidiary thereafter becomes a Wholly Owned Subsidiary, then the TCAS Subsidiary shall become a party to the Subsidiary Guarantee and Subsidiary Pledge Agreement and Borrower shall promptly (and in any event within 30 days after such event occurs) comply with the requirements of this subsection 6.10(b) with respect to the TCAS Subsidiary. 4.3 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.15: 6.15 TCAS Subsidiary. The Borrower shall at all times own, directly or indirectly, at least fifty-one percent (51%) of the Capital Stock of the TCAS Subsidiary; provided, that Borrower shall be permitted to sell all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower without violating the 7 terms of this subsection so long as the Net Proceeds resulting therefrom are applied in accordance with the terms of subsection 2.6(b)(ii) and (iv) hereof. 4.4 Section 6 of the Credit Agreement is hereby further amended by adding the following new Subsection 6.16: 6.16 Required Distributions for TCAS Subsidiary. To the extent not prohibited under applicable law, cause the TCAS Subsidiary to distribute to the holders of Capital Stock of the TCAS Subsidiary not later than the 50th day after each fiscal quarter of Borrower for the immediately preceding fiscal quarter (i) all amounts necessary to fund tax obligations arising by virtue of the ownership of such Capital Stock ("Tax Distributions") and (ii) after giving effect to the funding of such quarterly Tax Distributions, all unrestricted cash on hand not needed to fund the anticipated working capital and capital expenditure needs of the TCAS Subsidiary. 4.5 Subsection 7.4(f) to the Credit Agreement is hereby amended by deleting the word "and" appearing at the end thereof and inserting in place thereof the following additional language: "provided, that so long as the TCAS Subsidiary is not a Wholly Owned Subsidiary, no guarantee obligations by Borrower or any Subsidiary in respect of obligations of the TCAS Subsidiary shall be permitted under this clause (f) in excess of $3,000,000 at any time;" 4.6 Subsection 7.9(e) of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "provided, that solely with respect to the TCAS Subsidiary at any time the TCAS Subsidiary is not a Wholly Owned Subsidiary, the aggregate amount of Investments by Borrower or any other Subsidiaries in the TCAS Subsidiary at any time (other than and in addition to the contribution to the TCAS Subsidiary by Borrower of (x) the assets related to the Acquired Company distributed on, or within 6 months after, the date of acquisition of the Acquired Company in an amount not to exceed the product of (a) the final purchase price paid by Borrower for the Acquired Company pursuant to the Acquisition Documents, after giving effect to any post-closing purchase price adjustments required pursuant to such Acquisition Documents and (b) the Borrower's percentage ownership interest in the TCAS Subsidiary and (y) subject to the written consent of the Agents, which shall not be unreasonably withheld or delayed, cash for the ongoing operating needs of the TCAS Subsidiary funded within 6 months after the date of acquisition of the Acquired Company), do not at any time exceed the greater of (i) $17,000,000 or (ii) the sum of $10,000,000 plus an amount equal to ten percent (10%) of the aggregate cash distributions received by Borrower from the TCAS Subsidiary during the immediately preceding 12-month period;" 8 SECTION 5. CONDITIONS TO EFFECTIVENESS FOR SECTION 2. The provisions of Section 2 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT EFFECTIVE DATE"): 5.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 5.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 5.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 5.4 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 5.5 All conditions to effectiveness set forth in Subsections 5.1-5.4 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit Agreement and the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 6. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.1 AND SECTION 3. The provisions of Sections 1.1 and 3 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "PERMITTED CONVERTIBLE SECURITIES EFFECTIVE DATE"): 6.1 The Requisite Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 6.2 All conditions to the First Amendment Effective Date shall have been satisfied; 6.3 The representations and warranties contained in Section 8 hereof shall be true and correct in all respects; 6.4 Holdings shall have executed and delivered to the Administrative Agent an amendment to the Parent Guarantee in form and substance reasonably satisfactory to the Administrative Agent permitting Holdings to issue the Permitted Convertible Securities; 9 6.5 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; and 6.6 All conditions to effectiveness set forth in Subsections 6.1-6.5 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit Agreement and the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 7. CONDITIONS TO EFFECTIVENESS FOR SECTION 1.2 AND SECTION 4. The provisions of Sections 1.2 and 4 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "TCAS EFFECTIVE DATE"): 7.1 All conditions to the First Amendment Effective Date shall have been satisfied; 7.2 The representations and warranties contained in Section 4 hereof shall be true and correct in all respects; 7.3 Thomson - CFS Sextant S.A. and/or an Affiliate thereof ("SEXTANT") shall have purchased for cash no less than 30% of the Capital Stock of the TCAS Subsidiary for a reciprocal percentage of the purchase price of the final purchase price paid by the Borrower for the Acquired Company; 7.4 The Administrative Agent shall have received a perfected first priority pledge of the Capital Stock of the TCAS Subsidiary owned by Borrower in favor of the Administrative Agent for the ratable benefit of the Lenders, the Facility A Lenders and the Facility B Lenders pursuant to a LLC pledge agreement and related financing statement (collectively, the "LLC PLEDGE DOCUMENTS") in form and substance reasonably satisfactory to the Administrative Agent; 7.5 The Administrative Agent shall have received an opinion of counsel to the Borrower in form and substance reasonably satisfactory to the Administrative Agent; 7.6 The Administrative Agent shall have received a final executed copy of the limited liability company operating agreement of the TCAS Subsidiary which shall be in form and substance reasonably satisfactory to the Administrative Agent; 7.7 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying the board resolutions authorizing the execution, delivery and performance of this Amendment and the LLC Pledge Documents; 7.8 All fees and expenses owing to the Administrative Agent in connection with this Amendment and/or the administration of the Credit Agreement, including fees and disbursements of the Administrative Agent's counsel, shall have been paid by Borrower; 10 7.9 The Administrative Agent shall have received a certificate of a Responsible Officer of Borrower certifying and confirming the consummation of the Sextant investment described in Subsection 7.3 above and satisfaction of all other conditions to effectiveness set forth in this Section 7; and 7.10 All conditions to effectiveness set forth in Subsections 7.1-7.9 in each of the Consent, Waiver and First Amendment to the Second Amended and Restated Credit Agreement and the Consent, Waiver and First Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 8. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 8.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and the LLC Pledge Documents and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and the LLC Pledge Documents, (b) the execution and delivery of this Amendment and the LLC Pledge Documents has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment, the Amended Agreement and the LLC Pledge Documents have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 8.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and the TCAS Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 8.3 Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default. SECTION 9. MISCELLANEOUS. 9.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The 11 execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 9.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 9.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 9.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Sections 1, 2, 3 and 4 hereof (which shall only become effective on the First Amendment Effective Date, the Permitted Convertible Securities Effective Date and/or the TCAS Effective Date, as applicable), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower, the Required Lenders, the Syndication Agent, the Documentation Agent and the Administrative Agent and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ------------------------------------------ Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent, and as a Lender By: ------------------------------------------ Title: BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------------------ Title: BANK OF AMERICA, N.A., as a Lender By: ------------------------------------------ Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE BANK OF NEW YORK By: ------------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK ONE, NA By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE INC. By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] COMERICA BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] GE CAPITAL COMMERCIAL FINANCE, INC By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] MEES PIERSON CAPITAL CORP. By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] NATIONAL CITY BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE ROYAL BANK OF SCOTLAND PLC By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SOCIETE GENERALE By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SUMMIT BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] WEBSTER BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DEN DANSKE BANK AKTIESELSKAB CAYMAN ISLANDS BRANCH By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] MERITA BANK PLC By: ----------------------------------- Title: By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SUNTRUST BANK By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANQUE WORMS CAPITAL CORPORATION By: ----------------------------------- Title: [SIGNATURE PAGES TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent -------------------------------------- Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Dated: ____ ___, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: ------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: ------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: ------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: ------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: ----------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT, WAIVER AND FIRST AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] EX-10.43 8 0008.txt NEW 364 DAY CREDIT AGREEMENT ================================================================================ NEW 364 DAY CREDIT AGREEMENT AMONG L-3 COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, THE CERTAIN FINANCIAL INSTITUTIONS NAMED AS MANAGING AGENTS HEREIN, BANC OF AMERICA SECURITIES LLC AND LEHMAN BROTHERS, INC., AS ARRANGERS, BANK OF AMERICA, N.A. , AS ADMINISTRATIVE AGENT AND LEHMAN COMMERCIAL PAPER INC., AS DOCUMENTATION AGENT AND SYNDICATION AGENT DATED AS OF APRIL 24, 2000 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- Section 1. DEFINITIONS......................................................................................1 1.1 Defined Terms...........................................................................................1 1.2 Other Definitional Provisions..........................................................................23 Section 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS.......................................................23 2.1 Commitments............................................................................................23 2.2 Procedure for Borrowing................................................................................24 2.3 Commitment Fee.........................................................................................24 2.4 Termination or Reduction of Commitments................................................................24 2.5 Extension of Termination Date; Repayment of Loans; Evidence of Debt....................................25 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments...............................27 2.7 Conversion and Continuation Options....................................................................29 2.8 Minimum Amounts and Maximum Number of Tranches.........................................................30 2.9 Interest Rates and Payment Dates.......................................................................30 2.10 Computation of Interest and Fees.......................................................................31 2.11 Inability to Determine Interest Rate...................................................................31 2.12 Pro Rata Treatment and Payments........................................................................32 2.13 Illegality.............................................................................................33 2.14 Requirements of Law....................................................................................33 2.15 Taxes..................................................................................................35 2.16 Indemnity..............................................................................................38 2.17 Replacement of Lenders.................................................................................39 2.18 Certain Fees...........................................................................................39 2.19 Certain Rules Relating to the Payment of Additional Amounts............................................39 Section 3. [INTENTIONALLY OMITTED].........................................................................40 Section 4. REPRESENTATIONS AND WARRANTIES..................................................................40 4.1 Financial Condition....................................................................................40 4.2 No Change..............................................................................................41 4.3 Corporate Existence; Compliance with Law...............................................................41 4.4 Corporate Power; Authorization; Enforceable Obligations................................................41 4.5 No Legal Bar...........................................................................................42 4.6 No Material Litigation.................................................................................42 4.7 No Default.............................................................................................42 4.8 Ownership of Property; Liens...........................................................................42 4.9 Intellectual Property..................................................................................42 4.10 Taxes..................................................................................................42 4.11 Federal Regulations....................................................................................43 4.12 ERISA..................................................................................................43 4.13 Investment Company Act; Other Regulations..............................................................44 4.14 Subsidiaries...........................................................................................44 4.15 Purpose of Loans.......................................................................................44 4.16 Environmental Matters..................................................................................44 4.17 Collateral Documents...................................................................................45 i 4.18 Accuracy and Completeness of Information...............................................................45 4.19 Labor Matters..........................................................................................45 4.20 Acquisition............................................................................................46 4.21 Solvency...............................................................................................46 Section 5. CONDITIONS PRECEDENT............................................................................46 5.1 Conditions to Initial Loans............................................................................46 5.2 Conditions to Each Extension of Credit.................................................................51 Section 6. AFFIRMATIVE COVENANTS...........................................................................51 6.1 SEC Filings............................................................................................51 6.2 Certificates; Other Information........................................................................52 6.3 Payment of Obligations.................................................................................53 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law........................53 6.5 Insurance..............................................................................................53 6.6 Inspection of Property; Books and Records; Discussions.................................................53 6.7 Notices................................................................................................53 6.8 Environmental Laws.....................................................................................54 6.9 Further Assurances.....................................................................................55 6.10 Additional Collateral..................................................................................55 6.11 [Intentionally Omitted.]...............................................................................56 6.12 Foreign Jurisdictions..................................................................................56 6.13 Government Contracts...................................................................................56 6.14 Lien Searches..........................................................................................56 Section 7. NEGATIVE COVENANTS..............................................................................56 7.1 Financial Condition Covenants..........................................................................56 7.2 Limitation on Indebtedness.............................................................................57 7.3 Limitation on Liens....................................................................................58 7.4 Limitation on Guarantee Obligations....................................................................60 7.5 Limitation on Fundamental Changes......................................................................61 7.6 Limitation on Sale of Assets...........................................................................61 7.7 Limitation on Dividends................................................................................62 7.8 Limitation on Capital Expenditures.....................................................................62 7.9 Limitation on Investments, Loans and Advances..........................................................63 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements........................64 7.11 Limitation on Transactions with Affiliates.............................................................65 7.12 Limitation on Sales and Leasebacks.....................................................................65 7.13 Limitation on Changes in Fiscal Year...................................................................66 7.14 Limitation on Negative Pledge Clauses..................................................................66 7.15 Limitation on Lines of Business........................................................................66 7.16 Designated Senior Debt.................................................................................66 Section 8. EVENTS OF DEFAULT...............................................................................66 Section 9. THE AGENTS; THE ARRANGERS.......................................................................69 9.1 Appointment............................................................................................69 9.2 Delegation of Duties...................................................................................70 9.3 Exculpatory Provisions.................................................................................70 9.4 Reliance by Agents.....................................................................................70 9.5 Notice of Default......................................................................................70 9.6 Non-Reliance on Agents and Other Lenders...............................................................71 9.7 Indemnification........................................................................................71 ii 9.8 Agents, in Their Individual Capacities.................................................................72 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent..............................72 9.10 The Arrangers and the Managing Agents..................................................................72 Section 10. MISCELLANEOUS...................................................................................73 10.1 Amendments and Waivers.................................................................................73 10.2 Notices................................................................................................74 10.3 No Waiver; Cumulative Remedies.........................................................................76 10.4 Survival of Representations and Warranties.............................................................76 10.5 Payment of Expenses and Taxes..........................................................................76 10.6 Successors and Assigns; Participation and Assignments..................................................77 10.7 Adjustments; Set-off...................................................................................81 10.8 Counterparts...........................................................................................82 10.9 Severability...........................................................................................82 10.10 Integration............................................................................................82 10.11 GOVERNING LAW..........................................................................................82 10.12 SUBMISSION TO JURISDICTION; WAIVERS....................................................................82 10.13 Acknowledgments........................................................................................83 10.14 WAIVERS OF JURY TRIAL..................................................................................84 10.15 Confidentiality........................................................................................84 10.16 Conversion of Currencies...............................................................................84 10.17 Year 2000..............................................................................................85
iii EXHIBITS - -------- Exhibit A-1 Form of Note Exhibit B-1 Form of Parent Guarantee Exhibit B-2 Form of Subsidiary Guarantee Exhibit B-3 Form of Parent Pledge Agreement Exhibit B-4A Form of Borrower Pledge Agreement Exhibit B-4B Form of Charge Over Shares Exhibit B-5 Form of Subsidiary Pledge Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher and Bartlett Exhibit C-2 Form of Internal Counsel Opinion Exhibit D Form of Borrowing Certificate Exhibit E Form of Certificate of Non U.S. Lender Exhibit F Form of Assignment and Acceptance SCHEDULES Schedule I Lenders and Commitments Schedule II Pricing Grid Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.9 Intellectual Property Claims Schedule 4.10 Taxes Schedule 4.14 Subsidiaries Schedule 4.20 Acquisition Documents Schedule 7.2(f) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.9(c) Officers Schedule 7.9(g) Existing Investments Schedule 7.9(k) Approved Investments iv THIS NEW 364 DAY CREDIT AGREEMENT, dated as of April 24, 2000, is among L-3 Communications Corporation, a Delaware corporation (the "Borrower") which is wholly owned by L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), the several banks and other financial institutions or entities from time to time parties hereto (the "Lenders"), Banc of America Securities LLC and Lehman Brothers, Inc. ("LBI") as arrangers (each, in such capacity, an "Arranger" and together, the "Arrangers"), Bank of America, N.A. ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), Lehman Commercial Paper, Inc. ("LCPI"), as syndication agent and documentation agent (in such capacity, the "Syndication Agent" and the "Documentation Agent"), and certain financial institutions named as Managing Agents (as amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as this "Agreement" or the "Credit Agreement"). WHEREAS, the Borrower has requested that the Lenders extend credit to it for working capital and general corporate purposes (including acquisitions, as permitted herein) of the Borrower and its Subsidiaries upon the terms and subject to conditions set forth herein; and WHEREAS, the Lenders are willing to extend such credit to the Borrower upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined TermsAs used in this Agreement, the following terms shall have the following meanings: "Acquired Business": a company or business unit acquired by the Borrower or any of its Subsidiaries, provided that the Borrower has delivered to the Administrative Agent historical financial statements of such company or business unit prepared in accordance with GAAP. "Acquired Company": Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. "Acquisition": the purchase of the Acquired Company by Borrower pursuant to the terms of the Acquisition Documents. "Acquisition Documents": the Asset Purchase Agreement among Honeywell Inc. (as seller), Borrower (as buyer), and Honeywell International Inc. (as guarantor), dated as of February 10, 2000, and all material agreements, instruments and other documents executed or delivered pursuant thereto or in connection with all exhibits, schedules and attachments thereto. "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1 and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). "Administrative Agent": BOA, or following the resignation of BOA as Administrative Agent, any other Lender which may be appointed as Administrative Agent pursuant to subsection 9.9. "Affected Class": as defined in subsection 10.1. "Affected Lender": as defined in subsection 10.7. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Documentation Agent and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender, an amount equal to the sum of the aggregate principal amount of all Loans made by such Lender then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Currency": as defined in subsection 10.16(b). "Applicable Creditor": as defined in subsection 10.16(b). "Applicable Holdback": as defined in subsection 2.6(b)(ii). "Applicable Margin": at any time, the percentages set forth on Schedule II under the relevant column heading opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Applicable Margins determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Debt Ratio captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. "Arranger": as defined in the recitals to this Agreement. 2 "Asset Sale": any sale, sale-leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except sales and dispositions permitted by subsection 7.6 other than subsection 7.6(b) or (e). "Assignee": as defined in subsection 10.6(c). "Attributable Debt": in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Available Commitment": as to any Lender, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment over (b) such Lender's Aggregate Outstanding Extensions of Credit. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "BOA": as defined in the recitals to this Agreement. "Borrower Pledge Agreement": the Second Amended and Restated Borrower Pledge Agreement substantially in the form of Exhibit B-4A, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to Eurodollar Loans, any day on which dealings are carried on in the applicable London interbank market. 3 "Capital Expenditures" for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the expenditures relating to the Transaction. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Partners": Lehman Brothers Capital Partners III, L.P. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (i) the Principals and their Related Parties, as a whole, shall at any time cease to own, directly or indirectly, 51% of the Voting Stock of Holdings (measured by voting power rather than number of shares), determined on a fully diluted basis, and any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than 4 the Principals and their Related Parties shall become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 25% of the Voting Stock of Holdings (measured by voting power rather than number of shares); (ii) a majority of the members of the Board of Directors of Holdings fail to be (a) members of the Board of Directors incumbent as of the Closing Date, or (b) members nominated by the members of the Board of Directors incumbent on the Closing Date, or (c) members appointed by members of the Board nominated under clause (a) or (b); (iii) Holdings shall, at any time, cease to own 100% of the Capital Stock of the Borrower; or (iv) a "Change of Control" shall have occurred under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture. "Charge Over Shares": the Amended and Restated Charge Over Shares substantially in the form of Exhibit B-4B, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Class": (i) Lenders having Loan Exposure (taken together as a single class), (ii) Facility A Lenders having Facility A Loan Exposure (taken together as a single class) and (iii) Facility B Lenders having Facility B Loan Exposure (taken together as a single class). "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 are satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Pledge Agreement. "Commitment" and "Commitments": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make Loans to the Borrower pursuant to Subsection 2.1(a)(i); and "Commitments" means such commitments of all Lenders in an aggregate amount not to exceed $300,000,000. "Commitment Fee Rate": at any time, the applicable rates per annum on Schedule II under the relevant column heading for the Revolving 364-Day Facility set forth opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Commitment Fee Rate determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Commitment Fee Rate shall be (i) for the first 35 days subsequent to such due date, the Commitment Fee Rate in effect prior to such due date 5 and (ii) thereafter, that set forth opposite a Debt Ratio captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. "Commitment Percentage": as to the Commitment of any Lender, the percentage which the Commitment of such Lender constitutes of the aggregate Commitments (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders). "Commitment Period": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, paid in cash, of the Borrower and its Subsidiaries for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Interest Expense": for any Person, as of the last day of any fiscal quarter, the amount of interest expense of such Person for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income": for any Person and for any fiscal period, net income of such Person, determined on a consolidated basis in accordance with GAAP. 6 "Consolidated Total Assets": at any date, all assets of the Borrower and its Subsidiaries as determined according to the consolidated balance sheet contained in the SEC filing most recently delivered pursuant to subsection 6.1 or, if no such SEC filing has yet been delivered, the balance sheet referred to in subsection 4.1(a)(ii). "Consolidated Total Debt": at any date, all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g). "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date over (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries on such date (excluding, to the extent it would otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement or other organizational documents of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees and the Pledge Agreements. "Credit Parties": the Borrower, Holdings, and each Subsidiary of the Borrower which is a party to a Credit Document. "Debt Ratio": as at the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt minus Designated Cash Balances on such date to (b) Consolidated EBITDA. "December 1998 Subordinated Debt Documents": the December 1998 Subordinated Notes, the December 1998 Subordinated Notes Indenture, the Underwriting Agreement related thereto among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "December 1998 Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the December 1998 Subordinated Notes were issued. 7 "December 1998 Subordinated Notes": the Borrower's Senior Subordinated Notes, due December 1, 2008 ("Initial December 1998 Subordinated Notes") issued on or about the December 8, 1998 and any notes, having the same terms as the Initial December 1998 Subordinated Notes, issued in exchange for the Initial December 1998 Subordinated Notes as contemplated by the documents governing the issuance of the Initial December 1998 Subordinated Notes. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Designated Cash Balances": at any time, the lesser of (a) actual unrestricted cash balances on hand of Borrower and its Subsidiaries which are not subject to any Liens in favor of any Person (other than those described in subsection 7.3(o) hereof) and (b) $50,000,000. "Dollars" and "$": dollars in lawful currency of the United States of America. "Dow Jones Page 3750": the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (Sections) 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. (Sections) 9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (Sections) 1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (Sections) 6901 et seq.; the Clean Water Act; 33 U.S.C. (Sections) 1251 et seq.; the Clean Air Act, 42 U.S.C. (Sections) 7401 et seq.; or other similar federal and/or state environmental laws. "Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Environmental Law. "Equity Documents": the Stockholders Agreement, the Subscription Agreements and the Option Agreements. 8 "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Eurodollar Business Day": means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": means, for any Interest Period, with respect to Eurodollar Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows: LIBOR Eurodollar Rate = -------------------------------------- 1.00 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage": for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income for the Borrower and its Subsidiaries, non-cash interest expense, depreciation and amortization for such fiscal year, (iv) extraordinary non-cash losses during such fiscal year subtracted in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (v) change in deferred tax liability of the Borrower for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary 9 losses less (b) the sum, without duplication, of (i) the aggregate amount of permitted cash Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of (x) Loans not accompanied by reductions of the Commitments hereunder, (y) Facility A Loans not accompanied by reductions of Facility A Commitments and/or (z) Facility B Loans not accompanied by reductions of Facility B Commitments), (iv) deferred income tax credit of the Borrower for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Exchange Act": the Securities Exchange Act of 1934, as amended. "Extending Lender": any Lender consenting to the Extension Option. "Extension Option": as defined in subsection 2.5(a). "Facility A Administrative Agent": the "Administrative Agent" as defined in the Facility A Credit Agreement. "Facility A Agents": the "Agents" as defined in the Facility A Credit Agreement. "Facility A Commitments": the "Commitments" as defined in the Facility A Credit Agreement. "Facility A Credit Agreement": that certain Second Amended and Restated Credit Agreement of even date herewith among the Borrower, the Facility A Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities LLC as arrangers and certain financial institutions named as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility A Credit Documents": the "Credit Documents" as defined in the Facility A Credit Agreement. "Facility A Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility A Credit Agreement. "Facility A L/C Obligations": the "L/C Obligations" as defined in the Facility A Credit Agreement. "Facility A Lenders": the "Lenders" as defined in the Facility A Credit Agreement. 10 "Facility A Loan Exposure": the "Loan Exposure" as defined in the Facility A Credit Agreement. "Facility A Loans": the "Loans" as defined in the Facility A Credit Agreement. "Facility A Notes": the "Notes" as defined in the Facility A Credit Agreement. "Facility A Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility A Credit Agreement. "Facility B Administrative Agent": the "Administrative Agent" as defined in the Facility B Credit Agreement. "Facility B Agents": the "Agents" as defined in the Facility B Credit Agreement. "Facility B Commitments": the "Commitments" as defined in the Facility B Credit Agreement. "Facility B Credit Agreement": that certain Amended and Restated 364 Day Credit Agreement of even date herewith among the Borrower, the Facility B Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities, LLC as arrangers and certain financial institutions named as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility B Credit Documents": the "Credit Documents" as defined in the Facility B Credit Agreement. "Facility B Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility B Credit Agreement. "Facility B L/C Obligations": the "L/C Obligations" as defined in the Facility B Credit Agreement. "Facility B Lenders": the "Lenders" as defined in the Facility B Credit Agreement. "Facility B Loan Exposure": the "Loan Exposure" as defined in the Facility B Credit Agreement. "Facility B Loans": the "Loans" as defined in the Facility B Credit Agreement. "Facility B Notes": the "Notes" as defined in the Facility B Credit Agreement. "Facility B Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility B Credit Agreement. "Federal Funds Effective Rate": for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the 11 FRB (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands. "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America in effect on the Closing Date. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument 12 embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": the Parent Guarantee and the Subsidiary Guarantee. "Immaterial Subsidiary": any Subsidiary of the Borrower having assets not exceeding five percent (5%) of the Consolidated Total Assets. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and all reimbursement and other obligations with respect to any letters of credit and surety bonds, whether or not matured or drawn, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person. "Indenture": the Indenture between the Borrower and The Bank of New York, as trustee, pursuant to which the Subordinated Notes are issued. "Initial 1997 Credit Agreement": the Credit Agreement, dated as of April 30, 1997 among the Borrower, the lenders party thereto from time to time, Lehman Brothers Inc. as arranger, LCPI as syndication agent and documentation agent and BOA as administrative agent. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any Eurodollar Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: 13 (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; (c) solely for the purpose of permitting the Borrower to repay the Loans owing to Nonconsenting Lenders on the Termination Date in connection with the exercise of an Extension Option, a period commencing on the last day of the preceding Interest Period, with respect to such Eurodollar Loan and ending on a Business Day which is seven (7) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and (d) solely for the purpose of permitting the Borrower and the Arrangers to complete syndication of the Commitments, a period commencing on the borrowing date, conversion date, or last day of the preceding Interest Period, as the case may be, with respect to such Eurodollar Loan and ending on a Business Day which is seven (7) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current borrowing date, conversion date or Interest Period with respect thereto; provided, that such Interest Period option shall terminate and cease to be available to Borrower on the Syndication Completion Date; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period for any Loan that would otherwise extend beyond the applicable Termination Date shall end on the applicable Termination Date; and (iii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise 14 be scheduled to end) shall end on the last Business Day of the appropriate calendar month. "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Judgment Currency": as defined in subsection 10.16 (b). "LBI": as defined in the recitals to this Agreement. "LCPI": as defined in the recitals to this Agreement. "Lender" and "Lenders": the persons identified as Lenders and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.6; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "LIBOR": as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on the Dow Jones Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Account": as defined in subsection 2.5(g). 15 "Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Loans, that Lender's Commitment, and (ii) otherwise, the sum of the aggregate outstanding principal amount of the Loans of that Lender. "Managing Agents": those Lenders which, from time to time, are designated in writing by the Administrative Agent and the Syndication Agent as "Managing Agents" under this Agreement. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole, (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder or (c) solely for purposes of the representations and warranties of Borrower made on the Closing Date, the Acquisition. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by Holdings or any of its Subsidiaries in respect of: (a) any issuance by Holdings or any of its Subsidiaries of Indebtedness after the Closing Date; (b) any issuance by Holdings or any of its Subsidiaries of any Capital Stock after the Closing Date; (c) any Asset Sale; and (d) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to Holdings or such Subsidiary in respect of an Asset Sale; in each case net of (without duplication) (i), (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings or a Subsidiary of Holdings that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by Holdings or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by Holdings or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, 16 accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by Holdings or such Subsidiary to be actually payable. "New Investment Sublimit" shall mean, as of any date of determination thereof, an amount equal to (a) $650,000,000 plus (b) (i) Net Proceeds derived from Asset Sales during the immediately preceding twelve (12) month period and (ii) Net Proceeds from any Asset Sale that were reinvested within the twelve (12) month period following such Asset Sale for the purposes permitted in subsection 7.9(k) to the extent not included in subclause (i) of this clause (b) plus (c) net cash proceeds derived from the issuance of any equity securities of Holdings which are contributed to the Borrower as additional equity capital minus the amount of any Capital Expenditures funded in any fiscal year of the Borrower and its Subsidiaries which exceeds the amounts permitted during such fiscal year pursuant to subsection 7.8 hereof (without giving effect to the second proviso thereto referring to subsection 7.9(k)). "New Lender": as defined in subsection 2.1(a)(i). "New Subordinated Debt Documents": the New Subordinated Notes, the New Subordinated Notes Indenture, the Underwriting Agreement dated as of May 18, 1998 among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "New Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the New Subordinated Notes were issued. "New Subordinated Notes": the Borrower's 8 1/2% Senior Subordinated Notes, due 2008 ("Initial New Subordinated Notes") issued on or about May 22, 1998 and any notes, having the same terms as the Initial New Subordinated Notes, issued in exchange for the Initial New Subordinated Notes as contemplated by the documents governing the issuance of the Initial New Subordinated Notes. "Non-Excluded Taxes": as defined in subsection 2.15. "Non-U.S. Lender": as defined in subsection 2.15(b). "Nonconsenting Lenders": as defined in subsection 2.17. "Notes": (i) the promissory notes of the Borrower issued pursuant to subsection 2.5(i) of this Agreement on or after the Closing Date to evidence the Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Commitments and Loans of any Lenders, in each case 17 substantially in the form of Exhibit A-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Obligations": as defined in the Guarantees and the Pledge Agreements. "Option Agreements": the Option Agreements between Holdings and each of Frank C. Lanza and Robert V. LaPenta, each dated as of April 30, 1997. "Original Agents": the "Agents" under and as defined in the Original Credit Agreement. "Original Closing Date": August 13, 1998. "Original Credit Agreement": as defined in the preamble to the Facility B Credit Agreement. "Original Lenders": as defined in the preamble to this Agreement. "Parent Distributions": as defined in the Parent Guarantee. "Parent Guarantee": the Second Amended and Restated Parent Guarantee substantially in the form of Exhibit B-1, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Parent Pledge Agreement": the Second Amended and Restated Parent Pledge Agreement substantially in the form of Exhibit B-3, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Participant": as defined in subsection 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Permitted Liens": Liens permitted to exist under subsection 7.3. "Permitted Stock Payments": (A) dividends by the Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by the Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing; provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings, and (C) from and after May 1, 1999, dividends by the Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) 18 the aggregate amount of dividends paid by the Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity may incur any liability. "Pledge Agreements": the collective reference to the Parent Pledge Agreement, the Borrower Pledge Agreement, the Charge Over Shares, the Subsidiary Pledge Agreement, and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Principals": each of Lehman Brothers Holdings, Inc., Capital Partners, the Seller, Frank C. Lanza and Robert V. LaPenta. "Properties": as defined in subsection 4.16. "Purchase Agreement": the Purchase Agreement, dated as of April 25, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Register": as defined in subsection 10.6(d). "Registration Rights Agreement": the Registration Rights Agreement, dated as of April 30, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Related Party": with respect to the Principals, (a) any controlling stockholder, 51% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (b) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 51% or more controlling interest of which consist of the Principals and/or such other Persons referred to in the immediately preceding clause (a). "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. 19 "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Lenders": at any time, Lenders the Loan Exposure for all Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class of Lenders having Loan Exposure, Lenders having or holding 66 2/3% of the aggregate Loan Exposure of all Lenders, (b) for the Class of Facility A Lenders having Facility A Loan Exposure, Facility A Lenders having or holding 66 2/3% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) for the Class of Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding 66 2/3% of the aggregate Facility B Loan Exposure of all Facility B Lenders. "Responsible Officer": the chief executive officer, the president or vice president of the Borrower or, with respect to financial matters, the chief financial officer, vice president-finance or treasurer of the Borrower. "Restricted Government Contracts": as defined in the Pledge Agreements. "SPD Technologies": SPD Technologies Inc., a Delaware corporation. "SPD Technologies Acquisition Agreement": the Agreement and Plan of Merger, dated as of July 2, 1998, among L-3 Communications Corporation, SPD Merger Co., SPD Technologies, Inc. and Midmark Capital L.P. "SEC": the Securities and Exchange Commission. "Securities Act": Securities Act of 1933, as amended. "Seller": Lockheed Martin Corporation, a Maryland corporation. "Similar Business": a business, at least a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto or any business of the Borrower and/or its Subsidiaries existing as of the Closing Date, and (iv) any combination of any of the foregoing. 20 "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, (d) such Person will be able to pay its debts as they mature, and (e) such Person is not insolvent within the meaning of any applicable Requirements of Law. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Stockholders Agreement": the Stockholders Agreement, dated as of April 30, 1997, by and among the Borrower, Holdings, the Seller, the Principals and any other party that may from time to time become a party thereto as provided therein, as the same may be amended, supplemented or otherwise modified from time to time. "Subordinated Debt": indebtedness outstanding under the Subordinated Notes, the New Subordinated Notes and/or the December 1998 Subordinated Notes. "Subordinated Debt Documents": the Indenture, the Registration Rights Agreement, the Purchase Agreement and the Subordinated Notes. "Subordinated Notes": the Borrower's 10 3/8 % Senior Subordinated Notes, due 2007 (the "Initial Subordinated Notes"), issued on April 30, 1997, and any subordinated notes of the Borrower, having the same terms as the Initial Subordinated Notes, issued in exchange for the Initial Subordinated Notes as contemplated by the Subordinated Debt Documents. "Subscription Agreements": the Common Stock Subscription Agreements between Holdings and each of Frank C. Lanza, Robert V. LaPenta, Capital Partners and the Seller, each dated as of April 30, 1997. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the 21 happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantee": the Second Amended and Restated Subsidiary Guarantee substantially in the form of Exhibit B-2, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Subsidiary Pledge Agreement": the Second Amended and Restated Subsidiary Pledge Agreement substantially in the form of Exhibit B-5, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Swing Line Lender": as defined in the Facility A Credit Agreement. "Syndication Completion Date": shall mean the earlier to occur of (i) the date on which syndication of the Commitments has occurred to the mutual satisfaction of the Arrangers and the Borrower and (ii) 180 days from the Closing Date. "Termination Date": April 27, 2001, as the same may be extended in accordance with subsection 2.5(a) hereof. "Tranche": the collective reference to Eurodollar Loans with then-current Interest Periods which all begin on the same date and end on the same date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches". "Transaction": the transactions contemplated by the Transaction Documents. "Transaction Agreement": that certain Transaction Agreement, dated as of March 28, 1997 by and among Lockheed Martin Corporation, a Maryland corporation, Holdings, Capital Partners and its Affiliates, Frank C. Lanza and Robert V. LaPenta. "Transaction Documents": (i) the Transaction Agreement, the Schedules thereto and related documentation, (ii) the Equity Documents, (iii) the Subordinated Debt Documents and (iv) the New Subordinated Debt Documents. "Transferee": as defined in subsection 10.6(f). "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. 22 "Voting Stock": of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Year 2000 Problem": any significant risk that computer hardware, software or equipment containing embedded microchips essential to the business or operations of the Borrower or any of its Subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively and reliably as in the case of dates or time periods occurring before January 1, 2000, including the making of accurate leap year calculations. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make the loans described in this subsection 2.1(a) as applicable to the Borrower. (i) Loans. Each Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Commitment Period, in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender's Commitment. During the Commitment Period, the Borrower may use the Commitments by borrowing, prepaying the Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. 23 (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that, except as contemplated in clause (c) of the definition of Interest Period, no Loan shall be made as a Eurodollar Loan after the day that is one month prior to the applicable Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans, (b) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Base Rate Loan), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts below such minimum amounts in clauses (x) or (y) above solely for the purpose of (i) repaying Loans owing to any Nonconsenting Lenders on the Termination Date and (ii) permitting the addition of any New Lender or increasing the Commitment of any existing Lender pursuant to subsection 2.1(a)(i). Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of Eurodollar Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in accordance with the Borrower's payment instructions with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the first day of the Commitment Period to and including the Termination Date, computed at the Commitment Fee Rate on the daily amount of the Available Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to 24 terminate the Commitments or, from time to time, to reduce the amount of the Commitments ratably among the Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the aggregate principal amount of the Loans then outstanding, would exceed the Commitments then in effect. Any such reduction shall be in an amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Commitments then in effect. 2.5 Extension of Termination Date; Repayment of Loans; Evidence of Debt. (a) Extension of Termination Date. The Borrower may elect to forward to the Administrative Agent (for distribution to each Lender) no earlier than sixty (60) but no later than fifty-five (55) days prior to the initially scheduled Termination Date a written request asking each Lender to consent to the extension of the Termination Date for one (1) additional 364 day period. Not later than 30 days after receipt of such written request, each Lender shall advise the Administrative Agent and the Borrower in writing whether such Lender consents to the proposed extension if all the conditions, including those set forth in subsection 5.2 of this Agreement, thereto have been satisfied. If all of the Lenders have consented in writing to such extension and all conditions set forth in subsection 5.2 shall have been satisfied, then effective on the initially scheduled Termination Date, the Termination Date shall be deemed automatically extended by an additional 364 day period (herein, the "Extension Option"). If less than all of the Lenders consent to the exercise of the proposed Extension Option (the "Extending Lenders"), the Borrower may replace all, some or none of such Nonconsenting Lenders on or before the initially scheduled Termination Date pursuant to subsection 2.17 and repay all outstanding Loans owing to each Nonconsenting Lender that is not being replaced, if any, on the initially scheduled Termination Date (without giving effect to the Extension Option); provided that if the Extending Lenders do not hold more than 50% of the outstanding Commitments, the Borrower will not be entitled to exercise the Extension Option with respect to any Extending Lenders nor shall any Lender failing to consent to the Extension Option be deemed a Nonconsenting Lender and be subject to replacement under subsection 2.17 as a result thereof. Subject to the foregoing proviso, if the Borrower desires to exercise the Extension Option with the Extending Lenders, Borrower shall provide the Administrative Agent (for distribution to each Lender) with not less than five (5) days prior written notice thereof in addition to satisfying all conditions precedent set forth above (other than the requirement that all Lenders have timely consented to the Extension Option). On the date the Extension Option becomes effective, Schedule I hereto shall be deemed amended to accurately reflect the Commitments of the Lenders then in existence and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (b) [Intentionally Omitted]. 25 (c) Replacement of Nonconsenting Lenders. If any Lender declines to consent or fails to timely indicate its consent to the exercise by Borrower of the Extension Option and the Extending Lenders hold more than 50% of the Commitments, such Lender shall be deemed a Nonconsenting Lender and be subject to replacement in accordance with the terms of subsection 2.17 hereof. (d) Payments on Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) for the account of each Lender the then unpaid principal amount of each Loan of such Lender. (e) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. (f) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (g) Loan Accounts and Register; Notes. (i) The Loans made by, and the Commitments of, each Lender shall be evidenced by one or more loan accounts ("Loan Accounts") maintained by such Lender and by the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's books relating to such matters, be controlling and, absent manifest error, shall be conclusive as to the amount of the Loans made by the Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this subsection 2.5(g) and subsection 10.6, to maintain the Register on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this subsection 2.5(g) and subsection 10.6 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent). (ii) If requested by any Lender, the Borrower shall execute and deliver to such Lender (and deliver a copy thereof to the Administrative Agent) one or more promissory 26 notes evidencing the Loans owing to such Lender pursuant to this Agreement in accordance with subsection 2.5(i). (h) Prima Facie Evidence. The entries made in the Register and the Loan Accounts of each Lender maintained pursuant to subsection 2.5(g) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such Loan Account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. For the avoidance of doubt, the existence or non-existence of any Note representing any Obligations owing to any Lender hereunder shall not affect the existence, amount, validity or enforceability of such Obligations, which in all events shall be absolute and unconditional. (i) Notes. The Borrower agrees that the Borrower will execute and deliver to each Lender that requests any such Note pursuant to subsection 2.5(g)(ii), a promissory note of the Borrower evidencing the Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Note"). 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsections 2.12 and 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment in the case of Eurodollar Loans or on any Business Day in the case of Base Rate Loans, specifying the date and amount of prepayment of the Loans (which Loans shall be prepaid on a pro rata basis among the applicable Lenders) and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $100,000 in excess thereof. (b) (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility B Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility B Commitments as set forth in clause (iv) of 27 this subsection 2.6(b). Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale, such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility B Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility B Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) If, subsequent to the Closing Date, any Capital Stock shall be issued by Holdings, the Borrower or any of its Subsidiaries, an amount equal to 50% of the Net Proceeds thereof shall be promptly ratably applied on the date of such issuance toward the prepayment of the Loans, and permanent reduction of the Commitments, as set forth in clause (iv) of this subsection 2.6(b). Nothing in this paragraph (b) shall be deemed to permit any issuance of Capital Stock not permitted by subsection 7.6. (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Facility A Loans, Facility B Loans and Loans, with a corresponding ratable permanent reduction of the Facility A Commitments, the Facility B Commitments and the Commitments. Commitment, Facility A Commitment and Facility B Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) (and the corresponding subsections of the Facility A Credit Agreement and the Facility B Credit Agreement) hereof shall be applied to each Lender's respective Commitment, each Facility A Lender's Facility A Commitment and/or each 28 Facility B Lender's Facility B Commitment, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility A Commitments and Facility B Commitments. In addition, except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(iii) shall be applied ratably to the outstanding principal amount of Loans, with a corresponding permanent reduction of the Commitments. The Commitment reductions made pursuant to subsection 2.6(b)(iii) hereof shall be applied to each Lender's respective Commitment and shall reduce permanently such Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility A Credit Agreement and the Facility B Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. (v) If after giving effect to any reduction of the Commitments under subsection 2.4, 2.5 or 2.6, the aggregate outstanding principal amount of Loans shall exceed the aggregate amount of the Commitments, such reduction or recalculation shall be accompanied by prepayment in the amount of such excess to be applied to the Loans. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount to be converted, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount to be converted. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is then continuing and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date with respect to such Loan. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount to be converted, provided that no Eurodollar Loan may be continued as such (i) when 29 any Event of Default has occurred and is then continuing or (ii) after the date that is one month prior to the Termination Date with respect to such Loan and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts in any Eurodollar Tranche below such minimum amounts solely for the purpose of (i) repaying Loans owing to any Nonconsenting Lenders on the Termination Date or (ii) permitting the addition of any New Lender or any increasing the Commitment of any existing Lender pursuant to subsection 2.1(a)(i). All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate borrowings set forth in subsection 2.2 above. In no event shall the number of outstanding Eurodollar Tranches under this Agreement plus the number of outstanding Facility A Eurodollar Tranches and Facility B Eurodollar Tranches exceed 20 at any time. 2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). 30 (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date with respect to such Loan, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed 31 by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Commitments of Lenders shall be made pro rata according to the respective Commitment Percentages of the Lenders. Except during any period in which an Event of Default has occurred and is continuing, each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds. At any time that an Event of Default has occurred and is continuing, all payments (including prepayments) made by Borrower hereunder and any application by the Administrative Agent of the proceeds of any Collateral and/or payment under any Guarantee shall be applied in the following order: (1) to the ratable payment of all amounts due and owing by the Borrower pursuant to subsection 10.5 of this Agreement, subsection 10.5 of the Facility A Credit Agreement or subsection 10.5 or the Facility B Credit Agreement to the Agents, the Facility A Agents and/or the Facility B Agents and, after payment in full thereof, to any other Lender, Facility A Lender or Facility B Lender; (2) to the ratable payment of all interest, fees and commissions due and owing under this Agreement, the Facility A Credit Agreement or the Facility B Credit Agreement or to the Agents, the Facility B Agents, the Facility A Agents, the Swing Line Lender, any Lender, any Facility A Lender or any Facility B Lender; (3) to the ratable payment (or cash collateralization) of the aggregate outstanding principal amount of Loans, Facility A Loans and Facility B Loans and the aggregate Facility A L/C Obligations and Facility B L/C Obligations; and (4) to the ratable payment of all other obligations of the Borrower to the Agents, the Facility A Agents, the Facility B Agents, the Swing Line Lender, any Lender, any Facility A Lender or any Facility B Lender under any Credit Document, Facility A Credit Document or Facility B Credit Document. The Administrative Agent, the Facility A Administrative Agent and the Facility B Administrative Agent shall ratably distribute such payments to the applicable Lenders, the Facility A Lenders and the Facility B Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with 32 respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be reinstated. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any 33 request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different Eurodollar lending office if the making of such designation would allow the Lender or its Eurodollar lending office to continue to perform its obligations to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all Eurodollar Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental 34 Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15 Taxes. (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between any Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such 35 Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership created or organized in or under the laws of the United States of America, any estate that is subject to U.S. federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 ECI (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents) or Form W-8 BEN (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding 36 of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Borrower described in clause (B) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 2.15(b)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 ECI or W-8 BEN, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any U.S. Taxes from any payments made pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this subsection 2.15(b). The Borrower hereby agrees that for so long as a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 2.15(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed 37 that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to subsection 2.15(a)). If any Credit Party other than the Borrower makes any payment to any Non-U.S. Lender under any Credit Document, the foregoing provisions of this subsection 2.15 shall apply to such Non-U.S. Lender and such Credit Party as if such Credit Party were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Lender has received a request to do so from such Credit Party and has a reasonable time to comply with such request). (c) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of a Non-Excluded Tax paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the preceding sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section has been paid in full. 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this subsection 2.16 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, convert or continue Eurodollar Loans, or to prepay, after notice or after a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 38 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsections 2.13, 2.14 or 2.15 as a result of any condition described in such subsections, (b) any Lender ceases to make Eurodollar Loans pursuant to subsection 2.13, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on five (5) Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under one of the subsections described in clause (a) above, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under one of the subsections described in clause (a) above, as the case may be, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to this subsection 2.17, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto or consent to the Extension Option, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 or relates to a request to exercise the Extension Option under subsection 2.5(a) and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 2.18 Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees at the times and in the amounts as set forth in that certain fee letter between the Administrative Agent and the Borrower dated on or about March 1, 2000 2.19 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall reasonably afford the Borrower the opportunity to 39 contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes or other amounts giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Eurodollar Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. SECTION 3. [INTENTIONALLY OMITTED] SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Agents and each Lender that: 4.1 Financial Condition. (a) The following financial statements concerning Borrower and its Subsidiaries have been delivered to the Agents and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended: (i) The audited consolidated balance sheets at December 31, 1998 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers L.L.P. (ii) The unaudited condensed consolidated balance sheet(s) at September 30, 1999 and the related statement(s) of income and cash flows of Borrower and its Subsidiaries for the fiscal quarter then ended. 40 (b) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries which has been delivered pursuant to subsection 5.1(o) has been prepared based on the best information available to the Borrower as of the date of delivery thereof and presents fairly on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries, as at December 31, 1999, adjusted to give effect to the acquisition by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc. and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. 4.2 No Change. Since September 30, 1999 there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is, or will be on or before the date set forth in subsection 6.12, duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each of Holdings, the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party, except those referred to in subsections 4.17 and 6.13 and those set forth on Schedule 4.4. This Agreement has been, and each other Credit Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 41 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Pledge Agreements. 4.6 No Material Litigation. Except as set forth on Schedule 4.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Credit Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental 42 Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA. The Borrower has provided to the Agents a true and correct copy of all agreements, arrangements and understandings relating to the transfer of Plans from the Seller to the Borrower (the "Transfer Agreements"). The Transfer Agreements are in full force and effect and have not been waived or modified without the consent of the Agents (which shall not be unreasonably withheld) except to the extent any such waiver or modification, singly or in the aggregate, could not be reasonably expected to have a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination or, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. As of the last annual valuation date prior to the date on which this representation is made or deemed made, the fair market value of the assets available for benefits under each Single Employer Plan did not exceed the actuarial present value of all accumulated benefit obligations under such Plan by more than $20,000,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. 43 4.13 Investment Company Act; Other Regulations. None of the Borrower or any of its Subsidiaries is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. None of the Borrower or any of its subsidiaries is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 4.14 Subsidiaries. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 4.14. 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) to pay the cash portion of the purchase price for the Acquired Company pursuant to the Acquisition Documents, (ii) to pay fees and expenses related to the preparation and negotiation of the Acquisition Documents, this Agreement and the other Credit Documents and (iii) for general corporate and working capital purposes in the ordinary course of business of the Borrower and its Subsidiaries, including, without limitation, the making of Investments permitted under subsection 7.9. 4.16 Environmental Matters. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated Holdings, by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any 44 Environmental Law to which Holdings, the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Holdings, the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. 4.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, each Pledge Agreement will be effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the pledged stock described therein and, when stock certificates representing or constituting the pledged stock described therein are delivered to the Administrative Agent, together with undated stock powers executed in blank therefor, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock described therein. 4.18 Accuracy and Completeness of Information. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to subsections 4.1 and 6.1 hereto. 4.19 Labor Matters. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 45 The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. 4.20 Acquisition. The Acquisition Documents listed on Schedule 4.20 attached hereto constitute all of the material agreements, instruments and undertakings to which Holdings, the Borrower or any of its Subsidiaries is bound or by which such Person or any of its property or assets is bound or affected relating to, or arising out of, the Acquisition (including, without limitation, any agreements, instruments or undertakings assumed pursuant to the Acquisition Documents). None of such material agreements, instruments or undertakings have been amended, supplemented or otherwise modified, and all such material agreements, instruments and undertakings are in full force and effect. As of the Closing Date, the Borrower is not in default under any of the Acquisition Documents and, to the best of Borrower's knowledge, no other party to any Acquisition Document is in default thereunder. Upon the funding of the initial Loan under this Agreement on the Closing Date, the Acquisition shall have been consummated in accordance with the material terms of the Acquisition Documents. As of the Closing Date, the representations and warranties of the Borrower contained in the Acquisition Documents are true and correct in all material respects. 4.21 Solvency. Each Credit Party is, and after giving effect to the Acquisition and the incurrence of all Indebtedness and obligations being incurred in connection with the Credit Documents and the Acquisition will be and will continue to be, Solvent. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Initial Loans. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such extension of credit (including the making of any Loan) on the Closing Date, of the following conditions precedent: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, (ii) the Guarantees and (iii) the Pledge Agreements, in each case executed, duly acknowledged and delivered by duly authorized officers of each party thereto, with a counterpart or a conformed copy for each Lender. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the capital stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. 46 (b) Fees and Expenses. The Agents, the Arrangers and the Lenders shall have received all fees, expenses and other consideration required to be paid on or before the Closing Date and all attorneys fees and disbursements incurred by the Agents in connection with this Agreement shall have been paid on or before the Closing Date. (c) Good Standing Certificates. The Administrative Agent shall have received certificates of good standing for each Credit Party issued by the Secretary of State (or other relevant governmental officers) of the jurisdiction of incorporation of each Credit Party. (d) Consents, Authorizations and Filings, Etc. All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Credit Parties, and the validity and enforceability against the Credit Parties, of the Credit Documents to which any of them is a party, shall have been obtained or made, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, the failure to obtain which would not have a Material Adverse Effect. In addition, all governmental, shareholder and third party consents, authorizations, approvals and filings, if any, necessary or, in the reasonable discretion of the Agents, advisable in connection with the Acquisition, the continuing operations of Holdings, the Borrower and its Subsidiaries and the transactions contemplated hereby and by the Acquisition Documents shall have been obtained and be in full force and effect, and all applicable waiting periods (including any under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended), if any, shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose materially adverse conditions on the Acquisition or the financing contemplated hereby. (e) Insurance. The Lenders shall have received (i) a reasonably satisfactory schedule describing all insurance maintained by the Borrower and its Subsidiaries pursuant to subsection 6.5, and (ii) binders (or other customary evidence as to the obtaining and maintenance by the Borrower and its Subsidiaries of such insurance) for each policy set forth on such schedule insuring against casualty and other usual and customary risks. (f) Litigation. On the Closing Date, there shall not exist actions, suits or proceedings pending or threatened against any Credit Party or any order, decree, judgment, ruling or injunction (a) with respect to this Agreement or any other Credit Document or any Acquisition Document or the transactions contemplated hereby or thereby, (b) which the Agents or the Required Lenders shall determine could reasonably be expected to have a Material Adverse Effect or (c) which restrains the consummation of the Acquisition in the manner contemplated by the Acquisition Documents. 47 (g) Borrowing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (h) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Credit Documents and Acquisition Documents to which it is a party, (ii) the borrowings contemplated hereunder, and (iii) the stock pledges pursuant to the Borrower Pledge Agreement, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Credit Document or Acquisition Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (j) Corporate Proceedings of Other Credit Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party (other than the Borrower) authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, and (ii) the granting by it of the Liens created pursuant to the Pledge Agreements to which it is a party, certified by the Secretary or an Assistant Secretary of each such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (k) Credit Party Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Credit Party (other than the Borrower), dated the Closing Date, as to the incumbency and signature of the officers of such Credit Party executing any Credit Document, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Credit Party. 48 (l) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the such Credit Party. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender the executed legal opinion of each of Simpson Thacher and Bartlett, special counsel to the Credit Parties, and Christopher C. Cambria, Vice President - General Counsel and Secretary of the Borrower and counsel to the other Credit Parties, substantially in the form of Exhibits C-1 and C-2, respectively. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. (n) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. The Administrative Agent shall have also received any other documents reasonably requested by and in form and substance satisfactory to the Administrative Agent evidencing that the Administrative Agent (on behalf of the Lenders) holds, on a ratable basis with the Facility A Administrative Agent and the Facility B Administrative Agent, a perfected, first priority Lien in all of the Collateral, subject only to Permitted Liens. (o) Pro Forma Financials. The Lenders shall have received a reasonably satisfactory unaudited pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1999 which shall present fairly, in all material respects, on a pro forma basis, the estimated financial condition of the Borrower and its Subsidiaries as of such date, as adjusted to give effect to the acquisition by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc. and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. (p) Projections. Each Lender shall have received financial projections of the Borrower in form and substance reasonably satisfactory to the Agents prepared by the Borrower. (q) No Default. No Default or Event of Default shall have occurred and be continuing. (r) Facility A Credit Agreement. All conditions set forth in clauses (a) through (q) of subsection 5.1 of the Facility A Credit Agreement shall have been satisfied or waived in writing by the Facility A Lenders required to affect a waiver of such condition. 49 (s) Facility B Credit Agreement. All conditions set forth in clauses (a) through (q) of subsection 5.1 of the Facility B Credit Agreement shall have been satisfied or waived in writing by the Facility B Lenders required to affect a waiver of such condition. (t) Acquisition; Closing Certificate. Each of the Acquisition Documents shall have been executed and delivered by each of the parties thereto and shall be in form and substance reasonably satisfactory to the Agents, and concurrent with the funding of the initial Loans under this Agreement, the Acquisition shall be consummated in accordance with the material terms and conditions of the Acquisition Documents. The Agents shall have received a certificate of a Responsible Officer, in form and substance acceptable to the Agents confirming that (i) other than the payment of the purchase price with the proceeds of Loans, all conditions precedent to the consummation of the Acquisition in accordance with the material terms of the Acquisition Documents have been met, (ii) except as expressly disclosed in the Acquisition Documents, no liabilities (actual or contingent) shall be assumed or incurred by Holdings, Borrower or its Subsidiaries which are reasonably likely to result in a Material Adverse Effect and (iii) all conditions precedent set forth in this Section 5.1 have been met. (u) Financial and Other Information. The Agents shall have received and reviewed, with results satisfactory to the Agents, all diligence information requested with respect to the Acquired Company and its subsidiaries, if any, with respect to any actual or contingent liabilities to be assumed by Borrower in connection with the Acquisition. The Agents shall have also received and found to be reasonably satisfactory (i) the Confidential Offering Memorandum (including the related financial summary) concerning the Acquired Company which was prepared by Honeywell Inc. and (ii) any financial information concerning the Acquired Company received by Borrower prior to the Closing Date from Honeywell Inc. and/or its affiliates or agents. (v) Solvency Certificate. The Agents shall have received a solvency certificate in form and substance reasonably satisfactory to the Agents as to the financial condition and solvency of Holdings and its Subsidiaries (on a consolidated basis) after giving effect to the Acquisition and the incurrence of Indebtedness related to such Acquisition. (w) No Change. On the Closing Date, there shall not have occurred any material adverse change since September 30, 1999 in the business, assets, liabilities operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole and/or the Acquired Company and its subsidiaries taken as a whole. 50 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be provided by it on any date (including, without limitation, its initial Loan) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for any representation and warranty which is expressly made as of an earlier date, which representation and warranty shall have been true and correct in all material respects as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur or exist after giving effect to the extensions of credit requested to be made on such date. Borrower shall not be in violation of Section 4.09 {Incurrence of Indebtedness and Issuance of Preferred Stock} of any of the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture on such date nor will such a violation occur or exist after giving effect to the extensions of credit requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agents, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 SEC Filings. The Borrower will file on a timely basis with the SEC, to the extent such filings are accepted by the SEC and whether or not the Borrower has a class of securities registered under the Exchange Act, the annual reports, quarterly reports (including with respect to the fourth quarter of each fiscal year) and other documents that the Borrower would be required to file if the Borrower were subject to section 13(a) or 15(d) of the Exchange Act. The Borrower will also be required (i) to deliver to the Administrative Agent and each Lender, copies of such reports and documents within five days after the date on which the Borrower files such 51 reports and documents with the SEC or the date on which the Borrower would be required to file such reports and documents if the Borrower were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to promptly notify the Administrative Agent in writing of the occurrence of any such event and to supply at the Borrower's cost copies of such reports and documents to the Administrative Agent and any Lender upon request. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent with copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of the independent certified public accountants reporting on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto) and (ii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1, a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) the Debt Ratio and (ii) the financial covenants set forth in subsection 7.1, as of such last day or for the fiscal period then ended, as the case may be; (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or Holdings sends to its stockholders; and 52 (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law. Except as permitted by subsection 7.5 and subsection 7.6, (a) continue to engage in business of the same general type as now conducted by it; (b) preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (c) keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear and damage by fire and/or other casualty or taking by condemnation excepted) except if (i) in the reasonable business judgment of the Borrower or such Subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges or franchises, and (ii) such failure to preserve and maintain such privileges, rights or franchises would not materially adversely affect the rights of the Lenders hereunder or the value of the Collateral, and except as otherwise permitted pursuant to subsection 7.5; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 Insurance. The Borrower will, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies of similar stature engaged in the same or similar businesses operating in the same or similar locations. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records (except to the extent any such access is restricted by a Requirement of Law) at any reasonable time on a Business Day and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: 53 (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $7,500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the following events, as soon as possible and in any event within 45 days after the Borrower knows or has reason to know thereof: (i) the incurrence of an accumulated funding deficiency or the filing of an application to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan, the creation of any Lien in favor of the PBGC or a Plan, the occurrence of any "Trigger Event" (as defined in the Transfer Agreements) and the reassumption by the Seller of sponsorship of any Single Employer Plan, (ii) except where such event or liability could not reasonably be expected to have a Material Adverse Effect, the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure to make any required contribution to a Plan, (iii) the institution of proceedings by the PBGC with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan or (iv) except as could not reasonably be expected to have a Material Adverse Effect, the institution of proceedings or the taking of any other action with respect to the withdrawal from or termination of any Single Employer Plan; Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 6.8 Environmental Laws. (a) (i) Comply in all material respects with all Environmental Laws applicable to it, and obtain, comply in all material respects with and maintain any and all material Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all material respects with all applicable Environmental Laws, and obtain, comply in all material respects with and maintain any and all material Environmental Permits, 54 applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or suspected noncompliance, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve material compliance. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed and delivered any and all documents which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.10 Additional Collateral. (a) With respect to any Capital Stock of any newly created or acquired Subsidiary or any newly issued Capital Stock of any existing Subsidiary acquired after the Original Closing Date by the Borrower or any of its Subsidiaries that is intended to be subject to the Lien created by any of the Pledge Agreements but which is not so subject, promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Pledge Agreements or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such Capital Stock, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including delivering all such original certificates evidencing such Capital Stock to the Administrative Agent together with undated stock powers executed in blank therefor, and (iii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be required to grant to the Administrative Agent a Lien upon the Capital Stock of any Immaterial Subsidiary. (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the 55 Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. 6.11 [Intentionally Omitted.] 6.12 Foreign Jurisdictions. Maintain due qualification as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.13 Government Contracts. The Borrower and its Subsidiaries shall apply for and maintain all material facility security clearances and personnel security clearances required of the Borrower under all Requirements of Law to perform and deliver under any and all Government Contracts and as otherwise may be necessary to continue to perform the business of the Borrower and its Subsidiaries. 6.14 Lien Searches. Not later than 45 days following the Closing Date, the Borrower shall deliver to the Administrative Agent the results of a search of Uniform Commercial Code, tax and judgment filings made with respect to each of the Borrower and its Subsidiaries (other than any Immaterial Subsidiaries) in each jurisdiction in which the Borrower or such applicable Subsidiary maintains its principal place of business or any material assets and a certificate of a Responsible Officer certifying that such lien search results do not disclose any Liens, except for Liens permitted hereunder. SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1), shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the fiscal quarter during which such fiscal quarter occurs: 56 Fiscal Quarter Ending Ratio --------------------- ----- December 31, 1999 4.75 March 31, 2000 4.75 June 30, 2000 4.75 September 30, 2000 4.50 December 31, 2000 4.50 March 31, 2001 4.50 June 30, 2001 4.50 September 30, 2001 3.75 December 31, 2001 3.75 March 31, 2002 3.75 June 30, 2002 3.75 September 30, 2002 3.25 and thereafter (b) Interest Coverage. Permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense during any Test Period to be less than the ratio set forth opposite such period below (such ratio, the "Interest Coverage Ratio"): Test Period Interest Coverage Ratio ----------- ----------------------- 10/1/99 - 12/31/99 2.25 1/1/00 - 3/31/00 2.25 4/1/00 - 6/30/00 2.25 7/1/00 - 9/30/00 2.50 10/1/00 - 12/31/00 2.50 1/1/01 - 3/31/01 2.50 4/1/01 - 6/30/01 2.50 7/1/01 - 9/30/01 2.75 10/1/01 - 12/31/01 2.75 1/1/02 - 3/31/02 2.75 4/1/02 - 6/30/02 2.75 7/1/02 - 9/30/02 3.00 10/1/02 - and thereafter 3.00 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (including in respect of Interest Rate Agreements), except: (a) Indebtedness of the Borrower under this Agreement, the Facility A Credit Agreement and the Facility B Credit Agreement; 57 (b) Indebtedness of the Borrower incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $25,000,000 at any time outstanding; (c) Indebtedness assumed in connection with any Investment permitted pursuant to subsection 7.9(k) hereof. (d) additional Indebtedness of the Borrower not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); (e) Indebtedness of the Borrower in respect of not more than (i) $225,000,000 principal amount of Subordinated Notes issued on the April 30, 1997 (ii) $180,000,000 principal amount of New Subordinated Notes issued on May 22, 1998 and (iii) $200,000,000 principal amount of December 1998 Subordinated Notes issued on or about December 8, 1998; (f) the Indebtedness of the Borrower and its Subsidiaries outstanding on the Original Closing Date and reflected on Schedule 7.2(f), and refundings or refinancings thereof, provided that no such refunding or refinancing shall shorten the maturity or increase the principal amount of the original Indebtedness; (g) Guarantee Obligations permitted by subsection 7.4; (h) the incurrence by any Credit Party of intercompany Indebtedness between or among the Credit Parties; provided, however, that if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations; (i) Indebtedness secured by Permitted Liens; (j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $100,000,000 at any time outstanding, less, without duplication, the aggregate amount of then existing Guarantee Obligations permitted under 7.4(g); and (k) Up to $30,000,000 of purchase money Indebtedness the proceeds of which are utilized to acquire the real property (including improvements thereon) and related assets currently utilized by the Borrower's communications systems west division in Salt Lake City, Utah, on terms reasonably satisfactory to the Agents. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: 58 (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(f), provided that no such Lien is expanded to cover any additional property (other than after-acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals or replacements thereof provided that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the original Indebtedness; and provided, further, that the assets of the Borrower and its Subsidiaries encumbered by such Liens are existing equipment and other existing tangible assets; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsections 7.2(b) and 7.2(k) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property of such property at the time it was acquired; 59 (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $35,000,000 in aggregate amount at any time outstanding; (j) Liens created pursuant to the Pledge Agreements; (k) Liens on the property of the Borrower or any of its Subsidiaries in favor of landlords securing licenses, subleases or leases entered into in the ordinary course of business; (l) licenses, leases or subleases permitted hereunder granted to other Persons not interfering in any material respect in the business of the Borrower or any of its Subsidiaries; (m) so long as no Default or Event of Default shall have occurred and be continuing under clause (f) of Section 8, attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $7,500,000; (n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower, or any of its subsidiaries in the ordinary course of business; and (o) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and extensions, renewals and replacements thereof, provided, however, that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the Indebtedness guaranteed by the original guarantee; 60 (b) Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed $30,000,000 at any one time outstanding for the Borrower and its Subsidiaries; (c) guarantees made by the Subsidiaries of the Borrower pursuant to the Subordinated Debt Documents, the New Subordinated Debt Documents and the December 1998 Subordinated Debt Documents; (d) Guarantee Obligations under the Credit Documents and the Facility A Credit Documents and the Facility B Credit Documents; (e) Facility A L/C Obligations and the Facility B L/C Obligations; (f) Guarantee Obligations of the Borrower or any Subsidiary in respect of obligations of a Subsidiary permitted to be incurred by such Subsidiary by this Agreement; and (g) Guarantee Obligations in respect of surety bonds and/or performance letters of credit which shall not exceed $100,000,000 at any time less, without duplication, the amount of outstanding Indebtedness permitted under subsection 7.2(j). 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); and (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Credit Party. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; 61 (b) the sale of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); (c) as permitted pursuant to subsection 7.5(b); (d) the sale, lease, transfer or exchange of inventory in the ordinary course of business; (e) transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and (j) the conveyance, sale, assignment or contribution to any new Subsidiary of the Borrower or any existing Subsidiary of the Borrower assets of the Borrower or any Subsidiary of the Borrower not exceeding five percent (5%) of the Consolidated Total Assets. 7.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary other than Permitted Stock Payments. 7.8 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for capital expenditures in the ordinary course of business not exceeding $45,000,000 in the aggregate for the Borrower and its Subsidiaries during any fiscal year of the Borrower; provided, that up to 50% of any such amount not so expended in the fiscal year for which it is permitted above may be carried over for expenditure in the next following fiscal year (except in 62 the case of the fiscal year ended December 31, 1999, in which case Borrower shall be permitted to carry forward for expenditure in the fiscal year ending December 31, 2000 unexpended amounts for Capital Expenditures permitted to be carried forward for such fiscal year under the Facility A Credit Agreement and the Facility B Credit Agreement); provided, further, that Borrower and/or its Subsidiaries may exceed the annual limit on capital expenditures set forth above by utilizing any amounts available for Investments permitted under subsection 7.9(k) hereto to fund such additional Capital Expenditures. 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) loans to officers of the Borrower listed on Schedule 7.9(c) in aggregate principal amounts outstanding not to exceed the respective amounts set forth for such officers on said Schedule; (d) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at any one time outstanding; (e) investments by the Borrower in its Subsidiaries that are Credit Parties and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Credit Parties; (f) so long as no Event of Default has occurred and is continuing, loans by the Borrower to its employees (other than any Principals or their Related Parties) in connection with (i) management incentive plans, (ii) management stock purchase plans, and (iii) obligations of employee option-holders of Storm Control Systems, Inc. to fund the exercise of such options, which loans in (i), (ii) and (iii) in the aggregate do not exceed $5,000,000; (g) Investments in existence on the Original Closing Date set forth on Schedule 7.9(g) and extensions, renewals, modifications or restatements or replacements thereof; provided that no such extension, renewal, modification or restatement shall increase the amount of the original loan, advance or investment; (h) promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (i) Investments permitted by subsection 7.6(b) and subsection 7.6(j); 63 (j) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (k) Investments made at any time from and after the Original Closing Date to acquire (i) all or any portion of the Capital Stock, or all or any portion of the assets, of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business, or (ii) all or substantially all of the assets of any division of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business; provided, that, (a) if such Investment is an acquisition of a majority of the Voting Stock of any Person, such Person's board of directors or similar governing body shall have approved such acquisition and (b) at the time of each such Investment described above in clauses (i) and (ii) (both before and after giving effect to such Investment), there shall exist no Default or Event of Default and the aggregate consideration paid (regardless of form, including in the case of an acquisition of assets, any assumed obligations) in connection with all Investments made pursuant to this subsection 7.9(k) shall not exceed the New Investment Sublimit (without deducting therefrom (w) the portion of any purchase price for any Investment funded with Capital Stock of Holdings, (x) consideration paid by the Borrower in connection with the acquisition of SPD Technologies pursuant to the SPD Technologies Acquisition Agreement, (y) consideration not exceeding $92 million paid by Borrower in connection with the acquisition of Microdyne Corporation and (z) any consideration paid prior to December 8, 1998 by the Borrower in connection with any Investment which is listed on Schedule 7.9(k) ---------------- hereto); provided, further, that in connection with each individual, or series of related, Investments made pursuant to this subsection 7.9(k), the Borrower shall deliver to the Administrative Agent, on or prior to the date which is one Business Day prior to the consummation of such Investment or Investments, a certificate of a Responsible Officer that certifies that no Default or Event of Default has occurred and is continuing or will be caused as a result of consummating such proposed Investment. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents, New Subordinated Debt Documents or December 1998 Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). 64 (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Transaction Documents in any manner that could reasonably be expected to be adverse to the Lenders. 7.11 Limitation on Transactions with Affiliates. (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's business and (iii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. (b) In addition, notwithstanding the foregoing, the Borrower and its Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower and Holdings; (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and (iv) transactions described in the Transaction Documents. 7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary; provided that the Borrower may enter into a sale and leaseback transaction if the Borrower could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction and (b) incurred a Lien to secure such Indebtedness, in each case in accordance with the restrictions contained in this Agreement and the other Credit Documents. 65 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, the Facility A Credit Agreement and the Facility B Credit Agreement, (b) the Subordinated Debt Documents, the New Subordinated Debt Documents or the December 1998 Subordinated Debt Documents, and (c) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary (other than an Immaterial Subsidiary), except for Similar Businesses. 7.16 Designated Senior Debt. Designate any Indebtedness or other obligation, other than Indebtedness under the Credit Documents, as "Designated Senior Debt," as such term is defined in the Indenture as in effect on April 30, 1997, the New Subordinated Debt Indenture as in effect on May 22, 1998 or the December 1998 Subordinated Debt Indenture as in effect on December 8, 1998, or any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate blockage periods under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture or any other Indebtedness or other obligation of the Borrower and its Subsidiaries (other than as a result of a payment default). SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; (b) Any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; 66 (c) The Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 7 or subsection 6.7(a) of this Agreement, Section 4 of the Parent Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the Parent Pledge Agreement, Section 4 of the Borrower Pledge Agreement, or Section 4 of the Subsidiary Pledge Agreement; (d) The Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; (e) The Borrower or any of its Subsidiaries shall (i) default (x) in any payment of principal of or interest of any Indebtedness (other than the Loans and any intercompany debt) or Interest Rate Agreement Obligations or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of Indebtedness, Interest Rate Agreement Obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $7,500,000 and (ii) such default continues for a period in excess of 10 days; (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in 67 clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Holdings, Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $7,500,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) (i) Any of the Pledge Agreements shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Pledge Agreements shall so assert or (ii) the Lien created 68 by any of the Pledge Agreements shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); (j) The Guarantee Obligation of any Credit Party under the Credit Documents shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; (k) There shall have occurred a Change in Control; or (l) An "Event of Default" as defined in the Facility A Credit Agreement and/or the Facility B Credit Agreement shall have occurred and be continuing; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS; THE ARRANGERS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary 69 elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received 70 notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The 71 agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it or Loan Account maintained by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall, unless a Default or Event of Default shall have occurred and be continuing, be approved by the Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Similarly, the Syndication Agent and/or the Documentation Agent may resign as Syndication Agent and/or Documentation Agent, as the case may be, upon 30 days' notice to the Lenders. The procedure for replacement and effective date of resignation for the Syndication Agent and the Documentation Agent shall be identical to that provided above for the Administrative Agent. 9.10 The Arrangers and the Managing Agents. Except as expressly set forth herein, each of the Arrangers and the Managing Agents, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. 72 SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of maturity of any Loan or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender affected thereby, or increase the commitment of any Lender or extend the expiry of the commitment of any Lender without the consent of such Lender, (ii) amend, modify or waive the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all the Lenders, (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Agents, or (v) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents without the written consent of the Arrangers or the Agents, as the case may be. In addition to the foregoing, (A) no amendment, modification, termination or waiver of any provision of subsection 2.5, subsection 2.6 or subsection 2.12 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, the application of any scheduled payment or voluntary or mandatory prepayment, the application of proceeds of any Collateral or any Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class), (B) no amendment, modification, termination or waiver of any provision of any Guarantee or Pledge Agreement shall be effective without the written concurrence of the Requisite Class Lenders for each Class and (C) no amendment, modification or waiver with respect to any provision of this subsection 10.1 or to the definition of "Requisite Class Lenders" shall be effective without the written concurrence of all Lenders, all Facility A Lenders and all Facility B Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and all future holders 73 of the Loans. In the case of any waiver, the Borrower, the Lenders and the Agents shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, the Syndication Agent and the Documentation Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings, the Borrower or any of its Subsidiaries: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, NY 10016 Attention: Robert LaPenta Fax: (212) 805-5470 with a copy to Attention: Christopher C. Cambria Fax: (212) 805-5494 74 The Administrative Agent: Addresses for notices of borrowing, prepayments and other administrative matters: Bank of America, N.A. 1850 Gateway Boulevard, 5th Floor Concord, CA 94520 Attention: Agency Administrative Services #5596 Josephine T. Flores, Vice President Fax: (925) 675-8500 Tel: (925) 675-8374 Addresses for all other notices (including with respect to amendments and waivers): Bank of America, N.A. 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management #10831 Dietmar Schiel, Vice President Fax: (415) 436-3425 Tel: (415) 436-2769 with a copy to: Bank of America, N.A. 335 Madison Avenue New York, NY 10017 Attention: Lisa B. Choi Fax: (212) 503-7066 Tel: (212) 503-8101 75 The Documentation Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michelle Swanson Fax: (212) 528-0819 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michelle Swanson Fax: (212) 528-0819 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each of the Arranger and the Agents for all of their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Lenders (in addition to any local counsel), (b) to pay or reimburse each Lender and Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or 76 determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender, Arranger and Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Acquisition, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), it being understood that the Borrower shall have an obligation hereunder to any Lender, Arranger or Agent with respect to any indemnified liabilities incurred by any Agent, Arranger or Lender as a result of any Materials of Environmental Concern that are first manufactured, emitted, generated, treated, released, spilled, stored or disposed of on, at or from any Property or any violation of any Environmental Law, which in any case first occurs on or with respect to such Property (i) after the Property is transferred to any Agent, Arranger or Lender or their successors or assigns by foreclosure sale, deed in lieu of foreclosure, or similar transfer or, following such transfer, (ii) in connection with, but prior to, the sale, leasing or other transfer of such Property by such Agent, Arranger or Lender or their successors or assigns to one or more third parties; provided, however, that the Borrower shall have no obligation hereunder to any Agent, Arranger or Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent, Arranger or Lender, or with respect to otherwise indemnified liabilities following the sale, leasing or other transfer of such Property to one or more third parties. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participation and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations 77 under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i), (ii) and (iii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said subsection; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender, any affiliate thereof or, in the case of Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities (an "Investment Fund"), any other such Investment Fund which is under common management with such Lender, or, with the consent of the Borrower, the Administrative Agent and the Syndication Agent (which in each case shall not be unreasonably withheld), to an additional bank, Investment Fund or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent and the Syndication Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register with a copy to the Syndication Agent, provided that, in the case of any such assignment to an additional bank or financial institution, (A) either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, 78 the sum of the aggregate principal amount of the Loans and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (B) each Assignee which is a Non-U.S. Lender shall comply with the provisions of clause (A) of subsection 2.15(b) hereof, or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of subsection 2.15(b) hereof (and, in either case, with all of the other provisions of subsection 2.15(b) hereof). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection, the consent of the Borrower shall not be required for any assignment which occurs at any time when any of the events described in clause (f) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans owing to each Lender from time to time and the registered owners of the Obligations evidenced by the Notes and the Loan Accounts. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, a Note or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, Commitment or other obligation evidenced by a Note or a Loan Account shall be effective only upon appropriate entries with respect thereto being made in the Register, and prior to such recordation, all amounts owing to the assignor with respect thereto shall remain owing to the assignor. Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Notes shall be issued to the designated Assignee, if requested, and the old Note shall be returned by the Administrative Agent to the Borrower marked "canceled." 79 (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower the Administrative Agent and the Syndication Agent ) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (provided that no such payment shall be required whenever LCPI or BOA is the assigning Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. Following the effective date of any such Assignment and Acceptance, the Administrative Agent shall be entitled to update Schedule I hereto to reflect the then outstanding Commitments of each Lender whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I and be deemed a part of this Agreement without any further action or consent of any party and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge 80 or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (i) Notwithstanding any other provision contained in this Agreement or any other Credit Document to the contrary, (x) any Lender may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect to such assigned Loans to the extent of such payments and (y) with the consent of the Administrative Agent (not to be unreasonably withheld), any Lender which is an Investment Fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee. No such assignment shall release the assigning Lender from its obligations hereunder. 10.7 Adjustments; Set-off. (a) At any time that an Event of Default has occurred and is continuing, if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, Facility A Lender or Facility B Lender (any such affected Lender, Facility A Lender or Facility B Lender, hereinafter, an "Affected Lender"), if any, in respect of the Borrower's obligations owing to such other Affected Lender, whether under this Agreement, the Facility A Credit Agreement or Facility B Credit Agreement, including any interest thereon, such benefited Lender shall purchase for cash from each other Affected Lender a participating interest in such portion of each such other Affected Lender's Loans owing to it, Facility A Loans or Facility A Reimbursement Obligations and/or Facility B Loans or Facility B Reimbursement Obligations owing to it, or shall provide such other Affected Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Affected Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest unless the benefited Lender is required by court order to pay interest thereon, in which case each Lender returning funds to such benefited Lender shall pay its pro rata share of such interest. 81 (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and Borrower also agree that all proceeds of any such set-off shall be subject to the ratable sharing provisions of subsections 2.12 and 10.7(a) hereof to the same extent as if an Event of Default had occurred and was then continuing. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER 82 CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 83 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE ARRANGERS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 10.16 Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. (b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained 84 in this subsection 10.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 10.17 Year 2000. The Borrower has reviewed, or will expeditiously review, its operations and those of its Subsidiaries with a view to assessing whether its businesses, or the businesses of any of its Subsidiaries, are experiencing any Year 2000 Problem. The Borrower shall take all actions necessary and commit adequate resources to assure that its computer-based and other systems (and those of all of its Subsidiaries) are able to effectively process data, including dates after January 1, 2000, without experiencing any Year 2000 Problem that could reasonably be expected to cause a Material Adverse Effect. At the request of the Required Lenders, the Borrower will provide the Administrative Agent with assurances and substantiations (including, but not limited to, the results of internal or external audit reports prepared in the ordinary course of business) reasonably acceptable to the Administrative Agent as to the capability of the Borrower and its Subsidiaries to conduct its and their businesses and operations after January 1, 2000 without experiencing a Year 2000 Problem causing a Material Adverse Effect. The Borrower represents and warrants that it has a reasonable basis to believe that no Year 2000 Problem will cause a Material Adverse Effect. [SIGNATURE PAGES FOLLOW] SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: -------------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: -------------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: -------------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE BANK OF NEW YORK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE BANK OF NOVA SCOTIA By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT BANK ONE, NA By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT FIRST UNION COMMERCIAL CORPORATION By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE INC. By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT COMERICA BANK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT CREDIT INDUSTRIEL ET COMMERCIAL By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE DAI-ICHI KANGYO BANK, LTD. By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT ERSTE BANK, NEW YORK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT GE CAPITAL COMMERCIAL FINANCE, INC. By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE INDUSTRIAL BANK OF JAPAN, LIMITED By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT MEES PIERSON CAPITAL CORP. By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT MITSUBISHI TRUST AND BANKING CORPORATION By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT NATIONAL CITY BANK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT THE ROYAL BANK OF SCOTLAND PLC By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT SOCIETE GENERALE By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT SUMMIT BANK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT WEBSTER BANK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT DEN DANSKE BANK AKTIESELSKAB CAYMAN ISLANDS BRANCH By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT MERITA BANK PLC By: --------------------------------- Title: By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT SUNTRUST BANK By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT BANQUE WORMS CAPITAL CORPORATION By: --------------------------------- Title: SIGNATURE PAGES TO NEW 364 DAY CREDIT AGREEMENT Schedule I to Credit Agreement SCHEDULE I ---------- TO CREDIT AGREEMENT
Lenders/Address for Notices Commitment - --------------------------- ---------- BANK OF AMERICA, N.A. $12,500,000 335 Madison Avenue New York, New York 10017 Attention: Lisa B. Choi Fax: (212) 503-7066 Tel: (212) 503-8101 with a copy to other parties listed in (Section) 10.2 for BOA. LEHMAN COMMERCIAL PAPER INC. $12,500,000 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michelle Swanson Fax: (212) 528-0819 Tel: (212) 526-0330 THE BANK OF NEW YORK $12,000,000 One Wall Street New York, New York 10286 Attention: Kenneth P. Sneider, Jr. Fax: (212) 635-6999 Tel: (212) 635-6863 THE BANK OF NOVA SCOTIA $12,000,000 One Liberty Plaza New York, New York 10006 Attention: Ben Sileo Tel: (212) 225-5076 Fax: (212) 225-5090 I-1 BANK ONE, NA $12,000,000 153 West 51st Street New York, New York 10019-6025 Attention: Andrea Kantor Fax: (212) 373-1180 Tel: (212) 373-1023 CREDIT LYONNAIS NEW YORK BRANCH $12,000,000 1301 Avenue of the Americas, 18th Floor New York, NY 10019-6022 Attention: Judy Domkowski Fax: (212) 459-3179 Tel: (212) 261-7341 FIRST UNION COMMERCIAL CORPORATION $12,000,000 201 So. College St. Charlotte, NC 28288 Attention: Barbara Van Meerten Fax: (704) 374-4793 Tel: (704) 374-7115 BANK AUSTRIA CREDITANSTALT $10,000,000 CORPORATE FINANCE INC. 2 Greenwich Plaza Greenwich, CT 06830 Attention: Alison McGuigan Fax: (203) 861-1532 Tel: (203) 861-6464 THE GOVERNOR AND COMPANY OF THE $10,000,000 BANK OF IRELAND LaTouche House, I.F.S.C. Custom House Docks Dublin 1, Ireland Attention: Brendan McLoughlin Fax: 011-353-1-829-0129 Tel: 011-353-1-609-3513 I-2 BANK OF TOKYO - MITSUBISHI TRUST COMPANY $10,000,000 1251 Avenue of the Americas, 18th Floor New York, NY 10020 Attention: Hidekazu Kojima Fax: (212) 782-4981 Tel: (212) 782-4795 COMERICA BANK $10,000,000 500 Woodward Avenue, 9th Floor, MC 3280 Detroit, MI 48275-3280 Attention: Joel S. Gordon Fax: (313) 222-3330 Tel: (313) 222-3647 CREDIT INDUSTRIEL ET COMMERCIAL $10,000,000 520 West Madison Avenue, 37th Floor New York, NY 10022 Attention: Brian O'Leary Fax: (212) 715-4535 Tel: (212) 715-4422 THE DAI-ICHI KANGYO BANK, LTD. $10,000,000 One World Trade Center, 48th Floor New York, NY 10048 Attention: Nicholas A. Fiore Fax: (212) 912-1879 Tel: (212) 432-6784 DG BANK $10,000,000 DEUTSCHE GENOSSENSCHAFTSBANK AG DG Bank Building 609 Fifth Avenue New York, NY 10017-1021 Attention: Stephen A. Santora Fax: (212) 745-1556 Tel: (212) 745-1575 I-3 DRESDNER BANK AG NEW YORK AND GRAND CAYMAN BRANCHES $10,000,000 75 Wall Street New York, NY 10006-2889 Attention: Craig Erickson Fax: (212) 429-2524 Tel: (212) 429-2183 ERSTE BANK, NEW YORK $10,000,000 280 Park Avenue, 32nd Floor, West Building New York, NY 10017 Attention: Arcinee Hovanessian Fax: (212) 984-5627 Tel: (212) 984-5635 GE CAPITAL COMMERCIAL FINANCE, INC. $10,000,000 60 Long Ridge Road Stamford, CT 06927-5100 Attention: Colleen Mooney Fax: (203) 602-8335 Tel: (203) 357-4223 THE INDUSTRIAL BANK OF JAPAN, LIMITED $10,000,000 1251 Avenue of the Americas New York, NY 10020 Attention: Wayne Wright Fax: (212) 282-4488 Tel: (212) 282-3462 MEES PIERSON CAPITAL CORP. $10,000,000 3 Stamford Plaza 301 Trasser Boulavard Stamford, CT 08901-3239 Attention: John O'Connor Fax: (203) 705-5890 Tel: (203) 705-5747 I-4 THE MITSUBISHI TRUST AND BANKING CORPORATION $10,000,000 520 Madison Avenue New York, NY 10020 Attention: Rosetta Conti Fax: (212) 644-6825 Tel: (212) 891-8268 NATIONAL CITY BANK $10,000,000 1900 East 9th Street, Loc. #2077 Cleveland, OH 44114 Attention: Robert Rowe Fax: (216) 222-0003 Tel: (216) 575-2018 THE ROYAL BANK OF SCOTLAND PLC $10,000,000 Wall Street Plaza 88 Pine Street, 26th Floor New York, NY 10005 Attention: Derek Bonnar Fax: (212) 480-0791 Tel: (212) 269-1718 SOCIETE GENERALE $10,000,000 181 West Madison Chicago, IL 60602 Attention: John Root Fax: (312) 578-5099 Tel: (312) 578-5158 SUMMIT BANK $10,000,000 750 Walnut Avenue Cranford, NJ 07016 Attention: Richard Banning Fax: (908) 709-6433 Tel: (908) 709-2838 I-5 WEBSTER BANK $10,000,000 City Place II 185 Asylum Street, 3rd Floor Hartford, CT 06103-3494 Attention: John Gilsenan Fax: (860) 947-1872 Tel: (860) 692-1343 DEN DANSKE BANK AKTIESELSKAB $10,000,000 Cayman Islands Branch 280 Park Avenue, 4th Floor East Building New York, NY 10017 Attention: Peter L. Hargraves Fax: (212) 370-9239 Tel: (212) 984-8472 MERITA BANK PLC $10,000,000 437 Madison Avenue New York, NY 10022 Attention: Clifford Abramsky Fax: (212) 318-9318 Tel: (212) 318-9564 SUNTRUST BANK $10,000,000 711 Fifth Avenue, 16th Floor New York, NY 10022 Attention: Armen Karozichian Fax: (212) 371-9386 Tel: (212) 583-2604 BANQUE WORMS CAPITAL CORPORATION $5,000,000 450 Park Avenue, Suite 2900 New York, NY 10022 Attention: Jeff Marco Fax: (212) 593-4854 Tel: (212) 826-5426/5459/5479
I-6 Schedule II to Credit Agreement PRICING GRID*
APPLICABLE APPLICABLE MARGIN-BASE DEBT RATIO MARGIN-EURODOLLAR RATE* RATE** COMMITMENT FEE* - ------------------------------------------------------------------------------------------------------------- greater than 4.75x 275 175 30 greater than 4.25x 237.5 137.5 30 greater than 3.75x 200 100 30 greater than 3.25x 175 75 25 greater than 2.75x 150 50 22.5 less than or equal to 2.75x 125 37.5 20
- --------------------------- * Pricing Grid (except for Debt Ratios) reflects basis points. ** Notwithstanding the foregoing Pricing Grid, the Applicable Margins and the Commitment Fee Rate for the facility for the period following the Closing Date through but excluding the Adjustment Date related to the fiscal quarter ending as of September 30, 2000 will be no lower in cost to Borrower than the pricing level applicable if the Debt Ratio is greater than 3.25x but not greater than 3.75x; provided, however, nothing contained herein shall limit the effect of any increase in the pricing level on any Adjustment Date occurring after the Closing Date if the Debt Ratio exceeds 3.75x. II-1 EX-10.44 9 0009.txt AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT ================================================================================ AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT AMONG L-3 COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AS BORROWER, FROM TIME TO TIME PARTIES HERETO, THE CERTAIN FINANCIAL INSTITUTIONS NAMED AS CO-AGENTS HEREIN, BANC OF AMERICA SECURITIES LLC AND LEHMAN COMMERCIAL PAPER INC., AS ARRANGERS, BANK OF AMERICA, N.A. , AS ADMINISTRATIVE AGENT AND LEHMAN COMMERCIAL PAPER INC., AS DOCUMENTATION AGENT AND SYNDICATION AGENT DATED AS OF APRIL 24, 2000 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- Section 1. DEFINITIONS.....................................................................................1 1.1 Defined Terms...................................................................................1 1.2 Other Definitional Provisions..................................................................25 1.3 Interrelationship with Original Credit Agreement...............................................25 1.4 Confirmation of Existing Obligations...........................................................26 Section 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS......................................................26 2.1 Commitments....................................................................................26 2.2 Procedure for Borrowing........................................................................27 2.3 Commitment Fee.................................................................................28 2.4 Termination or Reduction of Revolving 364 Day Commitments......................................28 2.5 Extension of Revolving 364 Day Termination Date; Conversion Option; Repayment of Loans; Evidence of Debt...............................................................................28 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments.......................31 2.7 Conversion and Continuation Options............................................................34 2.8 Minimum Amounts and Maximum Number of Tranches.................................................34 2.9 Interest Rates and Payment Dates...............................................................35 2.10 Computation of Interest and Fees...............................................................35 2.11 Inability to Determine Interest Rate...........................................................36 2.12 Pro Rata Treatment and Payments................................................................36 2.13 Illegality.....................................................................................38 2.14 Requirements of Law............................................................................38 2.15 Taxes..........................................................................................40 2.16 Indemnity......................................................................................42 2.17 Replacement of Lenders.........................................................................43 2.18 Certain Fees...................................................................................44 2.19 Certain Rules Relating to the Payment of Additional Amounts....................................44 Section 3. LETTERS OF CREDIT..............................................................................44 3.1 L/C Commitment.................................................................................44 3.2 Procedure for Issuance of Letters of Credit....................................................45 3.3 Fees, Commissions and Other Charges............................................................46 3.4 L/C Participation..............................................................................46 3.5 Reimbursement Obligation of the Borrower.......................................................47 3.6 Obligations Absolute...........................................................................48 3.7 Letter of Credit Payments......................................................................49 3.8 Application....................................................................................49 3.9 Determination of Exchange Rate.................................................................49 Section 4. REPRESENTATIONS AND WARRANTIES.................................................................49 4.1 Financial Condition............................................................................49 4.2 No Change......................................................................................50 4.3 Corporate Existence; Compliance with Law.......................................................50 4.4 Corporate Power; Authorization; Enforceable Obligations........................................50 4.5 No Legal Bar...................................................................................51 i 4.6 No Material Litigation.........................................................................51 4.7 No Default.....................................................................................51 4.8 Ownership of Property; Liens...................................................................51 4.9 Intellectual Property..........................................................................51 4.10 Taxes..........................................................................................52 4.11 Federal Regulations............................................................................52 4.12 ERISA..........................................................................................52 4.13 Investment Company Act; Other Regulations......................................................53 4.14 Subsidiaries...................................................................................53 4.15 Purpose of Loans...............................................................................53 4.16 Environmental Matters..........................................................................53 4.17 Collateral Documents...........................................................................54 4.18 Accuracy and Completeness of Information.......................................................54 4.19 Labor Matters..................................................................................55 Section 5. CONDITIONS PRECEDENT...........................................................................55 5.1 Conditions to Initial Loans....................................................................55 5.2 Conditions to Each Extension of Credit.........................................................58 Section 6. AFFIRMATIVE COVENANTS..........................................................................58 6.1 SEC Filings....................................................................................58 6.2 Certificates; Other Information................................................................59 6.3 Payment of Obligations.........................................................................60 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law................60 6.5 Insurance......................................................................................60 6.6 Inspection of Property; Books and Records; Discussions.........................................60 6.7 Notices........................................................................................60 6.8 Environmental Laws.............................................................................61 6.9 Further Assurances.............................................................................62 6.10 Additional Collateral..........................................................................62 6.11 [Intentionally Omitted.].......................................................................63 6.12 Foreign Jurisdictions..........................................................................63 6.13 Government Contracts...........................................................................63 6.14 Lien Searches..................................................................................63 Section 7. NEGATIVE COVENANTS.............................................................................63 7.1 Financial Condition Covenants..................................................................63 7.2 Limitation on Indebtedness.....................................................................64 7.3 Limitation on Liens............................................................................65 7.4 Limitation on Guarantee Obligations............................................................67 7.5 Limitation on Fundamental Changes..............................................................68 7.6 Limitation on Sale of Assets...................................................................68 7.7 Limitation on Dividends........................................................................69 7.8 Limitation on Capital Expenditures.............................................................69 7.9 Limitation on Investments, Loans and Advances..................................................70 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements................71 7.11 Limitation on Transactions with Affiliates.....................................................72 7.12 Limitation on Sales and Leasebacks.............................................................72 7.13 Limitation on Changes in Fiscal Year...........................................................72 7.14 Limitation on Negative Pledge Clauses..........................................................72 7.15 Limitation on Lines of Business................................................................73 7.16 Designated Senior Debt.........................................................................73 ii Section 8. EVENTS OF DEFAULT..............................................................................73 Section 9. THE AGENTS; THE ARRANGERS......................................................................76 9.1 Appointment....................................................................................76 9.2 Delegation of Duties...........................................................................77 9.3 Exculpatory Provisions.........................................................................77 9.4 Reliance by Agents.............................................................................77 9.5 Notice of Default..............................................................................77 9.6 Non-Reliance on Agents and Other Lenders.......................................................78 9.7 Indemnification................................................................................78 9.8 Agents, in Their Individual Capacities.........................................................79 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent......................79 9.10 The Arrangers and the Co-Agents................................................................79 Section 10. MISCELLANEOUS..................................................................................80 10.1 Amendments and Waivers.........................................................................80 10.2 Notices........................................................................................81 10.3 No Waiver; Cumulative Remedies.................................................................83 10.4 Survival of Representations and Warranties.....................................................83 10.5 Payment of Expenses and Taxes..................................................................84 10.6 Successors and Assigns; Participation and Assignments..........................................85 10.7 Adjustments; Set-off...........................................................................88 10.8 Counterparts...................................................................................89 10.9 Severability...................................................................................89 10.10 Integration....................................................................................89 10.11 GOVERNING LAW..................................................................................89 10.12 SUBMISSION TO JURISDICTION; WAIVERS............................................................89 10.13 Acknowledgments................................................................................90 10.14 WAIVERS OF JURY TRIAL..........................................................................90 10.15 Confidentiality................................................................................90 10.16 Conversion of Currencies.......................................................................91 10.17 Year 2000......................................................................................91 10.18 Existing Agreements Superseded.................................................................92
iii EXHIBITS - -------- Exhibit A-1 Form of Revolving 364 Day Note Exhibit A-2 Form of Term Note Exhibit B-1 Form of Parent Guarantee Exhibit B-2 Form of Subsidiary Guarantee Exhibit B-3 Form of Parent Pledge Agreement Exhibit B-4A Form of Borrower Pledge Agreement Exhibit B-4B Form of Charge Over Shares Exhibit B-5 Form of Subsidiary Pledge Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher and Bartlett Exhibit C-2 Form of Internal Counsel Opinion Exhibit D Form of Borrowing Certificate Exhibit E Form of Certificate of Non U.S. Lender Exhibit F Form of Assignment and Acceptance SCHEDULES Schedule I Lenders and Commitments Schedule II Pricing Grid Schedule III Transaction Documents Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.9 Intellectual Property Claims Schedule 4.10 Taxes Schedule 4.14 Subsidiaries Schedule 7.2(f) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.9(c) Officers Schedule 7.9(g) Existing Investments Schedule 7.9(k) Approved Investments iv THIS AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT, dated as of April 24, 2000, is among L-3 Communications Corporation, a Delaware corporation (the "Borrower") which is wholly owned by L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), the several banks and other financial institutions or entities from time to time parties hereto (the "Lenders"), Banc of America Securities LLC (f/k/a BancAmerica Robertson Stephens) and Lehman Commercial Paper Inc. ("LCPI") as arrangers (each, in such capacity, an "Arranger" and together, the "Arrangers"), Bank of America, N.A. (f/k/a Bank of America National Trust & Savings Association) ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), LCPI, as syndication agent and documentation agent (in such capacity, the "Syndication Agent" and the "Documentation Agent"), and certain financial institutions named as Co-Agents AMENDS AND RESTATES IN FULL the 364 Day Credit Agreement, dated August 13, 1998 (as amended, supplemented and/or modified from time to time prior to the date hereof, the "Original Credit Agreement"), among the Borrower, the lenders party thereto from time to time (the "Original Lenders"), the Arrangers, the Syndication Agent, Documentation Agent, the Administrative Agent and certain financial institutions named as co-agents; this amendment and restatement of the Original Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as this "Agreement" or the "Credit Agreement"). WHEREAS, the Borrower has requested that the Original Credit Agreement be amended and restated in full as set forth herein. NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Original Credit Agreement as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Acquired Business": a company or business unit acquired by the Borrower or any of its Subsidiaries, provided that the Borrower has delivered to the Administrative Agent historical financial statements of such company or business unit prepared in accordance with GAAP. "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1 and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). "Administrative Agent": BOA, or following the resignation of BOA as Administrative Agent, any other Lender which may be appointed as Administrative Agent pursuant to subsection 9.9. "Affected Class": as defined in subsection 10.1. "Affected Lender": as defined in subsection 10.7. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Documentation Agent and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender with respect to any Type of Loan at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans of such Type made by such Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Currency": as defined in subsection 10.16(b). "Alternative Currency": any currency which as of the time of any issuance or renewal, as applicable, of a Foreign L/C is freely tradable and convertible into Dollars and has been approved as an "Alternative Currency" for the purposes of this Agreement by the Issuing Lender. "Applicable Converted Commitment": as defined in subsection 2.5(b). "Applicable Creditor": as defined in subsection 10.16(b). "Applicable Holdback": as defined in subsection 2.6(b)(ii). "Applicable Issuing Lender": an Issuing Lender as to which any proposed Assignee under subsection 10.6 shall become an L/C Participant upon giving effect to the relevant Assignment and Acceptance. "Applicable Margin": at any time, the percentages set forth on Schedule II under the relevant column heading opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Applicable Margins determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Debt Ratio captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. 2 "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Asset Sale": any sale, sale-leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except sales and dispositions permitted by subsection 7.6 other than subsection 7.6(b) or (e). "Assignee": as defined in subsection 10.6(c). "Attributable Debt": in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Available Commitment": as to any Lender and any Type of Loan, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment with respect to such Type of Loan over (b) such Lender's Aggregate Outstanding Extensions of Credit with respect to such Type of Loan. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "BOA": as defined in the recitals to this Agreement. "Borrower Pledge Agreement": the Second Amended and Restated Borrower Pledge Agreement substantially in the form of Exhibit B-4A, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16. 3 "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to Eurodollar Loans or Foreign L/Cs, any day on which dealings are carried on in the applicable London interbank market. "Calculation Date": with respect to each Foreign L/C, during the period that such Foreign L/C is outstanding (or the Reimbursement Obligation in connection therewith has not been fully satisfied) (i) the last Business Day of a fiscal month, (ii) the date on which such Letter of Credit is to be issued or renewed by the Issuing Lender, (iii) the date on which any draft presented under such Letter of Credit is paid by the Issuing Lender, (iv) such other dates as the Borrower may reasonably request from time to time, and (v) such other dates as the Issuing Lender or the Administrative Agent may select from time to time, provided that the Borrower receives prompt notice thereof. "Capital Expenditures" for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the expenditures relating to the Transaction. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Partners": Lehman Brothers Capital Partners III, L.P. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or 4 taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (i) the Principals and their Related Parties, as a whole, shall at any time cease to own, directly or indirectly, 51% of the Voting Stock of Holdings (measured by voting power rather than number of shares), determined on a fully diluted basis, and any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals and their Related Parties shall become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 25% of the Voting Stock of Holdings (measured by voting power rather than number of shares); (ii) a majority of the members of the Board of Directors of Holdings fail to be (a) members of the Board of Directors incumbent as of the Closing Date, or (b) members nominated by the members of the Board of Directors incumbent on the Closing Date, or (c) members appointed by members of the Board nominated under clause (a) or (b); (iii) Holdings shall, at any time, cease to own 100% of the Capital Stock of the Borrower; or (iv) a "Change of Control" shall have occurred under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture.. "Charge Over Shares": the Amended and Restated Charge Over Shares substantially in the form of Exhibit B-4B, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Class": (i) Lenders having Loan Exposure (taken together as a single class), (ii) Facility A Lenders having Facility A Loan Exposure (taken together as a single class) and (iii) Facility C Lenders having Facility C Loan Exposure (taken together as a single class). "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 are satisfied. 5 "Co-Agents": collectively, Fleet National Bank, The Bank of New York, The Bank of Nova Scotia, Credit Lyonnais, Bank One, N.A., First Union Commercial Corporation, HSBC Bank USA, and Societe Generale. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Pledge Agreement. "Commitment": as to any Lender, such Lender's Revolving 364 Day Commitment and, subject to satisfaction of the conditions precedent in subsection 2.5(b) hereto, Term Loan Commitment. "Commitment Fee Rate": at any time, the applicable rates per annum on Schedule II under the relevant column heading for the Revolving 364 Day Facility set forth opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Commitment Fee Rate determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Commitment Fee Rate shall be (i) for the first 35 days subsequent to such due date, the Commitment Fee Rate in effect prior to such due date and (ii) thereafter, that set forth opposite a Debt Ratio captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. "Commitment Percentage": as to the Commitment of any Lender with respect to any Type of Loan at any time, the percentage which the Commitment of such Lender with respect to such Type of Loan then constitutes of the aggregate Commitments with respect to such Type of Loan (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender with respect to such Type of Loan constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders with respect to such Type of Loan). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) 6 Consolidated Interest Expense of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, paid in cash, of the Borrower and its Subsidiaries for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Interest Expense": for any Person, as of the last day of any fiscal quarter, the amount of interest expense of such Person for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income": for any Person and for any fiscal period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Assets": at any date, all assets of the Borrower and its Subsidiaries as determined according to the consolidated balance sheet contained in the SEC filing most recently delivered pursuant to subsection 6.1 or, if no such SEC filing has yet been delivered, the balance sheet referred to in subsection 4.1(a)(ii). "Consolidated Total Debt": at any date, all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g). "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date over (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries on such date (excluding, to the extent it would otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement or other organizational documents of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. 7 "Conversion Option": as defined in subsection 2.5(b). "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees and the Pledge Agreements. "Credit Parties": the Borrower, Holdings, and each Subsidiary of the Borrower which is a party to a Credit Document. "December 1998 Subordinated Debt Documents": the December 1998 Subordinated Notes, the December 1998 Subordinated Notes Indenture, the Underwriting Agreement related thereto among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "December 1998 Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the December 1998 Subordinated Notes were issued. "December 1998 Subordinated Notes": the Borrower's Senior Subordinated Notes, due December 1, 2008 ("Initial December 1998 Subordinated Notes") issued on or about the December 8, 1998 and any notes, having the same terms as the Initial December 1998 Subordinated Notes, issued in exchange for the Initial December 1998 Subordinated Notes as contemplated by the documents governing the issuance of the Initial December 1998 Subordinated Notes. "Debt Ratio": as at the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt minus Designated Cash Balances on such date to (b) Consolidated EBITDA. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Designated Cash Balances": at any time, the lesser of (a) actual unrestricted cash balances on hand of Borrower and its Subsidiaries which are not subject to any Liens in favor of any Person (other than those described in subsection 7.3(o) hereof) and (b) $50,000,000. "Dollar Equivalent": at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Alternative Currency, the equivalent amount in Dollars as determined on the basis of the Exchange Rate for the purchase of Dollars with such Alternative Currency as of the most recent Calculation Date. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic L/C": a Letter of Credit denominated in Dollars. 8 "Dow Jones Page 3750": the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (Sections) 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. (Sections) 9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (Sections) 1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (Sections) 6901 et seq.; the Clean Water Act; 33 U.S.C. (Sections) 1251 et seq.; the Clean Air Act, 42 U.S.C. (Sections) 7401 et seq.; or other similar federal and/or state environmental laws. "Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Environmental Law. "Equity Documents": the Stockholders Agreement, the Subscription Agreements and the Option Agreements. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Eurodollar Business Day": means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. 9 "Eurodollar Rate": means, for any Interest Period, with respect to Eurodollar Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows: LIBOR Eurodollar Rate = --------------------------------------- 1.00 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage": for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income for the Borrower and its Subsidiaries, non-cash interest expense, depreciation and amortization for such fiscal year, (iv) extraordinary non-cash losses during such fiscal year subtracted in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (v) change in deferred tax liability of the Borrower for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary losses less (b) the sum, without duplication, of (i) the aggregate amount of permitted cash Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of (x) Revolving 364 Day Loans not accompanied by reductions of the Commitments hereunder, (y) Facility A Loans not accompanied by reductions of Facility A Commitments and/or (z) Facility C Loans not accompanied by reductions of Facility C Commitments), (iv) deferred income tax credit of the Borrower for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Exchange Act": the Securities Exchange Act of 1934, as amended. "Exchange Rate": on any day, with respect to any Alternative Currency, the spot rate at which Dollars are offered on such day by the Issuing Lender in San Francisco, 10 California (or such other location selected by the Issuing Lender) for such Alternative Currency. "Extending Lender": any Lender consenting to the Extension Option. "Extension Option": as defined in subsection 2.5(a). "Facility A Administrative Agent": the "Administrative Agent" as defined in the Facility A Credit Agreement. "Facility A Agents": the "Agents" as defined in the Facility A Credit Agreement. "Facility A Commitments": the "Commitments" as defined in the Facility A Credit Agreement. "Facility A Credit Agreement": that certain Second Amended and Restated Credit Agreement of even date herewith among the Borrower, the Facility A Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities LLC as arrangers and certain financial institutions named as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility A Credit Documents": the "Credit Documents" as defined in the Facility A Credit Agreement. "Facility A Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility A Credit Agreement. "Facility A L/C Obligations": the "L/C Obligations" as defined in the Facility A Credit Agreement. "Facility A Lenders": the "Lenders" as defined in the Facility A Credit Agreement. "Facility A Loan Exposure": the "Loan Exposure" as defined in the Facility A Credit Agreement. "Facility A Loans": the "Loans" as defined in the Facility A Credit Agreement. "Facility A Notes": the "Notes" as defined in the Facility A Credit Agreement. "Facility A Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility A Credit Agreement. "Facility C Administrative Agent": the "Administrative Agent" as defined in the Facility C Credit Agreement. 11 "Facility C Agents": the "Agents" as defined in the Facility C Credit Agreement. "Facility C Commitments": the "Commitments" as defined in the Facility C Credit Agreement. "Facility C Credit Agreement": that certain New 364 Day Credit Agreement of even date herewith among the Borrower, the Facility C Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities, LLC as arrangers and certain financial institutions named as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility C Credit Documents": the "Credit Documents" as defined in the Facility C Credit Agreement. "Facility C Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility C Credit Agreement. "Facility C Lenders": the "Lenders" as defined in the Facility C Credit Agreement. "Facility C Loan Exposure": the "Loan Exposure" as defined in the Facility C Credit Agreement. "Facility C Loans": the "Loans" as defined in the Facility C Credit Agreement. "Facility C Notes": the "Notes" as defined in the Facility C Credit Agreement. "Federal Funds Effective Rate": for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the FRB (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Financial L/C": a standby Letter of Credit not constituting a Performance L/C. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign L/C": a Letter of Credit denominated in an Alternative Currency. "Foreign L/C Obligations": at any time, an amount equal to the sum of (i) the Dollar Equivalent of the aggregate then undrawn and unexpired face amount of all then outstanding Foreign L/Cs and (ii) the Dollar Equivalent of the aggregate amount of all 12 drawings under Foreign L/Cs which have not then been reimbursed pursuant to subsection 3.5. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands. "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America in effect on the Closing Date. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": the Parent Guarantee and the Subsidiary Guarantee. 13 "Immaterial Subsidiary": any Subsidiary of the Borrower having assets not exceeding five percent (5%) of the Consolidated Total Assets. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and all reimbursement and other obligations with respect to any letters of credit and surety bonds, whether or not matured or drawn, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person. "Indenture": the Indenture between the Borrower and The Bank of New York, as trustee, pursuant to which the Subordinated Notes are issued. "Initial 1997 Credit Agreement": the Credit Agreement, dated as of April 30, 1997 among the Borrower, the lenders party thereto from time to time, Lehman Brothers Inc. as arranger, LCPI as syndication agent and documentation agent and BOA as administrative agent. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any Eurodollar Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three, six or, if made available by the Administrative Agent and the Lenders, nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; 14 (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or, if made available by the Administrative Agent and Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and (c) solely for the purpose of permitting the Borrower to (i) convert Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date pursuant to the exercise of the Conversion Option, (ii) repay Revolving 364 Day Loans owing to Nonconsenting Lenders on the Revolving 364 Day Termination Date in connection with the exercise of the Extension Option and (iii) fund any scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then outstanding, a period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending on a Business Day which is no less than seven (7) and no more than thirty (30) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto. provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period for any Loan that would otherwise extend beyond the applicable Termination Date shall end on the applicable Termination Date; (iii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Business Day of the appropriate calendar month; and (iv) no Interest Period with respect to any portion of any Type of Term Loan shall extend beyond a date on which the Borrower is required to make a scheduled payment of principal of Term Loans of such Type unless the sum of (a) the aggregate principal amount of Term Loans of such Type that are Base Rate Loans plus (b) the aggregate principal amount of Term Loans of such Type that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on Term Loans of such Type on such date. 15 "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Issuing Lender": BOA, in its capacity as issuer of any Letter of Credit or, at the election of BOA, such other Lender or Lenders that agrees to act as Issuing Lender at the request of the Borrower, or upon resignation by BOA as an Issuing Lender at any time upon notice to the other parties to this Agreement, such other Lender or Lenders that agree to act as Issuing Lender at the request of the Borrower and to whom the Required Lenders consent in writing. "Judgment Currency": as defined in subsection 10.16 (b). "LCPI": as defined in the recitals to this Agreement. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the Dollar Equivalent of the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5. "L/C Participants": a collective reference to all the Revolving 364 Day Lenders other than the Applicable Issuing Lender. "Lender" and "Lenders": the persons identified as Lenders and listed on the signature pages of this Agreement (including the Issuing Lender), together with their successors and permitted assigns pursuant to subsection 10.6; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Letters of Credit": as defined in subsection 3.1(a). "LIBOR": as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on the Dow Jones Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at 16 approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Account": as defined in subsection 2.5(g). "Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Letters of Credit or Revolving 364 Day Loans, that Lender's Revolving 364 Day Commitment, and (ii) otherwise, the sum of (a) the aggregate outstanding principal amount of the Revolving 364 Day Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the Dollar Equivalent of the aggregate stated or face amount in respect of all Letters of Credit issued by that Lender and outstanding (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) in the event that Lender is a Term Lender, the outstanding principal amount of the Term Loans of that Lender plus (d) the Dollar Equivalent of the aggregate amount of all participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by Holdings or any of its Subsidiaries in respect of: 17 (a) any issuance by Holdings or any of its Subsidiaries of Indebtedness after the Closing Date; (b) any Asset Sale; and (c) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to Holdings or such Subsidiary in respect of an Asset Sale; in each case net of (without duplication) (i), (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings or a Subsidiary of Holdings that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by Holdings or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by Holdings or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by Holdings or such Subsidiary to be actually payable. "New Investment Sublimit" shall mean, as of any date of determination thereof, an amount equal to (a) $650,000,000 plus (b) (i) Net Proceeds derived from Asset Sales during the immediately preceding twelve (12) month period and (ii) Net Proceeds from any Asset Sale that were reinvested within the twelve (12) month period following such Asset Sale for the purposes permitted in subsection 7.9(k) to the extent not included in subclause (i) of this clause (b) plus (c) net cash proceeds derived from the issuance of any equity securities of Holdings which are contributed to the Borrower as additional equity capital minus the amount of any Capital Expenditures funded in any fiscal year of the Borrower and its Subsidiaries which exceeds the amounts permitted during such fiscal year pursuant to subsection 7.8 hereof (without giving effect to the second proviso thereto referring to subsection 7.9(k)). "New Subordinated Debt Documents": the New Subordinated Notes, the New Subordinated Notes Indenture, the Underwriting Agreement dated as of May 18, 1998 among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "New Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the New Subordinated Notes were issued. 18 "New Subordinated Notes": the Borrower's 8 1/2% Senior Subordinated Notes, due 2008 ("Initial New Subordinated Notes") issued on or about May 22, 1998 and any notes, having the same terms as the Initial New Subordinated Notes, issued in exchange for the Initial New Subordinated Notes as contemplated by the documents governing the issuance of the Initial New Subordinated Notes. "Non-Excluded Taxes": as defined in subsection 2.15. "Non-U.S. Lender": as defined in subsection 2.15(b). "Nonconsenting Lenders": as defined in subsection 2.17. "Notes": The Revolving 364 Day Notes and the Term Notes (or any of them). "Obligations": as defined in the Guarantees and the Pledge Agreements. "Option Agreements": the Option Agreements between Holdings and each of Frank C. Lanza and Robert V. LaPenta, each dated as of April 30, 1997. "Original Agents": the "Agents" under and as defined in the Original Credit Agreement. "Original Closing Date": August 13, 1998. "Original Credit Agreement": as defined in the preamble to this Agreement. "Original Lenders": as defined in the preamble to this Agreement. "Parent Distributions": as defined in the Parent Guarantee. "Parent Guarantee": the Second Amended and Restated Parent Guarantee substantially in the form of Exhibit B-1, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Parent Pledge Agreement": the Second Amended and Restated Parent Pledge Agreement substantially in the form of Exhibit B-3, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Participant": as defined in subsection 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Performance L/C": a standby Letter of Credit issued to ensure the performance of services and/or delivery of goods by or on behalf of the Borrower. "Permitted Liens": Liens permitted to exist under subsection 7.3. 19 "Permitted Stock Payments": (A) dividends by the Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by the Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing; provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings, and (C) from and after May 1, 1999, dividends by the Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by the Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity may incur any liability. "Pledge Agreements": the collective reference to the Parent Pledge Agreement, the Borrower Pledge Agreement, the Charge Over Shares, the Subsidiary Pledge Agreement, and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Principals": each of Lehman Brothers Holdings, Inc., Capital Partners, the Seller, Frank C. Lanza and Robert V. LaPenta. "Properties": as defined in subsection 4.16. "Purchase Agreement": the Purchase Agreement, dated as of April 25, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Register": as defined in subsection 10.6(d). "Registration Rights Agreement": the Registration Rights Agreement, dated as of April 30, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. 20 "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Amount": as defined in subsection 3.5(a). "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "Related Party": with respect to the Principals, (a) any controlling stockholder, 51% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (b) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 51% or more controlling interest of which consist of the Principals and/or such other Persons referred to in the immediately preceding clause (a). "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Lenders": at any time, Lenders the Loan Exposure for all Types of Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class of Lenders having Loan Exposure, Lenders having or holding 66 2/3% of the aggregate Loan Exposure of all Lenders and (b) for the Class of Facility A Lenders having Facility A Loan Exposure, Facility A Lenders having or holding 66 2/3% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) for the Class of Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding 66 2/3% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Responsible Officer": the chief executive officer, the president or vice president of the Borrower or, with respect to financial matters, the chief financial officer, vice president-finance or treasurer of the Borrower. "Restricted Government Contracts": as defined in the Pledge Agreements. "Revolving 364 Day Commitment": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make 21 Revolving 364 Day Loans to the Borrower pursuant to Subsection 2.1(a)(i); and "Revolving 364 Day Commitments" means such commitments of all Lenders in an aggregate amount not to exceed $200,000,000 at any time. "Revolving 364 Day Commitment Period": the period from and including the Closing Date to but not including the Revolving 364 Day Termination Date or such earlier date on which the Revolving 364 Day Commitments shall terminate as provided herein. "Revolving 364 Day Lender": any Lender or Lenders having a Revolving 364 Day Commitment or a Revolving 364 Day Loan outstanding. "Revolving 364 Day Loans": the Loans made by Revolving 364 Day Lenders to the Borrower pursuant to Subsection 2.1(a)(i). "Revolving 364 Day Notes": (i) the promissory notes of the Borrower, if any, issued pursuant to subsection 2.5(i) of the Original Credit Agreement prior to the Closing Date and/or pursuant to subsection 2.5(i) of this Agreement on or after the Closing Date, in each case, to evidence the Revolving 364 Day Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Revolving 364 Day Commitments and Revolving 364 Day Loans of any Lenders, in each case substantially in the form of Exhibit A-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Revolving 364 Day Termination Date": August 10, 2000, as the same may be extended in accordance with subsection 2.5(a) hereof. "SPD Technologies": SPD Technologies Inc., a Delaware corporation. "SPD Technologies Acquisition Agreement": the Agreement and Plan of Merger, dated as of July 2, 1998, among L-3 Communications Corporation, SPD Merger Co., SPD Technologies, Inc. and Midmark Capital L.P. "SEC": the Securities and Exchange Commission. "Securities Act": Securities Act of 1933, as amended. "Seller": Lockheed Martin Corporation, a Maryland corporation. "Similar Business": a business, at least a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto or any business of the Borrower and/or its Subsidiaries existing as of the Closing Date, and (iv) any combination of any of the foregoing. 22 "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Stockholders Agreement": the Stockholders Agreement, dated as of April 30, 1997, by and among the Borrower, Holdings, the Seller, the Principals and any other party that may from time to time become a party thereto as provided therein, as the same may be amended, supplemented or otherwise modified from time to time. "Subordinated Debt": indebtedness outstanding under the Subordinated Notes, the New Subordinated Notes and/or the December 1998 Subordinated Notes. "Subordinated Debt Documents": the Indenture, the Registration Rights Agreement, the Purchase Agreement and the Subordinated Notes. "Subordinated Notes": the Borrower's 10 3/8 % Senior Subordinated Notes, due 2007 (the "Initial Subordinated Notes"), issued on April 30, 1997, and any subordinated notes of the Borrower, having the same terms as the Initial Subordinated Notes, issued in exchange for the Initial Subordinated Notes as contemplated by the Subordinated Debt Documents. "Subscription Agreements": the Common Stock Subscription Agreements between Holdings and each of Frank C. Lanza, Robert V. LaPenta, Capital Partners and the Seller, each dated as of April 30, 1997. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantee": the Second Amended and Restated Subsidiary Guarantee substantially in the form of Exhibit B-2, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Subsidiary Pledge Agreement": the Second Amended and Restated Subsidiary Pledge Agreement substantially in the form of Exhibit B-5, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Swing Line Lender": as defined in the Facility A Credit Agreement. 23 "Term Loan Commitment or Term Loan Commitments": the commitments of a Lender to convert all outstanding Revolving 364 Day Loans as of the Revolving 364 Day Termination Date into Term Loans pursuant to subsection 2.5(b); and Term Loan Commitments means such commitments of all Lenders in the aggregate, which shall not exceed an amount equal to the lesser of (x) the aggregate amount of Revolving 364 Day Loans outstanding as of the Revolving 364 Day Termination Date and (y) the aggregate amount of the Revolving 364 Day Commitments existing on the Revolving 364 Day Termination Date. "Term Lender": any Lender having a Term Loan Commitment or a Term Loan outstanding. "Term Loans": the Loans made or deemed made by the Term Lenders to the Borrower pursuant to subsection 2.1(a)(ii). "Term Notes": (i) the promissory notes of the Borrower, if any, which may be hereafter issued pursuant to subsection 2.5(b) on or about the Revolving 364 Day Termination Date to evidence all Revolving 364 Day Loans which were converted into Term Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Term Loan Commitments and Term Loans of any Lender, in each case substantially in the form of Exhibit A-2 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Termination Date": (i) with respect to the Term Loans, if any, March 31, 2003, and (ii) with respect to the Revolving 364 Day Commitments, the Revolving 364 Day Termination Date. "Tranche": the collective reference to Eurodollar Loans with then-current Interest Periods which all begin on the same date and end on the same date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches". "Transaction": the transactions contemplated by the Transaction Documents. "Transaction Agreement": that certain Transaction Agreement, dated as of March 28, 1997 by and among Lockheed Martin Corporation, a Maryland corporation, Holdings, Capital Partners and its Affiliates, Frank C. Lanza and Robert V. LaPenta. "Transaction Documents": (i) the Transaction Agreement, the Schedules thereto and the documents set forth on Schedule III hereto, (ii) the Equity Documents, (iii) the Subordinated Debt Documents and (iv) the New Subordinated Debt Documents. "Transferee": as defined in subsection 10.6(f). "Type": a Revolving 364 Day Loan or a Term Loan, as applicable. 24 "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. "Voting Stock": of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Year 2000 Problem": any significant risk that computer hardware, software or equipment containing embedded microchips essential to the business or operations of the Borrower or any of its Subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively and reliably as in the case of dates or time periods occurring before January 1, 2000, including the making of accurate leap year calculations. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 1.3 Interrelationship with Original Credit Agreement. (a) As stated in the preamble hereof, this Credit Agreement is intended to amend and restate the provisions of the Original Credit Agreement and, notwithstanding any substitution of Notes as of the Closing Date, except as expressly modified herein, (x) all of the terms and provisions of the Original Credit Agreement shall continue to apply for the period prior to the Closing Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to the Original Agents or the Original Lenders (or 25 their assignees or replacements hereunder), and (y) the obligations under the Original Credit Agreement shall continue to be paid or prepaid on or prior to the Closing Date, and shall from and after the Closing Date continue to be owing and be subject to the terms of this Credit Agreement. All references in the Notes and the other Credit Documents to (i) the Original Credit Agreement or the "Credit Agreement" shall be deemed to include references to this Credit Agreement and (ii) the "Lenders" or a "Lender" or to the "Agents" or any "Agent" shall mean such terms as defined in this Credit Agreement. As to all periods occurring on or after the Closing Date, all of the covenants set forth in the Original Credit Agreement shall be of no further force and effect, it being understood that all obligations of the Borrower under the Original Credit Agreement shall be governed by this Credit Agreement from and after the Closing Date. (b) The Borrower, the Agents and the Lenders acknowledge and agree that all outstanding Loans under the Original Credit Agreement (including all outstanding L/C Obligations) are hereby converted into Loans (and, as applicable, L/C Obligations) outstanding hereunder effective as of the Closing Date. The Borrower, the Agents and the Lenders acknowledge and agree that all interest, fees, costs and reimbursable expenses accruing or arising under the Original Credit Agreement which remain unpaid and outstanding as of the Closing Date shall be and remain outstanding and payable as an obligation under this Agreement and the other Credit Documents. 1.4 Confirmation of Existing Obligations. The Borrower hereby agrees and admits that, as of the date hereof, it has no defenses to, or offsets or counterclaim against, any of its obligations to the Agents or any Lender under the Credit Documents of any kind whatsoever. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make the loans described in this subsection 2.1(a) as applicable to the Borrower. (i) Revolving 364 Day Loans. Each Revolving 364 Day Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Revolving 364 Day Commitment Period, in an aggregate principal amount at any one time outstanding which, when added to such Lender's Commitment Percentage with respect to Revolving 364 Day Loans of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving 364 Day Commitment. During the Revolving 364 Day Commitment Period, the Borrower may use the Revolving 364 Day Commitments by borrowing, prepaying the Revolving 364 Day Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (ii) Term Loans. In the event the conditions in subsection 2.5(b) to the exercise of the Conversion Option are satisfied, each Extending Lender severally agrees to convert, effective upon the Revolving 364 Day Termination Date, a principal amount of Revolving 364 Day Loans of such Lender into a Term Loan of such Lender to the 26 Borrower in an aggregate principal amount which does not exceed the lesser of (a) the principal amount of Revolving 364 Day Loans of such Lender outstanding on the Revolving 364 Day Termination Date and (b) the principal amount of such Lender's 364 Day Commitment outstanding on the Revolving 364 Day Termination Date. Amounts borrowed under this subsection 2.1(a)(ii) and subsequently repaid may not be reborrowed. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that, except as contemplated in clause (c) of the definition of Interest Period, no Revolving 364 Day Loan shall be made as a Eurodollar Loan after the day that is one month prior to the applicable Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Revolving 364 Day Commitments during the Revolving 364 Day Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans, (b) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Base Rate Loan), specifying (i) the amount to be borrowed of each Type of Loan, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts below such minimum amounts in clauses (x) or (y) above solely for the purpose of (i) converting Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date, (ii) repaying Revolving 364 Day Loans owing to any Nonconsenting Lenders on the Revolving 364 Day Termination Date and (iii) funding any scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then outstanding. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of Eurodollar Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in accordance with the Borrower's payment instructions with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 27 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving 364 Day Lender a commitment fee for the period from and including the first day of the Revolving 364 Day Commitment Period to and including the Revolving 364 Day Termination Date, computed at the Commitment Fee Rate on the daily amount of the Available Commitment of such Revolving 364 Day Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Revolving 364 Day Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to terminate the Revolving 364 Day Commitments or, from time to time, to reduce the amount of the Revolving 364 Day Commitments ratably among the Revolving 364 Day Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving 364 Day Loans made on the effective date thereof, the aggregate principal amount of the Revolving 364 Day Loans then outstanding, when added to the then outstanding L/C Obligations, would exceed the Revolving 364 Day Commitments then in effect. Any such reduction shall be in an amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Revolving 364 Day Commitments then in effect. 2.5 Extension of Revolving 364 Day Termination Date; Conversion Option; Repayment of Loans; Evidence of Debt. (a) Extension of Revolving 364 Day Termination Date. The Borrower may elect to forward to the Administrative Agent (for distribution to each Lender) no earlier than sixty (60) but no later than fifty-five (55) days prior to the initially scheduled Revolving 364 Day Termination Date a written request asking each Revolving 364 Day Lender to consent to the extension of the Revolving 364 Day Termination Date for one (1) additional 364 day period. Not later than 30 days after receipt of such written request, each Lender shall advise the Administrative Agent and the Borrower in writing whether such Lender consents to the proposed extension if all the conditions, including those set forth in subsection 5.2 of this Agreement, thereto have been satisfied. If all of the Revolving 364 Day Lenders have consented in writing to such extension and all conditions set forth in subsection 5.2 shall have been satisfied, then effective on the initially scheduled Revolving 364 Day Termination Date, the Revolving 364 Day Termination Date shall be deemed automatically extended by an additional 364 day period (herein, the "Extension Option"). If less than all of the Revolving 364 Day Lenders consent to the exercise of the proposed Extension Option (the "Extending Lenders"), the Borrower may replace all, some or none of such Nonconsenting Lenders on or before the initially scheduled Revolving 364 Day Termination Date pursuant to subsection 2.17 and repay all outstanding Revolving 364 Day Loans owing to each Nonconsenting Lender that is not being replaced, if any, on the initially scheduled Revolving 364 Day Termination Date (without giving effect to the Extension Option); provided that if the Extending Lenders do not hold more than 50% of the outstanding Revolving 364 Day Commitments, the Borrower will not be entitled to exercise the Extension Option with respect to any Extending Lenders nor shall any Lender failing to consent 28 to the Extension Option be deemed a Nonconsenting Lender and be subject to replacement under subsection 2.17 as a result thereof. Subject to the foregoing proviso, if the Borrower desires to exercise the Extension Option with the Extending Lenders, Borrower shall provide the Administrative Agent (for distribution to each Lender) with not less than five (5) days prior written notice thereof in addition to satisfying all conditions precedent set forth above (other than the requirement that all Revolving 364 Day Lenders have timely consented to the Extension Option). On the date the Extension Option becomes effective, Schedule I hereto shall be deemed amended to accurately reflect the Revolving 364 Day Commitments of the Revolving 364 Day Lenders then in existence and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (b) Conversion Option. Subject to the terms of this subsection 2.5(b), whether or not the Extension Option is utilized, the Borrower shall be entitled as of the Revolving 364 Day Termination Date to convert the principal amount of any or all Revolving 364 Day Loans (but not any obligations in respect of any Letters of Credit) outstanding as of the Revolving 364 Day Termination Date into Term Loans so long as each of the following conditions are met as of the effective date of such conversion to the satisfaction of the Administrative Agent (the "Conversion Option"): (i) each of the conditions precedent set forth in subsection 5.2 of this Agreement shall be satisfied, (ii) not later than five (5) Business Days before the Revolving 364 Day Termination Date, all Letters of Credit shall have terminated and/or been released and canceled to the satisfaction of the Issuing Lender and the Administrative Agent and all outstanding L/C Obligations in respect of any Letters of Credit shall have been paid in full in cash or cash collateralized on terms deemed satisfactory by the Administrative Agent and the Issuing Lender and (iii) not later than five (5) days before the Revolving 364 Day Termination Date, the Borrower shall have provided the Administrative Agent (for distribution to each Lender) (x) written notice of the Borrower's desire to exercise the Conversion Option, (y) a certificate of a Responsible Officer of the Borrower specifying the aggregate amount of Revolving 364 Day Loans to be paid in full and the amount of such Loans which will be converted to Term Loans, in each case, on the Revolving 364 Day Termination Date and certifying that all conditions precedent to exercise of the Conversion Option are satisfied and will remain satisfied on the Revolving 364 Day Termination Date and (z) Term Notes in the form of Exhibit A-2 hereto for each Lender that requests a Term Note pursuant to subsection 2.5(g)(ii) in the amount of each such Lender's respective Revolving 364 Day Loans which are to be converted into Term Loans of such Lender. If the Conversion Option is exercised, the Term Loans shall be repaid by the Borrower in nine (9) consecutive quarterly installments commencing on March 31, 2001, by funding on each amortization payment date set forth below an amount necessary to cause the aggregate principal amount of Term Loans outstanding on any such date to not exceed an amount equal to the product of (x) the "Applicable Percentage" set forth opposite such amortization payment date multiplied by (y) the aggregate amount of Revolving 364 Day Commitments of all Lenders in existence on the Revolving 364 Day Termination Date (the "Applicable Converted Commitment"): 29 Applicable Percentage of the Amortization Payment Date Applicable Converted Commitment ------------------------- ------------------------------- 3/31/01 90.0% 6/30/01 80.0% 9/30/01 70.0% 12/31/01 60.0% 3/31/02 50.0% 6/30/02 40.0% 9/30/02 30.0% 12/31/02 20.0% 3/31/03 0.0% provided that the scheduled installments of principal of the Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans in accordance with subsection 2.6 (as provided in such subsection); and provided further that the Term Loans and all other amounts owed hereunder with respect to the Term Loans shall be paid in full no later than March 31, 2003, and the final installment payable by the Borrower in respect of the Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the Term Loans. (c) Replacement of Nonconsenting Lenders. If any Revolving 364 Day Lender declines to consent or fails to timely indicate its consent to the exercise by Borrower of the Extension Option and the Extending Lenders hold more than 50% of the Revolving 364 Day Commitments, such Lender shall be deemed a Nonconsenting Lender and be subject to replacement in accordance with the terms of subsection 2.17 hereof. (d) Payments on Revolving 364 Day Loans. Subject to the exercise of the Conversion Option in accordance with the terms of subsection 2.5(b), the Borrower hereby unconditionally promises to pay to the Administrative Agent on the Revolving 364 Day Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) for the account of each Revolving 364 Day Lender the then unpaid principal amount of each Revolving 364 Day Loan of such Lender. (e) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. (f) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (g) Loan Accounts and Register; Notes. 30 (i) The Loans made by, and the Commitments of, each Lender shall be evidenced by one or more loan accounts ("Loan Accounts") maintained by such Lender and by the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's books relating to such matters, be controlling and, absent manifest error, shall be conclusive as to the amount of the Loans made by the Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this subsection 2.5(g) and subsection 10.6, to maintain the Register on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this subsection 2.5(g) and subsection 10.6 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent). (ii) If requested by any Lender, the Borrower shall execute and deliver to such Lender (and deliver a copy thereof to the Administrative Agent) one or more promissory notes evidencing the Loans owing to such Lender pursuant to this Agreement in accordance with subsection 2.5(i). (h) Prima Facie Evidence. The entries made in the Register and the Loan Accounts of each Lender maintained pursuant to subsection 2.5(g) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such Loan Account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. For the avoidance of doubt, the existence or non-existence of any Note representing any Obligations owing to any Lender hereunder shall not affect the existence, amount, validity or enforceability of such Obligations, which in all events shall be absolute and unconditional. (i) Notes. The Borrower agrees that the Borrower will execute and deliver to each Lender that requests any such Note pursuant to subsection 2.5(g)(ii), a promissory note of the Borrower evidencing the Revolving 364 Day Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Revolving 364 Day Note"). 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsections 2.12 and 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon 31 irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment in the case of Eurodollar Loans or on any Business Day in the case of Base Rate Loans, specifying the date and amount of prepayment, the Type of Loan to be prepaid (which Loans shall be prepaid on a pro rata basis among the applicable Lenders) and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $100,000 in excess thereof. In the event of any voluntary prepayment of the Term Loans, such voluntary prepayment shall be deemed applied to the next scheduled amortization payment(s) as described in subsection 2.5(b) (rather than be applied in inverse order of maturity). (b) (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b). Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale, such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans and permanent reduction of the Commitments, the Facility A Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until 32 such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) [Intentionally Omitted] (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by this subsection 2.6 shall be applied ratably to the outstanding principal amount of Facility A Loans, Facility C Loans and Loans, with a corresponding ratable permanent reduction of the Facility A Commitments, the Facility C Commitments and the Revolving 364 Day Commitments (or, if applicable, the Term Loans on a pro rata basis to reduce the unpaid scheduled installments of principal of the Term Loans in inverse order of maturity). Revolving 364 Day Commitment, Facility A Commitment and the Facility C Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) hereof (and the corresponding subsections of the Facility A Credit Agreement and the Facility C Credit Agreement) shall be applied to each Lender's respective Revolving 364 Day Commitment, each Facility A Lender's Facility A Commitment and/or each Facility C Lender's Facility C Commitment, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility A Commitments and Facility C Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility A Credit Agreement and the Facility C Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. (v) If after giving effect to (i) any reduction of the Revolving 364 Day Commitments under subsection 2.4, 2.5 or 2.6 or (ii) any recalculation of the Exchange Rate pursuant to subsection 3.9, the aggregate outstanding principal amount of Revolving 364 Day Loans plus the aggregate outstanding amount of L/C Obligations shall exceed the aggregate amount of the Revolving 364 Day Commitments, such reduction or recalculation shall be accompanied by prepayment in the amount of such excess to be applied to the Revolving 364 Day Loans; provided that if the aggregate principal amount of Revolving 364 Day Loans then outstanding is less than the amount of such excess (because Letters of Credit constitute a portion of such excess), the Borrower shall immediately, without notice or demand, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount (but in no event greater than such balance) in a cash collateral account opened by the Administrative Agent for the benefit of the Revolving 364 Day Lenders (such deposit to be in Dollars with respect to Domestic L/Cs and the applicable Alternative Currency with respect to Foreign L/Cs). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants in such Letters of Credit, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Credit Documents. Any amounts deposited in such accounts shall be released to the Borrower on any Calculation Date on which the aggregate outstanding principal amount of Revolving 364 Day Loans plus the aggregate outstanding amount of L/C Obligations 33 equals or is less than the aggregate amount of the Revolving 364 Day Commitments, provided that no Default or Event of Default has occurred and is continuing. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is then continuing and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date with respect to such Loan. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount and Type of Loan to be converted, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is then continuing or (ii) after the date that is one month prior to the Termination Date with respect to such Loan and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts in any Eurodollar Tranche below such minimum amounts solely for the purpose of (i) converting Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date, (ii) repaying Revolving 364 Day Loans owing to any Nonconsenting Lenders on the Revolving 364 Day Termination Date or (iii) funding any scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then 34 outstanding. All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate borrowings set forth in subsection 2.2 above. In no event shall the number of outstanding Eurodollar Tranches under this Agreement plus the number of outstanding Facility A Eurodollar Tranches and Facility C Eurodollar Tranches exceed 20 at any time. 2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date with respect to such Loan, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of 35 the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Revolving 364 Day Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Revolving 364 Day Commitments of Revolving 364 Day Lenders shall be made pro rata according to the respective Commitment Percentages of the Revolving 364 Day Lenders. Except during any period in which an Event of Default has occurred and is continuing, each payment (including each prepayment) by the Borrower on account of principal of and interest on any Term Loans and/or the Revolving 364 Day Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, Reimbursement Obligations (whether in respect of Domestic L/Cs or Foreign L/Cs), fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower 36 arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. At any time that an Event of Default has occurred and is continuing, all payments (including prepayments) made by Borrower hereunder and any application by the Administrative Agent of the proceeds of any Collateral and/or payment under any Guarantee shall be applied in the following order: (1) to the ratable payment of all amounts due and owing by the Borrower pursuant to subsection 10.5 of this Agreement, subsection 10.5 of the Facility A Credit Agreement or subsection 10.5 or the Facility C Credit Agreement to the Agents, the Facility A Agents and/or the Facility C Agents and, after payment in full thereof, to any other Lender, Facility A Lender or Facility C Lender; (2) to the ratable payment of all interest, fees and commissions due and owing under this Agreement, the Facility A Credit Agreement or the Facility C Credit Agreement or to the Agents, the Facility C Agents, the Facility A Agents, the Swing Line Lender, any Lender, any Facility A Lender or any Facility C Lender; (3) to the ratable payment (or cash collateralization) of the aggregate outstanding principal amount of Loans, Facility A Loans and Facility C Loans and the aggregate L/C Obligations and Facility A L/C Obligations; and (4) to the ratable payment of all other obligations of the Borrower to the Agents, the Facility A Agents, the Facility C Agents, the Swing Line Lender, any Lender, any Facility A Lender or any Facility C Lender under any Credit Document, Facility A Credit Document or Facility C Credit Document. For purposes of applying payments and proceeds distributed under clause 3 above, each Lender will first apply such amounts to all outstanding Loans of such Lender before such amounts will be held as cash collateral for L/C Obligations in which such Lender is a L/C Participant. The Administrative Agent, the Facility A Administrative Agent and the Facility C Administrative Agent shall ratably distribute such payments to the applicable Lenders, the Facility A Lenders and the Facility C Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make 37 any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be reinstated. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such additional amount or amounts as will compensate such 38 Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different Eurodollar lending office if the making of such designation would allow the Lender or its Eurodollar lending office to continue to perform its obligations to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all Eurodollar Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 39 2.15 Taxes. (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between any Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership created or organized in or under the laws of the United States of America, any estate that is subject to U.S. federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: 40 (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 ECI (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents) or Form W-8 BEN (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Borrower described in clause (B) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 2.15(b)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 ECI or W-8 BEN, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower from and against any taxes, penalties, 41 interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any U.S. Taxes from any payments made pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this subsection 2.15(b). The Borrower hereby agrees that for so long as a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 2.15(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to subsection 2.15(a)). If any Credit Party other than the Borrower makes any payment to any Non-U.S. Lender under any Credit Document, the foregoing provisions of this subsection 2.15 shall apply to such Non-U.S. Lender and such Credit Party as if such Credit Party were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Lender has received a request to do so from such Credit Party and has a reasonable time to comply with such request). (c) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of a Non-Excluded Tax paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the preceding sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section has been paid in full. 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a 42 failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this subsection 2.16 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, convert or continue Eurodollar Loans, or to prepay, after notice or after a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsections 2.13, 2.14 or 2.15 as a result of any condition described in such subsections, (b) any Lender ceases to make Eurodollar Loans pursuant to subsection 2.13, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on five (5) Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under one of the subsections described in clause (a) above, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under one of the subsections described in clause (a) above, as the case may be, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to this subsection 2.17, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto or consent to the Extension Option, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 or relates to a request to exercise the 43 Extension Option under subsection 2.5(a) and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 2.18 Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees at the times and in the amounts as set forth in that certain fee letter between the Administrative Agent and the Borrower dated on or about August 11, 1998. 2.19 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes or other amounts giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Eurodollar Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the Revolving 364 Day Lenders set forth in subsection 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving 364 Day Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (x) the L/C Obligations would exceed the L/C Commitment or (y) the Available Commitment with respect to Revolving 364 Day Loans of all Revolving 364 Day Lenders then outstanding would be less than zero. 44 (b) Each Domestic L/C shall (i) be denominated in Dollars, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods and (iii) expire no later than the fifth Business Day prior to the Revolving 364 Day Termination Date. (c) Each Foreign L/C shall (i) be denominated in an Alternative Currency, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods, and (iii) expire no later than the fifth Business Day prior to the Revolving 364 Day Termination Date. For purposes of this Agreement, the amount deemed outstanding under each Foreign L/C at any time, and the amount of the Borrower's Reimbursement Obligations under subsection 3.5 for any amounts paid by the Issuing Lender in connection with any Foreign L/C, shall be the Dollar Equivalent, as determined on the most recent Calculation Date, of (x) such Letter of Credit or (y) the Reimbursement Amount (as defined in Subsection 3.5(a)), as applicable. (d) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, Domestic L/Cs shall also be subject to the laws of the State of New York. (e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if (i) such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law or any policies of the Issuing Lender or (ii) in the case of any Foreign L/C, it has determined that it cannot provide such Letter of Credit in the applicable Alternative Currency. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Revolving 364 Day Termination Date by delivering to the Issuing Lender with a copy to the Administrative Agent at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent (with copies for each Lender) promptly following the issuance thereof. 45 3.3 Fees, Commissions and Other Charges (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum equal to (i) in the case of any such Letter of Credit issued as a Performance L/C, one-half (1/2) of the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding and (ii) in the case of any other Letter of Credit (except for the type described in clause (i) above), the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding, payable, in each such case, in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. Such fees shall be payable to the Administrative Agent to be shared ratably among the Revolving 364 Day Lenders in accordance with their respective Commitment Percentages with respect to Revolving 364 Day Loans. In addition, the Borrower shall pay to the Issuing Lender, for its sole account, a fee equal to 0.125% per annum of the Dollar Equivalent of the aggregate face amount of all outstanding Letters of Credit payable quarterly in arrears on each L/C Fee Payment Date and on the Revolving 364 Day Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the relevant L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participation. (a) The Issuing Lender irrevocably agrees to sell and hereby sells to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Commitment Percentage with respect to Revolving 364 Day Loans from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement or any such reimbursement payment received by the Issuing Lender is avoided or 46 required to be returned in accordance with applicable law, such L/C Participant shall pay to the Issuing Lender upon demand in Dollars at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Commitment Percentage with respect to Revolving 364 Day Loans of the Dollar Equivalent of the amount of such draft (determined on the date such draft is paid), or any part thereof, which is not so indefeasibly reimbursed; provided that, if such demand is made prior to 11:00 A.M., New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 11:00 A.M., New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender and distributed to the L/C Participants shall be required to be returned by the Issuing Lender, each such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender on the same Business Day on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender provided such notice is 47 received by 1:00 P.M., New York City time, on such Business Day, and the next Business Day if such notice is received after such time. The Issuing Lender shall provide notice to the Borrower on each Business Day on which a draft is presented indicating the Dollar Equivalent of the amount of (i) such draft so paid (and, in the case of a Foreign L/C, the amount of such draft so paid stated in the applicable Alternative Currency) and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment ((i) and (ii) collectively with any interest accruing pursuant to paragraph (b) below, the "Reimbursement Amount"). Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. (b) Interest shall be payable on the Dollar Equivalent of any and all amounts remaining unpaid by the Borrower under this subsection from the date a draft presented under any Letter of Credit is paid by the Issuing Lender until payment in full (i) at the rate which would be payable on any Loans that are Base Rate Loans at such time until such payment is required to be made pursuant to subsection 3.5(a), and (ii) thereafter, at the rate which would be payable on any Loans that are Base Rate Loans at such time which were then overdue. (c) For the avoidance of doubt, subject to the provisos in the third sentence of subsection 2.12(a) and the last sentence of subsection 3.5(a) of this Agreement, all payments due from the Borrower hereunder in respect of Foreign L/Cs (and Reimbursement Obligations in connection therewith) shall be made in Dollars as provided in subsection 2.12 of this Agreement. 3.6 Obligations Absolute. (a) The Borrower's obligations under subsection 3.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (unless the Issuing Lender has knowledge of such invalidity, fraud or forgery), (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred, or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or 48 advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and the Dollar Equivalent of the amount thereof (and, in the case of a Foreign L/C, the amount thereof stated in the applicable Alternative Currency). If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the Borrower in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall govern and control. 3.9 Determination of Exchange Rate. On each Calculation Date with respect to each outstanding Foreign L/C, the Issuing Lender shall determine the Exchange Rate as of such Calculation Date with respect to the applicable Alternative Currency and shall promptly notify the Administrative Agent and the Borrower thereof and of the Dollar Equivalent of all Foreign L/Cs outstanding on such Calculation Date. The Exchange Rate so determined shall become effective on such Calculation Date and shall remain effective until the next succeeding Calculation Date. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Issuing Lender, and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agents, the Issuing Lender, and each Lender that: 4.1 Financial Condition. (a) The following financial statements concerning Borrower and its Subsidiaries have been delivered to the Agents and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial 49 position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended: (i) The audited consolidated balance sheets at December 31, 1998 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers L.L.P. (ii) The unaudited condensed consolidated balance sheet(s) at September 30, 1999 and the related statement(s) of income and cash flows of Borrower and its Subsidiaries for the fiscal quarter then ended. (b) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries which has been delivered pursuant to subsection 5.1(o) has been prepared based on the best information available to the Borrower as of the date of delivery thereof and presents fairly on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries, as at December 31, 1999, adjusted to give effect to the acquisition by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc., and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. 4.2 No Change. Since September 30, 1999 there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is, or will be on or before the date set forth in subsection 6.12, duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each of Holdings, the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party, except those referred to in subsections 4.17 and 6.13 and those set 50 forth on Schedule 4.4. This Agreement has been, and each other Credit Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Pledge Agreements. 4.6 No Material Litigation Except as set forth on Schedule 4.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Credit Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or 51 questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA. The Borrower has provided to the Agents a true and correct copy of all agreements, arrangements and understandings relating to the transfer of Plans from the Seller to the Borrower (the "Transfer Agreements"). The Transfer Agreements are in full force and effect and have not been waived or modified without the consent of the Agents (which shall not be unreasonably withheld) except to the extent any such waiver or modification, singly or in the aggregate, could not be reasonably expected to have a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination or, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. As of the 52 last annual valuation date prior to the date on which this representation is made or deemed made, the fair market value of the assets available for benefits under each Single Employer Plan did not exceed the actuarial present value of all accumulated benefit obligations under such Plan by more than $20,000,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. 4.13 Investment Company Act; Other Regulations. None of the Borrower or any of its Subsidiaries is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. None of the Borrower or any of its subsidiaries is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 4.14 Subsidiaries. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 4.14. 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) to pay fees and expenses related to the preparation and negotiation of this Agreement and the other Credit Documents and (ii) for general corporate and working capital purposes in the ordinary course of business of the Borrower and its Subsidiaries, including, without limitation, the making of Investments permitted under subsection 7.9. 4.16 Environmental Matters. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated Holdings, by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. 53 (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which Holdings, the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Holdings, the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. 4.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, each Pledge Agreement will be effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the pledged stock described therein and, when stock certificates representing or constituting the pledged stock described therein are delivered to the Administrative Agent, together with undated stock powers executed in blank therefor, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock described therein. 4.18 Accuracy and Completeness of Information. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its 54 Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to subsections 4.1 and 6.1 hereto. 4.19 Labor Matters. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Effectiveness. This Agreement shall not be effective until the following conditions precedent have been satisfied or waived in writing by the Administrative Agent and the Requisite Class Lenders: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, (ii) the Guarantees and (iii) the Pledge Agreements, in each case executed, duly acknowledged and delivered by duly authorized officers of each party thereto, with a counterpart or a conformed copy for each Lender. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the capital stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. (b) Fees and Expenses. The Agents, the Arrangers and the Lenders shall have received all fees, expenses and other consideration required to be paid on or before the Closing Date and all attorneys fees and disbursements incurred by the Agents in connection with this Agreement shall have been paid on or before the Closing Date. (c) Good Standing Certificates. The Administrative Agent shall have received certificates of good standing for each Credit Party issued by the Secretary of State (or other relevant governmental officers) of the jurisdiction of incorporation of each Credit Party. (d) Consents, Authorizations and Filings, Etc. All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Credit Parties, and the validity and enforceability against the Credit Parties, of the Credit Documents to which any of them is a party, shall have been obtained or made, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, the failure to obtain which would not have a Material Adverse Effect. (e) Insurance. The Lenders shall have received (i) a reasonably satisfactory schedule describing all insurance maintained by the Borrower and its Subsidiaries pursuant to subsection 6.5, and (ii) binders (or other customary evidence as to the obtaining and maintenance 55 by the Borrower and its Subsidiaries of such insurance) for each policy set forth on such schedule insuring against casualty and other usual and customary risks. (f) Litigation. On the Closing Date, there shall be no actions, suits or proceedings pending or threatened against any Credit Party (a) with respect to this Agreement or any other Credit Document or any Transaction Document or the transactions contemplated hereby or thereby or (b) which the Agents or the Required Lenders shall determine could reasonably be expected to have a Material Adverse Effect. (g) Borrowing Certificate. IF ANY LOAN IS TO BE REQUESTED ON THE CLOSING DATE, the Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (h) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, (ii) the borrowings contemplated hereunder, and (iii) the stock pledges pursuant to the Borrower Pledge Agreement, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Credit Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (j) Corporate Proceedings of Other Credit Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party (other than the Borrower) authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, and (ii) the granting by it of the Liens created pursuant to the Pledge Agreements to which it is a party, certified by the Secretary or an Assistant Secretary of each such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (k) Credit Party Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Credit Party (other than the Borrower), dated the Closing Date, as to the incumbency and signature of the officers of such 56 Credit Party executing any Credit Document, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Credit Party. (l) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the such Credit Party. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender the executed legal opinion of each of Simpson Thacher and Bartlett, special counsel to the Credit Parties, and Christopher C. Cambria, Vice President - General Counsel and Secretary of the Borrower and counsel to the other Credit Parties, substantially in the form of Exhibits C-1 and C-2, respectively. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. (n) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (o) Pro Forma Financials. The Lenders shall have received a reasonably satisfactory unaudited pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1999 which shall present fairly, in all material respects, on a pro forma basis, the estimated financial condition of the Borrower and its Subsidiaries as of such date, as adjusted to give effect to the acquisition by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc., and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. (p) Projections. Each Lender shall have received financial projections of the Borrower in form and substance reasonably satisfactory to the Agents prepared by the Borrower. (q) No Default. No Default or Event of Default shall have occurred and be continuing. (r) Facility A Credit Agreement. All conditions set forth in clauses (a) through (q) of subsection 5.1 of the Facility A Credit Agreement shall have been satisfied or waived in writing by the Facility A Lenders required to affect a waiver of such condition. (s) Facility C Credit Agreement. All conditions set forth in clauses (a) through (q) and (t) through (w) of subsection 5.1 of the Facility C Credit Agreement shall have been satisfied or waived in writing by the Facility C Lenders required to affect a waiver of such condition. 57 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit (including the issuance of any Letter of Credit) requested to be provided by it on any date (including, without limitation, its initial Loan and Letter(s) of Credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for any representation and warranty which is expressly made as of an earlier date, which representation and warranty shall have been true and correct in all material respects as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur or exist after giving effect to the extensions of credit requested to be made on such date. Borrower shall not be in violation of Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture on such date nor will such a violation occur or exist after giving effect to the extensions of credit requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agents, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by, and each Letter of Credit issued on behalf of, the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 SEC Filings. The Borrower will file on a timely basis with the SEC, to the extent such filings are accepted by the SEC and whether or not the Borrower has a class of securities registered under the Exchange Act, the annual reports, quarterly reports (including with respect to the fourth quarter of each fiscal year) and other documents that the Borrower would be required to file if the Borrower were subject to section 13(a) or 15(d) of the Exchange Act. The Borrower will also be required (i) to deliver to the Administrative Agent and each Lender, copies of such reports and documents within five days after the date on which the Borrower files such reports and documents with the SEC or the date on which the Borrower would be required to file 58 such reports and documents if the Borrower were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to promptly notify the Administrative Agent in writing of the occurrence of any such event and to supply at the Borrower's cost copies of such reports and documents to the Administrative Agent and any Lender upon request. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent with copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of the independent certified public accountants reporting on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto) and (ii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1, a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) the Debt Ratio and (ii) the financial covenants set forth in subsection 7.1, as of such last day or for the fiscal period then ended, as the case may be; (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or Holdings sends to its stockholders; and 59 (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law. Except as permitted by subsection 7.5 and subsection 7.6, (a) continue to engage in business of the same general type as now conducted by it; (b) preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (c) keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear and damage by fire and/or other casualty or taking by condemnation excepted) except if (i) in the reasonable business judgment of the Borrower or such Subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges or franchises, and (ii) such failure to preserve and maintain such privileges, rights or franchises would not materially adversely affect the rights of the Lenders hereunder or the value of the Collateral, and except as otherwise permitted pursuant to subsection 7.5; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 Insurance. The Borrower will, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies of similar stature engaged in the same or similar businesses operating in the same or similar locations. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records (except to the extent any such access is restricted by a Requirement of Law) at any reasonable time on a Business Day and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: 60 (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $7,500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the following events, as soon as possible and in any event within 45 days after the Borrower knows or has reason to know thereof: (i) the incurrence of an accumulated funding deficiency or the filing of an application to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan, the creation of any Lien in favor of the PBGC or a Plan, the occurrence of any "Trigger Event" (as defined in the Transfer Agreements) and the reassumption by the Seller of sponsorship of any Single Employer Plan, (ii) except where such event or liability could not reasonably be expected to have a Material Adverse Effect, the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure to make any required contribution to a Plan, (iii) the institution of proceedings by the PBGC with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan or (iv) except as could not reasonably be expected to have a Material Adverse Effect, the institution of proceedings or the taking of any other action with respect to the withdrawal from or termination of any Single Employer Plan; Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 6.8 Environmental Laws. (a) (i) Comply in all material respects with all Environmental Laws applicable to it, and obtain, comply in all material respects with and maintain any and all material Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all material respects with all applicable Environmental Laws, and obtain, comply in all material respects with and maintain any and all material Environmental Permits, applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or 61 suspected noncompliance, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve material compliance. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed and delivered any and all documents which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.10 Additional Collateral. (a) With respect to any Capital Stock of any newly created or acquired Subsidiary or any newly issued Capital Stock of any existing Subsidiary acquired after the Original Closing Date by the Borrower or any of its Subsidiaries that is intended to be subject to the Lien created by any of the Pledge Agreements but which is not so subject, promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Pledge Agreements or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such Capital Stock, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including delivering all such original certificates evidencing such Capital Stock to the Administrative Agent together with undated stock powers executed in blank therefor, and (iii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be required to grant to the Administrative Agent a Lien upon the Capital Stock of any Immaterial Subsidiary. (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the 62 Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. 6.11 [Intentionally Omitted.] 6.12 Foreign Jurisdictions. Maintain due qualification as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.13 Government Contracts. The Borrower and its Subsidiaries shall apply for and maintain all material facility security clearances and personnel security clearances required of the Borrower under all Requirements of Law to perform and deliver under any and all Government Contracts and as otherwise may be necessary to continue to perform the business of the Borrower and its Subsidiaries. 6.14 Lien Searches . Not later than 45 days following the Closing Date, the Borrower shall deliver to the Administrative Agent the results of a search of Uniform Commercial Code, tax and judgment filings made with respect to each of the Borrower and its Subsidiaries (other than any Immaterial Subsidiaries) in each jurisdiction in which the Borrower or such applicable Subsidiary maintains its principal place of business or any material assets and a certificate of a Responsible Officer certifying that such lien search results do not disclose any Liens, except for Liens permitted hereunder. SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1), shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the fiscal quarter during which such fiscal quarter occurs: Fiscal Quarter Ending Ratio --------------------- ----- December 31, 1999 4.75 March 31, 2000 4.75 June 30, 2000 4.75 63 September 30, 2000 4.50 December 31, 2000 4.50 March 31, 2001 4.50 June 30, 2001 4.50 September 30, 2001 3.75 December 31, 2001 3.75 March 31, 2002 3.75 June 30, 2002 3.75 September 30, 2002 3.25 and thereafter (b) Interest Coverage. Permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense during any Test Period to be less than the ratio set forth opposite such period below (such ratio, the "Interest Coverage Ratio"): Test Period Interest Coverage Ratio ----------- ----------------------- 10/1/99 - 12/31/99 2.25 1/1/00 - 3/31/00 2.25 4/1/00 - 6/30/00 2.25 7/1/00 - 9/30/00 2.50 10/1/00 - 12/31/00 2.50 1/1/01 - 3/31/01 2.50 4/1/01 - 6/30/01 2.50 7/1/01 - 9/30/01 2.75 10/1/01 - 12/31/01 2.75 1/1/02 - 3/31/02 2.75 4/1/02 - 6/30/02 2.75 7/1/02 - 9/30/02 3.00 10/1/02 - and thereafter 3.00 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (including in respect of Interest Rate Agreements), except: (a) Indebtedness of the Borrower under this Agreement, the Facility A Credit Agreement and the Facility C Credit Agreement; (b) Indebtedness of the Borrower incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $25,000,000 at any time outstanding; 64 (c) Indebtedness assumed in connection with any Investment permitted pursuant to subsection 7.9(k) hereof. (d) additional Indebtedness of the Borrower not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); (e) Indebtedness of the Borrower in respect of not more than (i) $225,000,000 principal amount of Subordinated Notes issued on the April 30, 1997 (ii) $180,000,000 principal amount of New Subordinated Notes issued on May 22, 1998 and (iii) $200,000,000 principal amount of December 1998 Subordinated Notes issued on or about December 8, 1998; (f) the Indebtedness of the Borrower and its Subsidiaries outstanding on the Original Closing Date and reflected on Schedule 7.2(f), and refundings or refinancings thereof, provided that no such refunding or refinancing shall shorten the maturity or increase the principal amount of the original Indebtedness; (g) Guarantee Obligations permitted by subsection 7.4; (h) the incurrence by any Credit Party of intercompany Indebtedness between or among the Credit Parties; provided, however, that if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations; (i) Indebtedness secured by Permitted Liens; (j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $100,000,000 at any time outstanding, less, without duplication, the aggregate amount of then existing Guarantee Obligations permitted under 7.4(g); and (k) Up to $30,000,000 of purchase money Indebtedness the proceeds of which are utilized to acquire the real property (including improvements thereon) and related assets currently utilized by the Borrower's communications systems west division in Salt Lake City, Utah, on terms reasonably satisfactory to the Agents. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are 65 maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(f), provided that no such Lien is expanded to cover any additional property (other than after-acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals or replacements thereof provided that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the original Indebtedness; and provided, further, that the assets of the Borrower and its Subsidiaries encumbered by such Liens are existing equipment and other existing tangible assets; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsections 7.2(b) and 7.2(k) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property of such property at the time it was acquired; (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), 66 provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $35,000,000 in aggregate amount at any time outstanding; (j) Liens created pursuant to the Pledge Agreements; (k) Liens on the property of the Borrower or any of its Subsidiaries in favor of landlords securing licenses, subleases or leases entered into in the ordinary course of business; (l) licenses, leases or subleases permitted hereunder granted to other Persons not interfering in any material respect in the business of the Borrower or any of its Subsidiaries; (m) so long as no Default or Event of Default shall have occurred and be continuing under clause (f) of Section 8, attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $7,500,000; (n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower, or any of its subsidiaries in the ordinary course of business; and (o) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and extensions, renewals and replacements thereof, provided, however, that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the Indebtedness guaranteed by the original guarantee; (b) Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed $30,000,000 at any one time outstanding for the Borrower and its Subsidiaries; 67 (c) guarantees made by the Subsidiaries of the Borrower pursuant to the Subordinated Debt Documents, the New Subordinated Debt Documents and the December 1998 Subordinated Debt Documents; (d) Guarantee Obligations under the Credit Documents and the Facility A Credit Documents and the Facility C Credit Documents; (e) L/C Obligations and the Facility A L/C Obligations; (f) Guarantee Obligations of the Borrower or any Subsidiary in respect of obligations of a Subsidiary permitted to be incurred by such Subsidiary by this Agreement; and (g) Guarantee Obligations in respect of surety bonds and/or performance letters of credit which shall not exceed $100,000,000 at any time less, without duplication, the amount of outstanding Indebtedness permitted under subsection 7.2(j). 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); and (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Credit Party. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); 68 (c) as permitted pursuant to subsection 7.5(b); (d) the sale, lease, transfer or exchange of inventory in the ordinary course of business; (e) transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and (j) the conveyance, sale, assignment or contribution to any new Subsidiary of the Borrower or any existing Subsidiary of the Borrower assets of the Borrower or any Subsidiary of the Borrower not exceeding five percent (5%) of the Consolidated Total Assets. 7.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary other than Permitted Stock Payments. 7.8 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for capital expenditures in the ordinary course of business not exceeding $45,000,000 in the aggregate for the Borrower and its Subsidiaries during any fiscal year of the Borrower; provided, that up to 50% of any such amount not so expended in the fiscal year for which it is permitted above may be carried over for expenditure in the next following fiscal year; provided, further, that Borrower and/or its Subsidiaries may exceed the annual limit on capital expenditures set forth above by utilizing any amounts available for Investments permitted under subsection 7.9(k) hereto to fund such additional Capital Expenditures. 69 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) loans to officers of the Borrower listed on Schedule 7.9(c) in aggregate principal amounts outstanding not to exceed the respective amounts set forth for such officers on said Schedule; (d) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at any one time outstanding; (e) investments by the Borrower in its Subsidiaries that are Credit Parties and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Credit Parties; (f) so long as no Event of Default has occurred and is continuing, loans by the Borrower to its employees (other than any Principals or their Related Parties) in connection with (i) management incentive plans, (ii) management stock purchase plans, and (iii) obligations of employee option-holders of Storm Control Systems, Inc. to fund the exercise of such options, which loans in (i), (ii) and (iii) in the aggregate do not exceed $5,000,000; (g) Investments in existence on the Original Closing Date set forth on Schedule 7.9(g) and extensions, renewals, modifications or restatements or replacements thereof; provided that no such extension, renewal, modification or restatement shall increase the amount of the original loan, advance or investment; (h) promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (i) Investments permitted by subsection 7.6(b) and subsection 7.6(j); (j) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; 70 (k) Investments made at any time from and after the Original Closing Date to acquire (i) all or any portion of the Capital Stock, or all or any portion of the assets, of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business, or (ii) all or substantially all of the assets of any division of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business; provided, that, (a) if such Investment is an acquisition of a majority of the Voting Stock of any Person, such Person's board of directors or similar governing body shall have approved such acquisition and (b) at the time of each such Investment described above in clauses (i) and (ii) (both before and after giving effect to such Investment), there shall exist no Default or Event of Default and the aggregate consideration paid (regardless of form, including in the case of an acquisition of assets, any assumed obligations) in connection with all Investments made pursuant to this subsection 7.9(k) shall not exceed the New Investment Sublimit (without deducting therefrom (w) the portion of any purchase price for any Investment funded with Capital Stock of Holdings, (x) consideration paid by the Borrower in connection with the acquisition of SPD Technologies pursuant to the SPD Technologies Acquisition Agreement, (y) consideration not exceeding $92 million paid by Borrower in connection with the acquisition of Microdyne Corporation and (z) any consideration paid prior to December 8, 1998 by the Borrower in connection with any Investment which is listed on Schedule 7.9(k) hereto); provided, further, that in connection with each individual, or series of related, Investments made pursuant to this subsection 7.9(k),the Borrower shall deliver to the Administrative Agent, on or prior to the date which is one Business Day prior to the consummation of such Investment or Investments, a certificate of a Responsible Officer that certifies that no Default or Event of Default has occurred and is continuing or will be caused as a result of consummating such proposed Investment. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents, New Subordinated Debt Documents or December 1998 Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Transaction Documents in any manner that could reasonably be expected to be adverse to the Lenders. 71 7.11 Limitation on Transactions with Affiliates. (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's business and (iii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. (b) In addition, notwithstanding the foregoing, the Borrower and its Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower and Holdings; (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and (iv) transactions described in the Transaction Documents. 7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary; provided that the Borrower may enter into a sale and leaseback transaction if the Borrower could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction and (b) incurred a Lien to secure such Indebtedness, in each case in accordance with the restrictions contained in this Agreement and the other Credit Documents. 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, the Facility A Credit Agreement and the Facility C Credit Agreement, (b) the Subordinated Debt Documents, the New Subordinated Debt Documents or the December 1998 Subordinated Debt Documents, and (c) any industrial revenue 72 bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary (other than an Immaterial Subsidiary), except for Similar Businesses. 7.16 Designated Senior Debt. Designate any Indebtedness or other obligation, other than Indebtedness under the Credit Documents, as "Designated Senior Debt," as such term is defined in the Indenture as in effect on April 30, 1997, the New Subordinated Debt Indenture as in effect on May 22, 1998 or the December 1998 Subordinated Debt Indenture as in effect on December 8, 1998, or any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate blockage periods under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture or any other Indebtedness or other obligation of the Borrower and its Subsidiaries (other than as a result of a payment default). SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; (b) Any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) The Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 7 or subsection 6.7(a) of this Agreement, Section 4 of the Parent Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the Parent Pledge Agreement, Section 4 of the Borrower Pledge Agreement, or Section 4 of the Subsidiary Pledge Agreement; (d) The Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; 73 (e) The Borrower or any of its Subsidiaries shall (i) default (x) in any payment of principal of or interest of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or Interest Rate Agreement Obligations or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of Indebtedness, Interest Rate Agreement Obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $7,500,000 and (ii) such default continues for a period in excess of 10 days; (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Holdings, Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of 74 the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $7,500,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) (i) Any of the Pledge Agreements shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Pledge Agreements shall so assert or (ii) the Lien created by any of the Pledge Agreements shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); (j) The Guarantee Obligation of any Credit Party under the Credit Documents shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; (k) There shall have occurred a Change in Control; or (l) An "Event of Default" as defined in the Facility A Credit Agreement and/or the Facility C Credit Agreement shall have occurred and be continuing; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the 75 following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Equivalent of the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants (and the benefit of each such "Issuing Lender" and the "L/C Participants" as defined in the Facility A Credit Agreement), a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement, the Facility A Credit Agreement, the other Credit Documents and the other Facility A Credit Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent in accordance with subsection 2.12 hereof. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants (and each applicable "Issuing Lender" and the "L/C Participants" as defined in the Facility A Credit Agreement), such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS; THE ARRANGERS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied 76 covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or 77 Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Types of Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The 78 agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it or Loan Account maintained by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall, unless a Default or Event of Default shall have occurred and be continuing, be approved by the Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Similarly, the Syndication Agent and/or the Documentation Agent may resign as Syndication Agent and/or Documentation Agent, as the case may be, upon 30 days' notice to the Lenders. The procedure for replacement and effective date of resignation for the Syndication Agent and the Documentation Agent shall be identical to that provided above for the Administrative Agent. 9.10 The Arrangers and the Co-Agents. Except as expressly set forth herein, each of the Arrangers and the Co-Agents, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. 79 SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of maturity of any Loan, extend the expiration of any Letter of Credit beyond the Revolving 364 Day Termination Date, or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender affected thereby, or increase the commitment of any Lender or extend the expiry of the commitment of any Lender without the consent of such Lender, (ii) amend, modify or waive the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all the Lenders, (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Agents, or (v) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents or the Issuing Lender without the written consent of the Arrangers, the Agents or the Issuing Lender, as the case may be. In addition to the foregoing, (A) no amendment, modification, termination or waiver of any provision of subsection 2.5, subsection 2.6 or subsection 2.12 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, the application of any scheduled payment or voluntary or mandatory prepayment, the application of proceeds of any Collateral or any Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class), (B) no amendment, modification, termination or waiver of any provision of any Guarantee or Pledge Agreement shall be effective without the written concurrence of the Requisite Class Lenders for each Class and (C) no amendment, modification or waiver with respect to any provision of this subsection 10.1 or to the definition of "Requisite Class Lenders" shall be effective without the written concurrence of all Lenders, all Facility A Lenders and all Facility C Lenders Any such waiver and any such 80 amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and the Issuing Lender and all future holders of the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as issuance of a new Letter of Credit. In the case of any waiver, the Borrower, the Lenders and the Agents and the Issuing Lender shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, Issuing Lender, the Syndication Agent and the Documentation Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings, the Borrower or any of its Subsidiaries: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, NY 10016 Attention: Robert LaPenta Fax: (212) 805-5470 with a copy to Attention: Christopher C. Cambria Fax: (212) 805-5494 81 The Administrative Agent: Addresses for notices of borrowing, prepayments and other administrative matters: Bank of America, N.A. 1850 Gateway Boulevard, 5th Floor Concord, CA 94520 Attention: Agency Administrative Services #5596 Josephine T. Flores, Vice President Fax: (925) 675-8500 Tel: (925) 675-8374 Addresses for all other notices (including with respect to amendments and waivers): Bank of America, N.A. 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management #10831 Dietmar Schiel, Vice President Fax: (415) 436-3425 Tel: (415) 436-2769 with a copy to: Bank of America, N.A. 335 Madison Avenue New York, NY 10017 Attention: Lisa B. Choi Fax: (212) 503-7066 Tel: (212) 503-8101 82 The Issuing Lender: Bank of America, N.A. 333 S. Beaudry Avenue, 19th Floor Los Angeles CA 90017-1486 Attention: Trade Operations Center - Standby Letters of Credit #22621 Sandra M. Leon, Vice President Fax: (213) 345-6694 Tel: (213) 345-5231 The Documentation Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michele Swanson Fax: (212) 528-0819 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michelle Swanson Fax: (212) 528-0819 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 83 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each of the Agents for all of their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Lenders (in addition to any local counsel), (b) to pay or reimburse each Lender and each Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and each Arranger, each Agent and each Issuing Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Transaction, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), it being understood that the Borrower shall have an obligation hereunder to the Lender or any Agent with respect to any indemnified liabilities incurred by any Agents, Arranger or the Issuing Lender or any Lender as a result of any Materials of Environmental Concern that are first manufactured, emitted, generated, treated, released, spilled, stored or disposed of on, at or from any Property or any violation of any Environmental Law, which in any case first occurs on or with respect to such Property (i) after the Property is transferred to any Agent, Arranger, Issuing Lender or any Lender or their successors or assigns by foreclosure sale, deed in lieu of foreclosure, or similar transfer or, following such transfer, (ii) in connection with, but prior to, the sale, leasing or other transfer of such Property by such Agent, Arranger, Issuing Lender, or any Lender or their successors or assigns to one or more third parties; provided, however, that the Borrower shall have no obligation hereunder to any Agent or the Issuing Lender or any Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent or the Issuing Lender or any such Lender, or with respect to otherwise indemnified liabilities following the sale, leasing or other transfer of such Property to one or more third parties. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 84 10.6 Successors and Assigns; Participation and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law and the limitations set forth in subsection 2.1(a)(ii), at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i), (ii) and (iii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Letters of Credit, the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said subsection; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law and the limitations set forth in subsection 2.1(a)(ii), at any time and from time to time assign to any Lender, any affiliate thereof or, in the case of Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities (an "Investment Fund"), any other such Investment Fund which is under common management with such Lender, or, with the consent of the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender (which in each case shall not be 85 unreasonably withheld), to an additional bank, Investment Fund or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register with a copy to the Syndication Agent, provided that, in the case of any such assignment to an additional bank or financial institution, (A) either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (B) each Assignee which is a Non-U.S. Lender shall comply with the provisions of clause (A) of subsection 2.15(b) hereof, or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of subsection 2.15(b) hereof (and, in either case, with all of the other provisions of subsection 2.15(b) hereof). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection, the consent of the Borrower shall not be required for any assignment which occurs at any time when any of the events described in clause (f) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans of each Type owing to each Lender from time to time and the registered owners of the Obligations evidenced by the Notes and the Loan Accounts. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, a Note or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, Commitment or other obligation evidenced by a Note or a Loan Account shall be effective only upon appropriate entries with respect thereto being made in the Register, and prior to such recordation, all amounts owing to the assignor with respect thereto shall remain owing to the assignor. Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be 86 registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Notes shall be issued to the designated Assignee, if requested, and the old Note shall be returned by the Administrative Agent to the Borrower marked "canceled." (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,000 (provided that no such payment shall be required whenever LCPI or BOA is the assigning Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. Following the effective date of any such Assignment and Acceptance, the Administrative Agent shall be entitled to update Schedule I hereto to reflect the then outstanding Commitments of each Lender whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I and be deemed a part of this Agreement without any further action or consent of any party and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security 87 interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (i) Notwithstanding any other provision contained in this Agreement or any other Credit Document to the contrary, (x) any Lender may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect to such assigned Loans to the extent of such payments and (y) with the consent of the Administrative Agent (not to be unreasonably withheld), any Lender which is an Investment Fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee. No such assignment shall release the assigning Lender from its obligations hereunder. 10.7 Adjustments; Set-off. (a) At any time that an Event of Default has occurred and is continuing, if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, Facility A Lender or Facility C Lender (any such affected Lender, Facility A Lender or Facility C Lender, hereinafter, an "Affected Lender"), if any, in respect of the Borrower's obligations owing to such other Affected Lender, whether under this Agreement, the Facility A Credit Agreement or Facility C Credit Agreement, including any interest thereon, such benefited Lender shall purchase for cash from each other Affected Lender a participating interest in such portion of each such other Affected Lender's Loans or the Reimbursement Obligations owing to it, Facility A Loans or Facility A Reimbursement Obligations and/or Facility C Loans owing to it, or shall provide such other Affected Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Affected Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest unless the benefited Lender is required by court order to pay interest thereon, in which case each Lender returning funds to such benefited Lender shall pay its pro rata share of such interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other 88 credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and Borrower also agree that all proceeds of any such set-off shall be subject to the ratable sharing provisions of subsections 2.12 and 10.7(a) hereof to the same extent as if an Event of Default had occurred and was then continuing. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT 89 IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE ARRANGERS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the 90 Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 10.16 Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. (b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this subsection 10.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 10.17 Year 2000. The Borrower has reviewed, or will expeditiously review, its operations and those of its Subsidiaries with a view to assessing whether its businesses, or the businesses of any of its Subsidiaries, are experiencing any Year 2000 Problem. The Borrower shall take all actions necessary and commit adequate resources to assure that its computer-based and other systems (and those of all of its Subsidiaries) are able to effectively process data, including dates after January 1, 2000, without experiencing any Year 2000 Problem that could reasonably be expected to cause a Material Adverse Effect. At the request of the Required Lenders, the Borrower will provide the Administrative Agent with assurances and substantiations 91 (including, but not limited to, the results of internal or external audit reports prepared in the ordinary course of business) reasonably acceptable to the Administrative Agent as to the capability of the Borrower and its Subsidiaries to conduct its and their businesses and operations after January 1, 2000 without experiencing a Year 2000 Problem causing a Material Adverse Effect. The Borrower represents and warrants that it has a reasonable basis to believe that no Year 2000 Problem will cause a Material Adverse Effect. 10.18 Existing Agreements Superseded. As set forth in subsection 1.3 hereof, the Original Credit Agreement is superseded by this Credit Agreement, which has been executed in renewal, amendment, restatement and modification, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. [SIGNATURE PAGES FOLLOW] 92 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ----------------------------------------- Title: BANK OF AMERICA, N.A, as Administrative Agent By: ----------------------------------------- Title: BANK OF AMERICA, N.A., as a Lender and Swing Line Lender By: ----------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: ----------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE BANK OF NEW YORK By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE BANK OF NOVA SCOTIA By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT BANK ONE, NA By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT BANKBOSTON, N.A. By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT CREDIT LYONNAIS By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT FIRST UNION COMMERCIAL CORPORATION By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT FLEET NATIONAL BANK By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE FUJI BANK, LIMITED By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT HSBC BANK USA By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT SOCIETE GENERALE By: ---------------------------------------- Title: SIGNATURE PAGES TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT Schedule I To Credit Agreement
Lenders/Address for Notices Revolving 364 Day Commitment LEHMAN COMMERCIAL PAPER INC. $19,285,714.28 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Michelle Swanson Fax : (212) 528-0819 Tel : (212) 526-0330 BANK OF AMERICA, N.A. $19,285,714.28 335 Madison Avenue New York, New York 10017 Attention: Lisa Choi Fax: (212) 503-7066 Tel: (212) 503-8101 with a copy to other parties listed in (Section) 10.2 for BOA. CREDIT LYONNAIS $17,857,142.86 1301 Avenue of the Americas New York, NY 10019-6022 Attention: Judy Domkowski Fax: (212) 459-3179 Tel: (212) 261-7341 FLEET NATIONAL BANK $12,857,142.86 100 Federal Street MA DE 10010A Boston, MA 02110 Attention: Roger Boucher Fax: (617) 434-0601 Tel: (617) 434-3951 HSBC BANK USA $12,857,142.86 140 Broadway 5th Floor New York, NY 10005-1196 Attention: John Lyons Fax: (212) 658-2586 Tel: (212) 658-2200 I-1 THE BANK OF NOVA SCOTIA $17,857,142.86 One Liberty Plaza New York, NY 10006 Attention: Ben Sileo Fax: (212) 225-5090 Tel: (212) 225-5159 BANK ONE, N.A. $17,857,142.86 153 West 51st Street New York, NY 10019-6025 Attention: Andrea Kantor Fax: (212) 373-1180 Tel: (212) 373-1023 THE FUJI BANK LIMITED $8,571,428.56 Two World Trade Center, 79th Floor New York, NY 10048-0001 Attention: David Manheim Fax: (212) 898-2399 Tel: (212) 898-2723 SOCIETE GENERALE $12,857,142.86 181 West Madison Street Suite 3400 Chicago, IL 60602 Attention: Joe Moreno Fax: (312) 578-5099 Tel: (312) 578-5050 THE BANK OF NEW YORK $12,857,142.86 One Wall Street New York, NY 10286 Attention: Ken Sneider Fax: (212) 635-6999 Tel: (212) 635-6863 FIRST UNION COMMERCIAL CORPORATION $12,857,142.86 201 So. College St. Charlotte, NC 28288 Attention: Barbara Van Meerten Fax: (704) 374-4793 Tel: (704) 374-7115 I-2 BANK BOSTON, N.A $15,000,000 100 Federal Street Boston, MA 02110 Attention: Jana Dombrowski Fax: (617) 434-0601 Tel: (617) 434-7570 THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY $20,000,000 1251 Avenue of the Americas, 18th Floor New York, New York 10020 Attention: Karen Brinkman Fax: (212) 782-4981 Tel: (212) 782-4396
I-3 Schedule II to Credit Agreement PRICING GRID*
REVOLVING 364 DAY FACILITY REVOLVING 364 DAY FACILITY AND TERM LOAN APPLICABLE AND TERM LOAN APPLICABLE REVOLVING 364 DAY DEBT RATIO MARGIN-EURODOLLAR RATE** MARGIN-BASE RATE** COMMITMENT FEE** - ----------------------------------------------------------------------------------------------------------------------- greater than 4.75x 275 175 30 greater than 4.25x 237.5 137.5 30 greater than 3.75x 200 100 30 greater than 3.25x 175 75 25 greater than 2.75x 150 50 22.5 less than or equal to 2.75x 125 37.5 20
- --------------------------- * Pricing Grid (except for Debt Ratios) reflects basis points. ** Notwithstanding the foregoing Pricing Grid, the Applicable Margins and the Commitment Fee Rate for the Revolving 364 Day Facility for the period following the Closing Date through but excluding the Adjustment Date related to the fiscal quarter ending as of September 30, 2000 will be no lower in cost to Borrower than the pricing level applicable if the Debt Ratio is greater than 3.25x but not greater than 3.75x; provided, however, nothing contained herein shall limit the effect of any increase in the pricing level on any Adjustment Date occurring after the Closing Date if the Debt Ratio exceeds 3.75x. II-1 EX-10.45 10 0010.txt SECOND AMENDED AND RESTATED CREDIT AGREEMENT ================================================================================ SECOND AMENDED AND RESTATED CREDIT AGREEMENT AMONG L-3 COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, THE CERTAIN FINANCIAL INSTITUTIONS NAMED AS CO-AGENTS HEREIN, BANC OF AMERICA SECURITIES LLC AND LEHMAN COMMERCIAL PAPER INC., AS ARRANGERS, BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT AND LEHMAN COMMERCIAL PAPER INC., AS DOCUMENTATION AGENT AND SYNDICATION AGENT DATED AS OF APRIL 24, 2000 ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS...........................................................................................1 1.1. Defined Terms.......................................................................................1 1.2. Other Definitional Provisions......................................................................24 1.3. Interrelationship with Original Credit Agreement...................................................24 1.4. Confirmation of Existing Obligations...............................................................25 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS.............................................................25 2.1. Commitments........................................................................................25 2.2. Procedure for Borrowing............................................................................27 2.3. Commitment Fee.....................................................................................28 2.4. Termination or Reduction of Revolving Credit Commitments...........................................28 2.5. Repayment of Loans; Evidence of Debt...............................................................28 2.6. Optional Prepayments; Mandatory Prepayments and Reduction of Commitments...........................30 2.7. Conversion and Continuation Options................................................................32 2.8. Minimum Amounts and Maximum Number of Tranches.....................................................33 2.9. Interest Rates and Payment Dates...................................................................33 2.10. Computation of Interest and Fees..................................................................34 2.11. Inability to Determine Interest Rate..............................................................34 2.12. Pro Rata Treatment and Payments...................................................................34 2.13. Illegality........................................................................................36 2.14. Requirements of Law...............................................................................36 2.15. Taxes.............................................................................................38 2.16. Indemnity.........................................................................................41 2.17. Replacement of Lenders............................................................................41 2.18. Certain Fees......................................................................................42 2.19. Certain Rules Relating to the Payment of Additional Amounts.......................................42 SECTION 3. LETTERS OF CREDIT.....................................................................................43 3.1. L/C Commitment.....................................................................................43 3.2. Procedure for Issuance of Letters of Credit........................................................43 3.3. Fees, Commissions and Other Charges................................................................44 3.4. L/C Participation..................................................................................44 3.5. Reimbursement Obligation of the Borrower...........................................................46 3.6. Obligations Absolute...............................................................................46
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3.7. Letter of Credit Payments..........................................................................47 3.8. Application........................................................................................47 3.9. Determination of Exchange Rate.....................................................................47 SECTION 4. REPRESENTATIONS AND WARRANTIES........................................................................47 4.1. Financial Condition................................................................................48 4.2. No Change..........................................................................................48 4.3. Corporate Existence; Compliance with Law...........................................................48 4.4. Corporate Power; Authorization; Enforceable Obligations............................................48 4.5. No Legal Bar.......................................................................................49 4.6. No Material Litigation.............................................................................49 4.7. No Default.........................................................................................49 4.8. Ownership of Property; Liens.......................................................................49 4.9. Intellectual Property..............................................................................49 4.10. Taxes.............................................................................................50 4.11. Federal Regulations...............................................................................50 4.12. ERISA.............................................................................................50 4.13. Investment Company Act; Other Regulations.........................................................51 4.14. Subsidiaries......................................................................................51 4.15. Purpose of Loans..................................................................................51 4.16. Environmental Matters.............................................................................51 4.17. Collateral Documents..............................................................................52 4.18. Accuracy and Completeness of Information..........................................................52 4.19. Labor Matters.....................................................................................53 SECTION 5. CONDITIONS PRECEDENT..................................................................................53 5.1. Conditions to Initial Loans........................................................................53 5.2. Conditions to Each Extension of Credit.............................................................56 SECTION 6. AFFIRMATIVE COVENANTS.................................................................................56 6.1. SEC Filings........................................................................................56 6.2. Certificates; Other Information....................................................................57 6.3. Payment of Obligations.............................................................................58 6.4. Conduct of Business; Maintenance of Existence and Property; Compliance with Law....................58 6.5. Insurance..........................................................................................58 6.6. Inspection of Property; Books and Records; Discussions.............................................58 6.7. Notices............................................................................................58 6.8. Environmental Laws.................................................................................59 6.9. Further Assurances.................................................................................60 6.10. Additional Collateral.............................................................................60
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6.11. [Intentionally Omitted.]..........................................................................61 6.12. Foreign Jurisdictions.............................................................................61 6.13. Government Contracts..............................................................................61 6.14. Lien Searches.....................................................................................61 SECTION 7. NEGATIVE COVENANTS....................................................................................61 7.1. Financial Condition Covenants......................................................................61 7.2. Limitation on Indebtedness.........................................................................62 7.3. Limitation on Liens................................................................................63 7.4. Limitation on Guarantee Obligations................................................................65 7.5. Limitation on Fundamental Changes..................................................................66 7.6. Limitation on Sale of Assets.......................................................................66 7.7. Limitation on Dividends............................................................................67 7.8. Limitation on Capital Expenditures.................................................................67 7.9. Limitation on Investments, Loans and Advances......................................................67 7.10. Limitation on Optional Payments and Modifications of Instruments and Agreements...................69 7.11. Limitation on Transactions with Affiliates........................................................69 7.12. Limitation on Sales and Leasebacks................................................................70 7.13. Limitation on Changes in Fiscal Year..............................................................70 7.14. Limitation on Negative Pledge Clauses.............................................................70 7.15. Limitation on Lines of Business...................................................................70 7.16. Designated Senior Debt............................................................................70 SECTION 8. EVENTS OF DEFAULT.....................................................................................71 SECTION 9. THE AGENTS; THE ARRANGERS.............................................................................74 9.1. Appointment........................................................................................74 9.2. Delegation of Duties...............................................................................74 9.3. Exculpatory Provisions.............................................................................74 9.4. Reliance by Agents.................................................................................75 9.5. Notice of Default..................................................................................75 9.6. Non-Reliance on Agents and Other Lenders...........................................................75 9.7. Indemnification....................................................................................76 9.8. Agents, in Their Individual Capacities.............................................................76 9.9. Successor Administrative Agent, Syndication Agent and Documentation Agent..........................76 9.10. The Arrangers and the Co-Agents...................................................................77
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SECTION 10. MISCELLANEOUS........................................................................................77 10.1. Amendments and Waivers............................................................................77 10.2. Notices...........................................................................................78 10.3. No Waiver; Cumulative Remedies....................................................................81 10.4. Survival of Representations and Warranties........................................................82 10.5. Payment of Expenses and Taxes.....................................................................82 10.6. Successors and Assigns; Participation and Assignments.............................................83 10.7. Adjustments; Set-off..............................................................................86 10.8. Counterparts......................................................................................87 10.9. Severability......................................................................................87 10.10. Integration......................................................................................87 10.11.GOVERNING LAW.....................................................................................87 10.12. SUBMISSION TO JURISDICTION; WAIVERS..............................................................87 10.13. Acknowledgments..................................................................................88 10.14.WAIVERS OF JURY TRIAL.............................................................................88 10.15. Confidentiality..................................................................................89 10.16. Conversion of Currencies.........................................................................89 10.17. Year 2000........................................................................................89 10.18. Existing Agreements Superseded...................................................................90
iv EXHIBITS Exhibit A-1 Form of Revolving Credit Note Exhibit A-2 Form of Swing Line Note Exhibit B-1 Form of Parent Guarantee Exhibit B-2 Form of Subsidiary Guarantee Exhibit B-3 Form of Parent Pledge Agreement Exhibit B-4A Form of Borrower Pledge Agreement Exhibit B-4B Form of Charge Over Shares Exhibit B-5 Form of Subsidiary Pledge Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher and Bartlett Exhibit C-2 Form of Internal Counsel Opinion Exhibit D Form of Borrowing Certificate Exhibit E Form of Certificate of Non-U.S. Lender Exhibit F Form of Assignment and Acceptance SCHEDULES Schedule I Lenders and Commitments Schedule II Pricing Grid Schedule III Transaction Documents Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.9 Intellectual Property Claims Schedule 4.10 Taxes Schedule 4.14 Subsidiaries Schedule 7.2(f) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.9(c) Officers Schedule 7.9(g) Existing Investments Schedule 7.9(k) Approved Investments v THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 24, 2000, among L-3 Communications Corporation, a Delaware corporation (the "Borrower") which is wholly owned by L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), the several banks and other financial institutions or entities from time to time parties hereto (the "Lenders"), Banc of America Securities LLC (f/k/a BancAmerica Robertson Stephens) and Lehman Commercial Paper Inc. ("LCPI"), as arrangers (each, in such capacity, an "Arranger" and together, the "Arrangers"), Bank of America, N.A. (f/k/a Bank of America National Trust & Savings Association) ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), LCPI, as syndication agent and documentation agent (in such capacity, the "Syndication Agent" and the "Documentation Agent"), and certain financial institutions named as co-agents, AMENDS AND RESTATES IN FULL the Amended and Restated Credit Agreement, dated as of August 13, 1998 (as amended, supplemented and/or modified from time to time prior to the date hereof, the "Original Credit Agreement"), among the Borrower, the lenders party thereto from time to time (the "Original Lenders"), LCPI and Banc of America Securities LLC (f/k/a BancAmerica Robertson Stephens), as arrangers (each, in such capacity, an Original Arranger and together, the "Original Arrangers"), the Syndication Agent, the Documentation Agent and the Administrative Agent; this amendment and restatement of the Original Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as this "Agreement" or the "Credit Agreement". WHEREAS, the Borrower has requested that the Original Credit Agreement be amended and restated in full as set forth herein. NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Original Credit Agreement as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Acquired Business": a company or business unit acquired by the Borrower or any of its Subsidiaries, provided that the Borrower has delivered to the Administrative Agent historical financial statements of such company or business unit prepared in accordance with GAAP. "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1 and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). "Administrative Agent": BOA, or following the resignation of BOA as Administrative Agent, any other Lender which may be appointed as Administrative Agent pursuant to subsection 9.9. "Affected Class": as defined in subsection 10.1. "Affected Lender": as defined in subsection 10.7. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Documentation Agent and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender with respect to any Type of Loan at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans of such Type made by such Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Currency": as defined in subsection 10.16(b). "Alternative Currency": any currency which as of the time of any issuance or renewal, as applicable, of a Foreign L/C is freely tradeable and convertible into Dollars and has been approved as an "Alternative Currency" for the purposes of this Agreement by the Issuing Lender. "Applicable Creditor": as defined in subsection 10.16(b). "Applicable Holdback": as defined in subsection 2.6(b)(ii). "Applicable Issuing Lender": an Issuing Lender as to which any proposed Assignee under subsection 10.6 shall become an L/C Participant upon giving effect to the relevant Assignment and Acceptance. "Applicable Margin": at any time, the percentages set forth on Schedule II under the relevant column heading opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Applicable Margins determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Debt Ratio 2 captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Asset Contribution": as defined in the recitals to the Initial 1997 Credit Agreement. "Asset Sale": any sale, sale-leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except sales and dispositions permitted by subsection 7.6 other than subsection 7.6(b) or (e). "Assignee": as defined in subsection 10.6(c). "Attributable Debt": in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Available Commitment": as to any Lender and any Type of Loan, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment with respect to such Type of Loan over (b) such Lender's Aggregate Outstanding Extensions of Credit with respect to such Type of Loan. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "BOA": as defined in the recitals to this Agreement. "Borrower Pledge Agreement": the Second Amended and Restated Borrower Pledge Agreement substantially in the form of Exhibit B-4A, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. 3 "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to Eurodollar Loans or Foreign L/Cs, any day on which dealings are carried on in the applicable London interbank market. "Calculation Date": with respect to each Foreign L/C, during the period that such Foreign L/C is outstanding (or the Reimbursement Obligation in connection therewith has not been fully satisfied) (i) the last Business Day of a fiscal month, (ii) the date on which such Letter of Credit is to be issued or renewed by the Issuing Lender, (iii) the date on which any draft presented under such Letter of Credit is paid by the Issuing Lender, (iv) such other dates as the Borrower may reasonably request from time to time, and (v) such other dates as the Issuing Lender or the Administrative Agent may select from time to time, provided that the Borrower receives prompt notice thereof. "Capital Expenditures" for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the expenditures relating to the Transaction. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Partners": Lehman Brothers Capital Partners III, L.P. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard 4 and Poor's Ratings Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (i) the Principals and their Related Parties, as a whole, shall at any time cease to own, directly or indirectly, 51% of the Voting Stock of Holdings (measured by voting power rather than number of shares), determined on a fully diluted basis, and any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals and their Related Parties shall become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 25% of the Voting Stock of Holdings (measured by voting power rather than number of shares); (ii) a majority of the members of the Board of Directors of Holdings fail to be (a) members of the Board of Directors incumbent as of the Closing Date, or (b) members nominated by the members of the Board of Directors incumbent on the Closing Date, or (c) members appointed by members of the Board nominated under clause (a) or (b); (iii) Holdings shall, at any time, cease to own 100% of the Capital Stock of the Borrower; or (iv) a "Change of Control" shall have occurred under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture. "Charge Over Shares": the Amended and Restated Charge Over Shares substantially in the form of Exhibit B-4B, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Class": (i) Lenders having Loan Exposure (taken together as a single class)(ii) Facility B Lenders having Facility B Loan Exposure (taken together as a single class) and (iii) Facility C Lenders having Facility C Loan Exposure (taken together as a single class). 5 "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 are satisfied. "Co-Agents": collectively, Fleet National Bank, The Bank of New York, The Bank of Nova Scotia, Credit Lyonnais, Bank One, N.A., First Union Commercial Corporation, HSBC Bank, and Societe Generale. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Pledge Agreement. "Commitment": as to any Lender, such Lender's Revolving Credit Commitment. "Commitment Fee Rate": at any time, the applicable rates per annum on Schedule II under the relevant column heading for the Revolving Credit Facility set forth opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Commitment Fee Rate determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Commitment Fee Rate shall be (i) for the first 35 days subsequent to such due date, the Commitment Fee Rate in effect prior to such due date and (ii) thereafter, that set forth opposite a Debt Ratio captioned "greater than or equal to 4.75," in either case, until the date of delivery of such financial statements and compliance certificate. "Commitment Percentage": as to the Commitment of any Lender with respect to any Type of Loan at any time, the percentage which the Commitment of such Lender with respect to such Type of Loan then constitutes of the aggregate Commitments with respect to such Type of Loan (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender with respect to such Type of Loan constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders with respect to such Type of Loan). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on 6 discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, paid in cash, of the Borrower and its Subsidiaries for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Interest Expense": for any Person, as of the last day of any fiscal quarter, the amount of interest expense of such Person for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income": for any Person and for any fiscal period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Assets": at any date, all assets of the Borrower and its Subsidiaries as determined according to the consolidated balance sheet contained in the SEC filing most recently delivered pursuant to subsection 6.1 or, if no such SEC filing has yet been delivered, the balance sheet referred to in subsection 4.1(a)(ii). "Consolidated Total Debt": at any date, all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g). "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date over (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries on such date (excluding, to the extent it would otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement or other organizational documents of such Person. 7 "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees and the Pledge Agreements. "Credit Parties": the Borrower, Holdings, and each Subsidiary of the Borrower which is a party to a Credit Document. "Debt Ratio": as at the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt minus Designated Cash Balances on such date to (b) Consolidated EBITDA. "December 1998 Subordinated Debt Documents": the December 1998 Subordinated Notes, the December 1998 Subordinated Notes Indenture, the Underwriting Agreement related thereto among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "December 1998 Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the December 1998 Subordinated Notes were issued. "December 1998 Subordinated Notes": the Borrower's Senior Subordinated Notes, due December 1, 2008 ("Initial December 1998 Subordinated Notes") issued on or about the December 8, 1998 and any notes, having the same terms as the Initial December 1998 Subordinated Notes, issued in exchange for the Initial December 1998 Subordinated Notes as contemplated by the documents governing the issuance of the Initial December 1998 Subordinated Notes. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Designated Cash Balances": at any time, the lesser of (a) actual unrestricted cash balances on hand of Borrower and its Subsidiaries which are not subject to any Liens in favor of any Person (other than those described in subsection 7.3(o) hereof) and (b) $50,000,000. "Dollar Equivalent": at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Alternative Currency, the equivalent amount in Dollars as determined on the basis of the Exchange Rate for the purchase of Dollars with such Alternative Currency as of the most recent Calculation Date. "Dollars" and "$": dollars in lawful currency of the United States of America. 8 "Domestic L/C": a Letter of Credit denominated in Dollars. "Dow Jones Page 3750": the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (Sections) 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. (Sections) 9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (Sections) 1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (Sections) 6901 et seq.; the Clean Water Act; 33 U.S.C. (Sections) 1251 et seq.; the Clean Air Act, 42 U.S.C. (Sections) 7401 et seq.; or other similar federal and/or state environmental laws. "Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Environmental Law. "Equity Documents": the Stockholders Agreement, the Subscription Agreements and the Option Agreements. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Eurodollar Business Day": means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. 9 "Eurodollar Rate": means, for any Interest Period, with respect to Eurodollar Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows: LIBOR Eurodollar Rate = ------------------------------------ 1.00 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage": for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income for the Borrower and its Subsidiaries, non-cash interest expense, depreciation and amortization for such fiscal year, (iv) extraordinary non-cash losses during such fiscal year subtracted in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (v) change in deferred tax liability of the Borrower for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary losses less (b) the sum, without duplication, of (i) the aggregate amount of permitted cash Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of (x) Revolving Credit Loans not accompanied by reductions of the Commitments hereunder, (y) Facility B Loans not accompanied by reductions of Facility B Commitments and/or (z) Facility C Loans and accompanied by reductions of Facility C Commitments), (iv) deferred income tax credit of the Borrower for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Exchange Act": the Securities Exchange Act of 1934, as amended. 10 "Exchange Rate": on any day, with respect to any Alternative Currency, the spot rate at which Dollars are offered on such day by the Issuing Lender in San Francisco, California (or such other location selected by the Issuing Lender) for such Alternative Currency. "Facility B Administrative Agent": the "Administrative Agent" as defined in the Facility B Credit Agreement. "Facility B Agents": the "Agents" as defined in the Facility B Credit Agreement. "Facility B Commitments": the "Commitments" as defined in the Facility B Credit Agreement. "Facility B Credit Agreement": that certain Amended and Restated 364 Day Credit Agreement of even date herewith among the Borrower, the Facility B Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities LLC (f/k/a BankAmerica Robertson Stephens) as arrangers and certain other financial institutions named therein as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility B Credit Documents": the "Credit Documents" as defined in the Facility B Credit Agreement. "Facility B Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility B Credit Agreement. "Facility B L/C Obligations": the "L/C Obligations" as defined in the Facility B Credit Agreement. "Facility B Lenders": the "Lenders" as defined in the Facility B Credit Agreement. "Facility B Loan Exposure": the "Loan Exposure" as defined in the Facility B Credit Agreement. "Facility B Loans": the "Loans" as defined in the Facility B Credit Agreement. "Facility B Notes": the "Notes" as defined in the Facility B Credit Agreement. "Facility B Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility B Credit Agreement. "Facility C Administrative Agent": the "Administrative Agent" as defined in the Facility C Credit Agreement. "Facility C Agents": the "Agents" as defined in the Facility C Credit Agreement. "Facility C Commitments": the "Commitments" as defined in the Facility C Credit Agreement. 11 "Facility C Credit Agreement": that certain New 364 Day Credit Agreement of even date herewith among the Borrower, the Facility C Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities, LLC as arrangers and certain financial institutions named as co-agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility C Credit Documents": the "Credit Documents" as defined in the Facility C Credit Agreement. "Facility C Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility C Credit Agreement. "Facility C Lenders": the "Lenders" as defined in the Facility C Credit Agreement. "Facility C Loan Exposure": the "Loan Exposure" as defined in the Facility C Credit Agreement. "Facility C Loans": the "Loans" as defined in the Facility C Credit Agreement. "Facility C Notes": the "Notes" as defined in the Facility C Credit Agreement. "Federal Funds Effective Rate": for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the FRB (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Financial L/C": a standby Letter of Credit not constituting a Performance L/C. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign L/C": a Letter of Credit denominated in an Alternative Currency. "Foreign L/C Obligations": at any time, an amount equal to the sum of (i) the Dollar Equivalent of the aggregate then undrawn and unexpired face amount of all then outstanding Foreign L/Cs and (ii) the Dollar Equivalent of the aggregate amount of all drawings under Foreign L/Cs which have not then been reimbursed pursuant to subsection 3.5. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands. 12 "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America in effect on the Closing Date. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": the Parent Guarantee and the Subsidiary Guarantees. "Immaterial Subsidiary": any Subsidiary of the Borrower having assets not exceeding five percent (5%) of the Consolidated Total Assets. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in 13 accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and all reimbursement and other obligations with respect to any letters of credit and surety bonds, whether or not matured or drawn, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person. "Indenture": the Indenture between the Borrower and The Bank of New York, as trustee, pursuant to which the Subordinated Notes are issued. "Initial 1997 Credit Agreement": the Credit Agreement, dated as of April 30, 1997 among the Borrower, the lenders party thereto from time to time, Lehman Brothers Inc. as arranger, LCPI as syndication agent and documentation agent and BOA as administrative agent. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any Eurodollar Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three, six or, if made available by the Administrative Agent and the Lenders, nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or, if made available by the Administrative Agent and Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto. 14 provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (v) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (vi) any Interest Period for any Loan that would otherwise extend beyond the applicable Termination Date shall end on the applicable Termination Date; and (vii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Business Day of the appropriate calendar month. "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Issuing Lender": BOA, in its capacity as issuer of any Letter of Credit or, at the election of BOA, such other Lender or Lenders that agrees to act as Issuing Lender at the request of the Borrower, or upon resignation by BOA as an Issuing Lender at any time upon notice to the other parties to this Agreement, such other Lender or Lenders that agree to act as Issuing Lender at the request of the Borrower and to whom the Required Lenders consent in writing. "Judgment Currency": as defined in subsection 10.16 (b). "LCPI": as defined in the recitals to this Agreement. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the Dollar Equivalent of the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5. "L/C Participants": a collective reference to all the Revolving Credit Lenders other than the Applicable Issuing Lender. 15 "Lender" and "Lenders": the persons identified as Lenders and listed on the signature pages of this Agreement (including the Issuing Lender and the Swing Line Lender), together with their successors and permitted assigns pursuant to subsection 10.6. "Letters of Credit": as defined in subsection 3.1(a). "LIBOR": as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on the Dow Jones Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Account": as defined in subsection 2.5(d). "Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Letters of Credit or Revolving Credit Loans, that Lender's Revolving Credit Commitment, and (ii) otherwise, the sum of (a) the aggregate outstanding principal amount of the Revolving Credit Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the Dollar Equivalent of the aggregate stated or face amount in respect of all Letters of Credit issued by that Lender and outstanding (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) in the event that such Lender is the Swing Line Lender, the aggregate principal amount of Swing Line Loans made by such Lender then outstanding (net of any participations purchased by other Lenders in such Swing Line Loans) plus (d) the Dollar Equivalent of the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans or Letters of Credit or any unreimbursed drawings under any Letters of Credit. 16 "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by Holdings or any of its Subsidiaries in respect of: (a) any issuance by Holdings or any of its Subsidiaries of Indebtedness after the Closing Date; (b) any Asset Sale; and (c) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to Holdings or such Subsidiary in respect of an Asset Sale; in each case net of (without duplication) (i), (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings or a Subsidiary of Holdings that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by Holdings or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by Holdings or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by Holdings or such Subsidiary to be actually payable. "New Investment Sublimit" shall mean, as of any date of determination thereof, an amount equal to (a) $650,000,000 plus (b) (i) Net Proceeds derived from Asset Sales during the immediately preceding twelve (12) month period and (ii) Net Proceeds from any Asset Sale that were reinvested within the twelve (12) month period following such Asset Sale for the purposes permitted in subsection 7.9(k) to the extent not included in 17 subclause (i) of this clause (b) plus (c) net cash proceeds derived from the issuance of any equity securities of Holdings which are contributed to the Borrower as additional equity capital minus the amount of any Capital Expenditures funded in any fiscal year of the Borrower and its Subsidiaries which exceeds the amounts permitted during such fiscal year pursuant to subsection 7.8 hereof (without giving effect to the second proviso thereto referring to subsection 7.9(k)). "New Subordinated Debt Documents": the New Subordinated Notes, the New Subordinated Notes Indenture, the Underwriting Agreement dated as of May 18, 1998 among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "New Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the New Subordinated Notes were issued. "New Subordinated Notes": the Borrower's 8 1/2% Senior Subordinated Notes, due 2008 ("Initial New Subordinated Notes") issued on or about May 22, 1998 and any notes, having the same terms as the Initial New Subordinated Notes, issued in exchange for the Initial New Subordinated Notes as contemplated by the documents governing the issuance of the Initial New Subordinated Notes. "Non-Excluded Taxes": as defined in subsection 2.15. "Non-U.S. Lender": as defined in subsection 2.15(b). "Nonconsenting Lenders": as defined in subsection 2.17. "Notes": The Revolving Credit Notes and the Swing Line Note (or any of them). "Obligations": as defined in the Guarantees and the Pledge Agreements. "Option Agreements": the Option Agreements between Holdings and each of Frank C. Lanza and Robert V. LaPenta, each dated as of the April 30, 1997. "Original Agents": the "Agents" under and as defined in the Original Credit Agreement. "Original Closing Date": August 13, 1998. "Original Credit Agreement": as defined in the preamble to this Agreement. "Original Lenders": as defined in the preamble to this Agreement. "Parent Distributions": as defined in the Parent Guarantee. 18 "Parent Guarantee": the Second Amended and Restated Parent Guarantee substantially in the form of Exhibit B-1, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Parent Pledge Agreement": the Second Amended and Restated Parent Pledge Agreement substantially in the form of Exhibit B-3, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Participant": as defined in subsection 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Performance L/C": a standby Letter of Credit issued to ensure the performance of services and/or delivery of goods by or on behalf of the Borrower. "Permitted Liens": Liens permitted to exist under subsection 7.3. "Permitted Stock Payments": (A) dividends by the Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by the Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing; provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings, and (C) from and after May 1, 1999, dividends by the Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by the Borrower to Holdings under this clause (C) since the Original Closing Date does not exceed $5,000,000. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity may incur any liability. "Pledge Agreements": the collective reference to the Parent Pledge Agreement, the Borrower Pledge Agreement, the Charge Over Shares, the Subsidiary Pledge Agreement, and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and 19 liabilities of the Borrower hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Principals": each of Lehman Brothers Holdings, Inc., Capital Partners, the Seller, Frank C. Lanza and Robert V. LaPenta. "Properties": as defined in subsection 4.16. "Purchase Agreement": the Purchase Agreement, dated as of April 25, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Refunded Swing Line Loan": as defined in subsection 2.1(b)(iii). "Register": as defined in subsection 10.6(d). "Registration Rights Agreement": the Registration Rights Agreement, dated as of April 30, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Amount": as defined in subsection 3.5(a). "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "Related Party": with respect to the Principals, (a) any controlling stockholder, 51% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (b) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 51% or more controlling interest of which consist of the Principals and/or such other Persons referred to in the immediately preceding clause (a). "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Lenders": at any time, Lenders the Loan Exposure for all Types of Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court 20 or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class of Lenders having Loan Exposure, Lenders having or holding 66 2/3% of the aggregate Loan Exposure of all Lenders (b) for the Class of Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding 66 2/3% of the aggregate Facility B Loan Exposure of all Facility B Lenders and (c) for the Class of Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding 66 2/3% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Responsible Officer": the chief executive officer, the president or vice president of the Borrower or, with respect to financial matters, the chief financial officer, vice president-finance or treasurer of the Borrower. "Restricted Government Contracts": as defined in the Pledge Agreements. "Revolving Credit Commitment": the commitment of a Lender, initially as set forth on Schedule I hereto, to make Revolving Credit Loans to the Borrower pursuant to subsection 2.1(a) and to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving Credit Commitments" means such commitments of all Lenders in the aggregate, which shall be $200,000,000. "Revolving Credit Commitment Period": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein. "Revolving Credit Lender": any Lender or Lenders having a Revolving Credit Commitment or a Revolving Credit Loan outstanding. "Revolving Credit Loans": the Loans made by Revolving Credit Lenders to the Borrower pursuant to Subsection 2.1(a). "Revolving Credit Notes": (i) the promissory notes of the Borrower, if any, issued pursuant to subsection 2.5(f) of the Original Credit Agreement prior to the Closing Date and/or pursuant to subsection 2.5(i) of this Agreement on or after the Closing Date, in each case, to evidence the Revolving Credit Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Revolving Credit Commitments and Revolving Credit Loans of any Lenders, in each case substantially in the form of Exhibit A-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Revolving 364 Day Commitment": as defined in the Facility B Credit Agreement. "SPD Technologies": SPD Technologies Inc., a Delaware corporation. 21 "SPD Technologies Acquisition Agreement": the Agreement and Plan of Merger, dated as of July 2, 1998, among L-3 Communications Corporation, SPD Merger Co., SPD Technologies, Inc. and Midmark Capital L.P. "SEC": the Securities and Exchange Commission. "Securities Act": Securities Act of 1933, as amended. "Seller": Lockheed Martin Corporation, a Maryland corporation. "Similar Business": a business, at least a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto or any business of the Borrower and/or its Subsidiaries existing as of the Closing Date, and (iv) any combination of any of the foregoing. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Stockholders Agreement": the Stockholders Agreement, dated as of April 30, 1997, by and among the Borrower, Holdings, the Seller, the Principals and any other party that may from time to time become a party thereto as provided therein, as the same may be amended, supplemented or otherwise modified from time to time. "Subordinated Debt": indebtedness outstanding under the Subordinated Notes, the New Subordinated Notes and/or the December 1998 Subordinated Notes. "Subordinated Debt Documents": the Indenture, the Registration Rights Agreement, the Purchase Agreement and the Subordinated Notes. "Subordinated Notes": the Borrower's 10 3/8% Senior Subordinated Notes, due 2007 (the "Initial Subordinated Notes"), issued on the April 30, 1997, and any subordinated notes of the Borrower, having the same terms as the Initial Subordinated Notes, issued in exchange for the Initial Subordinated Notes as contemplated by the Subordinated Debt Documents. "Subscription Agreements": the Common Stock Subscription Agreements between Holdings and each of Frank C. Lanza, Robert V. LaPenta, Capital Partners and the Seller, each dated as of the April 30, 1997. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly 22 or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantee": the Second Amended and Restated Subsidiary Guarantee substantially in the form of Exhibit B-2, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Subsidiary Pledge Agreement": the Second Amended and Restated Subsidiary Pledge Agreement substantially in the form of Exhibit B-5, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Swing Line Lender": means BOA, or, following the resignation of BOA as Swing Line Lender at any time upon notice to the other parties to this Agreement, any other Lender which is appointed as Swing Line Lender by the Required Lenders and reasonably acceptable to Borrower. "Swing Line Loans": as defined in subsection 2.1(b). "Swing Line Note": as defined in subsection 2.5(f). "Term Loans": as defined in the Facility B Credit Agreement. "Termination Date": March 31, 2003. "Tranche": the collective reference to Eurodollar Loans with then-current Interest Periods which all begin on the same date and end on the same date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches". "Transaction": the transactions contemplated by the Transaction Documents. "Transaction Agreement": that certain Transaction Agreement, dated as of March 28, 1997 by and among Lockheed Martin Corporation, a Maryland corporation, Holdings, Capital Partners and its Affiliates, Frank C. Lanza and Robert V. LaPenta. "Transaction Documents": (i) the Transaction Agreement, the Schedules thereto and the documents set forth on Schedule III hereto, (ii) the Equity Documents, (iii) the Subordinated Debt Documents and (iv) the New Subordinated Debt Documents. "Transferee": as defined in subsection 10.6(f). "Type": a Revolving Credit Loan or a Swing Line Loan, as applicable. 23 "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. "Voting Stock": of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Year 2000 Problem": any significant risk that computer hardware, software or equipment containing embedded microchips essential to the business or operations of the Borrower or any of its Subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively and reliably as in the case of dates or time periods occurring before January 1, 2000, including the making of accurate leap year calculations. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 1.3 Interrelationship with Original Credit Agreement. (a) As stated in the preamble hereof, this Credit Agreement is intended to amend and restate the provisions of the Original Credit Agreement and, notwithstanding any substitution of Notes as of the Closing Date, except as expressly modified herein, (x) all of the terms and provisions of the Original Credit Agreement shall continue to apply for the period prior to the Closing Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to the Original Agents or the Original Lenders (or their assignees or replacements hereunder), and (y) the obligations under the Original Credit 24 Agreement shall continue to be paid or prepaid on or prior to the Closing Date, and shall from and after the Closing Date continue to be owing and be subject to the terms of this Credit Agreement. All references in the Notes and the other Credit Documents to (i) the Original Credit Agreement or the "Credit Agreement" shall be deemed to include references to this Credit Agreement and (ii) the "Lenders" or a "Lender" or to the "Agents" or any "Agent" shall mean such terms as defined in this Credit Agreement. As to all periods occurring on or after the Closing Date, all of the covenants set forth in the Original Credit Agreement shall be of no further force and effect, it being understood that all obligations of the Borrower under the Original Credit Agreement shall be governed by this Credit Agreement from and after the Closing Date. (b) The Borrower, the Agents and the Lenders acknowledge and agree that all outstanding Loans (including all outstanding L/C Obligations) are hereby converted into Revolving Credit Loans (and, as applicable, L/C Obligations) outstanding hereunder effective as of the Closing Date. The Borrower, the Agents and the Lenders acknowledge and agree that all interest, fees, costs and reimbursable expenses accruing or arising under the Original Credit Agreement which remain unpaid and outstanding as of the Closing Date shall be and remain outstanding and payable as an obligation under this Agreement and the other Credit Documents. 1.4 Confirmation of Existing Obligations. The Borrower hereby agrees and admits that, as of the date hereof, it has no defenses to, or offsets or counterclaim against, any of its obligations to the Agents or any Lender under the Credit Documents of any kind whatsoever. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. (a) Revolving Credit Loans. Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Revolving Credit Commitment Period, in an aggregate principal amount at any one time outstanding which, when added to the aggregate principal amount of outstanding Swing Line Loans in which such Lender has purchased a participation (or, in the case of the Swing Line Lender, the Swing Line Loans made by such Swing Line Lender less the participations purchased in such Swing Line Loans by any other Lender) and such Lender's Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) Swing Line Loans. (i) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make $10,000,000 of the credit otherwise available to the Borrower under the Revolving Credit Commitments by making swing line loans (individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the Borrower from time to time during 25 the Revolving Credit Commitment Period; provided, that no Swing Line Loan shall be made if, after giving effect thereto, the aggregate principal amount of Revolving Credit Loans then outstanding plus the aggregate principal amount of Swing Line Loans then outstanding, plus the aggregate amount of L/C Obligations would exceed the Revolving Credit Commitments of the Revolving Credit Lenders. Amounts borrowed by the Borrower under this subsection 2.1(b) may be repaid and, through but excluding the Termination Date, reborrowed. All Swing Line Loans shall be made as Base Rate Loans and may not be converted into Eurodollar Loans. In order to borrow a Swing Line Loan, the Borrower shall give the Swing Line Lender, with a copy to the Administrative Agent, irrevocable notice (which notice must be received by the Swing Line Lender prior to 12:00 Noon, New York City time) on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in a minimum amount of $500,000 or whole multiples of $100,000 in excess thereof. The proceeds of the Swing Line Loan will be made available by the Swing Line Lender to the Borrower at the office of the Swing Line Lender by crediting the account of the Borrower at such office with such proceeds. (ii) The Swing Line Loans shall be evidenced by a Loan Account and, if requested by the Swing Line Lender, a promissory note of the Borrower, substantially in the form of Exhibit A-2 (the "Swing Line Note"), with appropriate insertions, payable to the order of the Swing Line Lender and representing the obligation of the Borrower to pay the unpaid principal amount of the Swing Line Loans, with interest thereon as prescribed in subsection 2.9. The Swing Line Note, if any, shall (i) be dated the Closing Date, (ii) be stated to mature on the Termination Date and (iii) bear interest, payable on the dates specified in 2.9, for the period from the date thereof to the Termination Date on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum specified in subsection 2.9. (iii) The Swing Line Lender, at any time in its sole and absolute discretion, may on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf) request each Lender, including the Swing Line Lender, to make a Revolving Credit Loan (which shall be a Base Rate Loan) in an amount equal to such Lender's Commitment Percentage of such Swing Line Loan (the "Refunded Swing Line Loans") outstanding on the date such notice is given. Unless any of the events described in clause (f) of Section 8 shall have occurred (in which event the procedures of subsection 2.1(b)(iv) shall apply) each Lender shall, not later than 12:00 P.M., New York City time, on the Business Day next succeeding the date on which such notice is given, make available to the Swing Line Lender in immediately available funds the amount equal to the Revolving Credit Loan to be made by such Lender. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Refunded Swing Line Loans. Upon any request by the Swing Line Lender to the Lenders pursuant to this subsection 2.1(b)(iii), the Administrative Agent shall promptly give notice to the Borrower of such request. (iv) If prior to the making of a Revolving Credit Loan pursuant to subsection 2.1(b)(iii) one of the events described in clause (f) of Section 8 shall have 26 occurred, each Lender will, on the date such Loan was to have been made, purchase an undivided participating interest in the Swing Line Loans in an amount equal to its Commitment Percentage. Each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. (v) Whenever, at any time after the Swing Line Lender has received from any Lender such Lender's participating interest in a Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Lender will return to the Swing Line Lender any portion thereof previously distributed to it. (vi) Each Lender's obligation to purchase participating interests pursuant to subsection 2.1(b)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Line Lender, any other Lender or anyone else for any reason whatsoever, (b) the occurrence or continuance of any Default or Event of Default; (c) any adverse change in the condition (financial or otherwise) of the Borrower; (d) any breach of this Agreement by the Borrower or any other Lender; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (c) Except for Swing Line Loans, which shall be Base Rate Loans, the Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that, no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans, (b) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Base Rate Loan other than a Swing Line Loan), specifying (i) the amount to be borrowed of each Type of Loan, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans (other than Swing Line Loans or Refunded Swing Line Loans), $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), (y) in the case of Swing Line Loans, as provided in subsection 2.1(b)(i) and (z) in the case of Eurodollar Loans, $5,000,000 or a whole 27 multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of Eurodollar Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in accordance with the Borrower's payment instructions with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to and including the Termination Date, computed at the Commitment Fee Rate on the daily amount of the Available Commitment of such Revolving Credit Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments ratably among the Revolving Credit Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding, when added to the then outstanding L/C Obligations and the outstanding Swing Line Loans, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. 2.5 Repayment of Loans; Evidence of Debt. (a) Payments on Revolving Credit Loans and Swing Line Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) (x) for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Loan of such Lender and (y) for the account of the Swing Line Lender (and each other Revolving Credit Lender that has purchased a participation in then outstanding Swing Line Loans) the then unpaid principal amount of Swing Line Loans. (b) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. 28 (c) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (d) Loan Accounts and Register; Notes (i) The Loans made by, and the Commitments of, each Lender shall be evidenced by one or more loan accounts ("Loan Accounts") maintained by such Lender and by the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's books relating to such matters, be controlling and, absent manifest error, shall be conclusive as to the amount of the Loans made by the Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this subsection 2.5(d) and subsection 10.6, to maintain the Register on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this subsection 2.5(d) and subsection 10.6 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent). (ii) If requested by any Lender, the Borrower shall execute and deliver to such Lender (and deliver a copy thereof to the Administrative Agent) one or more promissory notes evidencing the Loans owing to such Lender pursuant to this Agreement in accordance with subsection 2.5(f). (e) Prima Facie Evidence. The entries made in the Register and the Loan Accounts of each Lender maintained pursuant to subsection 2.5(d) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such Loan Account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. For the avoidance of doubt, the existence or non-existence of any Note representing any Obligations owing to any Lender hereunder shall not affect the existence, amount, validity or enforceability of such Obligations, which in all events shall be absolute and unconditional. (f) Notes. The Borrower agrees that the Borrower will execute and deliver to each Lender that requests any such Note pursuant to subsection 2.5(d)(ii), a promissory note of the Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Revolving Credit 29 Note"). The Borrower also agrees that, if requested by the Swing Line Lender, the Borrower will execute and deliver to the Swing Line Lender a promissory note of the Borrower evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form of Exhibit A-2 with appropriate insertions as to date and principal amount. 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsections 2.12 and 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment in the case of Eurodollar Loans or on any Business Day in the case of Base Rate Loans, specifying the date and amount of prepayment, the Type of Loan to be prepaid (which Loans shall be prepaid on a pro rata basis among the applicable Lenders) and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $100,000 in excess thereof. (b) (i) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility B Loans and the Facility C Loans and permanent reduction of the Commitments, the Facility B Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b). Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale, such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans and the Facility B Loans and Facility C Loans and permanent reduction of the Commitments and the Facility B Commitments and the Facility C Commitments as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales occurring since the Original Closing Date that has not been applied toward the 30 prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iv) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) [Intentionally Omitted] (iv) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by this subsection 2.6 shall be applied ratably to the outstanding principal amount of Loans, Facility B Loans and Facility C Loans with a corresponding ratable permanent reduction of the Revolving Credit Commitments, the Facility C Commitments and the Revolving 364 Day Commitments (or, if applicable, the Term Loans on a pro rata basis to reduce the unpaid scheduled installments of principal of the Term Loans in inverse order of maturity). Revolving Credit Commitment, Facility C Commitments and Revolving 364 Day Commitment reductions made pursuant to subsections 2.6(b)(i) and (ii) hereof (and the corresponding subsections of the Facility B Credit Agreement and Facility C Credit Agreement) shall be applied to each Lender's respective Revolving Credit Commitment, each Facility C Lender's Facility C Commitments and/or each Facility B Lender's Revolving 364 Day Commitments, as applicable, on a pro rata basis and shall reduce permanently such Commitments, Revolving 364 Day Commitments and Facility C Commitments. At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility B Credit Agreement and/or the Facility C Credit Agreement). Mandatory prepayments shall not be subject to any minimum amount requirement. (v) In addition, if after giving effect to (i) any reduction of the Revolving Credit Commitments under subsection 2.4, 2.5 or 2.6 or (ii) any recalculation of the Exchange Rate pursuant to subsection 3.9, the aggregate outstanding principal amount of Swing Line Loans plus the aggregate outstanding principal amount of Revolving Credit Loans plus the aggregate outstanding amount of L/C Obligations shall exceed the aggregate amount of the Revolving Credit Commitments, such reduction or recalculation shall be accompanied by prepayment in the amount of such excess to be applied (x) first, to the outstanding Swing Line Loans and (y) second, to outstanding Revolving Credit Loans (in each case, together with any amounts payable under subsection 2.16)); provided that if the aggregate principal amount of Swing Line Loans and Revolving Credit Loans then outstanding is less than the amount of such excess (because Letters of Credit constitute a portion of such excess), the Borrower shall immediately, without notice or demand, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount (but in no event greater 31 than such balance) in a cash collateral account opened by the Administrative Agent for the benefit of the Revolving Credit Lenders (such deposit to be in Dollars with respect to Domestic L/Cs and the applicable Alternative Currency with respect to Foreign L/Cs). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants in such Letters of Credit, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Credit Documents. Any amounts deposited in such accounts shall be released to the Borrower on any Calculation Date on which the aggregate outstanding principal amount of Swing Line Loans plus the aggregate outstanding principal amount of Revolving Credit Loans plus the aggregate outstanding amount of L/C Obligations equals or is less than the aggregate amount of the Revolving Credit Commitments, provided that no Default or Event of Default has occurred and is continuing. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans (other than Swing Line Loans) to Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is then continuing and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount and Type of Loan to be converted, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is then continuing or (ii) after the date that is one month prior to the Termination Date and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 32 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $100,000 in excess thereof. All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate borrowings set forth in subsection 2.2 above. In no event shall the number of outstanding Eurodollar Tranches plus outstanding Facility B Eurodollar Tranches and Facility C Eurodollar Tranches exceed 20 at any time. 2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. 33 (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Revolving Credit Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Revolving Credit Commitments of Revolving Credit Lenders shall be made pro rata according to the respective Commitment Percentages of the Revolving Credit Lenders. Except during any period in which an Event of Default has occurred and is continuing, each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, Reimbursement Obligations (whether in respect of Domestic L/Cs or Foreign L/Cs), fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds; provided, that, with respect to 34 any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. At any time that an Event of Default has occurred and is continuing, all payments (including prepayments) made by Borrower hereunder and any application by the Administrative Agent of the proceeds of any Collateral and/or payment under any Guarantee shall be applied in the following order: (1) to the ratable payment of all amounts due and owing by the Borrower pursuant to subsection 10.5 of this Agreement, subsection 10.5 of the Facility B Credit Agreement or subsection 10.5 of the Facility C Credit Agreement to the Agents, the Facility B Agents and/or the Facility C Agents, and after payment in full thereof, to any other Lender, Facility B Lender or Facility C Lender; (2) to the ratable payment of all interest, fees and commissions due and owing under this Agreement, the Facility B Credit Agreement or the Facility C Credit Agreement to the Agents, the Facility B Agents, the Facility C Agents, the Swing Line Lender, any Lender, any Facility B Lender or any Facility C Lender; (3) to the ratable payment (or cash collateralization) of the aggregate outstanding principal amount of Loans, Facility B Loans, Facility C Loans and the aggregate L/C Obligations and Facility B L/C Obligations; and (4) to the ratable payment of all other obligations of the Borrower to the Agents, the Facility B Agents, the Facility C Agents, the Swing Line Lender, any Lender, any Facility B Lender, or any Facility C Lender under any Credit Document, Facility B Credit Document or Facility C Credit Document. For purposes of applying payments and proceeds distributed under clause 3 above, each Lender will first apply such amounts to all outstanding Loans of such Lender before such amounts will be held as cash collateral for L/C Obligations in which such Lender is a L/C Participant. The Administrative Agent, the Facility B Administrative Agent and the Facility C Administrative Agent shall ratably distribute such payments to the applicable Lenders, the Facility B Lenders and the Facility C Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to 35 Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be reinstated. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay 36 such Lender upon written demand such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different Eurodollar lending office if the making of such designation would allow the Lender or its Eurodollar lending office to continue to perform its obligations to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all Eurodollar Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 37 2.15 Taxes. (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between any Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership created or organized in or under the laws of the United States of America, any estate that is subject to U.S. federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: 38 (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 ECI (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents) or Form W-8 BEN (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Borrower described in clause (B) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 2.15(b)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 ECI or W-8 BEN, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and 39 expenses) incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any U.S. Taxes from any payments made pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this subsection 2.15(b). The Borrower hereby agrees that for so long as a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 2.15(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to subsection 2.15(a)). If any Credit Party other than the Borrower makes any payment to any Non-U.S. Lender under any Credit Document, the foregoing provisions of this subsection 2.15 shall apply to such Non-U.S. Lender and such Credit Party as if such Credit Party were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Lender has received a request to do so from such Credit Party and has a reasonable time to comply with such request). (c) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of a Non-Excluded Tax paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the preceding sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section has been paid in full. 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for 40 herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this subsection 2.16 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, convert or continue Eurodollar Loans, or to prepay, after notice or after a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsections 2.13, 2.14 or 2.15 as a result of any condition described in such subsections, (b) any Lender ceases to make Eurodollar Loans pursuant to subsection 2.13, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on five (5) Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under one of the subsections described in clause (a) above, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under one of the subsections described in clause (a) above, as the case may be, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to this subsection 2.17, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 41 2.18 Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees at the times and in the amounts as set forth in that certain fee letter between the Administrative Agent and the Borrower dated on or about August 11, 1998. 2.19 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes or other amounts giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Eurodollar Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the Revolving Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (x) the L/C Obligations would exceed the Revolving Credit Commitment or (y) the Available Commitment with respect to Revolving Credit Loans of all Revolving Credit Lenders less the aggregate principal amount of the Swing Line Loans then outstanding would be less than zero. (b) Each Domestic L/C shall (i) be denominated in Dollars, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods and (iii) expire no later than the fifth Business Day prior to the Termination Date. 42 (c) Each Foreign L/C shall (i) be denominated in an Alternative Currency, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods, and (iii) expire no later than the fifth Business Day prior to the Termination Date. For purposes of this Agreement, the amount deemed outstanding under each Foreign L/C at any time, and the amount of the Borrower's Reimbursement Obligations under subsection 3.5 for any amounts paid by the Issuing Lender in connection with any Foreign L/C, shall be the Dollar Equivalent, as determined on the most recent Calculation Date, of (x) such Letter of Credit or (y) the Reimbursement Amount (as defined in Subsection 3.5(a)), as applicable. (d) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, Domestic L/Cs shall also be subject to the laws of the State of New York. (e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if (i) such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law or any policies of the Issuing Lender or (ii) in the case of any Foreign L/C, it has determined that it cannot provide such Letter of Credit in the applicable Alternative Currency. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Termination Date by delivering to the Issuing Lender with a copy to the Administrative Agent at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent (with copies for each Lender) promptly following the issuance thereof. 3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum equal to (i) in the case of any such Letter of Credit issued as a Performance L/C, one-half (1/2) of the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding and (ii) in the case of any other Letter of Credit (except for the type described in clause (i) above), the Applicable Margin then in effect for Eurodollar Loans, of the 43 Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding, payable, in each such case, in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. Such fees shall be payable to the Administrative Agent to be shared ratably among the Revolving Credit Lenders in accordance with their respective Commitment Percentages. In addition, the Borrower shall pay to the Issuing Lender, for its sole account, a fee equal to 0.125% per annum of the Dollar Equivalent of the aggregate face amount of all outstanding Letters of Credit payable quarterly in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the relevant L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participation. (a) The Issuing Lender irrevocably agrees to sell and hereby sells to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Commitment Percentage from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement or any such reimbursement payment received by the Issuing Lender is avoided or required to be returned in accordance with applicable law, such L/C Participant shall pay to the Issuing Lender upon demand in Dollars at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Commitment Percentage of the Dollar Equivalent of the amount of such draft (determined on the date such draft is paid), or any part thereof, which is not so indefeasibly reimbursed; provided that, if such demand is made prior to 11:00 A.M., New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any portion of any payment made by the 44 Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 11:00 A.M., New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender and distributed to the L/C Participants shall be required to be returned by the Issuing Lender, each such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender on the same Business Day on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender provided such notice is received by 1:00 P.M., New York City time, on such Business Day, and the next Business Day if such notice is received after such time. The Issuing Lender shall provide notice to the Borrower on each Business Day on which a draft is presented indicating the Dollar Equivalent of the amount of (i) such draft so paid (and, in the case of a Foreign L/C, the amount of such draft so paid stated in the applicable Alternative Currency) and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment ((i) and (ii) collectively with any interest accruing pursuant to paragraph (b) below, the "Reimbursement Amount"). Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. 45 (b) Interest shall be payable on the Dollar Equivalent of any and all amounts remaining unpaid by the Borrower under this subsection from the date a draft presented under any Letter of Credit is paid by the Issuing Lender until payment in full (i) at the rate which would be payable on any Loans that are Base Rate Loans at such time until such payment is required to be made pursuant to subsection 3.5(a), and (ii) thereafter, at the rate which would be payable on any Loans that are Base Rate Loans at such time which were then overdue. (c) For the avoidance of doubt, subject to the provisos in the third sentence of subsection 2.12(a) and the last sentence of subsection 3.5(a) of this Agreement, all payments due from the Borrower hereunder in respect of Foreign L/Cs (and Reimbursement Obligations in connection therewith) shall be made in Dollars as provided in subsection 2.12 of this Agreement. 3.6 Obligations Absolute. (a) The Borrower's obligations under subsection 3.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (unless the Issuing Lender has knowledge of such invalidity, fraud or forgery), (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred, or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and the Dollar Equivalent of the amount thereof (and, in the case of a Foreign L/C, the amount thereof stated in the applicable Alternative Currency). If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the 46 Borrower in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall govern and control. 3.9 Determination of Exchange Rate. On each Calculation Date with respect to each outstanding Foreign L/C, the Issuing Lender shall determine the Exchange Rate as of such Calculation Date with respect to the applicable Alternative Currency and shall promptly notify the Administrative Agent and the Borrower thereof and of the Dollar Equivalent of all Foreign L/Cs outstanding on such Calculation Date. The Exchange Rate so determined shall become effective on such Calculation Date and shall remain effective until the next succeeding Calculation Date. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Issuing Lender, the Swing Line Lender and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agents, the Issuing Lender, the Swing Line Lender and each Lender that: 4.1 Financial Condition. (a) The following financial statements concerning Borrower and its Subsidiaries have been delivered to the Agents and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended: (i) The audited consolidated balance sheets at December 31, 1998 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers L.L.P. (ii) The unaudited condensed consolidated balance sheet(s) at September 30, 1999 and the related statement(s) of income and cash flows of Borrower and its Subsidiaries for the fiscal quarter then ended. (b) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries which has been delivered pursuant to subsection 5.1(o) has been prepared based on the best information available to the Borrower as of the date of delivery thereof and presents fairly on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries, as December 31, 1999, adjusted to give effect to the acquisition 47 by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc., and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. 4.2 No Change. Since September 30, 1999 there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is, or will be on or before the date set forth in subsection 6.12, duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each of Holdings, the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party, except those referred to in subsections 4.17 and 6.13 and those set forth on Schedule 4.4. This Agreement has been, and each other Credit Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or 48 assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Pledge Agreements. 4.6 No Material Litigation. Except as set forth on Schedule 4.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Credit Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 49 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA. The Borrower has provided to the Agents a true and correct copy of all agreements, arrangements and understandings relating to the transfer of Plans from the Seller to the Borrower (the "Transfer Agreements"). The Transfer Agreements are in full force and effect and have not been waived or modified without the consent of the Agents (which shall not be unreasonably withheld) except to the extent any such waiver or modification, singly or in the aggregate, could not be reasonably expected to have a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination or, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. As of the last annual valuation date prior to the date on which this representation is made or deemed made, the fair market value of the assets available for benefits under each Single Employer Plan did not exceed the actuarial present value of all accumulated benefit obligations under such Plan by more than $20,000,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. 4.13 Investment Company Act; Other Regulations. None of the Borrower or any of its Subsidiaries is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. None of the Borrower or any of its subsidiaries is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 50 4.14 Subsidiaries. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 4.14. 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) to pay fees and expenses related to the preparation and negotiation of this Agreement and the other Credit Documents and (ii) for general corporate and working capital purposes in the ordinary course of business of the Borrower and its Subsidiaries, including, without limitation, the making of Investments permitted under subsection 7.9. 4.16 Environmental Matters. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated Holdings, by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which Holdings, the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Holdings, the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. 51 (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. 4.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, each Pledge Agreement will be effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the pledged stock described therein and, when stock certificates representing or constituting the pledged stock described therein are delivered to the Administrative Agent, together with undated stock powers executed in blank therefor, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock described therein. 4.18 Accuracy and Completeness of Information. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to subsections 4.1 and 6.1 hereto. 4.19 Labor Matters. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Effectiveness. This Agreement shall not be effective until the following conditions precedent have been satisfied or waived in writing by the Administrative Agent and the Requisite Class Lenders: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, (ii) the Guarantees and (iii) the Pledge Agreements, in each case executed, duly acknowledged and delivered by duly authorized officers of each party thereto, with a counterpart or a conformed copy for each Lender. Notwithstanding the foregoing, no Immaterial Subsidiary 52 or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the capital stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. (b) Fees and Expenses. The Agents, the Arrangers and the Lenders shall have received all fees, expenses and other consideration required to be paid on or before the Closing Date and all attorneys fees and disbursements incurred by the Agents in connection with this Agreement shall have been paid on or before the Closing Date. (c) Good Standing Certificates. The Administrative Agent shall have received certificates of good standing for each Credit Party issued by the Secretary of State (or other relevant governmental officers) of the jurisdiction of incorporation of each Credit Party. (d) Consents, Authorizations and Filings, Etc. All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Credit Parties, and the validity and enforceability against the Credit Parties, of the Credit Documents to which any of them is a party, shall have been obtained or made, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, the failure to obtain which would not have a Material Adverse Effect. (e) Insurance. The Lenders shall have received (i) a reasonably satisfactory schedule describing all insurance maintained by the Borrower and its Subsidiaries pursuant to subsection 6.5, and (ii) binders (or other customary evidence as to the obtaining and maintenance by the Borrower and its Subsidiaries of such insurance) for each policy set forth on such schedule insuring against casualty and other usual and customary risks. (f) Litigation. On the Closing Date, there shall be no actions, suits or proceedings pending or threatened against any Credit Party (a) with respect to this Agreement or any other Credit Document or any Transaction Document or the transactions contemplated hereby or thereby or (b) which the Agents or the Required Lenders shall determine could reasonably be expected to have a Material Adverse Effect. (g) Borrowing Certificate. If any Loan is to be requested on the Closing Date, the Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (h) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, (ii) the borrowings contemplated hereunder, and (iii) the stock pledges 53 pursuant to the Borrower Pledge Agreement, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Credit Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (j) Corporate Proceedings of Other Credit Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party (other than the Borrower) authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, and (ii) the granting by it of the Liens created pursuant to the Pledge Agreements to which it is a party, certified by the Secretary or an Assistant Secretary of each such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (k) Credit Party Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Credit Party (other than the Borrower), dated the Closing Date, as to the incumbency and signature of the officers of such Credit Party executing any Credit Document, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Credit Party. (l) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the such Credit Party. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender the executed legal opinion of each of Simpson Thacher and Bartlett, special counsel to the Credit Parties, and Christopher C. Cambria, Vice President - General Counsel and Secretary of the Borrower and counsel to the other Credit Parties, substantially in the form of Exhibits C-1 and C-2, respectively. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. (n) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. 54 (o) Pro Forma Financials. The Lenders shall have received a reasonably satisfactory unaudited pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1999 which shall present fairly, in all material respects, on a pro forma basis, the estimated financial condition of the Borrower and its Subsidiaries as of such date, as adjusted to give effect to acquisition by Borrower of (i) the Training Devices and Training Systems ("TDTS") assets of Raytheon, Inc., and (ii) the assets of Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. (p) Projections. Each Lender shall have received financial projections of the Borrower in form and substance reasonably satisfactory to the Agents prepared by the Borrower. (q) No Default. No Default or Event of Default shall have occurred and be continuing. (r) Facility B Credit Agreement. All conditions set forth in clauses (a) through (q) of subsection 5.1 of the Facility B Credit Agreement shall have been satisfied or waived in writing by the Facility B Lenders required to affect a waiver of such condition. (s) Facility C Credit Agreement. All conditions set forth in clauses (a) through (q) and (t) through (w) of subsection 5.1 of the Facility C Credit Agreement shall have been satisfied or waived in writing by the Facility C Lenders required to affect a waiver of such condition. 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit (including the issuance of any Letter of Credit) requested to be provided by it on any date (including, without limitation, its initial Loan and Letter(s) of Credit but excluding Revolving Credit Loans made to repay Refunded Swing Line Loans) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for any representation and warranty which is expressly made as of an earlier date, which representation and warranty shall have been true and correct in all material respects as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur or exist after giving effect to the extensions of credit requested to be made on such date. Borrower shall not be in violation of Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture on such date nor will such a violation occur or exist after giving effect to the extensions of credit requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated 55 by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agents, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by, and each Letter of Credit issued on behalf of, the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 SEC Filings. The Borrower will file on a timely basis with the SEC, to the extent such filings are accepted by the SEC and whether or not the Borrower has a class of securities registered under the Exchange Act, the annual reports, quarterly reports (including with respect to the fourth quarter of each fiscal year) and other documents that the Borrower would be required to file if the Borrower were subject to section 13(a) or 15(d) of the Exchange Act. The Borrower will also be required (i) to deliver to the Administrative Agent and each Lender, copies of such reports and documents within five days after the date on which the Borrower files such reports and documents with the SEC or the date on which the Borrower would be required to file such reports and documents if the Borrower were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to promptly notify the Administrative Agent in writing of the occurrence of any such event and to supply at the Borrower's cost copies of such reports and documents to the Administrative Agent and any Lender upon request. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent with copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of the independent certified public accountants reporting on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of a Responsible Officer stating that, to the best of such Officer's 56 knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto) and (ii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1, a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) the Debt Ratio and (ii) the financial covenants set forth in subsection 7.1, as of such last day or for the fiscal period then ended, as the case may be; (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or Holdings sends to its stockholders; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law. Except as permitted by subsection 7.5 and subsection 7.6, (a) continue to engage in business of the same general type as now conducted by it; (b) preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (c) keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear and damage by fire and/or other casualty or taking by condemnation excepted) except if (i) in the reasonable business judgment of the Borrower or such Subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges or franchises, and (ii) such failure to preserve and maintain such privileges, rights or franchises would not materially adversely affect the rights of the Lenders hereunder or the value of the Collateral, and except as otherwise permitted pursuant to subsection 7.5; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 Insurance. The Borrower will, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against 57 such risks as are customarily maintained by companies of similar stature engaged in the same or similar businesses operating in the same or similar locations. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records (except to the extent any such access is restricted by a Requirement of Law) at any reasonable time on a Business Day and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $7,500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the following events, as soon as possible and in any event within 45 days after the Borrower knows or has reason to know thereof: (i) the incurrence of an accumulated funding deficiency or the filing of an application to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan, the creation of any Lien in favor of the PBGC or a Plan, the occurrence of any "Trigger Event" (as defined in the Transfer Agreements) and the reassumption by the Seller of sponsorship of any Single Employer Plan, (ii) except where such event or liability could not reasonably be expected to have a Material Adverse Effect, the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure to make any required contribution to a Plan, (iii) the institution of proceedings by the PBGC with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Single 58 Employer Plan or Multiemployer Plan or (iv) except as could not reasonably be expected to have a Material Adverse Effect, the institution of proceedings or the taking of any other action with respect to the withdrawal from or termination of any Single Employer Plan; Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 6.8 Environmental Laws. (a) (i) Comply in all material respects with all Environmental Laws applicable to it, and obtain, comply in all material respects with and maintain any and all material Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all material respects with all applicable Environmental Laws, and obtain, comply in all material respects with and maintain any and all material Environmental Permits, applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or suspected noncompliance, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve material compliance. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed and delivered any and all documents which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.10 Additional Collateral. (a) With respect to any Capital Stock of any newly created or acquired Subsidiary or any newly issued Capital Stock of any existing Subsidiary acquired after the Original Closing Date by the Borrower or any of its Subsidiaries that is intended to be subject to the Lien created by any of the Pledge Agreements but which is not so subject, promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Pledge Agreements or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such Capital Stock, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including delivering all such original certificates evidencing such Capital Stock to the Administrative Agent together with undated stock powers executed in 59 blank therefor, and (iii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be required to grant to the Administrative Agent a Lien upon the Capital Stock of any Immaterial Subsidiary. (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. 6.11 [Intentionally Omitted.] 6.12 Foreign Jurisdictions. Maintain due qualification as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.13 Government Contracts. The Borrower and its Subsidiaries shall apply for and maintain all material facility security clearances and personnel security clearances required of the Borrower under all Requirements of Law to perform and deliver under any and all Government Contracts and as otherwise may be necessary to continue to perform the business of the Borrower and its Subsidiaries. 6.14 Lien Searches. Not later than 45 days following the Closing Date, the Borrower shall deliver to the Administrative Agent the results of a search of Uniform Commercial Code, tax and judgment filings made with respect to each of the Borrower and its Subsidiaries (other than any Immaterial Subsidiaries) in each jurisdiction in which the Borrower or such applicable Subsidiary maintains its principal place of business or any material assets and a certificate of a Responsible Officer certifying that such lien search results do not disclose any Liens, except for Liens permitted hereunder. 60 SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1), shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the fiscal quarter during which such fiscal quarter occurs: Fiscal Quarter Ending Ratio December 31, 1999 4.75 March 31, 2000 4.75 June 30, 2000 4.75 September 30, 2000 4.50 December 31, 2000 4.50 March 31, 2001 4.50 June 30, 2001 4.50 September 30, 2001 3.75 December 31, 2001 3.75 March 31, 2002 3.75 June 30, 2002 3.75 September 30, 2002 3.25 and thereafter (b) Interest Coverage. Permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense during any Test Period to be less than the ratio set forth opposite such period below (such ratio, the "Interest Coverage Ratio"): Test Period Interest Coverage Ratio 10/1/99 - 12/31/99 2.25 1/1/00 - 3/31/00 2.25 4/1/00 - 6/30/00 2.25 7/1/00 - 9/30/00 2.50 10/1/00 - 12/31/00 2.50 1/1/01 - 3/31/01 2.50 4/1/01 - 6/30/01 2.50 61 7/1/01 - 9/30/01 2.75 10/1/01 - 12/31/01 2.75 1/1/02 - 3/31/02 2.75 4/1/02 - 6/30/02 2.75 7/1/02 - 9/30/02 3.00 10/1/02 - and thereafter 3.00 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (including in respect of Interest Rate Agreements), except: (a) Indebtedness of the Borrower under this Agreement and the Facility B Credit Agreement and the Facility C Credit Agreement; (b) Indebtedness of the Borrower incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $25,000,000 at any time outstanding; (c) Indebtedness assumed in connection with any Investment permitted pursuant to subsection 7.9(k) hereof; (d) additional Indebtedness of the Borrower not exceeding $50,000,000 in aggregate principal amount at any one time outstanding (of which up to $35,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); (e) Indebtedness of the Borrower in respect of not more than (i) $225,000,000 principal amount of Subordinated Notes issued on the April 30, 1997 and (ii) $180,000,000 principal amount of New Subordinated Notes issued on May 22, 1998 and (iii) $200,000,000 principal amount of December 1998 Subordinated Notes issued on or about December 8, 1998; (f) the Indebtedness of the Borrower and its Subsidiaries outstanding on the Original Closing Date and reflected on Schedule 7.2(f), and refundings or refinancings thereof, provided that no such refunding or refinancing shall shorten the maturity or increase the principal amount of the original Indebtedness; (g) Guarantee Obligations permitted by subsection 7.4; (h) the incurrence by any Credit Party of intercompany Indebtedness between or among the Credit Parties; provided, however, that if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations; (i) Indebtedness secured by Permitted Liens; (j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any 62 Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $100,000,000 at any time outstanding, less, without duplication, the aggregate amount of then existing Guarantee Obligations permitted under 7.4(g); and (k) Up to $30,000,000 of purchase money Indebtedness the proceeds of which are utilized to acquire the real property (including improvements thereon) and related assets currently utilized by the Borrower's communications systems - west division in Salt Lake City, Utah, on terms reasonably satisfactory to the Agents. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(f), provided that no such Lien is expanded to cover any additional property (other than after-acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals or replacements thereof provided that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the original Indebtedness; and provided, further, that the assets of the Borrower and its Subsidiaries encumbered by such Liens are existing equipment and other existing tangible assets; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsections 7.2(b) and 7.2(k) incurred to finance the acquisition of fixed or capital assets, 63 provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property of such property at the time it was acquired; (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $35,000,000 in aggregate amount at any time outstanding; (j) Liens created pursuant to the Pledge Agreements; (k) Liens on the property of the Borrower or any of its Subsidiaries in favor of landlords securing licenses, subleases or leases entered into in the ordinary course of business; (l) licenses, leases or subleases permitted hereunder granted to other Persons not interfering in any material respect in the business of the Borrower or any of its Subsidiaries; (m) so long as no Default or Event of Default shall have occurred and be continuing under clause (f) of Section 8, attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $7,500,000; (n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower, or any of its subsidiaries in the ordinary course of business; and (o) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and extensions, renewals and replacements thereof, provided, however, that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the Indebtedness guaranteed by the original guarantee; 64 (b) Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed $30,000,000 at any one time outstanding for the Borrower and its Subsidiaries; (c) guarantees made by the Subsidiaries of the Borrower pursuant to the Subordinated Debt Documents and the New Subordinated Debt Documents and the December 1998 Subordinated Debt Documents; (d) Guarantee Obligations under the Credit Documents and the Facility B Credit Documents and the Facility C Credit Document; (e) L/C Obligations and the Facility B L/C Obligations; (f) Guarantee Obligations of the Borrower or any Subsidiary in respect of obligations of a Subsidiary permitted to be incurred by such Subsidiary by this Agreement; and (g) Guarantee Obligations in respect of surety bonds and/or performance letters of credit which shall not exceed $100,000,000 at any time less, without duplication, the amount of outstanding Indebtedness permitted under subsection 7.2(j). 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); and (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Credit Party. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); 65 (c) as permitted pursuant to subsection 7.5(b); (d) the sale, lease, transfer or exchange of inventory in the ordinary course of business; (e) transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and (j) the conveyance, sale, assignment or contribution to any new Subsidiary of the Borrower or any existing Subsidiary of the Borrower assets of the Borrower or any Subsidiary of the Borrower not exceeding five percent (5%) of the Consolidated Total Assets. 7.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary other than Permitted Stock Payments. 7.8 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for capital expenditures in the ordinary course of business not exceeding $45,000,000 in the aggregate for the Borrower and its Subsidiaries during any fiscal year of the Borrower; provided, that up to 50% of any such amount not so expended in the fiscal year for which it is permitted above may be carried over for expenditure in the next following fiscal year; provided, further, that Borrower and/or its Subsidiaries may exceed the annual limit on capital expenditures set forth above by utilizing any amounts available for Investments permitted under subsection 7.9(k) hereto to fund such additional Capital Expenditures. 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or 66 other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) loans to officers of the Borrower listed on Schedule 7.9(c) in aggregate principal amounts outstanding not to exceed the respective amounts set forth for such officers on said Schedule; (d) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at any one time outstanding; (e) investments by the Borrower in its Subsidiaries that are Credit Parties and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Credit Parties; (f) so long as no Event of Default has occurred and is continuing, loans by the Borrower to its employees (other than any Principals or their Related Parties) in connection with (i) management incentive plans, (ii) management stock purchase plans, and (iii) obligations of employee option-holders of Storm Control Systems, Inc. to fund the exercise of such options, which loans in (i), (ii) and (iii) in the aggregate do not exceed $5,000,000; (g) Investments in existence on the Original Closing Date set forth on Schedule 7.9(g) and extensions, renewals, modifications or restatements or replacements thereof; provided that no such extension, renewal, modification or restatement shall increase the amount of the original loan, advance or investment; (h) promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (i) Investments permitted by subsection 7.6(b) and subsection 7.6(j); (j) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (k) Investments made at any time from and after the Original Closing Date to acquire (i) all or any portion of the Capital Stock, or all or any portion of the assets, of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business, or (ii) all or substantially all of the assets of any division of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business; provided, that, (a) if such Investment is an acquisition of a majority of the Voting Stock of any Person, such Person's board 67 of directors or similar governing body shall have approved such acquisition and (b) at the time of each such Investment described above in clauses (i) and (ii) (both before and after giving effect to such Investment), there shall exist no Default or Event of Default and the aggregate consideration paid (regardless of form, including in the case of an acquisition of assets, any assumed obligations) in connection with all Investments made pursuant to this subsection 7.9(k) shall not exceed the New Investment Sublimit (without deducting therefrom (w) the portion of any purchase price for any Investment funded with Capital Stock of Holdings, (x) consideration paid by the Borrower in connection with the acquisition of SPD Technologies pursuant to the SPD Technologies Acquisition Agreement, (y) consideration not exceeding $92 million paid by Borrower in connection with the acquisition of Microdyne Corporation and (z) any consideration paid prior to December 8, 1998 by the Borrower in connection with any Investment which is listed on Schedule 7.9(k) hereto); provided, further, that in connection with each individual, or series of related, Investments made pursuant to this subsection 7.9(k), Borrower shall deliver to the Administrative Agent, on or prior to the date which is one Business Day prior to the consummation of such Investment or Investments, a certificate of a Responsible Officer that certifies that no Default or Event of Default has occurred and is continuing or will be caused as a result of consummating such proposed Investment. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents, New Subordinated Debt Documents or December 1998 Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Transaction Documents in any manner that could reasonably be expected to be adverse to the Lenders. 68 7.11 Limitation on Transactions with Affiliates. (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's business and (iii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. (b) In addition, notwithstanding the foregoing, the Borrower and its Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower and Holdings; (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and (iv) transactions described in the Transaction Documents. 7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary; provided that the Borrower may enter into a sale and leaseback transaction if the Borrower could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction and (b) incurred a Lien to secure such Indebtedness, in each case in accordance with the restrictions contained in this Agreement and the other Credit Documents. 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, the Facility B Credit Agreement and the Facility C Credit Agreement, (b) the Subordinated Debt Documents, the New Subordinated Debt Documents or the December 1998 Subordinated Debt Documents, and (c) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which 69 cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary (other than an Immaterial Subsidiary), except for Similar Businesses. 7.16 Designated Senior Debt. Designate any Indebtedness or other obligation, other than Indebtedness under the Credit Documents, as "Designated Senior Debt," as such term is defined in the Indenture as in effect on the April 30, 1997, the New Subordinated Debt Indenture as in effect on May 22, 1998 or the December 1998 Subordinated Debt Indenture as in effect on the December 8, 1998, or any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate blockage periods under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture or any other Indebtedness or other obligation of the Borrower and its Subsidiaries (other than as a result of a payment default). SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; (b) Any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) The Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 7 or subsection 6.7(a) of this Agreement, Section 4 of the Parent Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the Parent Pledge Agreement, Section 4 of the Borrower Pledge Agreement, or Section 4 of the Subsidiary Pledge Agreement; (d) The Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; 70 (e) The Borrower or any of its Subsidiaries shall (i) default (x) in any payment of principal of or interest of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or Interest Rate Agreement Obligations or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of Indebtedness, Interest Rate Agreement Obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $7,500,000 and (ii) such default continues for a period in excess of 10 days; (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Holdings, Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with 71 respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $7,500,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) (i) Any of the Pledge Agreements shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Pledge Agreements shall so assert or (ii) the Lien created by any of the Pledge Agreements shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); (j) The Guarantee Obligation of any Credit Party under the Credit Documents shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; (k) There shall have occurred a Change in Control; or (l) An "Event of Default" as defined in the Facility B Credit Agreement and/or the Facility C Credit Agreement shall have occurred and be continuing; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative 72 Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Equivalent of the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants (and the benefit of each such "Issuing Lender" and the "L/C Participants" as defined in the Facility B Credit Agreement), a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement, the Facility B Credit Agreement, the other Credit Documents and the other Facility B Credit Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent in accordance with subsection 2.12 hereof. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants (and each applicable "Issuing Lender" and the "L/C Participants" as defined in the Facility B Credit Agreement), such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS; THE ARRANGERS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 73 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until such Agent shall have received such directions, 74 such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Types of Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the 75 Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it or Loan Account maintained by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall, unless a Default or Event of Default shall have occurred and be continuing, be approved by the Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Similarly, the Syndication Agent and/or the Documentation Agent may resign as Syndication Agent and/or Documentation Agent, as the case may be, upon 30 days' notice to the Lenders. The procedure for replacement and effective date of resignation for the Syndication Agent and the Documentation Agent shall be identical to that provided above for the Administrative Agent. 9.10 The Arrangers and the Co-Agents. Except as expressly set forth herein, each of the Arrangers and the Co-Agents, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to 76 the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of maturity of any Loan, extend the expiration of any Letter of Credit beyond the Termination Date, or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender affected thereby, or increase the commitment of any Lender or extend the expiry of the commitment of any Lender without the consent of such Lender, (ii) amend, modify or waive the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all the Lenders, (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Agents, (v) amend, modify or waive any provision of subsection 2.1(b), any other provision of this Agreement relating to the Swing Line Loans or the Swing Line Note, if any, without the written consent of the Swing Line Lender, or (vi) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents or the Issuing Lender or the Swing Line Lender without the written consent of the Arrangers, the Agents or the Issuing Lender or the Swing Line Lender, as the case may be. In addition to the foregoing, (A) no amendment, modification, termination or waiver of any provision of subsection 2.5, subsection 2.6 or subsection 2.12 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, the application of any scheduled payment or voluntary or mandatory prepayment, the application of proceeds of any Collateral or any Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class), (B) no amendment, modification, termination or waiver of any provision of any Guarantee or Pledge Agreement shall be effective without the written concurrence of the Requisite Class Lenders for each Class and (C) no amendment, modification or waiver with respect to any provision of this subsection 10.1 or to the definition of "Requisite Class Lenders" shall be effective without the written concurrence of all Lenders, all Facility B Lenders and all Facility C Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and the Issuing Lender and all future holders of the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as issuance of a new Letter of Credit. In the case of any waiver, the Borrower, the Lenders and the Agents 77 and the Issuing Lender shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, Swing Line Lender, Issuing Lender, the Syndication Agent and the Documentation Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings, the Borrower or any of its Subsidiaries: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, NY 10016 Attention: Robert LaPenta Fax: (212) 805-5470 with a copy to Attention: Christopher C. Cambria Fax: (212) 805-5494 78 The Administrative Agent: Addresses for notices of borrowing, prepayments and other administrative matters: Bank of America, N.A. 1850 Gateway Boulevard, 5th Floor Concord, CA 94520 Attention: Agency Administrative Services #5596 Josephine T. Flores, Vice President Fax: (925) 675-8500 Tel: (925) 675-8374 Addresses for all other notices (including with respect to amendments and waivers): Bank of America, N.A. 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management #10831 Dietmar Schiel, Vice President Fax: (415) 436-3425 Tel: (415) 436-2769 with a copy to: Bank of America, N.A. 335 Madison Avenue New York, NY 10017 Attention: Lisa Choi Fax: (212) 503-7066 Tel: (212) 503-7950 79 The Swing Line Lender: Bank of America, N.A. 231 South LaSalle Street Chicago, IL 60697 Attention: Renee Waller Fax: (312) 974-9626 Tel: (312) 828-3874 The Issuing Lender: Bank of America, N.A. 333 S. Beaudry Avenue, 19th Floor Los Angeles CA 90017-1486 Attention: Trade Operations Center - Standby Letters of Credit #22621 Sandra M. Leon, Vice President Fax: (213) 345-6694 Tel: (213) 345-5231 The Documentation Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michelle Swanson Fax: (212) 528-0819 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 9th Floor New York, New York 10285 Attention: Michele Swanson Fax: (212) 528-0819 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or 80 further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each of the Agents for all of their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Lenders (in addition to any local counsel), (b) to pay or reimburse each Lender and each Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and each Arranger, each Agent and each Issuing Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Transaction, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), it being understood that the Borrower shall have an obligation hereunder to the Lender or any Agent with respect to any indemnified liabilities incurred by any Agents, Arranger or the Issuing Lender or any Lender as a result of any Materials of Environmental Concern that are first manufactured, emitted, generated, treated, released, spilled, stored or disposed of on, at or from any Property or any violation of any Environmental Law, which in any case first occurs on or with respect to such Property (i) after the Property is transferred to any Agent, Arranger, Issuing Lender or any Lender or their successors or assigns by foreclosure sale, deed in lieu of foreclosure, or similar transfer or, following such transfer, (ii) in connection with, but prior to, the sale, leasing or other transfer of such Property by such Agent, Arranger, Issuing Lender, or any Lender or their successors or assigns to one or more third parties; provided, however, that the Borrower shall have no obligation hereunder to any Agent or 81 the Issuing Lender or any Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent or the Issuing Lender or any such Lender, or with respect to otherwise indemnified liabilities following the sale, leasing or other transfer of such Property to one or more third parties. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participation and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i), (ii) and (iii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Letters of Credit, the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said subsection; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender, any affiliate thereof 82 or, in the case of Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities (an "Investment Fund"), any other such Investment Fund which is under common management with such Lender, or, with the consent of the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender (which in each case shall not be unreasonably withheld), to an additional bank, Investment Fund or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register with a copy to the Syndication Agent, provided that, in the case of any such assignment to an additional bank or financial institution, (A) either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (B) each Assignee which is a Non-U.S. Lender shall comply with the provisions of clause (A) of subsection 2.15(b) hereof, or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of subsection 2.15(b) hereof (and, in either case, with all of the other provisions of subsection 2.15(b) hereof). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection, the consent of the Borrower shall not be required for any assignment which occurs at any time when any of the events described in clause (f) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans of each Type owing to each Lender from time to time and the registered owners of the Obligations evidenced by the Notes and the Loan Accounts. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, a Note or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other 83 Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, Commitment or other obligation evidenced by a Note or a Loan Account shall be effective only upon appropriate entries with respect thereto being made in the Register, and prior to such recordation, all amounts owing to the assignor with respect thereto shall remain owing to the assignor. Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Notes shall be issued to the designated Assignee, if requested, and the old Note shall be returned by the Administrative Agent to the Borrower marked "canceled." (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,000 (provided that no such payment shall be required whenever LCPI or BOA is the assigning Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. Following the effective date of any such Assignment and Acceptance, the Administrative Agent shall be entitled to update Schedule I hereto to reflect the then outstanding Commitments of each Lender whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I and be deemed a part of this Agreement without any further action or consent of any party and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). 84 (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (i) Notwithstanding any other provision contained in this Agreement or any other Credit Document to the contrary, (x) any Lender may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect to such assigned Loans to the extent of such payments and (y) with the consent of the Administrative Agent (not to be unreasonably withheld), any Lender which is an Investment Fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee. No such assignment shall release the assigning Lender from its obligations hereunder. 10.7 Adjustments; Set-off. (a) At any time that an Event of Default has occurred and is continuing, if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, Facility B Lender or Facility C Lender (any such affected Lender, Facility B Lender or Facility C Lender hereinafter, an "Affected Lender"), if any, in respect of the Borrower's obligations owing to such other Affected Lender, whether under this Agreement, the Facility B Credit Agreement or Facility C Credit Agreement, including any interest thereon, such benefited Lender shall purchase for cash from each other Affected Lender a participating interest in such portion of each such other Affected Lender's Loans or the Reimbursement Obligations owing to it, Facility B Loans or Facility B Reimbursement Obligations and/or Facility C Loans owing to it, or shall provide such other Affected Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Affected Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest unless the benefited Lender is required by court order to pay interest thereon, in which case each Lender returning funds to such benefited Lender shall pay its pro rata share of such interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by 85 acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and Borrower also agree that all proceeds of any such set-off shall be subject to the ratable sharing provisions of subsections 2.12 and 10.7(a) hereof to the same extent as if an Event of Default had occurred and was continuing. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; 86 (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE ARRANGERS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the 87 Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 10.16 Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. (b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this subsection 10.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 10.17 Year 2000. The Borrower has reviewed, or will expeditiously review, its operations and those of its Subsidiaries with a view to assessing whether its businesses, or the businesses of any of its Subsidiaries, are experiencing any Year 2000 Problem. The Borrower shall take all actions necessary and commit adequate resources to assure that its computer-based and other systems (and those of all of its Subsidiaries) are able to effectively process data, including dates after January 1, 2000, without experiencing any Year 2000 Problem that could reasonably be expected to cause a Material Adverse Effect. At the request of the Required Lenders, the Borrower will provide the Administrative Agent with assurances and substantiations (including, but not limited to, the results of internal or external audit reports prepared in the 88 ordinary course of business) reasonably acceptable to the Administrative Agent as to the capability of the Borrower and its Subsidiaries to conduct its and their businesses and operations after January 1, 2000 without experiencing a Year 2000 Problem causing a Material Adverse Effect. The Borrower represents and warrants that it has a reasonable basis to believe that no Year 2000 Problem will cause a Material Adverse Effect. 10.18 Existing Agreements Superseded. As set forth in subsection 1.3 hereof, the Original Credit Agreement is superseded by this Credit Agreement, which has been executed in renewal, amendment, restatement and modification, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. [SIGNATURE PAGES FOLLOW] 89 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: -------------------------------------------- Title: BANK OF AMERICA, N.A. as Administrative Agent By: -------------------------------------------- Title: BANK OF AMERICA, N.A. as a Lender and Swing Line Lender By: -------------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent, and as a Lender By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THE BANK OF NEW YORK By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THE BANK OF NOVA SCOTIA By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT BANK ONE, N.A. By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT FLEET NATIONAL BANK By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT CREDIT LYONNAIS By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT FIRST UNION COMMERCIAL CORPORATION By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THE FUJI BANK, LIMITED By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT HSBC BANK USA By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT SOCIETE GENERALE By: -------------------------------------------- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT Schedule I ---------- To Credit Agreement Lenders/Address for Notices Revolving Credit Commitment LEHMAN COMMERCIAL PAPER INC. $25,714,285.72 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Michele Swanson Fax : (212) 528-0819 Tel : (212) 526-0330 BANK OF AMERICA, N.A. $25,714,285.72 335 Madison Avenue New York, New York 10017 Attention: Lisa Choi Fax: (212) 503-7066 Tel: (212) 503-8101 with a copy to other parties listed in (Section) 10.2 for BOA. CREDIT LYONNAIS NEW YORK BRANCH $17,142,857.14 1301 Avenue of the Americas New York, NY 10019-6022 Attention: Judy Domkowski Fax: (212) 459-3179 Tel: (212) 261-7341 FLEET NATIONAL BANK $17,142,857.14 100 Federal Street MA DE 10010A Boston, MA 02110 Attention: Roger Boucher Fax: (617) 434-0601 Tel: (617) 434-3951 HSBC BANK USA $17,142,857.14 140 Broadway 5th Floor New York, NY 10005-1196 Attention: John Lyons Fax: (212) 658-2586 Tel: (212) 658-2200 I-1 THE BANK OF NOVA SCOTIA $17,142,857.14 One Liberty Plaza New York, NY 10006 Attention: Ben Sileo Fax: (212) 225-5090 Tel: (212) 225-5159 BANK ONE, N.A. $17,142,857.14 153 West 51st Street New York, NY 10019-6025 Attention: Andrea Kantor Fax: (212) 373-1180 Tel: (212) 373-1023 THE FUJI BANK LIMITED $11,428,571.44 Two World Trade Center, 79th Floor New York, NY 10048-0001 Attention: David Manheim Fax: (212) 898-2399 Tel: (212) 898-2723 SOCIETE GENERALE $17,142,857.14 181 West Madison Street Suite 3400 Chicago, IL 60602 Attention: Joe Moreno Fax: (312) 578-5099 Tel: (312) 578-5050 THE BANK OF NEW YORK $17.142,857 One Wall Street New York, NY 10286 Attention: Ken Sneider Fax: (212) 635-6999 Tel: (212) 635-6863 FIRST UNION COMMERCIAL CORPORATION $17,142,857.14 201 So. College St. Charlotte, NC 28288 Attention: Barbara Van Meerten Fax: (704) 374-4793 Tel: (704) 374-7115 I-2 Schedule II to Credit Agreement PRICING GRID**
REVOLVING CREDIT FACILITY APPLICABLE REVOLVING CREDIT FACILITY, REVOLVING CREDIT DEBT RATIO MARGIN-EURODOLLAR RATE* APPLICABLE MARGIN-BASE RATE* COMMITMENT FEE* - ----------------------- ---------------------------- ------------------------------ -------------------- (greater than) 4.75x 275 175 50 (greater than) 4.25x 237.5 137.5 50 (greater than) 3.75x 200 100 45 (greater than) 3.25x 175 75 40 (greater than) 2.75x 150 50 35 (less than) 2.75x 125 37.5 30
- --------------------------- * Notwithstanding the foregoing Pricing Grid, the Applicable Margins and the Commitment Fee Rate for the Revolving Credit Facility for the period following the Closing Date through but excluding the Adjustment Date related to the fiscal quarter ending as of September 30, 2000 will be no lower in cost to Borrower than the pricing level applicable if the Debt Ratio is greater than 3.25x but not greater than 3.75x; provided, however, nothing contained herein shall limit the effect of any increase in the pricing level on any Adjustment Date occurring after the Closing Date if the Debt Ratio exceeds 3.75x. ** Pricing Grid (except for Debt Ratios) reflects basis points. II-1 EX-10.46 11 0011.txt CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT This CONSENT AND THIRD AMENDMENT TO THE AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 16, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Amended and Restated 364-Day Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to the waiver of certain prepayment requirements and certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. CONSENT TO LIMITED WAIVER. Borrower has requested that the Required Class Lenders consent to a waiver of the mandatory prepayment of the Loans and permanent reduction in Commitments required by Section 2.6(b)(i) of the Credit Agreement with respect to the Net Proceeds of Indebtedness incurred in connection with the issuance of up to the Designated Issue Amount (as defined herein) of Permitted Convertible Securities (the "Requested Waiver"). Subject to the satisfaction of the conditions precedent to this Amendment set forth in Section 3 hereof, each Lender executing this Amendment hereby consents to the Requested Waiver. As used herein, "Designated Issue Amount" shall mean the aggregate principal amount of Permitted Convertible Securities actually issued on or prior to January 31, 2001, which shall not in any event exceed $300,000,000. SECTION 2. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 3 of this Amendment, the Borrower and the Lenders hereby agree to amend the Credit Agreement as follows: 2.1 The definition of "New Investment Sublimit" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting the term "$650,000,000" and inserting the term "$850,000,000" in place thereof. 2.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined term in alphabetical order: "Third Amendment Effective Date": shall have the meaning given to such term in that certain Consent and Third Amendment to the Amended and Restated 364-Day Credit Agreement dated as of November 16, 2000. 2.3 Subsection 2.18 of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "Subject to the occurrence of the Third Amendment Effective Date, Borrower hereby agrees to pay to each Lender submitting to the Administrative Agent an executed counterpart to the Third Amendment to this Agreement on or before 12:00 (noon) (New York time) on November 29, 2000 (a "Third Amendment Lender") a non-refundable amendment fee (the "Third Amendment Fee") in an amount equal to 5 basis points multiplied by the Commitment of such Lender under the Credit Agreement. The Third Amendment Fee owing to each Third Amendment Lender shall be paid in immediately available funds by the Borrower to the Administrative Agent for the benefit of such Third Amendment Lenders not later than noon (New York time) on the first Business Day following the occurrence of the Third Amendment Effective Date." 2.4 Subsection 7.4(h) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (h) Guarantee Obligations in respect of up to $400,000,000 principal amount of Convertible Securities issued by Holdings having an initial annual interest rate not in excess of 7% per annum which initial annual interest rate may be subject to subsequent adjustments in accordance with the terms of such Convertible Securities in the event of a Reset Transaction (the "Permitted Convertible Securities"). As used herein, a "Reset Transaction" shall have the meaning ascribed to such term in the Indenture governing the issuance of the Convertible Senior Subordinated Notes of Holdings due 2009 as in effect at the time of such issuance. 2.5 Subsection 7.9(e) of the Credit Agreement is hereby amended by deleting the term "6 months" each place it appears therein, and inserting the term "12 months" in place thereof. 2 SECTION 3. CONDITIONS TO EFFECTIVENESS. Sections 1 and 2 of this Amendment shall be deemed effective as of the date when each of the following conditions precedent have been satisfied (such effective date occurring upon satisfaction of such conditions precedent being referred to herein as the "THIRD AMENDMENT EFFECTIVE DATE"): 3.1. The Required Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment, the Second Amendment to the Second Amended and Restated Credit Agreement of even date herewith and the Second Amendment to the New 364 Day Credit Agreement of even date herewith. 3.2. The Borrower shall have delivered to the Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto. 3.3. All fees owing to the Administrative Agent by the Borrower and all attorneys fees and disbursements incurred by the Agents in connection with the administration of the Credit Agreement and/or this Amendment shall have been paid. 3.4. The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by Borrower. 3.5. The representations and warranties contained in Section 4 hereof shall be true and correct in all respects. 3.6. All conditions set forth in Sections 3.1 through 3.5 of the Second Amendment to the Second Amended and Restated Credit Agreement of even date herewith and the Second Amendment to the New 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 4.1. Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except 3 as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.2. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Third Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 4.3. Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 5. MISCELLANEOUS. 5.1. Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 5.2. Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 5.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 5.4. SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 5.5. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together 4 shall constitute but one and the same instrument. Except for the terms of Sections 1 and 2 hereof (which shall only become effective on the Third Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: /s/ Lawrence O'Brien ---------------------------------------------- Title: Vice-President and Treasurer BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Liliana Claar ---------------------------------------------- Title: Vice-President BANK OF AMERICA, N.A., as a Lender By: /s/ Lisa Choi ---------------------------------------------- Title: Vice-President LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: /s/ G. Andrew Keith ---------------------------------------------- Title: [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] THE BANK OF NEW YORK By: /s/ Ken Sneider ---------------------------------------------- Title: Vice-President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: /s/ Todd S. Meller ---------------------------------------------- Title: Managing Director [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] BANK ONE, NA By: /s/ Andrea S. Kantor ---------------------------------------------- Title: First Vice President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] FLEET NATIONAL BANK By: /s/ Jana Dombrowski ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ Chris Droussiotis ---------------------------------------------- Title: Vice Prsident [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Scott R. Chappelka ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: /s/ Barbara Van Meerten ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] FLEET NATIONAL BANK By: Jana Dombrowski ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: /s/ Nobuoki Koike ---------------------------------------------- Title: Vice President & Senior Team Leader [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] HSBC BANK USA By: /s/ D. C. English ---------------------------------------------- Title: Associate Director [SIGNATURE PAGES TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] SOCIETE GENERALE By: /s/ Jose A. Moreno ---------------------------------------------- Title: Director [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: _Nov 16, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By:/s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By:/s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO CONSENT AND THIRD AMENDMENT TO AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT] EX-10.47 12 0012.txt CONSENT AND SECOND AMENDMENT TO NEW 364-DAY CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT AND SECOND AMENDMENT TO NEW 364-DAY CREDIT AGREEMENT This CONSENT AND SECOND AMENDMENT TO THE NEW 364-DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 16, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the New 364-Day Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT Agreement"); and WHEREAS, the Borrower desires that the Lenders consent to the waiver of certain prepayment requirements and certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. CONSENT TO LIMITED WAIVER. Borrower has requested that the Required Class Lenders consent to a waiver of the mandatory prepayment of the Loans and permanent reduction in Commitments required by Section 2.6(b)(i) of the Credit Agreement with respect to the Net Proceeds of Indebtedness incurred in connection with the issuance of up to the Designated Issue Amount (as defined herein) of Permitted Convertible Securities (the "Requested Waiver"). Subject to the satisfaction of the conditions precedent to this Amendment set forth in Section 3 hereof, each Lender executing this Amendment hereby consents to the Requested Waiver. As used herein, "Designated Issue Amount" shall mean the aggregate principal amount of Permitted Convertible Securities actually issued on or prior to January 31, 2001, which shall not in any event exceed $300,000,000. SECTION 2. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 3 of this Amendment, the Borrower and the Lenders hereby agree to amend the Credit Agreement as follows: 2.1 The definition of "New Investment Sublimit" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting the term "$650,000,000" and inserting the term "$850,000,000" in place thereof. 2.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined term in alphabetical order: "Second Amendment Effective Date": shall have the meaning given to such term in that certain Consent and Second Amendment to the New 364-Day Credit Agreement dated as of November 16, 2000. 2.3 Subsection 2.18 of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "Subject to the occurrence of the Second Amendment Effective Date, Borrower hereby agrees to pay to each Lender submitting to the Administrative Agent an executed counterpart to the Second Amendment to this Agreement on or before 12:00 (noon) (New York time) on November 29, 2000 (a "Second Amendment Lender") a non-refundable amendment fee (the "Second Amendment Fee") in an amount equal to 5 basis points multiplied by the Commitment of such Lender under the Credit Agreement. The Second Amendment Fee owing to each Second Amendment Lender shall be paid in immediately available funds by the Borrower to the Administrative Agent for the benefit of such Second Amendment Lenders not later than noon (New York time) on the first Business Day following the occurrence of the Second Amendment Effective Date." 2.4 Subsection 7.4(h) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (h) Guarantee Obligations in respect of up to $400,000,000 principal amount of Convertible Securities issued by Holdings having an initial annual interest rate not in excess of 7% per annum which initial annual interest rate may be subject to subsequent adjustments in accordance with the terms of such Convertible Securities in the event of a Reset Transaction (the "Permitted Convertible Securities"). As used herein, a "Reset Transaction" shall have the meaning ascribed to such term in the Indenture governing the issuance of the Convertible Senior Subordinated Notes of Holdings due 2009 as in effect at the time of such issuance. 2.5 Subsection 7.9(e) of the Credit Agreement is hereby amended by deleting the term "6 months" each place it appears therein, and inserting the term "12 months" in place thereof. 2 SECTION 3. CONDITIONS TO EFFECTIVENESS. Sections 1 and 2 of this Amendment shall be deemed effective as of the date when each of the following conditions precedent have been satisfied (such effective date occurring upon satisfaction of such conditions precedent being referred to herein as the "SECOND AMENDMENT EFFECTIVE DATE"): 3.1. The Required Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment, the Second Amendment to the Second Amended and Restated Credit Agreement of even date herewith and the Third Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith. 3.2. The Borrower shall have delivered to the Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto. 3.3. All fees owing to the Administrative Agent by the Borrower and all attorneys fees and disbursements incurred by the Agents in connection with the administration of the Credit Agreement and/or this Amendment shall have been paid. 3.4. The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by Borrower. 3.5. The representations and warranties contained in Section 4 hereof shall be true and correct in all respects. 3.6. All conditions set forth in Sections 3.1 through 3.5 of the Second Amendment to the Second Amended and Restated Credit Agreement of even date herewith and the Third Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 4.1. Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except 3 as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.2. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Second Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 4.3. Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 5. MISCELLANEOUS. 5.1. Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 5.2. Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 5.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 5.4. SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 5.5. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together 4 shall constitute but one and the same instrument. Except for the terms of Sections 1 and 2 hereof (which shall only become effective on the Second Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: /s/ Lawrence O'Brien ---------------------------------------------- Title: Vice-President and Treasurer BANK OF AMERICA, N.A., as Administrative Agent By: /s/Liliana Claar ---------------------------------------------- Title: Vice President BANK OF AMERICA, N.A., as a Lender By: /s/ Lisa Choi ---------------------------------------------- Title: Vice President LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: /s/ G. Andrew Keith ---------------------------------------------- Title: Authorized Signatory [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: /s/ Todd S. Meller ---------------------------------------------- Title: Managing Director [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK ONE, NA By: /s/ Andrea S. Kantor ---------------------------------------------- Title: First Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Scott R. Chappelka ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: /s/ Barbara Van Meerten ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE INC. By: /s/ Ridgely H. Cromwell ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ---------------------------------------------- Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Chris Droussiotis ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] COMERICA BANK By: /s/ Joel Gordon ---------------------------------------------- Title: Account Officer [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: /s/ Brian O'Leary /s/ Marcus Edward ---------------------------------------------- Title: Vice Presidents [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: /s/ Charles Partnel ---------------------------------------------- Title: Senior Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: /s/ Stephen A. Santora /s/ Richard W. Wilbert ---------------------------------------------- Title: Vice Presidents [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ James Y. Hua /s/ Bo Andersen ---------------------------------------------- Title: Vice Presidents [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: /s/ Arinee Hovanessian ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] GE CAPITAL COMMERCIAL FINANCE, INC By: /s/ William S. Richardson ---------------------------------------------- Title: Duly Authorized Signatory [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/J. Kenneth Biegen ---------------------------------------------- Title: Senior Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] MEES PIERSON CAPITAL CORP. By: ---------------------------------------------- Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Rosetta Conti ---------------------------------------------- Title: Senior Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] NATIONAL CITY BANK By: /s/ Wilmer J. Jacobs ---------------------------------------------- Title: Assistant Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] THE ROYAL BANK OF SCOTLAND PLC By: /s/ Jayne Seaford ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SOCIETE GENERALE By: /s/ Jose A. Moreno ---------------------------------------------- Title: Director [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SUMMIT BANK By: /s/Ricard J. Banning ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] WEBSTER BANK By: /s/ John Gilsenan ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] DEN DANSKE BANK AKTIESELSKAB CAYMAN ISLANDS BRANCH By: ---------------------------------------------- Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] MERITA BANK PLC By: /s/ Michael J. Maher ---------------------------------------------- Title: Senior Vice President By: /s/ Garry Weiss ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] SUNTRUST BANK By: /s/ Armen Karozichian ---------------------------------------------- Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] BANQUE WORMS CAPITAL CORPORATION By: /s/H. Fleming ---------------------------------------------- Title: V.P. & General Counsel [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Dated: _Nov 16, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [GUARANTORS' ACKNOWLEDGMENT AND CONSENT AND SECOND AMENDMENT TO NEW 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.48 13 0013.txt CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT This CONSENT AND SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 16, 2000 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Second Amended and Restated Credit Agreement dated as of April 24, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to the waiver of certain prepayment requirements and certain other amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. CONSENT TO LIMITED WAIVER. Borrower has requested that the Required Class Lenders consent to a waiver of the mandatory prepayment of the Loans and permanent reduction in Commitments required by Section 2.6(b)(i) of the Credit Agreement with respect to the Net Proceeds of Indebtedness incurred in connection with the issuance of up to the Designated Issue Amount (as defined herein) of Permitted Convertible Securities (the "Requested Waiver"). Subject to the satisfaction of the conditions precedent to this Amendment set forth in Section 3 hereof, each Lender executing this Amendment hereby consents to the Requested Waiver. As used herein, "Designated Issue Amount" shall mean the aggregate principal amount of Permitted Convertible Securities actually issued on or prior to January 31, 2001, which shall not in any event exceed $300,000,000. SECTION 2. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 3 of this Amendment, the Borrower and the Lenders hereby agree to amend the Credit Agreement as follows: 2.1 The definition of "New Investment Sublimit" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting the term "$650,000,000" and inserting the term "$850,000,000" in place thereof. 2.2 Subsection 1.1 of the Credit Agreement is hereby further amended to add the following new defined term in alphabetical order: "Second Amendment Effective Date": shall have the meaning given to such term in that certain Consent and Second Amendment to Second Amended and Restated Credit Agreement dated as of November 16, 2000. 2.3 Subsection 2.18 of the Credit Agreement is hereby amended by adding at the end thereof the following additional language: "Subject to the occurrence of the Second Amendment Effective Date, Borrower hereby agrees to pay to each Lender submitting to the Administrative Agent an executed counterpart to the Second Amendment to this Agreement on or before 12:00 (noon) (New York time) on November 29, 2000 (a "Second Amendment Lender") a non-refundable amendment fee (the "Second Amendment Fee") in an amount equal to 5 basis points multiplied by the Commitment of such Lender under the Credit Agreement. The Second Amendment Fee owing to each Second Amendment Lender shall be paid in immediately available funds by the Borrower to the Administrative Agent for the benefit of such Second Amendment Lenders not later than noon (New York time) on the first Business Day following the occurrence of the Second Amendment Effective Date." 2.4 Subsection 7.4(h) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (h) Guarantee Obligations in respect of up to $400,000,000 principal amount of Convertible Securities issued by Holdings having an initial annual interest rate not in excess of 7% per annum which initial annual interest rate may be subject to subsequent adjustments in accordance with the terms of such Convertible Securities in the event of a Reset Transaction (the "Permitted Convertible Securities"). As used herein, a "Reset Transaction" shall have the meaning ascribed to such term in the Indenture governing the issuance of the Convertible Senior Subordinated Notes of Holdings due 2009 as in effect at the time of such issuance. 2 2.5 Subsection 7.9(e) of the Credit Agreement is hereby amended by deleting the term "6 months" each place it appears therein, and inserting the term "12 months" in place thereof. SECTION 3. CONDITIONS TO EFFECTIVENESS. Sections 1 and 2 of this Amendment shall be deemed effective as of the date when each of the following conditions precedent have been satisfied (such effective date occurring upon satisfaction of such conditions precedent being referred to herein as the "SECOND AMENDMENT EFFECTIVE DATE"): 3.1. The Required Class Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment, the Second Amendment to the New 365-Day Credit Agreement of even date herewith and the Third Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith. 3.2. The Borrower shall have delivered to the Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto. 3.3. All fees owing to the Administrative Agent by the Borrower and all attorneys fees and disbursements incurred by the Agents in connection with the administration of the Credit Agreement and/or this Amendment shall have been paid. 3.4. The Administrative Agent shall have received a secretary's or assistant secretary's certificate of Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by Borrower. 3.5. The representations and warranties contained in Section 4 hereof shall be true and correct in all respects. 3.6. All conditions set forth in Sections 3.1 through 3.5 of the Second Amendment to the New 365-Day Credit Agreement of even date herewith and the Third Amendment to the Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 4.1. Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this 3 Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.2. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Second Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 4.3. Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 5. MISCELLANEOUS. 5.1. Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 5.2. Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 5.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 5.4. SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated 4 into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 5.5. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Sections 1 and 2 hereof (which shall only become effective on the Second Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: /s/ Lawrence O'Brien ---------------------------------------------- Title: Vice President & Tresurer BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Lilana Claar ---------------------------------------------- Title: Vice President BANK OF AMERICA, N.A., as a Lender By: /s/ Lisa Choi ---------------------------------------------- Title: Vice President LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: /s/ G. Andrew Keith ---------------------------------------------- Title: Authorized Signatory [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NEW YORK By: /s/ Ken Sneider ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NOVA SCOTIA By: /s/ Todd S. Meller ---------------------------------------------- Title: Managing Director [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] BANK ONE, NA By: /s/ Andrea S. Kantor ---------------------------------------------- Title: First Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] BANKBOSTON, N.A. By: /s/ Jana Dombrowski ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ Chris Droussiotis ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Scott R. Chappelka ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: /s/ Barbara Van Meerten ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] FLEET NATIONAL BANK By: /s/ Jana Dombrowski ---------------------------------------------- Title: Vice President [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: /s/ Nobuoki Koike ---------------------------------------------- Title: Vice President & Senior Team Leader [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] HSBC BANK USA By: /s/ D. C. English ---------------------------------------------- Title: Associate Director [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] SOCIETE GENERALE By: /s/ Jose A. Moreno ---------------------------------------------- Title: Director [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: _Nov 16, 2000 L-3 COMMUNICATIONS HOLDINGS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: /s/ Christopher C. Cambria ---------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.91 14 0014.txt ASSET PURCHASE AGREEMENT - TCAS EXECUTION COPY - -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT relating to the HONEYWELL TCAS BUSINESS by and among HONEYWELL INC., L-3 COMMUNICATIONS CORPORATION and, solely in respect of the guaranty in article xiv, HONEYWELL INTERNATIONAL INC. dated as of February 10, 2000 - -------------------------------------------------------------------------------- TCAS Asset Purchase Agreement TABLE OF CONTENTS ARTICLE I DEFINITIONS.......................................1 Section 1.1. Acquisition Agreements............................1 Section 1.2. Affiliate.........................................1 Section 1.3. Assumed Liabilities...............................1 Section 1.4. Assumption Agreement..............................2 Section 1.5. Bill of Sale......................................2 Section 1.6. Break-Up Fee Letter Agreement.....................2 Section 1.7. Business..........................................2 Section 1.8. Business Intellectual Property Assets.............2 Section 1.9. Buyer's Plan......................................2 Section 1.10. Buyer's Savings Plans.............................2 Section 1.11. Cash Purchase Price...............................2 Section 1.12. Closing and Closing Date..........................2 Section 1.13. Closing Date Net Assets...........................2 Section 1.14. Closing Date Transferred Employees................2 Section 1.15. Closing Statement of Net Assets...................2 Section 1.16. Code..............................................2 Section 1.17. Confidential Attachment A.........................2 Section 1.18. Consent...........................................2 Section 1.19. Consent Decree....................................3 Section 1.20. Contracts.........................................3 Section 1.21. DOD...............................................3 Section 1.22. DOJ...............................................3 Section 1.23. Employee..........................................3 Section 1.24. Environmental Laws................................3 Section 1.25. Environmental Liabilities and Costs...............3 Section 1.26. Excluded Assets...................................3 Section 1.27. Excluded Liabilities..............................3 Section 1.28. Files and Records.................................3 Section 1.29. Final Closing Statement of Net Assets.............3 Section 1.30. Financial Statements..............................3 Section 1.31. GAAP..............................................3 Section 1.32. Government Approval...............................4 Section 1.33. Governmental Body.................................4 Section 1.34. Government Contract...............................4 Section 1.35. Hazardous Substance...............................4 Section 1.36. HI TCAS Products..................................4 Section 1.37. Hold Separate Order...............................4 Section 1.38. Initial Transfer Amount...........................4 Section 1.39. Including.........................................4 Section 1.40. Intellectual Property Agreement...................4 Section 1.41. Inventories.......................................4 i TCAS Asset Purchase Agreement Section 1.42. Leased Employees..................................4 Section 1.43. Legal Requirement.................................4 Section 1.44. Liens.............................................5 Section 1.45. Losses............................................5 Section 1.46. Material Adverse Effect...........................5 Section 1.47. Non-U.S. Transferred Employees....................5 Section 1.48. Permitted Liens...................................5 Section 1.49. Person............................................5 Section 1.50. Post-Closing Retirees.............................5 Section 1.51. Post-Closing Transferred Employees................5 Section 1.52. Prepaid Expenses..................................5 Section 1.53. Proceeding........................................5 Section 1.54. Proprietary Information Agreement.................5 Section 1.55. Purchased Assets..................................5 Section 1.56. Purchased Tangible Personal Property..............6 Section 1.57. Release...........................................6 Section 1.58. Representative....................................6 Section 1.59. Resolution Period.................................6 Section 1.60. SEC...............................................6 Section 1.61. Seller Retiree Welfare Plans......................6 Section 1.62. Seller's Continuing TCAS Business.................6 Section 1.63. Seller's Knowledge................................6 Section 1.64. Services Agreement................................6 Section 1.65. Solectron.........................................6 Section 1.66. Statement of Net Assets...........................6 Section 1.67. Supplemental Agreement............................6 Section 1.68. Supply Agreement..................................6 Section 1.69. Support Employees.................................6 Section 1.70. Tangible Personal Property........................7 Section 1.71. Target Net Assets.................................7 Section 1.72. Tax or Taxes......................................7 Section 1.73. TCAS..............................................7 Section 1.74. Transfer Amount...................................7 Section 1.75. Transferred Employees.............................7 Section 1.76. True-Up Amount....................................7 Section 1.77. True-Up Date......................................7 Section 1.78. Warranty Claim....................................7 Section 1.79. WARN Act..........................................7 ARTICLE II PURCHASE AND SALE.................................7 Section 2.1. Closing...........................................7 Section 2.2. Purchase and Sale of Assets.......................7 Section 2.3. Excluded Assets...................................9 Section 2.4. Non-Assignable Assets.............................9 Section 2.5. Purchase Price; Payment..........................10 Section 2.6. Assumption of Liabilities........................10 ii TCAS Asset Purchase Agreement Section 2.7. Excluded Liabilities.............................11 Section 2.8. Allocation of Cash Purchase Price................12 Section 2.8A. Estimated Cash Purchase Price Adjustment.........13 Section 2.9. Cash Purchase Price Adjustment...................13 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.........16 Section 3.1. Organization.....................................16 Section 3.2. Authorization; Enforceability....................16 Section 3.3. Financial Statements.............................17 Section 3.4. No Conflicts.....................................17 Section 3.5. Title............................................17 Section 3.6. Purchased Tangible Personal Property.............17 Section 3.7. Taxes............................................18 Section 3.8. Labor Matters....................................18 Section 3.9. Employee Benefit Plans...........................18 Section 3.10. Employee Benefit Plan Matters....................19 Section 3.11. Compliance With Legal Requirements...............20 Section 3.12. Environmental Matters............................20 Section 3.13. Legal Proceedings; Orders........................20 Section 3.14. Absence of Certain Changes and Events............21 Section 3.15. Intellectual Property Assets.....................21 Section 3.16. Contracts........................................21 Section 3.17. Insurance........................................22 Section 3.18. Brokerage........................................22 Section 3.19. Undisclosed Liabilities..........................22 Section 3.20. Real Estate......................................22 Section 3.21. Year 2000........................................22 Section 3.22. Government Contracts.............................23 Section 3.23. Government Furnished Equipment...................24 Section 3.24. Affiliate Transactions...........................24 Section 3.25. Entire Business..................................24 Section 3.26. No Additional Representations....................25 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........25 Section 4.1. Organization.....................................25 Section 4.2 Authorization....................................25 Section 4.3. No Conflicts.....................................25 Section 4.4. Brokerage........................................26 Section 4.5. Sufficient Funds.................................26 ARTICLE V COVENANTS OF SELLER..............................26 Section 5.1. Access and Investigation.........................26 Section 5.2. Conduct of Business..............................26 Section 5.3. Required Approvals...............................29 Section 5.4. No Negotiation...................................29 Section 5.5. Additional Information...........................29 iii TCAS Asset Purchase Agreement Section 5.6. Workers' Compensation............................29 Section 5.7. SEC Financial Reporting..........................29 Section 5.8. No Inconsistent Action...........................30 Section 5.9. Notices of Certain Events........................30 Section 5.10. Reasonable Efforts...............................30 Section 5.11. Break-Up Fee.....................................31 ARTICLE VI COVENANTS OF BUYER...............................31 Section 6.1. Required Approvals...............................31 Section 6.2. Non Solicitation; Non-Interference...............31 Section 6.3. Board Approval...................................31 Section 6.4. Reasonable Efforts...............................31 ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS................31 Section 7.1. Accuracy of Representations and Warranties.......32 Section 7.2. Seller's Performance.............................32 Section 7.3. Officer's Certificate............................32 Section 7.4. Governmental Approvals...........................32 Section 7.5. No Injunctions, Etc..............................32 Section 7.6. Consents.........................................32 Section 7.7. Conveyances......................................32 Section 7.8. Board Approval...................................33 Section 7.9. Other Agreements.................................33 Section 7.10. Non-Exercise of First Refusal Rights.............33 ARTICLE VIII CONDITIONS TO SELLER'S OBLIGATIONS...............33 Section 8.1. Accuracy of Representations and Warranties.......33 Section 8.2. Buyer's Performance..............................33 Section 8.3. Officer's Certificate............................33 Section 8.4. Governmental Approvals...........................33 Section 8.5. No Injunctions, Etc..............................34 Section 8.6. Purchase Price...................................34 Section 8.7. Other Agreements.................................34 ARTICLE IX POST-CLOSING COVENANTS...........................34 Section 9.1. Further Assurances...............................34 Section 9.2. Retention of Records.............................34 Section 9.3. Names............................................35 Section 9.4. Supply Contracts.................................35 Section 9.5. Research and Experimental Expenses...............36 Section 9.6. Novation of Government Contracts.................36 Section 9.7. Cooperation in Litigation........................36 Section 9.8. Mail; Payments...................................37 Section 9.9. Insurance........................................37 Section 9.10. Non-Solicitation.................................37 Section 9.11. Additional Post-Closing Covenants................37 iv TCAS Asset Purchase Agreement Section 9.12. Buyer's References to the Business...............39 Section 9.13. Use of Seller Aircraft...........................39 Section 9.14. New Contracts....................................39 Section 9.15. Certain Other Matters............................40 Section 9.16. Relocation of the Business.......................40 Section 9.17. Post-Closing Warranty Expense....................40 Section 9.18. Manufacture and Supply of HI TCAS Products.......41 ARTICLE X PENSION, EMPLOYEE AND UNION MATTERS..............41 Section 10.1. Scope of Article.................................41 Section 10.2. Employment.......................................41 Section 10.3. Pension Plans....................................43 Section 10.4. Savings Plans....................................45 Section 10.5. Retiree Health and Life Insurance Benefits.......46 Section 10.6. Employee Welfare Plans...........................46 Section 10.7. Severance and WARN Act Liability.................47 Section 10.8. Health Care Continuation Coverage................47 Section 10.9. Post-Closing Retirees............................47 Section 10.10. Support Employees................................48 ARTICLE XI TERMINATION AND ABANDONMENT......................48 Section 11.1. Termination......................................48 Section 11.2. Effect of Termination............................49 ARTICLE XII INDEMNIFICATION..................................49 Section 12.1. Indemnity by Seller..............................49 Section 12.2. Indemnity by Buyer...............................49 Section 12.3. Tax Indemnification..............................50 Section 12.4. Indemnification Procedure........................50 Section 12.5. Limitations......................................51 Section 12.6. Indemnification Sole Remedy......................51 ARTICLE XIII MISCELLANEOUS....................................52 Section 13.1. Expenses.........................................52 Section 13.2. Public Announcements.............................52 Section 13.3. Confidentiality..................................52 Section 13.4. Notices..........................................52 Section 13.5. Survival.........................................53 Section 13.6. Entire Agreement.................................53 Section 13.7. Waiver and Amendment.............................54 Section 13.8. No Third Party Beneficiary.......................54 Section 13.9. Severability.....................................54 Section 13.10. Headings and Interpretation......................54 Section 13.11. Governing Law and Jurisdiction...................54 Section 13.12. Assignment.......................................55 Section 13.13. Taxes............................................55 v TCAS Asset Purchase Agreement Section 13.14. Bulk Transfer Laws...............................55 Section 13.15. Attorneys' Fees..................................55 Section 13.16. Waiver of Trial by Jury..........................55 Section 13.17. Counterparts.....................................56 Section 13.18. Consent Decree...................................56 ARTICLE XIV GUARANTY ........................................57 Section 14.1. Guaranty.........................................57 Section 14.2. No Modification..................................57 Section 14.3. Absolute Guaranty................................57 Section 14.4. No Effect of Assignment..........................57 vi TCAS Asset Purchase Agreement Exhibits Exhibit A Consent Decree (excluding Confidential Attachment A) Exhibit B Intellectual Property Assignment and License Agreement Exhibit C Transitional Services Agreement Exhibit D Proprietary Information Exchange Agreement Exhibit E Supply Agreement Exhibit F Break-Up Fee Letter Agreement Exhibit G Supplemental Agreement Schedules 1.63 Seller's Knowledge 2.2(c) Purchased Tangible Personal Property 2.2(g) Records Retained by Seller 2.3 Excluded Assets 3.3 Financial Statements 3.4 No Conflicts 3.6 Condition of Assets 3.8 Labor Matters 3.9 Employee Benefit Plans 3.10 Employee Benefit Plan Matters 3.11 Compliance with Legal Requirements 3.12 Environmental Matters 3.13 Legal Proceedings; Orders 3.14 Absence of Certain Changes and Events 3.16 Contracts 3.17 Insurance 3.20 Real Estate 3.22 Government Contracts 3.23 Government Furnished Equipment 3.24 Affiliate Transactions 3.25 Declined Assets and Services 7.6 Consents 9.11(a) Announcement List 9.13 Use of Seller Aircraft 10.2(a) Employees 10.2(b)(1) Employees Employed Outside the U.S. 10.2(b)(4) Retention Agreements 10.2(d) Leased Employees 10.3(b) Pension Plans 10.5 Retiree Health and Life Insurance Benefits vii EXECUTION COPY ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of the 10th day of February, 2000, by and between, Honeywell Inc. ("Seller"), a Delaware corporation, and L-3 Communications Corporation ("Buyer"), a Delaware corporation, and, solely for purposes of Article XIV, Honeywell International Inc. ("Parent"), a Delaware corporation. W I T N E S S E T H: WHEREAS, Buyer wishes to purchase or acquire from Seller, and Seller wishes to sell to Buyer, all of the Purchased Assets (as defined herein) (but not the Excluded Assets as defined herein), and Buyer has agreed to assume the Assumed Liabilities of the Business (but not the Excluded Liabilities as defined herein), all for the purchase price and upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, contemporaneously with the execution and delivery of this Agreement, Seller and Buyer are entering into the Intellectual Property Agreement (as defined herein); NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties made herein and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms, when used in this Agreement, shall have the meanings indicated below. Other terms are defined throughout this Agreement. SECTION 1.1. Acquisition Agreements shall mean this Agreement, the Intellectual Property Agreement, the Services Agreement, the Supply Agreement, the Proprietary Information Exchange Agreement, the Assumption Agreement, the Bill of Sale, the Break-Up Fee Letter Agreement, the Supplemental Agreement and any other agreements or instruments which are executed in connection with this Agreement in order to effectuate the transfer of any of the Purchased Assets or the assumption of any of the Assumed Liabilities (collectively, the "Acquisition Agreements"). SECTION 1.2. Affiliate shall mean, with respect to any Person, a Person that, directly or indirectly, through one or more intermediaries, has control of, is controlled by, or is under common control with such Person. For these purposes, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management of any Person, whether through the ownership of voting securities, by contract or otherwise. SECTION 1.3. Assumed Liabilities shall have the meaning ascribed to such term in Section 2.6 hereof. EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.4. Assumption Agreement shall mean the Assumption Agreement to be entered into between Buyer and Seller at the Closing with respect to the assumption of the Assumed Liabilities, in form and substance reasonably satisfactory to Buyer and Seller. SECTION 1.5. Bill of Sale shall mean the Bill of Sale to be given by Seller to Buyer at the Closing with respect to the sale of the Purchased Assets, in form and substance reasonably satisfactory to Buyer and Seller. SECTION 1.6. Break-Up Fee Letter Agreement shall mean the letter agreement between Buyer and Seller dated February 1, 2000 a copy of which is attached hereto as Exhibit F. SECTION 1.7. Business shall mean the TCAS business of Seller as generally described in and currently held separate under the Consent Decree. SECTION 1.8. Business Intellectual Property Assets shall have the meaning ascribed to such term in the Intellectual Property Agreement. SECTION 1.9. Buyer's Plan shall have the meaning ascribed to such term in Section 10.3 hereof. SECTION 1.10. Buyer's Savings Plans shall have the meaning ascribed to such term in Section 10.4 hereof. SECTION 1.11. Cash Purchase Price shall have the meaning ascribed to such term in Section 2.5 hereof. SECTION 1.12. Closing and Closing Date shall have the meanings ascribed to such terms in Section 2.1 hereof. SECTION 1.13. Closing Date Net Assets shall have the meaning ascribed to such term in Section 2.9(a) hereof. SECTION 1.14. Closing Date Transferred Employees shall have the meaning ascribed to such term in Section 10.2(a) hereof. SECTION 1.15. Closing Statement of Net Assets shall have the meaning ascribed to such term in Section 2.9(b) hereof. SECTION 1.16. Code shall mean the Internal Revenue Code of 1986, as amended. SECTION 1.17. Confidential Attachment A shall mean Confidential Attachment A to the Consent Decree. SECTION 1.18. Consent shall mean any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, or novation agreement with, any Person, including any Governmental Body. -2- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.19. Consent Decree shall mean the proposed Final Judgment in United States of America v. AlliedSignal Inc. and Honeywell Inc. a copy of which is attached hereto as Exhibit A. SECTION 1.20. Contracts shall mean all leases, agreements, contracts, purchase orders and other legally binding commitments, whether written or oral, relating to the Business that are in effect on the Closing Date. The term "Contracts" shall not include employee benefit plans. SECTION 1.21. DOD shall mean the United States Department of Defense. SECTION 1.22. DOJ shall mean the United States Department of Justice. SECTION 1.23. Employee shall have the meaning ascribed to such term in Section 10.2(a). SECTION 1.24. Environmental Laws shall mean any and all Legal Requirements relating to the protection of the environment, to human health and safety, or to any emission, discharge, generation, processing, storage, holding, abatement, existence, Release, threatened Release, arranging for the disposal or transportation of any Hazardous Substances. SECTION 1.25. Environmental Liabilities and Costs shall mean any and all losses, expenses or damages: (a) relating to, or resulting from, the alleged presence of Hazardous Substances in the environment in quantities or concentrations exceeding those allowed pursuant to any Environmental Law, including claims for diminution of property value, personal injury or property damages; (b) imposed by, under or pursuant to Environmental Laws, based on, arising out of or otherwise in respect of (i) any real property owned, leased or operated by Seller in connection with the Business, or (ii) the environmental conditions existing on the Closing Date on, under or above any real property owned, leased or operated by Seller in connection with the Business. SECTION 1.26. Excluded Assets shall have the meaning ascribed to such term in Section 2.3 hereof. SECTION 1.27. Excluded Liabilities shall have the meaning ascribed to such term in Section 2.7 hereof. SECTION 1.28. Files and Records shall have the meaning ascribed to such term in Section 2.2(g) hereof. SECTION 1.29. Final Closing Statement of Net Assets shall have the meaning ascribed to such term in Section 2.9(d) hereof. SECTION 1.30. Financial Statements shall have the meaning ascribed to such term in Section 3.3 hereof. SECTION 1.31. GAAP shall mean generally accepted U.S. accounting principles, applied in the case of the TCAS Business on a basis consistent with the basis on which the Statement of Net Assets and the other Financial Statements were prepared. -3- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.32. Government Approval shall mean any Consent of, with or to any Governmental Body. SECTION 1.33. Governmental Body shall mean any federal, state, local, foreign or other governmental or administrative authority, board, commission, body, instrumentality, department or agency or any court, tribunal, administrative hearing, arbitration panel, commission or similar dispute resolving panel or body, or any self-regulatory organization. SECTION 1.34. Government Contract shall mean any contract relating to the Business between Seller and (i) the U.S. Government or any non-U.S. government, (ii) any prime contractor of the U.S. Government or any non-U.S. government, or (iii) any subcontractor at any tier with respect to any contract described in clauses (i) and (ii) above. SECTION 1.35. Hazardous Substance shall mean any substance that: (i) requires investigation, removal or redemption under any Environmental Law, or is defined, listed or identified as a "hazardous waste", "hazardous material", "toxic substance", "contaminant", "pollutant", "oil" or "hazardous substance" thereunder; or (ii) is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated as such under any Environmental Law. SECTION 1.36. HI TCAS Products shall mean the products of the Business as they may exist from time to time. SECTION 1.37. Hold Separate Order shall mean the Hold Separate Stipulation and Order referred to in Section VIII of the Consent Decree. SECTION 1.38. Initial Transfer Amount shall have the meaning ascribed to such term in Section 10.3 (c) hereof. SECTION 1.39. Including and words of similar import when used in this Agreement shall mean "including, without limitation", unless otherwise specified. SECTION 1.40. Intellectual Property Agreement shall mean the Intellectual Property Assignment and License Agreement to be entered into between Parent and Buyer at the Closing, substantially in the form of Exhibit B attached hereto. SECTION 1.41. Inventories shall have the meaning ascribed to such term in Section 2.2(d) hereof. SECTION 1.42. Leased Employees shall have the meaning ascribed to such term in Section 10.2(d) hereof. SECTION 1.43. Legal Requirement shall mean (i) any federal, state, local, foreign or other administrative order, constitution, law (including common law), ordinance, regulation or statute, (ii) Governmental Approvals, and (iii) orders, decisions, injunctions, judgments, awards and decrees of or agreements, specifically naming or applicable to the relevant Person, with any Governmental Body. -4- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.44. Liens shall mean any and all mortgages, pledges, liens, security interests, options, claims, easements, defects and other restrictions, limitations and encumbrances. SECTION 1.45. Losses shall have the meaning ascribed to such term in Section 12.1 hereof. SECTION 1.46. Material Adverse Effect shall mean a material adverse effect on (i) the operations, condition, results of operations, properties, assets, liabilities, or business of Seller in relation to the Business, taken as a whole, or (ii) the ability of Seller or any of its Affiliates to perform its obligations under any of the Acquisition Agreements to which it is a party. SECTION 1.47. Non-U.S. Transferred Employees shall have the meaning ascribed to such term in Section 10.2(e) hereof. SECTION 1.48. Permitted Liens shall mean (i) liens for taxes not yet due and payable or being contested in good faith for which adequate reserves are being maintained in accordance with GAAP, and (ii) encumbrances that do not have, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the value of the Purchased Assets subject thereto or the ability of Seller or Buyer to conduct the Business as it is now being conducted. SECTION 1.49. Person shall mean any individual, corporation (including any nonprofit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. SECTION 1.50. Post-Closing Retirees shall have the meaning ascribed to such term in Section 10.9 hereof. SECTION 1.51. Post-Closing Transferred Employees shall have the meaning ascribed to such term in Section 10.2(a) hereof. SECTION 1.52. Prepaid Expenses shall have the meaning ascribed to such term in Section 2.2(a) hereof. SECTION 1.53. Proceeding shall mean any action, writ, injunction, decree, order, judgment, claim, proceeding, directive, arbitration, investigation, litigation, or suit (including any civil, criminal, administrative, investigative, or appellate proceeding) commenced, brought, conducted, or heard by or before any Governmental Body. SECTION 1.54. Proprietary Information Agreement shall mean the Proprietary Information Exchange Agreement to be entered into between Seller and Buyer at the Closing, substantially in the form of Exhibit D attached hereto. SECTION 1.55. Purchased Assets shall have the meaning ascribed to such term in Section 2.2 hereof. -5- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.56. Purchased Tangible Personal Property shall have the meaning ascribed to such term in Section 2.2(c) hereof. SECTION 1.57. Release shall mean any releasing, disposing, discharging, injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping, dispersal, migration, transporting, placing and the like, including the moving of any materials through, into or upon, any land, soil, surface water, ground water or air, or otherwise entering into the environment. SECTION 1.58. Representative shall mean with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. SECTION 1.59. Resolution Period shall have the meaning ascribed to such term in Section 2.9(c) hereof. SECTION 1.60. SEC shall have the meaning ascribed to such term in Section 5.7 SECTION 1.61. Seller Retiree Welfare Plans shall have the meaning ascribed to such term in Section 10.9 hereof. SECTION 1.62. Seller's Continuing TCAS Business shall mean the TCAS business owned and operated by Parent. SECTION 1.63. Seller's Knowledge, and words or phrases of similar import, shall mean the knowledge after due inquiry of any executive officer of Seller or Parent or any other individual named on Schedule 1.63 hereto. SECTION 1.64. Services Agreement shall mean the Transition Services Agreement to be entered into between Seller and Buyer at the Closing, substantially in the form of Exhibit C attached hereto. SECTION 1.65. Solectron shall have the meaning set forth in Section 2.7(f). SECTION 1.66. Statement of Net Assets shall have the meaning ascribed to such term in Section 3.3 hereof. SECTION 1.67. Supplemental Agreement shall mean the Supplemental Agreement to be entered into between Seller and Buyer at the Closing, substantially in form of Exhibit G attached hereto. SECTION 1.68. Supply Agreement shall mean the Supply Agreement to be entered into between Seller and Buyer at the Closing, substantially in the form of Exhibit E attached hereto. SECTION 1.69. Support Employees shall have the meaning ascribed to such term in Section 10.10 hereof. -6- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 1.70. Tangible Personal Property shall mean machinery, equipment, tools, dies and molds and other tangible personal property (including tooling, test equipment, work stations and data processing equipment). SECTION 1.71. Target Net Assets shall have the meaning ascribed to such term in Section 2.9(a) hereof. SECTION 1.72. Tax or Taxes shall mean all income, gross receipts, sales, use, stock transfer, excise, bulk transfer, use, employment, franchise, profits, property, value added or other taxes, fees, stamp taxes and duties, assessments, levies or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (federal, state, local, provincial or foreign) with respect thereto. SECTION 1.73. TCAS shall mean "traffic alert and collision avoidance systems". SECTION 1.74. Transfer Amount shall have the meaning ascribed to such term in Section 10.3(b) hereof. SECTION 1.75. Transferred Employees shall have the meaning ascribed to such term in Section 10.2(a). SECTION 1.76. True-Up Amount shall have the meaning ascribed to such term in Section 10.3(c). SECTION 1.77. True-Up Date shall have the meaning ascribed to such term in Section 10.3(c). SECTION 1.78. Warranty Claim shall have the meaning ascribed to such term in Section 9.17 hereof. SECTION 1.79. WARN Act shall mean the Worker Adjustment and Retraining Notification Act of 1988, as amended. ARTICLE II PURCHASE AND SALE SECTION 2.1. Closing. Subject to the conditions set forth herein, the consummation of the purchase and sale contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. (New York City time), on the date which is five business days after the fulfillment of the conditions set forth in Sections 7.4 and 8.4 hereof or at such other time, date, or place, as Buyer and Seller may agree, at the offices of Whitman Breed Abbott & Morgan LLP, 200 Park Avenue, New York, New York. The parties shall endeavor to hold the Closing on or before February 29, 2000. The date on which the Closing shall take place is referred to as the "Closing Date." The Closing shall be deemed to be effective as of 11:59 p.m. (New York City time) on the Closing Date. SECTION 2.2. Purchase and Sale of Assets. Subject to and upon the terms and conditions set forth in this Agreement and the other Acquisition Agreements, at the Closing, -7- EXECUTION COPY TCAS Asset Purchase Agreement Seller will sell, set over, convey, transfer, assign and deliver to Buyer, and Buyer will purchase from Seller, all of Seller's right, title and interest in and to any of and all of their respective properties, assets and rights of every nature, kind and description, tangible and intangible (including goodwill), whether real, personal or mixed, whether accrued, contingent or otherwise and whether now existing or hereinafter acquired (other than the Excluded Assets) used exclusively or primarily in relation to the Business, as the same may exist on the Closing Date (collectively, the "Purchased Assets"), including, without limitation, the following Purchased Assets: (a) All of the deposits of Seller, prepaid assets, prepaid expenses, credits and deferred charges existing on the accounting records of Seller as of the Closing Date, except to the extent relating to items specified in Section 2.3 hereof (the "Prepaid Expenses"); (b) [Deliberately omitted] (c) All Tangible Personal Property listed on Schedule 2.2(c) hereto (other than items disposed of prior to the Closing in accordance with Section 5.2 hereof) (collectively, the "Purchased Tangible Personal Property"); (d) All inventories of raw materials, goods, spare parts, replacement and component parts, and office and other supplies (whether on hand, in-transit or on order) (collectively, the "Inventories"); (e) All rights of the Business under all Contracts except (i) those set forth on Schedule 3.16 as Contracts retained by Seller and (ii) set forth on Exhibit A to the Supply Agreement; (f) All Business Intellectual Property Assets, except to the extent set forth in the Intellectual Property Agreement as being retained by Seller), subject to the terms of the Intellectual Property Agreement; (g) All papers, books and records in Seller's care, custody or control to the extent relating to any or all of the Purchased Assets or to the operations of the Business, whether in hard copy, magnetic tape or other format or media, including, without limitation, customer and prospective customer files, vendor and prospective vendor files, maintenance records, warranty and customer support obligation records, sales and advertising material, documentation, specifications, technical manuals, outstanding proposals, accounting and financial records, price lists, personnel records for Transferred Employees to the extent permitted by law, manufacturing and quality control, records and procedures, research and development files, tax records and litigation files, except for Business Intellectual Property Assets (which are covered by clause (f) above) and except to the extent indicated on Schedule 2.2(g) hereto as being retained by Seller (collectively, "Files and Records"); (h) All of Seller's transferable rights in connection with the Business to Federal Aviation Administration certifications (including, without limitation, all Federal Aviation Administration Facility certifications, Federal Aviation Administration Supplemental Type certificates and Federal Aviation Administration Parts Manufacturer Authority certificates) and -8- EXECUTION COPY TCAS Asset Purchase Agreement any similar certificates, licenses, permits, authorizations and approvals issued by any foreign Governmental Body; (i) All other transferable Governmental Approvals, including all applications therefor; (j) All rights to causes of action, lawsuits, claims and demands of any nature available to or being pursued by Seller with respect to the Purchased Assets, the Business or the Assumed Liabilities; (k) All transferable rights of Seller pursuant to any express or implied warranties, representations or guarantees relating to Purchased Tangible Personal Property or made by suppliers furnishing goods or services to Seller; and (l) All assets reflected on the Final Closing Statement of Net Assets. SECTION 2.3. Excluded Assets. There shall be excluded from the Purchased Assets the following (collectively, the "Excluded Assets"): (a) All cash (including without limitation cash overdrafts) and cash equivalents held by Seller; (b) All accounts receivable due to Seller in respect of the Business; (c) Except as otherwise provided herein, all trademarks, trade names, assumed names, service marks, brands and logos of Seller and its Affiliates (other than all trademarks, tradenames, assumed names, service marks, brands and logos included in the Business Intellectual Property Assets), together with all good will associated therewith, and any applications and registrations therefor; (d) All real property located at (i) the Glendale, Arizona facility, (ii) the Phoenix, Arizona facility, (iii) the Ohio Service Center, (iv) the Basingstoke, UK and Wales support centers, (v) the AOSA Gauting, Germany repair station or (vi) the Auckland, New Zealand (e) All the Files and Records listed as being retained by Seller in Schedule 2.2(g) hereto; (f) All those other excluded assets set forth on Schedule 2.3 hereto; (g) All deferred income tax assets as of the Closing Date; and (h) All Contracts of Seller identified on Schedule 3.16 hereto as being retained by Seller. SECTION 2.4. Non-Assignable Assets. Notwithstanding anything herein to the contrary contained in this Agreement, to the extent the sale, assignment, transfer, conveyance or delivery to Buyer of any Purchased Asset is prohibited by any Legal Requirement or would require any Consents which shall not have been obtained prior to the Closing (after Seller's -9- EXECUTION COPY TCAS Asset Purchase Agreement reasonable best efforts to obtain them), this Agreement shall not constitute a sale, assignment, transfer, conveyance or delivery thereof. Following the Closing, the parties shall use reasonable best efforts and cooperate with each other to obtain promptly such Consents; provided, however, that Buyer shall not be required to pay any consideration therefor, other than filing, recordation or similar fees payable to any Governmental Body. Pending such Consents, the parties shall cooperate with each other in any commercially reasonable and lawful arrangements designed to provide to Buyer the benefits of use of the Purchased Assets in question and, provided Buyer receives such benefit of use thereof, Buyer shall pay or satisfy the Assumed Liabilities, if any, corresponding thereto. Once such Consents are obtained, Seller shall promptly assign, transfer, convey and deliver such Purchased Asset to Buyer for no additional consideration. To the extent that any such Purchased Asset cannot be transferred or the full benefits of use of any such Purchased Asset cannot be provided to Buyer following the Closing, then Buyer and Seller shall enter into such arrangements for no additional consideration from Buyer (including subleasing or subcontracting to the extent permitted) to provide Buyer the economic (taking into account tax costs and benefits) and operational equivalent of obtaining such Consents. SECTION 2.5. Purchase Price; Payment. (a) In consideration for the purchase of the Purchased Assets, Buyer will pay to Seller the Cash Purchase Price as set forth in Section 2.5(b) hereof, which shall be subject to adjustment as set forth in Sections 2.8A and 2.9 hereof, and Buyer will assume at the Closing the Assumed Liabilities specified in Section 2.6 hereof. (b) Buyer will deliver to Seller at the Closing, the sum of US$255,000,000 (such amount to be provisionally adjusted on the Closing Date pursuant to Section 2.8A and subsequently adjusted pursuant to Section 2.9 hereof) (subject to such adjustments, the "Cash Purchase Price") by wire transfer to an account specified by Seller at least 3 days prior to the Closing. SECTION 2.6. Assumption of Liabilities. Subject to the terms and conditions set forth herein, at and as of the Closing, Buyer will assume, and agree to pay, perform and discharge all operating liabilities of the Business incurred in the ordinary course of business consistent with past practice and (except as provided below) of the nature of those liabilities set forth on the Statement of Net Assets (except to the extent any of the same are enumerated as Excluded Liabilities in Section 2.7) (collectively, the "Assumed Liabilities"), including, without limitation, (i) all liabilities reflected on the Final Closing Statement of Net Assets, (ii) except as provided in Sections 2.7(b) and 2.7(c), all of the monetary and non-monetary obligations of Seller under the Contracts (other than those identified on Schedule 3.16 as being retained by Seller) to be performed, or arising out of acts or omissions after the Closing Date (including obligations arising from performance of warranty repairs as contemplated by Section 9.17 below), (iii) all monetary and non-monetary obligations arising out of or related to claims of product liability (regardless of whether such claims are stated to be in contract, tort, strict liability or any other legal theory) in respect of products of the Business that are designed, developed, manufactured and sold after the Closing Date and (iv) all liabilities assumed by Buyer in respect of Transferred Employees pursuant to Article X hereof. Buyer will not assume or agree to pay, perform or discharge any debt, claim, commitment, liability or obligation of Seller other than the Assumed Liabilities. -10- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 2.7. Excluded Liabilities. Other than the Assumed Liabilities, Buyer shall not assume or be responsible for any other debts, claims, commitments, liabilities or obligations of Seller, any of its Affiliates or the Business (collectively, the "Excluded Liabilities"). Without limiting the generality of the foregoing and notwithstanding anything herein that may be to the contrary, Excluded Liabilities include any and all debts, claims, commitments, liabilities or obligations of Seller, its Affiliates or the Business relating to or arising out of any of the following (which shall not constitute Assumed Liabilities): (a) obligations and liabilities for all Taxes relating to the Business for all periods to and including the Closing Date; (b) debts, claims, commitments, obligations and liabilities arising out of or related to the ownership or operation of the Purchased Assets or the Business on or prior to the Closing Date (including, but not limited to, the items referred to in Schedule 3.13); (c) all monetary and non-monetary obligations arising out of or related to claims of product liability (regardless of whether such claims are stated to be in contract, tort, strict liability or any other legal theory) in respect of products of the Business that are designed, developed, manufactured or sold on or prior to the Closing Date, provided that monetary obligations that are caused by improper or negligent modifications or repairs performed by Buyer after the Closing Date shall not constitute Excluded Liabilities; (d) all liability for sales credits relating to or arising out of the bundling of sales of avionics products, including TCAS products, that have occurred, are in backlog or are subject to an outstanding bid as of the Closing Date; (e) all obligations to third Persons for royalty payments relating to TCAS products sold that are due on or prior to the Closing Date except to the extent such royalty payments are reserved for in the Final Closing Statement of Net Assets; (f) any liabilities, costs and expenses arising out of the existence, or the termination by Seller of, any agreement, contract or legally-binding commitment with Solectron Corporation ("Solectron") that provides for Solectron to perform circuit card assembly or other services for the Business or any other business unit of Seller; (g) obligations and liabilities related to former Employees of the Business and Employees who do not become Transferred Employees, including without limitation all statutory and other liability associated with the termination of former employees or Employees who do not become Transferred Employees; (h) obligations, liabilities, expenses or charges to earnings or reserves taken in connection with any restructuring program of Seller not reflected in the Final Closing Statement of Net Assets; (i) debt or payables of Seller or any of its Affiliates, including under any Contract between or among Seller or any of its Affiliates; -11- EXECUTION COPY TCAS Asset Purchase Agreement (j) the Excluded Assets; (k) except as otherwise expressly provided in the Acquisition Agreements, expenses of Seller incurred in connection with the transactions contemplated hereby or any obligations relating to the transactions contemplated hereby or thereby (including any and all claims or amounts owed for any brokerage or finder's fee, commission or similar compensation, or for any bonus payable to any officer, director, employee, agent, sales representative, relative of or consultant to Seller or any of its Affiliates upon consummation of the transactions contemplated hereby); (l) debts, obligations, claims, commitments or liabilities whatsoever to the extent not primarily related to the Business or the Purchased Assets; (m) other debts, claims, commitments, obligations and liabilities for which Seller has expressly assumed responsibility pursuant to this Agreement; (n) Environmental Liabilities and Costs (whether or not currently known, discoverable or regulated by current Environmental Laws) arising from, relating to, in respect of or incurred in connection with conditions existing or events occurring on or prior to the Closing Date, including conditions existing at any current or past facility of the Business and the operations of the Business on or prior to the Closing Date; (o) obligations and liabilities arising out of past, present or future claims of infringement or misappropriation of intellectual property by the Business by V. T. Artemov or an heir, representative or assignee thereof; (p) all accounts payable for all periods on or prior to the Closing Date; and (q) all deferred income tax liabilities for all periods through (and including) the Closing Date. SECTION 2.8. Allocation of Cash Purchase Price. The parties shall agree to an allocation of the aggregate of the Cash Purchase Price and the Assumed Liabilities among the Purchased Assets in accordance with Section 1060 of the Code within 180 days following the Closing Date. Buyer shall initially prepare such allocations and deliver them to Seller within 120 days following the Closing Date. Such allocation shall be (a) based upon appraisal(s) prepared by independent firm(s) selected by Buyer and approved by Seller (such approval not to be unreasonably withheld or delayed), and (b) used by each party in preparing any filings required pursuant to Section 1060 of the Code or any similar provisions of state or local law and all relevant income and franchise tax returns. Seller shall have 30 days after receiving the allocations from Buyer to object to such allocations. Failure to object within such 30-day period shall be deemed approval by Seller of the allocations. Neither Buyer nor Seller will take any position before any taxing authority or in any judicial proceeding that is inconsistent with an agreed upon allocation without the prior consent of the other party. The parties shall in good faith exercise reasonable efforts to support such reported allocations in any audit proceedings initiated by any taxing authority. The cost and expenses of the appraisal(s) referred to above shall be borne by Buyer. Prior to the Closing, the parties shall agree upon a preliminary -12- EXECUTION COPY TCAS Asset Purchase Agreement allocation of the Cash Purchase Price to the Intellectual Property Assets. Such preliminary allocation shall be subject to adjustment, and shall be finalized within 180 days after the Closing Date, based on the appraisal(s) referred to above. SECTION 2.8A. ESTIMATED CASH PURCHASE PRICE ADJUSTMENT. Not later than four days prior to the Closing Date, Seller shall deliver to Buyer a good faith estimate of the Closing Date Net Assets. At the Closing, the amount of the Cash Purchase Price Buyer shall deliver to Seller shall be adjusted by the difference between such estimate of the Closing Date Net Assets and the Target Assets. If such estimate exceeds the Target Assets, the amount of the Cash Purchase Price paid at the Closing shall be increased dollar-for-dollar by the amount of such excess, and if such estimate is less than the Target Assets, the amount of the Cash Purchase Price paid at the Closing shall be decreased dollar-for-dollar by such shortfall. The Cash Purchase Price shall thereafter be subject to further adjustment as provided in Section 2.9. SECTION 2.9. Cash Purchase Price Adjustment. (a) Calculation of Adjustment. The amount of the Cash Purchase Price, as provisionally adjusted pursuant to Section 2.8A, shall be: (i) increased dollar-for-dollar by the amount that the Closing Date Net Assets are greater than $22.1 million (the "Target Net Assets"); or (ii) decreased dollar-for-dollar by the amount that the Closing Date Net Assets are less than the Target Net Assets. The term "Closing Date Net Assets" means the excess of the Purchased Assets set forth on the Final Closing Statement of Net Assets over the Assumed Liabilities set forth on the Final Closing Statement of Net Assets, determined in accordance with the procedures set forth in Section 2.9(b). The amount of any decrease or increase to the Cash Purchase Price pursuant to this Section 2.9(a), plus simple interest thereon from and including the Closing Date to but excluding the date of payment at the rate of 8.5% per annum, shall be paid by Buyer to Seller (in the case of an increase in the Cash Purchase Price), or by Seller to Buyer (in the case of a decrease in the Cash Purchase Price), in either case by wire transfer in immediately available funds within five business days after the Final Closing Statement of Net Assets is agreed to by Seller and Buyer or is determined by the Neutral Auditor in accordance with this Section 2.9. (b) Preparation of Closing Statement of Net Assets. As soon as practicable, and in any event within 60 days after the Closing Date, Seller shall prepare and deliver to Buyer a statement of net assets for the Business consisting of the Purchased Assets and the Assumed Liabilities, as of the close of business on the Closing Date determined on a pro forma basis as if the parties hereto had not consummated the transactions contemplated by this Agreement (the "Closing Statement of Net Assets"), to be prepared as set forth in this Section 2.9(b). The Closing Statement of Net Assets shall be prepared applying GAAP on a basis consistent with the Financial Statements (including the Statement of Net Assets) through full application of the policies and procedures used in preparing the Financial Statements (including the Statement of Net Assets), except as modified or set forth in subparagraphs (i) through (vi) below in this Section 2.9(b); provided, however, that there shall be no accrual on the Closing Statement of Net Assets for Excluded Assets or Excluded Liabilities: (i) Adjustment of Reserves and Valuation Accounts. The amount of any reserve or valuation accounts shall be determined by applying methods, practices, assumptions, -13- EXECUTION COPY TCAS Asset Purchase Agreement policies, factors and underlying data consistent with those used in determining the reserves or valuation accounts included in the Statement of Net Assets, and there shall be no changes made to any reserves or valuation accounts (including contract reserves, purchase accounting reserves, allowances for bad debts, inventory reserves of any kind, warranty reserves and other reserves), except to the extent that such changes are required by changes in facts and events occurring after September 30, 1999 and on or before the Closing Date. It is further understood and agreed that there shall be no increase in the Closing Date Net Assets as a result of reversal, reduction or other usage of reserves unless such reversal, reduction or usage arises out of facts or events that occur after September 30, 1999 and on or before the Closing Date. In connection with subparagraph (vii) below in this Section 2.9(b), it is further understood and agreed that there should be no increase in reserves and valuation amounts or write-down of Purchased Assets during the period between September 30, 1999 and the Closing Date which are recorded as purchase accounting adjustments with corresponding adjustments to goodwill. It is further understood and agreed that there shall be no increase in Closing Date Net Assets as a result of the reversal of any general, unspecified, unsubstantiated contingency or management reserve, after September 30, 1999 and on or before the Closing Date, that was (i) included in the determination of Target Net Assets and (ii) not disclosed as such by Seller to Buyer during Buyer's due diligence of the Business. (ii) Adjustment of Liability and Accrual Accounts. The amount of all liability and accrual accounts shall be determined by applying methods, practices, assumptions, policies, factors and underlying data consistent with those used in determining the liability and accrual accounts included in the Statement of Net Assets, and there shall be no changes made to any liability and accrual accounts, except to the extent that such changes are required by changes in facts and events occurring after September 30, 1999 and on or before the Closing Date. The Closing Statement of Net Assets shall reflect an accrual for warranty of $3,000,000. It is further understood that there shall be no increase in the Closing Date Net Assets as a result of reversals or reductions of liability and accrual accounts, unless such reversal or reduction arises out of facts or events that occur after September 30, 1999 and on or before the Closing Date; provided, however, that if such facts causing the reversal or reductions also did apply, were known or should have been known as of September 30, 1999, the reversals or reductions also shall be made to the Statement of Net Assets for purposes of increasing the Target Net Assets. (iii) Accounting For Certain Assumed Liabilities. The Closing Statement of Net Assets shall include liabilities for Assumed Liabilities that accrue from the date of the Statement of Net Assets to the Closing Date either because of the passage of time or the achievement or reasonably expected achievement of a performance measurement, even if such liabilities were not included in the Statement of Net Assets. Examples of these types of liabilities include, but are not limited to, Taxes, management profit sharing (covered in clause (vi) below), profit sharing loans, employer matching contributions for Seller sponsored savings plans, compensated absences (vacation time, sick pay, etc.) and royalties, in any event, only to the extent not retained by Seller. -14- EXECUTION COPY TCAS Asset Purchase Agreement (iv) Management Performance Bonus. Seller shall establish an appropriate accrual for the profit sharing, if any, of the Business' management for calendar year 1999 through the Closing Date, accrued ratably through the Closing Date, to the extent not paid out prior to the Closing. (v) Consistent Application of Accounting Policies, Methods, and Practices. The accounting policies, methods and practices and their related applications used by Seller to prepare the Closing Statement of Net Assets shall be consistent with those underlying the Statement of Net Assets. Use of different or alternative accounting policies and methods that are otherwise in accordance with GAAP is not permitted because such use violates this consistency requirement. (vi) Goodwill and Other Intangible Assets. There shall be no increases or decreases to goodwill and other intangible assets from those used in preparation of the Statement of Net Assets and included in the Target Net Assets except for amortization expense recorded during the period between September 30, 1999 and the Closing Date based on the amortization accounting policies and useful lives used in preparing the Financial Statements. Buyer shall provide Seller and its representatives such access to the Files and Records as may reasonably be required for the preparation of the Closing Statement of Net Assets. Buyer and Seller shall each make available to the other (upon the request of the other) their respective work papers generated in connection with the preparation or review of the Closing Statement of Net Assets. (c) Review of Closing Statement of Net Assets. After receipt of the Closing Statement of Net Assets, Buyer shall have 60 days to review it. Unless Buyer delivers written notice to Seller on or prior to the 45th day after receipt of the Closing Statement of Net Assets specifying in reasonable detail all disputed items and the basis therefor, the parties shall be deemed to have accepted and agreed to the Closing Statement of Net Assets. If Buyer so notifies Seller of an objection to the Closing Statement of Net Assets, the parties shall, within 30 days following the date of such notice (the "Resolution Period"), attempt to resolve their differences and any resolution by them as to any disputed amount shall be final, binding, conclusive and nonappealable for all purposes under this Agreement. (d) Resolution. If at the conclusion of the Resolution Period the parties have not reached an agreement on the objections, then all amounts remaining in dispute shall be submitted to a mutually acceptable nationally recognized accounting firm (the "Neutral Auditor"). If Buyer and Seller are unable to agree on the choice of a Neutral Auditor, the parties shall select by lot as the Neutral Auditor a "Big Five" accounting firm other than PricewaterhouseCoopers LLP. Each party agrees to execute, if requested by the Neutral Auditor, a reasonable engagement letter. All fees and expenses relating to the work if any, to be performed by the Neutral Auditor shall be borne equally by Seller and Buyer. Except as provided in the preceding sentence, all other costs and expenses incurred by the parties in connection with resolving any dispute hereunder before the Neutral Auditor shall be borne by the party incurring such cost and expense. The Neutral Auditor shall act as an arbitrator to determine, based solely on the presentations by Seller and Buyer and the terms of this Agreement, and not by independent review, only those issues still in -15- EXECUTION COPY TCAS Asset Purchase Agreement dispute. The Neutral Auditor's determination shall be made within 30 days of its engagement (which engagement shall be made promptly following the conclusion of the Resolution Period), or as soon thereafter as possible, shall be set forth in a written statement delivered to Seller and Buyer and shall be final, binding, conclusive and nonappealable for all purposes hereunder, absent fraud or manifest error. Nothing herein shall be construed to authorize or permit the Neutral Auditor to determine (i) any questions or matters whatsoever under or in connection with this Agreement except the determination of what adjustments, if any, must be made in one or more of the items reflected in the initial Closing Statement of Net Assets in response to objections thereto made by the party that submitted the statement of objections, or (ii) an adjustment to an item on the initial Closing Statement of Net Assets that is outside of the range defined by amounts as finally proposed by Seller and Buyer, respectively. The term "Final Closing Statement of Net Assets" shall mean the definitive Closing Statement of Net Assets agreed to by Seller and Buyer in accordance with Section 2.9(c) or the definitive Closing Statement of Net Assets resulting from the determination made by the Neutral Auditor in accordance with this Section 2.9(d) (in addition to those items theretofore agreed to by Seller and Buyer). For the avoidance of doubt, all matters relating to the Closing Statement of Net Assets shall be finally settled in accordance with this Section 2.9. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as of the date hereof and as of the Closing Date that: SECTION 3.1. Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has full power and authority to own, lease and operate the properties of the Business, including the Purchased Assets, and to carry on the Business as now conducted and own all of its properties and assets. Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification except where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Seller has no subsidiaries engaged in the Business. SECTION 3.2. Authorization; Enforceability. Seller has all requisite corporate and other power and authority to execute and deliver this Agreement and the other Acquisition Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. All acts required to be taken by Seller to authorize the execution, delivery and the performance of the Acquisition Agreements to which it is or will be a party, and the consummation of the transactions contemplated herein and therein, have been taken, and no other corporate proceedings on the part of Seller are necessary to authorize such execution, delivery, performance and consummation. This Agreement has been duly authorized, executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy and other laws affecting creditors' rights, or by general equitable principles. Each other Acquisition Agreement to which Seller is or will be a party will -16- EXECUTION COPY TCAS Asset Purchase Agreement be, as of the Closing, duly authorized, executed and delivered by Seller and will constitute a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy and other laws affecting creditors' rights, or by general equitable principles. SECTION 3.3. Financial Statements. Schedule 3.3 hereto contains the unaudited pro forma Statement of Net Assets of the Business as of September 30, 1999 (the "Statement of Net Assets"), and an unaudited pro forma statement of operations for the years ended December 31, 1998 and 1999 and the related footnotes thereto (collectively, the "Financial Statements"). Such Financial Statements (i) are in accordance with the Files and Records of Seller, (ii) are accurate in all material respects, (iii) each fairly presents, in all material respects, the financial condition or the results of operations of the Business for the respective period presented, and (iv) have been prepared in accordance with GAAP, except as disclosed in the footnotes thereto. Except to the extent set forth in the Statement of Net Assets and the footnotes related thereto and except for the Excluded Liabilities, the Business does not have any liabilities or obligations (absolute, accrued, contingent or otherwise), whether due or to become due, which would be required, in accordance with GAAP, to be set forth on a balance sheet of the Business, other than any such liabilities or obligations incurred since September 30, 1999 in the ordinary course of business consistent with past practice. SECTION 3.4. No Conflicts. Except as set forth on Schedule 3.4 hereto, the execution, delivery and performance by Seller of this Agreement and the other Acquisition Agreements to which Seller is or will be a party and the consummation of the transactions contemplated hereby and thereby (a) do not and will not violate (with or without giving of notice or the lapse of time or both), or require any Consent, under any provision of any Contracts with, or licenses, permits, approvals, certificates of public convenience, orders, franchises and other authorizations of, any Governmental Body or other Person or any Legal Requirement applicable to Seller, the Business or any of the Purchased Assets or the Assumed Liabilities, other than the facilities clearance requirements of the Defense Investigative Services of the DOD, and (b) do not and will not (with or without the giving of notice or the lapse of time or both) (i) violate or conflict with, or result in the breach, suspension or termination of any provisions of, or constitute a default under, or result in the acceleration of the performance of the obligations of Seller under, or (ii) result in the creation of Liens upon the Business or Purchased Assets pursuant to, as the case may be, the Certificate of Incorporation, by-laws or other organization documents of Seller or any material agreement, lease, mortgage, note, deed of trust, bond, indenture, license or other document or undertaking, oral or written, to which Seller is a party or by which Seller is bound and by which any of the Purchased Assets or the Business may be affected. SECTION 3.5. Title. Seller holds the entire legal, equitable and beneficial title in and will transfer to Buyer good and merchantable title to, or a valid and binding leasehold interest in, the Purchased Assets (other than Business Intellectual Property Assets which are covered in the Intellectual Property Agreement), free and clear of all Liens other than Permitted Liens. SECTION 3.6. Purchased Tangible Personal Property. In all material respects, and except as set forth on Schedule 3.6 hereto, the Purchased Tangible Personal Property has been maintained in accordance with standard industry practices, is in reasonable working condition -17- EXECUTION COPY TCAS Asset Purchase Agreement (normal wear and tear excepted) and is sufficient for the conduct of the Business as it is currently being conducted. SECTION 3.7. Taxes. All Taxes with respect to the Purchased Assets that are or become due and payable or accrue with respect to any period or portion thereof ending on or prior to the Closing Date have been or will be duly and properly computed, reported, fully paid and discharged by Seller. There are no unpaid Taxes with respect to any period or portion thereof ending on or before the Closing Date that are or could become a Lien on the Purchased Assets, except for current Taxes not yet due and payable. SECTION 3.8. Labor Matters. (a) Schedule 3.8 lists the following as of the date of this Agreement: (i) All written arrangements that compel the employment of any Employee at a salary in excess of $100,000 (or the equivalent in any foreign currency) per annum and are not terminable on less than ninety (90) days' notice; (ii) All strikes in which any of the Employees are participating or have participated since January 1, 1997; (iii) All pending charges or complaints or petitions filed with or by the N.L.R.B., the O.F.C.C.P. of the United States Department of Labor, the Occupational Safety and Health Administration, the E.E.O.C. or any similar unit of any Governmental Body, including charges of race, sex, national origin, religious, handicap or age discrimination or similar complaints against the Business, and all pending employee-related arbitration proceedings and litigation matters (other than any workers compensation claims) involving the Business including breach of employment contract/wrongful discharge; and (iv) All pending written grievances as of the date of this Agreement. (b) There are no collective bargaining agreements covering Employees. SECTION 3.9. Employee Benefit Plans. Schedule 3.9 lists the following, as of the date of this Agreement: all employee benefit plans, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all material bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, in each case, which are maintained, contributed to or sponsored by Seller on behalf of Employees (collectively, the "Benefit Plans"). Seller has furnished Buyer with a complete and accurate copy of (a) each Benefit Plan that is in writing, (b) the most recently distributed summary plan description and summary of material modifications relating to each Benefit Plan, and (c), with respect to each Benefit Plan under which liabilities are being assumed by Buyer under this Agreement, (i) each trust or other funding agreement, (ii) the most recently filed IRS Form 5500, (iii) the most recently received IRS determination letter, and (iv) the most recently prepared actuarial report and financial statements. -18- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 3.10. Employee Benefit Plan Matters. Except as otherwise stated in Schedule 3.10, to Seller's Knowledge: (a) the Benefit Plans under which liabilities are being assumed by Buyer under this Agreement comply in all material respects with the applicable requirements of ERISA and the Code and have been operated and administered in all material respects in accordance with the applicable requirements of ERISA and the Code; (b) no liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any of the Benefit Plans subject to Title IV of ERISA, other than premium payments pursuant to Sections 4006 and 4007 of ERISA; (c) Seller has not incurred any material liability (either directly or indirectly, whether by way of indemnification or otherwise) for any tax imposed under Section 4975 of the Code or Part 5 Subtitle B of Title I of ERISA with respect to any of the Benefit Plans under which liabilities are being assumed by Buyer under this Agreement; (d) none of the Benefit Plans is a multiemployer plan within the meaning of Section 3(37)(A) of ERISA; (e) no suit, action, litigation or written claim (excluding claims for benefits incurred in the ordinary course of plan activities) has been brought against or with respect to any of the Benefit Plans by or on behalf of any Employee and is pending; (f) all contributions to the Benefit Plans under which liabilities are being assumed by Buyer under this Agreement that will be due as of the Closing Date have been (or will have been by the Closing Date) paid, accrued or otherwise fully reserved as of such date, in accordance with GAAP; (g) each Benefit Plan which is intended to meet the requirements of Section 401(a) of the Code meets the requirements for qualification under Section 401(a) of the Code and nothing has occurred which would adversely affect the qualified status of any such Benefit Plan other than such occurrences as may be corrected without resulting in a Material Adverse Effect. The Internal Revenue Service has issued a favorable determination letter with respect to the qualification under the Code of each such Benefit Plan and the Internal Revenue Service has not taken any action to revoke any such letter; (h) none of the Benefit Plans subject to Part 3 Subtitle B of Title I of ERISA has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code; (i) no Benefit Plan is a "multiple employer plan" within the meaning of Section 413(c) of the Code; and (j) except as provided in Article X or as set forth in Schedule 3.10 hereto, the execution, delivery and performance of the Acquisition Agreements or the consummation of the transactions contemplated by this Agreement will not of itself constitute an event under any -19- EXECUTION COPY TCAS Asset Purchase Agreement Benefit Plan under which liabilities are being assumed by Buyer under this Agreement that will require any payment (whether of severance pay or otherwise), acceleration, vesting or increase in material benefits under such Benefit Plan with respect to any Transferred Employee. SECTION 3.11. Compliance With Legal Requirements. Except as set forth in Schedule 3.11 hereto, Seller has conducted the Business in compliance with all Legal Requirements applicable to the Business or the Purchased Assets (excluding Environmental Laws which are covered in Section 3.12), except for such noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.12. Environmental Matters. (a) Compliance with Environmental Law. Except as disclosed on Schedule 3.12 hereto, Seller is and has been in compliance in all material respects with all applicable Environmental Laws pertaining to any of the properties and assets of the Business and the use by Seller thereof. Except as disclosed on Schedule 3.12, the Business has obtained all material permits, licenses and other authorizations that are required under Environmental Laws to operate the Business as it is currently operated. Except as disclosed on Schedule 3.12 hereto, Seller has not received notice of any violation of any applicable Environmental Law relating to any of the assets or to any premises utilized by the Business and, to Seller's knowledge, no notice of any such violation has been threatened. (b) Other Environmental Matters. Except as disclosed on Schedule 3.12 hereto, Seller has not caused or taken any action that resulted in, and Seller is not subject to, any material liability or obligation relating to (i) the environmental conditions on, under, or about any part of the premises utilized by the Business or other properties or assets owned, leased, operated or used by Seller in the Business, including the air, soil and groundwater conditions at such properties, or (ii) the use, management, handling, transport, treatment, generation, storage, disposal or Release of any Hazardous Substances by Seller in the conduct of the Business. (c) No Proceedings. Except as disclosed on Schedule 3.12, Seller has not received within the last five years written notice or other written communication concerning any alleged liability for Environmental Liabilities and costs in connection with any part of the premises utilized by the Business, and there is no Proceeding pending or, to Seller's Knowledge, threatened, relating to any environmental matters with respect to any such premises. SECTION 3.13. Legal Proceedings; Orders. Except as set forth on Schedule 3.13 hereto, there are no Proceedings pending or, to Seller's Knowledge, threatened against Seller involving, affecting or relating to the Business, the Purchased Assets or the transactions contemplated by this Agreement, except for those which would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 3.13, there is no judgment, writ, order, injunction or decree of any Governmental Body to which Seller, in respect of the Business, or any of the Purchased Assets is subject. Seller is not in violation of any judgment, writ, decree, injunction or order entered by any Governmental Body and outstanding against Seller or with respect to the Business, the Purchased Assets or the Assumed Liabilities, except for such violations which would not, individually or in the aggregate, have a Material Adverse Effect. -20- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 3.14. Absence of Certain Changes and Events. Except as set forth in Schedule 3.14 hereto, since September 30, 1999, Seller has conducted the Business only in the ordinary course of business consistent with past practice and no event, circumstance or condition has occurred that has caused or is reasonably likely to cause a Material Adverse Effect, and there has not been any: (a) change that (i) is materially adverse to the value of the Purchased Assets taken as a whole or materially adverse to the business, assets, properties, operations, financial condition or results of operations of the Business taken as a whole (other than as a result of changes in general economic conditions or industry-wide developments affecting all companies engaged in businesses substantially similar to the Business), or (ii) materially impairs or delays the ability of Seller to effect the Closing; (b) Lien created on any Purchased Asset except Permitted Liens; (c) unless required by any Legal Requirement or to the extent required under existing employee and director benefit plans, agreements or arrangements as in effect on the date of this Agreement (including, but not limited to, any collective bargaining agreement), increase in the compensation or fringe benefits of any of the Employees (including any such increase pursuant to any deferred compensation, severance, bonus, pension, profit-sharing or other plan or commitment), except for increases in the ordinary course of business consistent with past practice in salary or wages; (d) except as set forth in the current business plan, capital expenditures or commitment to make any such expenditures with respect to the Purchased Assets except to the extent such expenditures and commitments do not exceed $100,000 for any individual expenditure and $250,000 in the aggregate; (e) condemnation proceedings commenced with respect to any Purchased Assets or notice received by Seller as to the proposed commencement of any such proceedings; (f) change in any material accounting or auditing principle or policy; (g) damage, destruction or loss to any of the Purchased Assets, whether or not covered by insurance, materially and adversely affecting the Purchased Assets or the Business or the ability to conduct the Business as it is now conducted; or (h) sale or transfer of any Purchased Assets other than dispositions of inventory and obsolete or worn out equipment in the ordinary course of business. SECTION 3.15. Intellectual Property Assets. Rights granted by Seller to Buyer in the Business Intellectual Property Assets and Seller's representations and warranties in respect of the Business Intellectual Property Assets are set forth in the Intellectual Property Agreement. SECTION 3.16. Contracts. Schedule 3.16 hereto sets forth a list of all Contracts that are material to the Business. Except as set forth on Schedule 3.16 hereto, each such Contract is legal, valid, binding and enforceable against Seller in accordance with its terms, except to the -21- EXECUTION COPY TCAS Asset Purchase Agreement extent such enforceability may be limited by applicable bankruptcy or other laws affecting creditors' rights, or by general equity principles, and is in full force and effect. Seller has performed all obligations required to be performed by it to date under, and is not in material default in respect of, any such Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a material default. To Seller's Knowledge, no other party to any such Contract is in material default in respect thereof and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. Seller has made available to Buyer true and complete copies of all of such Contracts (or, in the case of oral Contracts, true and accurate summaries thereof), other than classified Government Contracts. Except as set forth on Schedule 3.16 hereto, such Contracts included in the Purchased Assets are assignable to Buyer without any required Consent of any other Person. SECTION 3.17. Insurance. Schedule 3.17 is a true and complete list of all insurance policies held by Seller in respect of the Business. All such insurance policies are in full force and effect and no notice of cancellation or non-renewal with respect to any such insurance policy has been received by Seller. SECTION 3.18. Brokerage. Seller has not incurred, directly or indirectly, any obligation or liability, contingent or otherwise, for any brokerage fees, finder's fees, agent's commissions or other like payment in connection with this Agreement or any other Acquisition Agreement, or the transactions contemplated herein or therein. SECTION 3.19. Undisclosed Liabilities. To Seller's Knowledge, there are no liabilities or obligations of Seller (whether or not reflected, accrued or provided for, or required to be reflected, accrued or provided for, on a balance sheet of the Business prepared in accordance with GAAP and whether or not fixed, liquidated, unliquidated, absolute, contingent or otherwise), which relate to or arise out of the Business or any of its operations as heretofore or currently conducted or the past or present operation, condition or use of any of the Purchased Assets, and are material to the Business taken as a whole, except (a) Excluded Liabilities, (b) those reflected or otherwise provided for in the Statement of Net Assets (including the footnotes thereto), (c) those set forth in this Agreement or the Schedules attached hereto, (d) those arising since the date of the Statement of Net Assets in the ordinary course of business consistent with prior practice and which will be reflected in the Final Closing Statement of Net Assets and (e) those not required to be set forth in the Schedules attached hereto because of an exception provided for in this Agreement. SECTION 3.20. Real Estate. Schedule 3.20 contains a list of all the real property owned, leased or used by Seller in the Business. SECTION 3.21. Year 2000. Each of the computer-based systems of the Business, including its information data bases, accounting systems and data processing systems, as well as all other computer software or hardware owned or used by the Business, (a) records, stores, processes, calculates, presents and, where appropriate, inserts correctly entered and formatted time and accurate dates and calculations for calendar dates falling on or after (and if applicable, spans of time including) January 1, 2000, and records, stores, processes, -22- EXECUTION COPY TCAS Asset Purchase Agreement calculates and presents correctly entered and formatted information or data dependent on or relating to such dates with the same functionality, data integrity and performance, as such item records, stores, processes, calculates and presents calendar dates on or before December 31, 1999, and in such fashion as to respond to two-digit date input in a way that eliminates all ambiguities as to the century of concern, and treats the year 2000 as a leap-year and correctly and accurately records and processes data and information with respect thereto; and (b) loses no functionality with respect to the introduction of records, including back-up and archived information or data, containing dates falling on or after January 1, 2000. SECTION 3.22. Government Contracts. (a) With respect to each and every Government Contract or bid to obtain a Government Contract to which Seller is a party, and which relates to the Business, and except as set forth in Schedule 3.22(a): (i) Seller has fully complied with all material terms and conditions of such Government Contract or bid for a Government Contract as required; (ii) Seller has fully complied with all material requirements of statute, rule or regulation pertaining to such Government Contract or bid for a Government Contract; (iii) all representations and certifications executed with respect to such Government Contract were to Seller's Knowledge accurate in every material respect as of their effective date and Seller to Seller's Knowledge has fully complied with all such representations and certifications in every material respect; and (iv) no termination for default, cure notice or show cause notice has been issued or, to Seller's Knowledge will be issued, (v) neither the U.S. Government nor any non-U.S. government nor any prime contractor, subcontractor or other Person has notified in writing Seller that Seller has breached or violated any Legal Requirement, certification, representation, clause, provision or requirement pertaining to such Government Contract or bid; (vi) no cost incurred by Seller pertaining to such Government Contract or bid has been questioned or challenged, is the subject of any investigation or has been disallowed by the U.S. Government or any non-U.S. government; (vii) no money due to Seller pertaining to such Government Contract or bid has been withheld or set off and Seller is entitled to all progress payments with respect thereto and (viii) each Government Contract is valid and in full force and effect. (b) To Seller's Knowledge, except as set forth in Schedule 3.22(b), with respect to the Business, (i) none of its respective employees, consultants or agents is (or during the last three years has been) under administrative, civil or criminal investigation, indictment or information by any Governmental Authority, (ii) there is not any pending audit or investigation by Seller nor within the last three years has there been any audit or investigation by Seller resulting in a material adverse finding with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or bid, and (iii) during the last three years, Seller has not made a voluntary disclosure to the U.S. Government or any non-U.S. government with respect to any alleged irregularity, misstatement or omission arising under or relating to a Government Contract or bid. Except as set forth in Schedule 3.22(b), to Seller's Knowledge there are no irregularities, misstatements or omissions arising under or relating to any Government Contract or bid that has led or is expected to lead, either before or after the Closing Date, to any of the consequences set forth in clause (i) or (ii) of the immediately preceding sentence or any other material damage, penalty assessment, recoupment of payment or disallowance of cost. (c) Except as set forth in Schedule 3.22(c), with respect to the Business, there exist (i) no outstanding claims against Seller, either by the U.S. Government or by any non-U.S. -23- government or by any prime contractor, subcontractor, vendor or other third party, arising under or relating to any Government Contract or bid referred to in Section 3.22(a) and (ii) no disputes between Seller and the U.S. Government or any non-U.S. government under (A) the Contract Disputes Act or any other Federal statute or (B) any analogous statute of any jurisdiction other than the United States or between Seller and any prime contractor, subcontractor or vendor arising under or relating to any such Government Contract or bid. Except as set forth in Schedule 3.22(c), to Seller's Knowledge there are no facts that could reasonably be expected to result in a claim or a dispute under clause (i) or (ii) of the immediately preceding sentence. (d) Except as set forth in Schedule 3.22(d), neither Seller nor any of its employees, consultants or agents is (or during the last three years has been) suspended or debarred from doing business with the U.S. Government or any non-U.S. government or is (or during such period was) the subject of a finding of nonresponsibility or ineligibility for U.S. Government or non-U.S. government contracting. Except as set forth in Schedule 3.22(d), Seller and its Affiliates have operated the Business in compliance with all requirements of all material laws pertaining to all Government Contracts and bids. (e) Except as set forth in Schedule 3.22(e), no statement, representation or warranty made by Seller in any Government Contract, any exhibit thereto or in any certificate, statement, list, schedule or other document submitted or furnished to the U.S. Government or any non-U.S. government in connection with any Government Contract or bid (i) contained on the date so furnished or submitted any untrue statement of a material fact, or failed to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading or (ii) contains on the date hereof any untrue statement of a material fact, or fails to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading, except in the case of both clauses (i) and (ii) any untrue statement or failure to state a material fact that would not result in any material liability to the Business as a result of such untrue statement or failure a material fact. SECTION 3.23. Government Furnished Equipment. Schedule 3.23 incorporates the most recent schedule delivered to the U.S. Government or any non-U.S. government which identifies by description or inventory number certain equipment and fixtures loaned, bailed or otherwise furnished to or held by the Business by or on behalf of the U.S. Government or any non-U.S. government. To Seller's Knowledge, such schedule was accurate and complete on its date and, if dated as of the Closing Date, would contain only those additions and omit only those deletions of equipment and fixtures that have occurred in the ordinary course of business, except for such inaccuracies that could not reasonably be expected to have a Material Adverse Effect. SECTION 3.24. Affiliate Transactions. Except as set forth in Schedule 3.24, there are no agreements, arrangements, undertakings or other transactions between the Business and any other division or businesses of Seller or any of its Affiliates. SECTION 3.25. Entire Business. Except for the Excluded Assets and such other assets and services of Seller that Seller has offered to sell or furnish to Buyer but Buyer has declined to accept, as set forth in Schedule 3.25, the Purchased Assets, together with the rights granted to Buyer under the Intellectual Property Agreement, the Supply Agreement and the Services -24- EXECUTION COPY TCAS Asset Purchase Agreement Agreement, constitute all of the assets, properties and rights necessary to conduct the Business in all material respects as currently conducted. SECTION 3.26. No Additional Representations. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT OR THE OTHER ACQUISITION AGREEMENTS, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS MAKING NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT OR ANY OTHER ACQUISITION AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE PURCHASED ASSETS. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT OR ANY OTHER ACQUISITION AGREEMENT, THE PURCHASED ASSETS ARE BEING SOLD ON AN "AS IS, WHERE IS" BASIS. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as of the date hereof and as of the Closing Date that: SECTION 4.1. Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. SECTION 4.2. Authorization. Buyer has all requisite corporate and other power and authority to execute and deliver this Agreement and the other Acquisition Agreements to which it is or will be a party, and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. All acts required to be taken by Buyer to authorize the execution, delivery and performance of the Acquisition Agreements to which it is or will be a party, and the consummation of the transactions contemplated herein and therein, other than approval hereof and thereof by Buyer's Board of Directors have been taken and, on the Closing Date, all such actions will have been taken and no other corporate proceedings on the part of Buyer are or will be necessary to authorize such execution, delivery, performance and consummation. Subject to approval of Buyer's Board of Directors, this Agreement has been duly authorized, executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy and other laws affecting creditors' rights, or by general equitable principles. This Agreement and each other Acquisition Agreement to which Buyer is or will be a party will be, as of the Closing, duly authorized, executed and delivered by Buyer and will constitute a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy and other laws affecting creditors' rights, or by general equitable principles. SECTION 4.3. No Conflicts. The execution, delivery and performance by Buyer of this Agreement and the other Acquisition Agreements to which Buyer is or will be a party and the consummation of the transactions contemplated hereby and thereby (a) do not and will not -25- EXECUTION COPY TCAS Asset Purchase Agreement violate (with or without giving of notice or the lapse of time or both), or require any Consent, under any provision of any licenses, permits, approvals, certificates of public convenience, orders, franchises and other authorizations of any Governmental Body, including any notice to or approval of the Committee on Foreign Investment in the United States pursuant to the Exon-Florio Amendment to the Defense Production Act of 1988, as amended, 50 U.S.C. App ss. 2170, and the regulations thereunder, or other Person or any Legal Requirement applicable to Buyer, and (b) do not and will not (with or without the giving of notice or the lapse of time or both) violate or conflict with, or result in the breach, suspension or termination of any provisions of, or constitute a default under, or result in the acceleration of the performance of the obligations of Buyer under, the Certificate of Incorporation, by-laws or other organization documents of Buyer or any material agreement, lease, mortgage, note, deed of trust, bond, indenture, license or other document or undertaking, oral or written, to which Buyer is a party or by which Buyer is bound, other than the Consents required under Buyer's existing credit facilities which Buyer believes will be obtained prior to Closing. SECTION 4.4. Brokerage. Buyer has not incurred, directly or indirectly, any obligation or liability, contingent or otherwise, for any brokerage fees, finder's fees, agent's commissions or other like payment in connection with this Agreement or any other Acquisition Agreement, or the transactions contemplated herein or therein. SECTION 4.5. Sufficient Funds. On the Closing Date Buyer will have funds sufficient and available to pay the Cash Purchase Price payable at the Closing. ARTICLE V COVENANTS OF SELLER SECTION 5.1. Access and Investigation. Between the date of this Agreement and the Closing Date or earlier termination of this Agreement, Seller will (a) afford Buyer and its Representatives access to Seller's personnel, facilities, properties, Contracts, Files and Records, on reasonable notice and during regular business hours, (b) furnish Buyer with such additional financial, operating, and other data and information in Seller's possession, in each case to the extent related to the Business, the Purchased Assets, the Assumed Liabilities or the Employees as Buyer may reasonably request, and (c) make available for inspection and review all documents, or copies thereof, listed in the Schedules hereto, and all files, records and papers of any and all proceedings and matters listed in the Schedules hereto, except to the extent prohibited or restricted by law, regulation, contract with a third party or where the documents are subject to the attorney client or work product privilege. SECTION 5.2. Conduct of Business. Prior to the Closing Date, except for actions taken in accordance with the Consent Decree or Hold Separate Order, Seller shall, to the extent related to the Business: (a) conduct the Business only in the usual, regular and ordinary manner, on a basis consistent with past practice and, to the extent consistent with such operation, use its reasonable best efforts to preserve its present business organization intact, keep available the service of its present employees, preserve its present business relationships and maintain all rights, privileges and franchises necessary or desirable in the normal conduct of the Business; -26- EXECUTION COPY TCAS Asset Purchase Agreement (b) maintain its inventory of supplies, parts and other materials and keep its books, accounts, Files and Records in the usual, regular and ordinary manner, on a basis consistent with past practice, and comply with and perform in all material respects all laws and contractual and other obligations applicable to the Business, the Purchased Assets and the Assumed Liabilities; (c) maintain in full force and effect adequate insurance with respect to the Business, the Purchased Assets and the Employees of the Business covering risks customarily insured by similar businesses; (d) not (i) enter into any Contract, bid, proposal or other commitment for the purchase of goods or services which is not terminable by the parties upon 30 days' notice or less without penalty or which involves aggregate consideration in excess of $250,000, (ii) enter into any Contract, bid, proposal or other commitment for the sale of goods or services which is not terminable by the parties upon 30 days' notice or less without penalty or which involves aggregate consideration in excess of $5 million or which would result in a loss in excess of $100,000 for any individual Contract or $250,000 in the aggregate, or (iii) amend, supplement, waive or otherwise modify any Contract, other than in the ordinary course of business consistent with past practice; (e) except as required by any Legal Requirement or to the extent required under existing employee and director benefit plans, agreements or arrangements as in effect on the date of this Agreement (including, but not limited to, any collective bargaining agreement), not (i) increase the compensation or fringe benefits of any of the Employees (including any such increase pursuant to any deferred compensation, severance, bonus, pension, profit-sharing or other plan or commitment), except for increases, in the ordinary course of business consistent with past practice, in salary or wages of Employees who are not senior managers of the Business, (ii) grant any severance or termination pay, (iii) hire, except in the ordinary course of business, any new Employees or consultants or (iv) enter into or amend or terminate any collective bargaining agreements, bonus, profit sharing, thrift, compensation, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any Employees or former Employees of the Business except, in each case, for changes in plans, programs, agreements, policies or arrangements affecting employees of Seller generally; (f) not (i) dispose of or abandon any of the Purchased Assets other than the disposition of obsolete or worn-out equipment or machinery in the ordinary course of business, consistent with past practice, or (ii) enter into or engage in any transaction with or for the benefit of any other division or business of Seller or any Affiliate of Seller; (g) not (i) permit or allow any of the Purchased Assets to become subject to any Liens, except for Permitted Liens, or (ii) waive any material claims or rights relating to the Business or the Purchased Assets; (h) except for capital expenditures in the current business plan, not acquire or agree to acquire any assets that are material, individually or in the aggregate, to the Business, or make or agree to make any capital expenditures; provided that the aggregate amount of capital -27- EXECUTION COPY TCAS Asset Purchase Agreement expenditures permitted by this paragraph, subject to the exception contained herein, shall not exceed $100,000 for any individual expenditure and $250,000 in the aggregate; (i) not pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction of liabilities or obligations in the ordinary course of business consistent with past practice or in accordance with their terms as in effect on the date hereof, or transfer any rights of material value or modify or change in any material respect any existing Contract or other document, other than in the ordinary course of business consistent with past practice; (j) not change any material accounting or auditing principle or policy; (k) refrain from entering into any Contract with respect to the Assigned Intellectual Property Assets, the Licensed Intellectual Property Assets and the Sublicensed Intellectual Property Assets in the Field of Use (as such terms are defined in the Intellectual Property Agreement); (l) use reasonable efforts to maintain the good relations of suppliers of the Business, customers of the Business and others with whom they have business relations in connection with the Business; (m) notify Buyer of any Material Adverse Effect with respect to the condition of the Purchased Assets or the Assumed Liabilities or the Business; (n) not acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof; (o) except for performance guarantees issued in the ordinary course of business consistent with past practice, not incur any indebtedness for borrowed money, or guarantee any such indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Seller, guarantee any debt securities of another Person, enter into any "keep well" or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, or make any loans, advances or capital contributions to, or investments in, any other Person; (p) not adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or reorganization; (q) not terminate or amend any existing contract with Solectron to terminate Solectron's obligations to provide circuit card assembly services to the Business; and (r) not authorize any, or commit or agree to take any, of the foregoing actions. -28- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 5.3. Required Approvals. (a) As promptly as practicable after the date of this Agreement, Seller will, and will cause each of its applicable Affiliates to, make all filings required by Legal Requirements to be made by them in order to consummate the transactions contemplated hereby (including all filings pursuant to the Consent Decree, as contemplated by Section 13.18). Between the date of this Agreement and the Closing Date, Seller will cooperate with Buyer with respect to all filings that Buyer is required by Legal Requirements to make in connection with the transactions contemplated hereby. (b) In addition to the foregoing, and subject to the terms and conditions hereof, Seller and Buyer agree to use their reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all other things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including using their reasonable efforts (without payment of money, commencement of litigation, the assumption of any material obligation or the entering of any agreement to divest and hold separate any asset) to obtain at the earliest practicable date prior to the Closing Date (pursuant to instruments reasonably satisfactory in form and substance) all Consents of parties to Contracts with Seller as are necessary for the consummation of the transactions contemplated hereby. SECTION 5.4. No Negotiation. Until such time, if any, as this Agreement is terminated pursuant to Article XI, Seller will not, nor will Seller permit any of its Representatives to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the Business or its assets (other than as expressly permitted pursuant to Section 5.2 and as necessary and appropriate in connection with the first refusal right of Thomson-CFS S.A. referred to in Section 7.10). SECTION 5.5. Additional Information. Seller shall promptly furnish to Buyer all such financial and operating reports with respect to the Business as may be prepared by the Business from time to time between the date hereof and the Closing Date as Buyer may reasonably request. Seller shall make available to Buyer information with respect to any document, event, transaction or condition entered into or occurring after the date hereof which, had it occurred or been in effect on or prior to the date hereof, would have been included on the Schedules to this Agreement, but no such information which would have been included on a Schedule shall be deemed to amend the relevant Schedule when so provided. SECTION 5.6. Workers' Compensation. Seller shall retain responsibility for all workers' compensation events which relate to incidents occurring on or before the Closing Date. Buyer shall have responsibility for all workers' compensation events which relate to incidents occurring after the Closing Date. SECTION 5.7. SEC Financial Reporting. Seller shall reasonably cooperate with Buyer and Buyer's auditors in the event that Buyer causes such auditors to audit the following: (i) the historical financial statements for the Business for the fiscal years ending December 31, 1999 and 1998 (if required) including unaudited quarterly 1999 income statements, and -29- EXECUTION COPY TCAS Asset Purchase Agreement (ii) unaudited historical financial statements for the Business for any interim period after December 31, 1999 but before the Closing Date as required, in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), for purposes of SEC filings or any other filings which must or may be undertaken by Buyer in connection with the consummation of transactions contemplated herein or subsequent financing transactions. SECTION 5.8. No Inconsistent Action. Subject to Section 11.1, the parties hereto shall not take any action inconsistent with their obligations under this Agreement or which could materially hinder or delay the consummation of the transactions contemplated by this Agreement. Neither of the parties hereto shall take or omit to take any action that could result in any of its respective representations and warranties not being true in all material respects on the Closing Date. SECTION 5.9. Notices of Certain Events. (a) Seller shall promptly notify Buyer of: (i) any notice or other communication to Seller's Knowledge from any Person alleging that the Consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication to Seller's Knowledge from any Governmental Body in connection with the transactions contemplated by this Agreement; (iii) to Seller's Knowledge any actions, suits, charges, complaints, claims, investigations, proceedings, strikes or written grievances commenced or threatened against, relating to, involving or otherwise affecting, the Business which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.8 or 3.13 or which relate to the consummation of the transactions contemplated by this Agreement; and (iv) any (i) Material Adverse Effect (which term does not include the result of changes in general economic conditions or industry-wide developments affecting all companies engaged in businesses substantially similar to the Business), or (ii) event that materially impairs the ability of Seller to effect the Closing. (b) Seller's notifications of Buyer of any of the events set forth in Section 5.9(a) above in accordance with this Section 5.9 shall not be deemed to cure any related breaches of the representations, warranties, covenants or agreements contained in this Agreement, nor shall the failure of Buyer to take any action with respect to such notice be deemed a waiver of any such breaches. SECTION 5.10. Reasonable Efforts. Seller will use its reasonable efforts to effectuate the transactions hereby contemplated and to fulfill the conditions to Buyer's obligations under Article VII of this Agreement. -30- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 5.11. Break-Up Fee. If Thomson - CSF S.A. or any Affiliate thereof exercises the first refusal right referred to in Section 7.10, Seller shall perform its obligations pursuant to the Break-Up Fee Letter Agreement. ARTICLE VI COVENANTS OF BUYER SECTION 6.1. Required Approvals. As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its applicable Affiliates to, make all filings required by Legal Requirements to be made by them in order to consummate the transactions contemplated hereby (including all filings pursuant to the Consent Decree, as contemplated by Section 13.18). Between the date of this Agreement and the Closing Date, Buyer will, and will cause each of its applicable Affiliates to, (a) reasonably cooperate with Seller with respect to all filings that either Seller is required by Legal Requirements to make in connection with the transactions contemplated hereby, and (b) reasonably cooperate with Seller in obtaining all Consents identified in Schedule 3.4 hereto. SECTION 6.2. Non Solicitation; Non-Interference. Except as otherwise contemplated by this Agreement, at no time after the date hereof until the Closing Date shall Buyer or its subsidiaries: (a) directly or indirectly, in any capacity or in association with any other person, solicit, induce, or in any manner attempt to solicit or induce, any Employee to terminate his or her employment or to become an employee of Buyer, or (b) directly or indirectly, interfere with Seller's relationship with, cause the cancellation, discontinuation, termination or alteration (in a manner detrimental to Seller) of Seller's relationship with, or do business with, any party who is a customer, supplier, or manufacturer with respect to the Business. SECTION 6.3. Board Approval. Not later than February 18, 2000, Buyer shall cause to be submitted to Buyer's Board of Directors for approval (i) this Agreement and the transactions contemplated hereby, and (ii) any financing that Buyer may require in connection therewith, and Buyer's Chief Executive Officer shall recommend to the Board of Directors that it approve this Agreement and the transactions contemplated hereby and such financing. SECTION 6.4. Reasonable Efforts. Buyer will use its reasonable efforts to effectuate the transactions contemplated hereby and to fulfill the conditions to Seller's obligations under Article VIII of this Agreement. ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS All obligations of Buyer under this Agreement are subject to the fulfillment, at the Closing, of each of the following conditions, any or all of which may be waived in whole or in part at or prior to the Closing by Buyer: -31- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 7.1. Accuracy of Representations and Warranties. All the representations and warranties of Seller contained in this Agreement shall be accurate in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of such time; provided, however, that if a representation or warranty is qualified by a reference to materiality or Material Adverse Effect, such representation and warranty shall be accurate in all respects at and as of the Closing Date as though such representation and warranty was made at and as of such time. SECTION 7.2. Seller's Performance. Seller shall have performed and complied in all material respects with all agreements and covenants on its part required by this Agreement to be performed or complied with prior to or at the Closing Date. SECTION 7.3. Officer's Certificate. Buyer shall have received a certificate of an officer of Seller, dated the Closing Date, certifying on behalf of Seller as to the fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof. SECTION 7.4. Governmental Approvals. Seller shall have made all filings and petitions required to be made by it prior to the Closing Date (and all applicable waiting periods shall have expired) with, and Buyer shall have received all Governmental Approvals required to be obtained prior to the Closing Date from, all Governmental Bodies in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement and the transactions contemplated hereby shall have been approved by (i) the DOD and the DOJ pursuant to the Consent Decree and (ii) the European Commission pursuant to Proposed Undertakings re Case No. IV/M.1601. No party to this Agreement shall have received notice from (i) the Federal Trade Commission or the DOJ that the transactions contemplated by this Agreement violate the Federal Trade Commission Act or the Clayton Act or (ii) the European Commission that the transactions contemplated by this Agreement violate the Merger Control Regulation of the European Community. SECTION 7.5. No Injunctions, Etc. There shall be no injunction, restraining order or decree of any nature of any Governmental Body of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transactions contemplated by this Agreement or any such injunction, restraining order or decree or any pending lawsuit, claim or legal action relating to the transactions contemplated by this Agreement which would reasonably be expected to materially adversely affect such transactions or Buyer's ownership, use or enjoyment of the Business or any part thereof. SECTION 7.6. Consents. There shall have been obtained the Consent, in form and substance reasonably satisfactory to counsel for Buyer, of each other party to those Contracts listed on Schedule 7.6 hereto. SECTION 7.7. Conveyances. Buyer shall have received the Bill of Sale and other conveyances, deeds, assignments, bills of sale, confirmations, and further instruments (in form and substance reasonably satisfactory to Buyer) as shall be necessary in order to complete the conveyances, transfers, assignments and deliveries provided for herein and to convey to Buyer the Purchased Assets. -32- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 7.8. Board Approval. Buyer's Board of Directors shall have approved (i) this Agreement and the transactions contemplated hereby and (ii) any financing that Buyer may require in connection therewith. SECTION 7.9. Other Agreements. Seller or its Affiliate, as the case may be, shall have executed and delivered to Buyer the Intellectual Property Agreement, the Services Agreement, the Proprietary Information Agreement, the Supplemental Agreement and the Supply Agreement. SECTION 7.10. Non-Exercise of First Refusal Rights. Seller shall have executed and delivered to Buyer a certificate, in form and substance satisfactory to Buyer, to the effect that (i) Seller has complied with its obligations pursuant to Section 2(c) of a Cooperation and Settlement Agreement, dated October 20, 1999, among AlliedSignal Inc., Honeywell Inc, Thomson-CSF S.A. and Thomson-CSF Sextant S.A., as amended, and (ii) neither Thomson-CSF S.A. nor any of its Affiliates has the right to purchase the TCAS Business pursuant to the right of first refusal granted to them pursuant to Section 2(c) of such agreement. ARTICLE VIII CONDITIONS TO SELLER'S OBLIGATIONS All obligations of Seller under this Agreement are subject to the fulfillment, at the Closing, of each of the following conditions, any or all of which may be waived in whole or in part at or prior to the Closing by Seller: SECTION 8.1. Accuracy of Representations and Warranties. All the representations and warranties of Buyer contained in this Agreement shall be accurate in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of such time; provided, however, that if a representation or warranty is qualified by a reference to materiality, such representation and warranty shall be accurate in all respects at and as of the Closing Date as though such representation and warranty was made at and as of such time. SECTION 8.2. Buyer's Performance. Buyer shall have performed and complied in all material respects with all agreements and covenants on its part required by this Agreement to be performed or complied with prior to or at the Closing Date. SECTION 8.3. Officer's Certificate. Seller shall have received a certificate of an officer of Buyer, dated the Closing Date, certifying on behalf of Buyer as to the fulfillment of the conditions specified in Sections 8.1 and 8.2 hereof. SECTION 8.4. Governmental Approvals. Buyer shall have made all filings and petitions required to be made by it prior to the Closing Date (and all applicable waiting periods shall have expired) with, and Seller shall have received all Governmental Approvals required to be obtained prior to the Closing Date from, all Governmental Bodies in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement and the transactions contemplated hereby shall have been approved by (i) the DOD and the DOJ pursuant to the Consent Decree and (ii) the European Commission pursuant to Proposed Undertakings re Case No. IV/M.1601. No party -33- EXECUTION COPY TCAS Asset Purchase Agreement to this Agreement shall have received notice from (i) the Federal Trade Commission or the DOJ that the transactions contemplated by this Agreement violate the Federal Trade Commission Act or the Clayton Act or (ii) the European Commission that the transactions contemplated by this Agreement violate the Merger Control Regulation of the European Community. SECTION 8.5. No Injunctions, Etc. There shall be no injunction, restraining order or decree of any nature of any Governmental Body of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transactions contemplated by this Agreement or any such injunction, restraining order or decree or any pending lawsuit, claim or legal action relating to the transactions contemplated by this Agreement which would reasonably be expected to materially adversely affect such transactions or Buyer's ownership, use or enjoyment of the Business or any part thereof. SECTION 8.6. Purchase Price. Seller shall have received the Cash Purchase Price payable to it from Buyer pursuant to Section 2.5 hereof (as provisionally adjusted pursuant to Section 2.8A), by wire transfer of immediately available funds to a bank account designated by it pursuant to Section 2.5(b). SECTION 8.7. Other Agreements. Buyer shall have executed and delivered to Seller or its Affiliate, as the case may be, the Intellectual Property Agreement, Services Agreement, the Supply Agreement, the Proprietary Information Agreement and the Assumption Agreement. ARTICLE IX POST-CLOSING COVENANTS SECTION 9.1. Further Assurances. From and after the Closing Date, each party to this Agreement shall (or shall cause its applicable Affiliate to), at any time and from time to time, make, execute and deliver, or cause to be made, executed and delivered, such assignments, assumptions, deeds, bills of sale, filings and other instruments, consents and assurances and take or cause to be taken all such action as the other party may reasonably request to carry out the terms of this Agreement. In addition, each party agrees to, and will cause its and its Affiliates' Representatives to, cooperate fully with the other party and provide the other party with such assistance as may reasonably be requested by the other party in connection with (a) any Proceeding which relates to the operation or activities of the Business prior to the Closing Date and (b) the preparation of any tax return and the conduct of any audit or other examination by any taxing authority relating to the Purchased Assets or the Business. SECTION 9.2. Retention of Records. After the Closing, Seller and its Affiliates and Representatives shall, upon reasonable notice to Buyer, have access during usual business hours to, and may make copies or extracts from, the Files and Records of the Business for all periods prior to the Closing Date for any reasonable purpose, such as for use in litigation or financial reporting, Tax return preparation, or tax compliance matters. Buyer agrees to retain the material Files and Records of the Business prior to the Closing Date for at least six years after the Closing Date except where longer records retention is required by a Legal Requirement (including Internal Revenue Service requirements). -34- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 9.3. Names. Except as otherwise permitted under Section 9.12 for the purpose of identifying the Business as having been the TCAS business of Seller prior to the Closing, from and after the Closing Date, neither Buyer nor any of its Affiliates shall use the name "Honeywell", "Honeywell International" or any other logo, trademark, trade name, assumed name or service mark, or any logo, trademark, trade name, assumed name, service mark or other name derived from or confusingly similar to "Honeywell," or any other mark, symbol or trade name or name not otherwise explicitly transferred in the Intellectual Property Agreement. Notwithstanding the foregoing, for a period not to exceed 90 days from the Closing Date, Buyer shall have the limited right (i) to use up Inventories, stationery and other printed material acquired pursuant to this Agreement without modifying any trademark or logo thereon, provided that all such material carrying the "Honeywell" or "Honeywell International" name shall clearly indicate by stamp, sticker or other similar notice or marking that the Purchased Assets are now owned by Buyer, and (ii) to use Purchased Tangible Personal Property acquired pursuant to this Agreement without modifying any trademark or logo thereon, provided that, in the case of tooling, Buyer marks any product manufactured with such tooling to indicate the date of manufacture and shall eliminate such trademark or logo from such tooling prior to abandoning or disposing thereof. SECTION 9.4. Supply Contracts. (a) In the case of each Contract in effect on the Closing Date under which the Business supplies any products to Seller or any of its Affiliates, or Seller or any of its Affiliates supplies any products to the Business (each such Contract being referred to hereinafter as a "Supply Contract"), Buyer and Seller shall honor, and cause their respective Affiliates to honor, all the terms (including, without limitation, pricing) of such Supply Contract for so long as such Supply Contract remains in effect. The aforesaid obligation shall also apply to the terms set forth in any written proposal for the supply of products by or to the Business pending on the Closing Date, in the event that Seller or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, enter into a Supply Contract relating to such proposal after the Closing. In the case of any new Supply Contract with respect to the Business entered into by Seller or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, after the Closing (and for which a written proposal is not pending on the Closing Date), Buyer and Seller agree that the terms thereof shall be the best commercial terms (including, without limitation, pricing) available to similarly situated buyers. (b) Neither Seller nor Parent has taken any action to cause any Affiliate of Seller that provides products to the Business under any Supply Contract (i) to dissolve or liquidate; or cease, suspend or change its business to eliminate the products it sells to the Business, (ii) to be sold, or (iii) otherwise to cease to supply any products to the Business; and neither Seller nor Parent has any current plan to take any of the actions described in the preceding clauses (i), (ii) and (iii). (c) If Seller or Parent shall make a decision to take any of the actions described in clauses (i), (ii) and (iii) of Section 9.4(b), Seller shall (i) give Buyer prompt notice of such decision, and (ii) offer Buyer the option to purchase from Seller's Affiliates sufficient quantities, in accordance with Buyer's good faith estimate of its requirements, of the products Seller's Affiliates sell to the Business to satisfy Buyer's requirements therefor during the remaining term -35- EXECUTION COPY TCAS Asset Purchase Agreement of its existing sales contracts with Buyer's customers for which such products are required. If any such action is taken within two (2) years after the Closing Date Buyer shall endeavor to locate a qualified, acceptable second source for such products, if available, that will agree to supply such products on the same economic terms as Seller's Affiliates. If, after commercially reasonable efforts, Buyer determines that such a second source does not exist or that it is not practicable to qualify a second source, or that the products are not available from a qualified, acceptable second source on the same economic terms, then Buyer may so notify Seller and Seller shall (i) accept payment for such products, as Buyer removes such products from its inventory and (ii) provide, or arrange for provision of, warranty and customer post-sale support for such products over the remaining term of Buyer's existing sales contracts with Buyer's customers plus a reasonable period thereafter. If, at the time a sales contract with Buyer's customer terminates by its terms, there is excess, unsold inventory of such products remaining in Buyer's warehouse (the "Excess") and Buyer's good faith estimate for its requirements of such products was reasonable, then (i) Seller shall have no further claim for payment of purchase price for the Excess and (ii) Buyer will promptly deliver the Excess to a location designated by Seller. Buyer shall also endeavor to take advantage of any provision in its contract with its customer that permits it to mitigate the expense or loss that may arise from such event. If customers terminates the existing sales contract for convenience, then Buyer will use commercially reasonable efforts to enforce customers obligations under such contract regarding reimbursement of costs for manufactured but undelivered products in the same manner as it does for its other suppliers under the contract. Buyer will pay any recovery received from the customer for the Excess over to Seller. SECTION 9.5. Research and Experimental Expenses. Seller will furnish to Buyer on Seller's letterhead as soon as reasonably practicable, but in no event more than 180 days after Closing, at Seller's cost and expense, all information reasonably requested relating to the base period research expenses and any other information to allow Buyer to claim research and experimental credits in accordance with the relevant sections of the Code and Treasury Regulations promulgated thereunder. SECTION 9.6. Novation of Government Contracts. As soon as reasonably practicable following the Closing, Seller shall, in accordance with Federal Acquisition Regulations Part 42, Section 42.12, submit in writing to each responsible Contracting Officer (as such term is defined in Federal Acquisition Regulations Part 42, Section 42.102(a)), a request for the U.S. Government to (i) recognize Buyer in accordance with this Agreement and (ii) enter into a novation agreement (the "Novation Agreement") substantially in the form contemplated by such regulations. Seller shall thereby reasonably assist Buyer in obtaining all Consents required for the purpose of processing, entering into and completing the Novation Agreement with regard to any of the Government Contracts, including responding to any reasonable requests for information by the U.S. Government with regard to such Novation Agreement. SECTION 9.7. Cooperation in Litigation. The parties shall reasonably cooperate with each other at the requesting party's expense in the prosecution or defense of any dispute or litigation or other proceeding arising from their respective operation of the Business, including but not limited to affording reasonable access to and providing information regarding amounts in dispute, information regarding employees of the Business and documentation created in the -36- EXECUTION COPY TCAS Asset Purchase Agreement running of the Business relating to such dispute or litigation. Buyer and Seller shall cooperate fully, as and to the extent reasonably requested by the other party, and at their own cost and expense, in connection with the filing of Tax returns, the retention of records and the forwarding of any relevant notices or other information received from any Tax authority and any audit, litigation or other proceeding with respect to Taxes, and shall fully and accurately submit any Tax data packages reasonably requested by Seller within the time periods established by Seller's tax department consistent with past practices (i.e., on or before April 15, 2000). SECTION 9.8. Mail; Payments. After the Closing, Seller authorizes and empowers Buyer to receive and open all mail and other communications addressed to Seller and received by Buyer. With respect to such communications that relate to the Business after the Closing Date, Buyer may act in such manner as it may elect, subject to any rights of Seller hereunder. With respect to such communications that relate to the Business on or prior to the Closing Date, Buyer shall act reasonably in consideration of the respective rights and obligations of the parties hereunder. With respect to such communications that do not relate to the Business, Buyer shall promptly forward such communications to Seller. Each party promptly shall deliver to the other any cash, checks or other instruments of payment to which the other is entitled and shall hold the same in trust for the other until such delivery. SECTION 9.9. Insurance. Until the Closing, Seller shall maintain in full force and effect in respect of the Business the existing insurance covering the Business and the Purchased Assets, subject to normal variations required by operation of the Business in the ordinary course of business consistent with past practice. Seller shall cooperate with Buyer in order to afford Buyer the full benefit of all insurance policies and all rights thereunder (including rights to causes of action, lawsuits, claims and demands, rights of recovery and set-off) covering the Business and the Purchased Assets, and proceeds under or with respect to such insurance policies, for periods prior to the Closing to the extent claims thereunder relate to any of the Purchased Assets or the Assumed Liabilities. SECTION 9.10. Non-Solicitation. Seller shall comply with the non-solicitation provisions in respect of the Business set forth in Section IV.E of the Consent Decree. SECTION 9.11. Additional Post-Closing Covenants. Seller and Buyer acknowledge that prior to this transaction, Buyer has offered only a single product to the commercial avionics industry, and, therefore, requires the benefits of certain limited restrictive covenants. In recognition of these unique circumstances, from and after the Closing Date, and for the period, if any, indicated, Seller shall (and shall cause its Affiliates to): (a) (i) Not use references to Seller's prior ownership of the Business or to any of the products and services of the Business developed, provided or sold on or prior to the Closing Date for the purpose of promoting, advertising, soliciting orders for, or attempting to sell, any product or service of Seller's Continuing TCAS Business, (ii) take commercially reasonable efforts to (x) prevent the impression on the part of customers or other Persons that Seller's Continuing TCAS Business is the Business and (y) correct any such impression of which Seller becomes aware, and (iii) for a period of one year from the Closing, in all brochures, technical and marketing proposals, presentations and other such materials identify clearly Seller's Continuing TCAS Business as being the former TCAS business of AlliedSignal and not the Business. The -37- EXECUTION COPY TCAS Asset Purchase Agreement phrase "identify clearly" means that such identification appears prominently on the cover or title page or in the first location in any such materials where Seller's Continuing TCAS Business is first mentioned. It is understood that, absent evidence to the contrary, Seller's sending an announcement reasonably satisfactory to Buyer to all of the persons set forth on Schedule 9.11(a) no later than fourteen days after the Closing Date and labeling materials in accordance with clause (iii) above shall constitute prima facie evidence of Seller's compliance with its obligations pursuant to clause (ii)(x) above. (b) Not interfere with Buyer's relationship after the Closing with customers of the Business under any Contract or in any manner induce, or attempt to induce, any such customer (i) to terminate such Contract, (ii) to reduce the amount of business that any such customer does with Buyer pursuant to such Contract or (iii) to substitute for HI TCAS Products any products of Seller's Continuing TCAS Business that a customer is required to purchase under its Contract; (c) Except as otherwise provided in the Supply Agreement, refer directly and promptly to Buyer all oral and written inquiries concerning, or orders for, HI TCAS Products and services relating to HI TCAS Products that Seller or its Affiliates receive in their order entry system, including, through customer service representatives and customer support marketing representatives, from customers or prospective customers, whether such inquiries relate to HI TCAS Products on a stand-alone basis or as part of an avionics package. Seller shall prepare and deliver to each of its telephone operators at Seller's facilities that support the Business on the date hereof, and each of its customer service representatives and customer support marketing representatives for HI TCAS products written instructions concerning the handling of such inquiries in a form consistent with that provided in writing to Seller by Buyer. Such instructions shall provide for (i) all telephone inquiries to be immediately referred to a representative of Buyer whose name and telephone number Buyer will provide to Seller (and which Buyer may change from time to time) and (ii) all written inquiries to be forwarded as soon as practical, but no longer than 48 hours after receipt thereof, to a representative of Buyer whose name and address Buyer will provide to Seller and responded to with a form response prepared by Buyer. The obligation described in this paragraph shall survive the Closing (i) for two years with respect to inquiries about HI TCAS Product sales and (ii) as long as reasonably necessary with respect to inquiries concerning product support or repair for HI TCAS Products. (d) For a period of four years from the Closing, in any sale of, or proposal to sell, avionic products and TCAS products other than HI TCAS Products together as part of the same bundle of products, to offer a good faith price for, such TCAS product separately from the other components of such bundle and not increase the price of the remaining portion of the bundle if the customer elects to purchase an HI TCAS Product component in substitution for the product offered by Seller. If a customer requests alternate sources for any TCAS products included in the bundle of products, Seller will identify Buyer as an alternative source for that product in its bundled offering and will give Buyer notice that it is doing so. (e) Seller's Continuing TCAS Business shall offer, and shall cause its authorized dealers to offer, software upgrades or other products regarding (i) the conversion of Mode C transponders to Mode S transponders and (ii) the interface between other avionics products of Seller and TCAS systems to customers for HI TCAS Products on terms and conditions no less -38- EXECUTION COPY TCAS Asset Purchase Agreement favorable than they offer such software upgrades and other products to similarly situated customers of TCAS Products of Seller's Continuing TCAS Business. SECTION 9.12. Buyer's References to the Business. For a period of two years from and after the Closing Date, Buyer shall be free to identify the Business in advertisements, brochures, technical and marketing proposals and other written materials as being the "former Honeywell TCAS business" or as having been the "Honeywell TCAS business" prior to the Closing. Thereafter, Buyer shall not use such phrases or similar phrases in such materials or otherwise in advertising or promoting, or soliciting orders for, the Business. Nothing in this Section 9.12 shall prohibit Buyer from making the factual representation, for purposes other than advertising and promotion, that, prior to the Closing, the Business was the TCAS business that Seller owned and operated. Buyer shall not, in any reference permitted by this Section, use the "Honeywell" logotype (or any confusingly similar mark) in its business. SECTION 9.13. Use of Seller Aircraft. For a period of five years from and after the Closing Date, Seller shall make available to Buyer access to, and use of, the aircraft and aircrews Seller uses for testing HI TCAS Products (or suitable and at least equivalent replacement aircraft) for testing of the HI TCAS Products in the same manner as they are currently made available to the Business. A summary of the amount, cost and terms and conditions of use of such aircraft are set forth in Schedule 9.13. The parties agree that the prices charged by Seller for the use of such aircraft shall be sufficient to cover Seller's reasonable estimate of its actual costs and, if applicable, consistent with the prices Seller would charge to an Affiliate, in each case without taking into account any profit margin or projected savings from increased efficiency. Buyer shall schedule its use of such aircraft with Seller's flight operations department. The parties acknowledge that disruptions in Buyer's scheduled use of the aircraft can materially and adversely affect Buyer's performance of its obligations to its customers. Therefore, if Seller's aircraft are not made available for Buyer's use when scheduled for reasons other than events or causes outside of Seller's control (such as adverse weather or the sickness of necessary members of the aircrew), Seller will make available suitable substitute aircraft at the same cost and otherwise on the same conditions as set forth on Schedule 9.13. If Seller fails to make aircraft available to Buyer in accordance with the foregoing, Seller shall be liable to Buyer for Buyer's actual cost for leasing substitute aircraft equivalent to Seller's aircraft. SECTION 9.14. New Contracts. Seller will use commercially reasonable efforts: (a) to maintain in effect, at the same price and on the other terms and conditions that were used in Seller's approved operating cost budget for the Business for fiscal year 2000, the existing agreement between Seller and Solectron for the provision by Solectron to the Business of circuit card assembly and other services regardless of whether similar services to other business units of Seller under the existing agreement between Seller and Solectron are terminated; (b) to assist Buyer in locating and in negotiating and consummating an agreement between Buyer and a Person who can provide Buyer's requirements for repair and overhaul services for TCAS products outside of the United States in the event that any of the Persons providing such services to the Business on the Closing Date terminates its Contract within two years following the Closing Date; and -39- EXECUTION COPY TCAS Asset Purchase Agreement (c) to maintain in effect, at the same price and on the other terms and conditions that were used in Seller's operating cost budget for the Business for fiscal year 2000, the existing agreement between Seller and EFTC for the provision by EFTC to the Business of circuit card assembly and other services regardless of whether similar services to other business units of Seller under the existing agreement between Seller and EFTC are terminated. SECTION 9.15. Certain Other Matters. Promptly following the Closing, Seller shall notify its employees of the sale of the Business pursuant to this Agreement, and shall inform them that the disclosure or use of the Business Intellectual Property Assets by Seller and its Affiliates is restricted pursuant to the terms of this Agreement and the Intellectual Property Agreement. SECTION 9.16. Relocation of the Business. Buyer covenants that it shall not relocate the portion of the Business located in Phoenix, Arizona on the Closing Date more than thirty (30) miles from its current location at any time within five (5) years from the Closing Date. SECTION 9.17. Post-Closing Warranty Expense. (a) In the event that a customer who has purchased from Seller a TCAS product manufactured by Seller on or prior to the Closing Date makes a claim against Buyer for repair or service pursuant to Seller's product warranty for such product (a "Warranty Claim"), Buyer (or, at Buyer's request, Seller, as Buyer's agent under the Services Agreement) shall perform such repair or service. Warranty Claims shall be validated on a basis consistent with the past practices and written warranty policies of the Business as of the Closing Date. Any such Warranty Claim that is so validated is referred to herein as a "Valid Claim". (b) Buyer (or, at Buyer's request, Seller as Buyer's agent under the Services Agreement) shall perform all warranty repairs and services in respect of Valid Claims at its cost. Buyer shall be responsible for the first $3 million of such warranty costs with respect to Valid Claims and Seller shall reimburse Buyer promptly upon receipt of Buyer's invoice for any excess of such warranty costs above the first $3 million incurred between the Closing Date and the earlier of (i) the fifth anniversary of the Closing Date and (ii) the expiration of the warranty period for all TCAS products manufactured on or prior to the Closing Date. If the aggregate amount of all such warranty costs incurred by Buyer during the five-year period referred to in the previous sentence is less than $3 million, Buyer shall reimburse Seller for the shortfall promptly following the end of such period. (c) If a Warranty Claim is determined not to be a Valid Claim, Buyer may, in its sole discretion, elect (or instruct Seller as its agent under the Services Agreement) to perform the repairs or services at its own cost. In such event, such costs shall (i) not be charged against the $3 million threshold nor (ii) be subject to reimbursement by Seller if the amount of warranty costs exceeds $3 million. (d) No more often than once annually, Seller shall have the option to review the warranty practices of Buyer. Any Warranty Claim presented shall be presumed to be a Valid Claim unless the invalidity of such claim is demonstrated by Buyer's written warranty records which Buyer shall create and maintain consistent with past practice. -40- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 9.18. Manufacture and Supply of HI TCAS Products. Nothwithstanding any limitation as to the term of manufacturing services set forth in the Services Agreement, until such time as Buyer shall obtain appropriate certifications from the Federal Aviation Administration to manufacture the HI TCAS Products, Seller shall manufacture such HI TCAS Products on Buyer's behalf and supply such HI TCAS Products to Buyer on the economic terms set forth in the Services Agreement. ARTICLE X PENSION, EMPLOYEE AND UNION MATTERS SECTION 10.1. Scope of Article. This Article X contains the covenants and agreements of the parties with respect to (a) the status of employment of the Employees employed as of the Closing Date upon the sale of the Business to Buyer, and (b) the employee benefits and employee benefit plans provided or covering such Employees. Nothing herein expressed or implied confers upon any Employee of Seller any rights or remedies of any nature or kind whatsoever under or by reason of this Article X, including, without limitation, any right of any Transferred Employee to employment with Buyer for a specified period of time. SECTION 10.2. Employment. (a) Employment. Buyer shall offer employment, effective as of the Closing Date, to the employees of Seller identified on Schedule 10.2(a) (the "Employees") who remain employed by Seller on the Closing Date and who are not then absent from work due to long-term disability, unless Buyer notifies Seller of its decision not to offer employment prior to Closing. Buyer and Seller acknowledge that any Employees identified on Confidential Attachment A who are not identified on Schedule 10.2(a) have been intentionally omitted therefrom and Buyer does not intend to offer employment to such Employees. Buyer shall use its best efforts to expedite and conclude the offer process at least two to five days prior to Closing. In the event that, as a result of Employees declining to accept employment with Buyer, Buyer will have insufficient Transferred Employees to operate the Business as Seller operates it on the date hereof, Seller will cooperate with Buyer in identifying and making available for employment by Buyer sufficient additional employees of Seller to enable Buyer to operate the Business as Seller operates it on the date hereof as provided in the Supplemental Agreement. All Employees who accept such offer of employment (other than Non-U.S. Transferred Employees shall be referred to herein as "Closing Date Transferred Employees". In addition, Buyer may offer employment effective as of any date within 6 months after the Closing Date to any Employee who is not offered employment by Buyer effective as of the Closing Date. All Employees who accept such an offer of employment by Buyer shall be referred to herein as "Post-Closing Transferred Employees". Closing Date Transferred Employees and Post-Closing Date Employees are collectively referred to herein as "Transferred Employees." (b) Transferred Employees. Transferred Employees are entitled to the benefits of the provisions of this Section 10.2(b) and Section 10.3. Employees who are offered but decline employment with Buyer, but who later become employed by Buyer will not be entitled to the benefits of such provisions and such Employees will be entitled only to such terms and conditions of employment with Buyer as they and Buyer may negotiate. -41- EXECUTION COPY TCAS Asset Purchase Agreement (1) Schedule 10.2(b)(1) identifies those Employees who are employed outside of the United States. The terms hereunder relating to such Employees are set forth in Section 10.2(e) below. (2) Provided they remain employed by Buyer, Buyer shall provide Transferred Employees other than those Employees listed on Schedule 10.2(b)(1), for a period of at least 12 months after the Closing Date, with a salary or wage rate, including the timing of merit pay increases and the payment of overtime to certain Transferred Employees who would otherwise be exempt from overtime requirements under applicable law that is not less favorable and benefits (other than any stock-based plans or benefits relating to equity securities or their equivalent, such as phantom stock plans or stock appreciation rights) that are, in the aggregate, comparable to or greater than those provided as of the date hereof. Buyer will offer initial employment to each Transferred Employee in substantially the same job with substantially the same job responsibilities but will have the right to make changes in such employment subsequently. Nothing in this Agreement shall limit Buyer's right to terminate the employment of any Transferred Employee at any time. (3) If Buyer terminates the employment of any Transferred Employee within 12 months after the Closing Date, Buyer shall pay such Transferred Employee a severance benefit that shall in no event be less than, or paid later than, the severance benefit, if any, to which such Transferred Employee would have been entitled if Seller's severance plan, as in effect as of the date hereof, applied to such termination of employment. For purposes of this Section 10.2(b)(2), service with both Seller and Buyer shall be taken into account in computing the amount of such benefit. Notwithstanding the preceding two sentences, Seller shall be solely responsible for and shall pay any amounts as required to be paid by Seller under the Consent Decree in respect of Transferred Employees other than liabilities assumed by Buyer upon the transfer of assets in respect of credited service pursuant to Section 10.3(e) hereof. (4) Following the Closing Date, Buyer shall provide all Transferred Employees with life insurance, medical coverage, dental, vision, prescription drugs and other employee welfare benefit plans (within the meaning of Section 3(1) of ERISA), on a basis substantially comparable in the aggregate to those provided to Transferred Employees on the date hereof; provided however, that except as provided in Section 10.2(f) hereof Buyer shall not be required to provide any of the Transferred Employees with any stock-based plans or benefits relating to equity securities (or their equivalent, such as phantom stock plans or stock appreciation rights). Buyer shall assume liability for all deferred compensation, supplemental and excess pension and savings benefits, bonus amounts, normal and enhanced severance benefits, and relocation benefits in respect of Transferred Employees who are employees of the Business to the extent accrued on the Statement of Net Assets of the Business as of the Closing Date. Buyer shall assume the stay-on bonus agreements for Transferred Employees listed on Schedule 10.2(b)(4); provided, however, that Seller shall reimburse Buyer for any payments made under -42- EXECUTION COPY TCAS Asset Purchase Agreement such agreements with respect to any Transferred Employee who voluntarily terminates employment with Buyer within one year after the Closing Date. (5) Except as otherwise provided for under the Services Agreement, at no time prior to or subsequent to the Closing Date shall Buyer offer or provide any financial or other incentive to any Transferred Employee to elect COBRA continuation coverage under any group health plan of Seller or its Affiliates. (c) Seller agrees to use reasonable efforts to facilitate the transition to employment with Buyer of Employees to whom Buyer offers employment. Such reasonable efforts shall include, to the extent permitted by applicable law, affording Buyer reasonable opportunities to review employment and personnel records of Employees, to discuss with Employees terms and conditions of employment with Buyer and to distribute to the active Employees forms and documents relating to employment with Buyer. (d) Leased Employees. Attached hereto as Schedule 10.2(d) is a list of all leased employees disclosed on Confidential Attachment A ("Leased Employees"). To the extent such Leased Employees are providing services to the Business on the Closing Date, Buyer may, at its sole discretion and to the extent assignable, assume the leasing agreements governing the Leased Employees. Seller shall cooperate in obtaining the required assignments. (e) Non-U.S. Transferred Employees. Subject to the last sentence of Section 10.2(b)(2), Buyer shall assume the employment agreements or terms and conditions of employment of those Employees listed on Schedule 10.2(b)(1) and those made available for employment pursuant to the Supplemental Agreement who are employed outside the United States and who are given offers of employment by Buyer and accept employment with Buyer ("Non-U.S. Transferred Employees"). Buyer shall provide the Non-U.S. Transferred Employees with a pension plan that is comparable (including any ancillary life insurance benefits provided as part of, or incidental to, such pension plan) to the pension scheme in which they participate at Closing. To the extent Buyer can, and choose to, assume Seller's obligation under an existing pension scheme, Seller shall cooperate in effecting that assumption. (f) Options in Buyer's Securities. The most senior executive and other key employees, as selected in Buyer's discretion, who are Transferred Employees, shall receive options to purchase Buyer's equity securities. SECTION 10.3. Pension Plans. (a) Seller shall amend the Honeywell Retirement Benefit Plan ("Pension Plan") to fully vest all Closing Date Transferred Employees who are participating in the Pension Plan in their accrued benefits as of the Closing Date. Buyer shall assume the liabilities and obligations as of the Closing Date of Seller for the accrued benefits of all Closing Date Transferred Employees under the Pension Plan including the provision of additional service credit to such Transferred Employees in accordance with Section 10.3(e) hereof. Buyer shall have established as of the Closing Date, or shall establish as soon as practicable after the Closing Date, a tax-qualified defined benefit pension plan or plans which shall discharge the pension obligations of Buyer set forth in this Section ("Buyer's Plan"). Buyer's Plan shall credit all service with Seller for -43- EXECUTION COPY TCAS Asset Purchase Agreement purposes of the eligibility, participation, vesting and benefit accrual requirements under Buyer's Plan. As soon as practicable after the Closing Date, Seller shall cause a transfer from Seller's Pension Plan to Buyer's Plan of the pension liabilities and obligations being assumed by Buyer and of the assets, as calculated below. (b) The assets to be transferred from Seller's Pension Plan to Buyer's Plan shall be an amount equal to the "projected benefit obligation," within the meaning of Financial Accounting Standard No. 87 ("PBO"), as of the Closing Date attributable to the Closing Date Transferred Employees under Seller's Pension Plan with adjustments described below. Seller's actuary shall calculate the transfer amount (the "Transfer Amount") by applying the assumptions, methods and methodologies listed on Schedule 10.3(b) and other actuarial assumptions and methodologies used in the ordinary course in the preparation of Seller's 1998 corporate annual report not inconsistent with those listed in Schedule 10.3(b); provided, however, that the interest rate used in such calculation shall be 7.75%. Notwithstanding any provision herein to the contrary, the transfer amount shall be subject to the applicable requirements of Sections 414(l) and 401(a)(12) of the Code. In the event that the applicable requirements of Sections 414(l) and 401(a)(12) of the Code require that an amount in excess of the PBO attributable to the Closing Date Transferred Employees covered by one of Seller's Pension Plan be transferred to Buyer's Plan, then the amount to be transferred from the other Seller's Pension Plan shall be reduced by such excess amount provided that such other transfer or transfers meet the applicable legal requirements of Code Sections 414(l) and 401(a)(12). The amount as so determined shall be adjusted for investment earnings at the short term investment fund rate earned by Seller's Pension Plan (the "Earnings") for the period between the Closing Date and the actual dates of transfer (see below in Section 10.3(c)) and reduced by the amount of any benefit payments to Closing Date Transferred Employees and a proportional share of investment and administrative expenses relative to asset values for such period (see below in Section 10.3(c)). The amount of assets caused to be transferred pursuant to this Section shall be calculated by Seller's actuary, and shall be subject to review by Buyer's actuary for the sole purpose of confirming that the calculation was made in accordance with this Section. In the event that Buyer's actuary does not agree that the calculation by Seller's actuary was made in accordance with this Section, the determination of the amount to be transferred pursuant to this Section shall be made by a third, nationally recognized actuarial firm selected by Seller's and Buyer's actuaries (the cost of which shall be borne equally between Seller and Buyer), and the determination of such third actuary as to the amount to be transferred shall be binding and conclusive upon the parties hereto. The transfer of assets from Seller's Pension Plan to Buyer's Plan shall be made in cash pursuant to Section 10.3(c). The parties shall file any necessary IRS Forms 5310-A with respect to such transfer. Services performed by Seller for Buyer relating to pension plan administration pursuant to the Services Agreement shall be required only to the extent that Buyer's Plan provides materially similar benefits, distribution option and retirement eligibility thresholds to those provided under Seller's Plan. (c) All transfers from the Pension Plan to Buyer's Plan shall be made in accordance with the provisions of this Section 10.3(c). As soon as is administratively practical, but in no event later than 45 days following the Closing Date, and conditioned upon Seller having been provided evidence reasonably satisfactory to it that Buyer has established a trust (or trusts) to hold the assets of Buyer's Plan and that Buyer's Plan is qualified under Section 401(a) of the -44- EXECUTION COPY TCAS Asset Purchase Agreement Code and the trusts holding assets of Buyer's Plan are tax exempt under Section 501(a) of the Code ("Initial Transfer Date"), Seller shall cause Seller's Pension Plan trust to make an initial transfer of assets in cash equal to 85% of the amount reasonably estimated by Seller in good faith to be equal to the Transfer Amount (the "Initial Transfer Amount"). In addition, prior to the Initial Transfer Date Seller shall provide Buyer with evidence reasonably satisfactory to Buyer that the Pension Plans remain qualified under Section 401(a) of the Code. As soon as practicable after the final determination of the amounts to be transferred ("True-Up Date"), Seller shall cause a second transfer to be made in cash of the "True-Up Amount." The True-Up Amount shall be equal to the following amount: (Transfer Amount minus Initial Transfer Amount), minus benefit payments made to Transferred Employees since the Closing Date from the Pension Plans, adjusted for Earnings and a proportionate amount of expenses on the excess of the Transfer Amount over the Initial Transfer Amount from the Closing Date to the True-Up Date. If the Initial Transfer Amount exceeds the Transfer Amount, as soon as practicable following such determination Buyer shall cause a transfer to be made to Seller's Pension Plan equal to the excess of the Initial Transfer Amount over the Transfer Amount, adjusted to reflect earnings at the short term investment fund rate earned by Buyer's Plan from the Initial Transfer Date until the date of transfer. (d) As soon as practicable after the end of the 6-month period following the Closing Date, or such date as Buyer and Seller agree, Seller shall amend Seller's Pension Plan to fully vest all Post-Closing Transferred Employees in their accrued benefits as of the end of such 6-month period and a transfer of assets and liabilities attributable to Post-Closing Transferred Employees shall be made from Seller's Pension Plan to Buyer's Plan in accordance with the provisions applicable to Closing Date Transferred Employees in Sections 10.3(b) and (c) above except that references to the Closing Date in such Sections shall be deemed to be references to the date that is 6 months after the Closing Date. Buyer shall assume the liabilities and obligations for accrued benefits of all Post-Closing Transferred Employees under Seller's Pension Plan as of the date of such transfer and Buyer's Plan shall credit all service with Seller for purposes of eligibility, participation, vesting and benefit accrual requirements under Buyer's Plan. (e) Commencing as of the Closing Date, or their date of hire if later, in addition to service credits to be accrued under the Buyer's Plan attributable to service with Buyer, Buyer shall concurrently credit Transferred Employees with additional service credits under the Buyer's Plan to the extent such service credits would have been earned by the Transferred Employees under the Seller's severance plan had the Transferred Employees been involuntarily terminated from the Seller without cause on the Closing Date or immediately prior to their date of hire with Buyer. For purposes of calculating the amount of the Transfer Amount, the Seller's actuary shall take into account this additional credited service. SECTION 10.4. Savings Plans. (a) Seller shall amend the Honeywell Savings and Stock Ownership Plan ("Seller's Savings Plan") to provide that Closing Date Transferred Employees shall fully vest in their -45- EXECUTION COPY TCAS Asset Purchase Agreement Seller's Savings Plan accounts (the "Accounts") as of the Closing Date. As promptly as practicable following the Closing Date, Seller and Buyer shall arrange for the transfer of the Accounts and the corresponding liabilities and obligations with respect to Closing Date Transferred Employees from Seller's Savings Plan to one or more tax-qualified plans established by Buyer which provide benefits and payment options substantially equivalent to the benefits available under the applicable Seller's Savings Plan ("Buyer's Savings Plans"). Buyer's Savings Plans shall credit all service with Seller for purposes of the eligibility, participation, vesting and benefit accrual requirements of Buyer's Savings Plans and shall also (a) provide for tax-deferred contributions and (b) meet all requirements for a qualified cash or deferred arrangement under Section 401(k) of the Code. The transfer of assets from Seller's Savings Plan shall be made in cash, promissory notes representing participant loans and shares of Honeywell International Inc. common stock. Without limiting the generality of the foregoing, Buyer agrees to accept the transfer of such accounts in Honeywell International Inc. common stock to the extent invested in Honeywell International Inc. common stock, and, to the extent permitted by law for such reasonable period of time, not to exceed six months, to provide Transferred Employees with an election to retain Honeywell International Inc. common stock in their accounts under Buyer's Savings Plans or to dispose of such stock and have the proceeds reinvested in other investment alternatives offered under Buyer's Savings Plan. The parties shall file any necessary IRS Forms 5310-A with respect to such transfer. Prior to the transfer date, Buyer shall, to the reasonable satisfaction of Seller's counsel, present Seller with such evidence and information as is reasonably necessary to establish that the tax-qualified plan or plans established or to be established by Buyer to which the transfer or transfers described in this Section are to be made are in full force and effect and meet all the requirements for qualification under Sections 401(a) and 411(d)(6) of the Code and Seller shall, to the reasonable satisfaction of Buyer's counsel, present Buyer with such evidence and information as is reasonably necessary to establish that Seller's Savings Plan meet the requirements of Section 401(a) of the Code. (b) As soon as practicable after the end of the 6-month period following the Closing Date, or such earlier date as Buyer and Seller may agree, Seller shall amend Seller's Savings Plan to provide that Post-Closing Transferred Employees shall fully vest in their respective Accounts as of the end of such 6-month period and a transfer of Accounts and the corresponding liabilities and obligations with respect to Post-Closing Transferred Employees shall be made from Seller's Savings Plan to the applicable Buyer's Savings Plan in accordance with the provisions applicable to Closing Date Transferred Employees under Section 10.4(a) above. Buyer's Savings Plans shall credit all service with Seller for purposes of the eligibility, participation, vesting and benefit accrual requirements of Buyer's Savings Plans. SECTION 10.5. Retiree Health and Life Insurance Benefits. Buyer shall, as of the Closing Date, assume all liabilities and obligations of Seller for the benefits payable or to become payable to all Transferred Employees and their beneficiaries under the medical benefit and life insurance benefit programs covering retired employees that are identified in Schedule 10.5. SECTION 10.6. Employee Welfare Plans. Buyer shall have established as of the Closing Date, or shall establish after the Closing Date in accordance with the terms of the Service Agreement, plans or programs to provide medical and life insurance, disability, -46- EXECUTION COPY TCAS Asset Purchase Agreement severance, vacation and other welfare benefits, including plans or programs to discharge the obligations of Buyer as set forth in Section 10.5. The plan or plans established by Buyer shall (a) credit all service with Seller for all purposes under the new plans, including eligibility, participation and benefit entitlement, (b) waive any pre-existing condition limitation or exclusion, and (c) credit all payments made for healthcare expenses during the current plan year for purposes of deductibles, co-payments and maximum out-of-pocket limits. SECTION 10.7. Severance and WARN Act Liability. Seller shall pay and be responsible for all liability, cost or expense for severance, termination indemnity payments, salary continuation, special bonuses and like costs under Seller's severance pay plans, policies or arrangements, with respect to any of the Employees that arise from or relate to the transactions described in or contemplated by this Agreement, or that arise under Seller's severance plans other than from the subsequent termination of employment by Buyer after the Closing Date. Buyer agrees to pay and be responsible for all liability, cost, expense and sanctions resulting from Buyer's failure to comply after the Closing Date with the WARN Act, and the regulations thereunder, in connection with any termination of Transferred Employees or for any action by Buyer taken after the Closing Date which causes the WARN Act to apply in connection with any termination of Transferred Employees. Seller agrees to pay and be responsible for all liability, cost, expense and sanctions resulting from any action taken by Seller in connection with, on, prior to or after the Closing Date with regard to any site of employment, facility, operating unit or employee affected by this Agreement which action by itself causes the WARN Act to apply. SECTION 10.8. Health Care Continuation Coverage. Seller agrees to provide continuation coverage required by Section 4980B of the Code or Sections 601 through 608 of ERISA ("COBRA") under any Seller group health plan with respect to Employees and their covered beneficiaries who are entitled to COBRA coverage and to pay and be responsible for all liability, cost, expense, taxes and sanctions under Section 4980B of the Code, and interest and penalties imposed upon, incurred by, or assessed against Buyer or Seller that arise by reason of or relate to any failure by any Seller group health plan to comply with the health care continuation coverage requirements of COBRA. SECTION 10.9. Post-Closing Retirees. If Buyer's period to consider an offer of employment made pursuant to Section 10.2(a) extends beyond the Closing Date, an Employee who, as of the Closing Date, is eligible to retire under Seller's Pension Plan may elect to retire from Seller effective as of a date after the Closing Date and prior to acceptance of employment with Buyer. An Employee who makes such an election to retire from Seller (a "Post-Closing Retiree") and accepts an offer of employment from Buyer pursuant to Section 10.2(a) shall be treated as a Transferred Employee for purposes of this Agreement, except that (a) Notwithstanding anything in Section 10.3 to the contrary, (i) Buyer shall not assume any liabilities or obligations of Seller's Pension Plan with respect to Post-Closing Retirees; (ii) Buyer's Plan shall not be required to credit the service with Seller of any Post-Closing Retiree for purposes of the benefit accrual requirements of Buyer's Plan; and (iii) there shall be no transfer of pension assets or liabilities from Seller's Pension Plan to Buyer's Plan with respect to Post-Closing Retirees (and the amount of assets to be transferred from Seller's Pension Plan to Buyer's Plan pursuant to Section 10.2 shall be calculated only with respect to Transferred Employees other than Post-Closing Retirees); -47- EXECUTION COPY TCAS Asset Purchase Agreement (b) Notwithstanding anything in Section 10.4 to the contrary, (i) Buyer shall not assume any liabilities or obligations of Seller's Savings Plan with respect to Post-Closing Retirees; (ii) Buyer's Savings Plans shall not be required to credit the service with Seller of any Post-Closing Retiree for purposes of the benefit accrual requirements of Buyer's Savings Plans; and (iii) there shall be no transfer of accounts or corresponding liabilities from Seller's Savings Plan to Buyer's Savings Plans with respect to Post-Closing Retirees; and (c) Notwithstanding anything in Section 10.5 to the contrary, Buyer shall not assume liabilities and obligations of Seller for the benefits payable or to become payable to Post-Closing Retirees and their beneficiaries under the medical and life insurance benefit programs covering retired employees that are identified in Schedule 10.5 ("Seller Retiree Welfare Plans"). The medical and life insurance plan coverage provided to Post-Closing Retirees after the Closing Date as active employees of Buyer (including any such coverage provided by Seller pursuant to the Services Agreement) shall be primary to coverage provided by Seller Retiree Welfare Plans. SECTION 10.10. Support Employees. In accordance with the Consent Decree, Buyer shall have reasonable access to technical, sales, production and administrative employees of the Business who are not listed on Schedule 10.2(a) or Confidential Attachment A ("Support Employees") under terms and conditions more fully described in Section 13.18(g). It is expressly agreed and understood by the parties hereto that the Support Employees (i) are Seller's employees, (ii) are not part of Confidential Attachment A, and (iii) are not subject to the Consent Decree's restrictions on continued employment with Seller if Buyer makes any such Support Employee an offer of employment. ARTICLE XI TERMINATION AND ABANDONMENT SECTION 11.1. Termination. This Agreement may be terminated at any time prior to or on the Closing Date: (a) by mutual written consent of Buyer and Seller; (b) by either Buyer or Seller, if the Closing has not occurred (other than (i) through the failure of any party seeking to terminate this Agreement to comply fully with its obligations or (ii) the failure to satisfy the condition in the second sentence of Sections 7.4 and 8.4 and Section 13.18(a)) on or before February 29, 2000 or such later date as Buyer and Seller may agree upon; provided, however, that in the case of the foregoing clause (ii), such termination right shall apply if such conditions are not satisfied on or before March 15, 2000; (c) by either Buyer or Seller upon written notice to the other if such other party or its Affiliate if there shall be in effect any Legal Requirement that prohibits the consummation of the Closing or if the consummation of the Closing would violate any order, decree or judgment of any court or Governmental Body having jurisdiction over the transactions contemplated hereby; (d) by Buyer, if there has been a material violation or breach by Seller of any agreement, covenant, representation or warranty contained in this Agreement, and such violation or breach has not been waived by Buyer and continues without cure for a period of five days -48- EXECUTION COPY TCAS Asset Purchase Agreement after Buyer notifies Seller of its intent to terminate this Agreement pursuant to this Section 11.1(d); or (e) By either Buyer or Seller if the first refusal right referred to in Sections 5.11 and 7.10 is exercised and Seller enters into an agreement to sell the Business to Thomson-CFS S.A. or any Affiliate thereof. (f) by Seller, if there has been a material violation or breach by Buyer of any agreement, covenant, representation or warranty contained in this Agreement, and such violation or breach has not been waived by Seller and continues without cure for a period of five days after Seller notifies Buyer of its intent to terminate this Agreement pursuant to this Section 11.1(f). SECTION 11.2. Effect of Termination. If this Agreement is terminated pursuant to Section 11.1, this Agreement and the Intellectual Property Agreement shall become void and of no further force and effect and neither of the parties hereto (nor their respective Affiliates, directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact or other Representatives) shall have any liability in respect of such termination except that the obligations contained in Sections 5.11, 11.2, 13.1, 13.3 and 13.11 shall survive such termination; provided, however, that if such termination is effected pursuant to Section 11.1(b), (c), (d) or (f) and the failure to consummate the transactions contemplated hereby was the result of any of the conditions to Closing having not been fulfilled by reason of the breach by either Buyer or Seller of their respective covenants, agreements, representations and/or warranties set forth in this Agreement or in any other Acquisition Agreement, the party having so breached shall remain liable to the other party for such breach. ARTICLE XII INDEMNIFICATION SECTION 12.1. Indemnity by Seller. Seller agrees to indemnify and hold harmless Buyer and its Affiliates and their respective directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact and other Representatives (collectively, "Buyer Indemnitees") from and against, and to reimburse Buyer Indemnitees on demand with respect to, any and all losses, damages, liabilities, claims, Taxes, costs and expenses, including reasonable attorneys', accountants' and experts' fees (collectively, "Losses"), incurred by Buyer Indemnitees by reason of or arising out of or in connection with (i) the breach of any of its or its Affiliate's representations or warranties contained herein or in any Acquisition Agreement, (ii) the failure of Seller or any Affiliate of Seller to perform any covenant or agreement required by any Acquisition Agreement to be performed by it, or (iii) the Excluded Liabilities. SECTION 12.2. Indemnity by Buyer. Buyer agrees to indemnify and hold harmless Seller and its Affiliates and their respective directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact and other Representatives (collectively, "Seller Indemnitees") from and against, and to reimburse Seller Indemnitees on demand with respect to, any and all Losses incurred by Seller Indemnitees by reason of or arising out of or in connection with (i) the breach of any representation or warranty contained herein or in any Acquisition Agreement, (ii) the failure of Buyer or any Affiliate of Buyer to perform any agreement required by any Acquisition Agreement to be performed by it, (iii) the Assumed Liabilities, or (iv) any third party action, suit, -49- EXECUTION COPY TCAS Asset Purchase Agreement claim, charge, complaint, proceeding or investigation to the extent arising out of or in connection with the operations of the Business by Buyer after the Closing Date, but excluding for purposes of this clause (iv) any such Losses to the extent arising out of (A) products or services sold, transferred, performed or otherwise provided by Seller or any of its Affiliates to or for the Business after the Closing Date, or any other actions taken by Seller or any of its Affiliates, pursuant to any Acquisition Agreement, (B) the operations of the Business on or prior to the Closing Date, (C) all actions or omissions of action by Seller or its Affiliates other than as described in the preceding clauses (A) and (B), and (D) all transactions, arrangements or agreements (including the sale of products or the performance of services) between Seller (or any of its Affiliates) and Buyer (or any of its Affiliates) other than pursuant to the Acquisition Agreements. SECTION 12.3. Tax Indemnification. Seller shall be responsible for, shall pay or cause to be paid, and shall indemnify and hold harmless Buyer Indemnitees from and against, any and all Taxes for or in respect of each of the following: (a) any and all Taxes with respect to any taxable period or a portion thereof ending on or before the Closing Date; and (b) any Taxes arising out of a breach of the representations and warranties contained in Section 3.7. SECTION 12.4. Indemnification Procedure. (a) Any party seeking indemnification hereunder (the "Indemnitee") shall notify the party liable for such indemnification (the "Indemnitor") in writing of any event, omission or occurrence which the Indemnitee believes has given or could give rise to Losses which are indemnifiable hereunder (such written notice being hereinafter referred to as a "Notice of Claim"). Any Notice of Claim shall be given promptly after the Indemnitee becomes aware of such event, omission or occurrence; provided, however, that the failure of any Indemnitee to give notice as provided in this Section 12.4 shall not relieve the Indemnitor of its obligations under this Section 12.4, except to the extent that the Indemnitor is actually prejudiced by such failure to give notice. A Notice of Claim shall specify in reasonable detail the nature and the particulars of the event, omission or occurrence giving rise to a right of indemnification to the extent known by or available to Indemnitee. The Indemnitor shall satisfy its obligations hereunder within thirty (30) days of its receipt of a Notice of Claim. (b) All costs and expenses incurred by the Indemnitor in defending any claim or demand shall be a liability of, and shall be paid by, the Indemnitor. Except as hereinafter provided, in the event that the Indemnitor notifies the Indemnitee within the 30-day period that it desires to defend the Indemnitee against such claim or demand, the Indemnitor shall have the right to defend the Indemnitee by appropriate proceedings and shall have the sole power to direct and control such defense (including engagement of counsel in connection therewith). If any Indemnitee desires to participate in any such defense, it may do so at its sole cost and expense; provided, however, that such Indemnitee shall have the right to employ separate counsel to represent such Indemnitee in such defense, at the Indemnitor's expense, if (i) in such Indemnitee's reasonable judgment and on the advice of counsel, a conflict of interest between -50- EXECUTION COPY TCAS Asset Purchase Agreement such Indemnitor and such Indemnitee exists with respect to such claim or demand, or (ii) the Indemnitor agrees to the retention of such counsel. So long as the Indemnitor is reasonably contesting any such claim or demand in good faith, the Indemnitee shall not pay or settle a claim or demand without the consent of the Indemnitor (unless the Indemnitee waives in writing any right to indemnity therefor). The Indemnitor may settle any claim or demand without the consent of the Indemnitee, provided that such settlement includes a full, unconditional and complete release of the Indemnitee, and provided also that no such settlement will, without the prior written consent of the Indemnitee, impose any obligation or restriction on the Indemnitee or any of its assets or businesses. So long as the Indemnitor is defending in good faith any such third party claim, demand, suit, action or proceeding, the Indemnitee shall at all times cooperate in all reasonable ways with, make its relevant files and records available for inspection and copying by, and make its employees reasonably available or otherwise render reasonable assistance to, the Indemnitor and shall be reimbursed for its reasonable out-of-pocket expenses related thereto. In the event that the Indemnitor fails to timely defend, contest or otherwise protect against any such third party claim, demand, suit, action or proceeding, the Indemnitee, at the Indemnitor's expense, shall have the right, but not the obligation, to defend, contest, assert crossclaims or counterclaims, or otherwise protect against, the same and may make any compromise or settlement thereof and be entitled to all amounts paid as a result of such third party claim, demand, suit or action or any compromise or settlement thereof. (c) The Indemnitor, following receipt of any notice from any Indemnitee requesting reimbursement for a Loss (which notice documents in reasonable detail the Loss or portion thereof by the Indemnitee) shall promptly and in any case within 30 days of receipt provide such reimbursement, unless and only to the extent that the Indemnitor disputes in good faith its indemnity obligation with respect to such Loss. (d) Each Indemnitee shall reasonably cooperate in complying with any applicable foreign, federal, state or local laws, rules or regulations or any discovery or testimony necessary to effectively carry out the Indemnitor's obligations hereunder. Such Indemnitee shall be reimbursed for any reasonable out-of-pocket expenses incurred in connection with such compliance. SECTION 12.5. Limitations. Anything to the contrary contained herein notwithstanding, (a) neither party shall assert any claim against the other for indemnification (not including indemnification for breach of Section 3.7 hereof) hereunder with respect to any inaccuracy or breach of any representations or warranties herein and in the other Acquisition Agreements unless and until the amount of such claim or claims shall exceed $1,000,000 calculated on a cumulative basis and not a per item basis, and then only in respect to the excess over said $1,000,000; and (b) neither party shall be entitled to recover from the other more than 50% of the Cash Purchase Price, as adjusted, with respect to all claims for indemnity with respect to any inaccuracy or breach of any warranties or representations. SECTION 12.6. Indemnification Sole Remedy. The parties shall only be liable to indemnify each other for actual damages and neither party shall be liable for any special, incidental, consequential or punitive damages (collectively, "Special Damages") hereunder including, without limitation, lost profits; provided, however, that Special Damages shall be indemnifiable in accordance with the applicable provisions of the Acquisition Agreements to the -51- EXECUTION COPY TCAS Asset Purchase Agreement extent owed by Buyer or Seller, as the case may be, to a third party. The indemnification provided under this Article XII and elsewhere in this Agreement and the other Acquisition Agreements shall constitute the parties' sole remedy for any and all breaches of the Acquisition Agreements, (i) except in the case of fraud or criminal misconduct and (ii) except for any equitable remedies provided for in the Acquisition Agreements. ARTICLE XIII MISCELLANEOUS SECTION 13.1. Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement agrees to pay, without right of reimbursement from the other party, the costs incurred by it incident to the performance of its obligations under this Agreement and the consummation of the transactions contemplated hereby including, without limitation, costs incident to the preparation of this Agreement, and the fees and disbursements of counsel, accountants and consultants employed by such party in connection herewith. SECTION 13.2. Public Announcements. Buyer and Seller shall consult with one another before issuing any press release or public announcement about the transactions contemplated by this Agreement and except as may be required by applicable Legal Requirements or the rules of any applicable securities exchange, no party shall issue any such press release or other public announcement without the prior consent of the other party. SECTION 13.3. Confidentiality. The Confidentiality and Non-Disclosure Agreement dated October 18, 1999, between Buyer and Seller will remain in full force and effect until the Closing shall have occurred, and all information received by Buyer, its Affiliates or Representatives prior to Closing relating to the Business, whether orally or in writing, shall be subject thereto. Such Confidentiality and Non-Disclosure Agreement shall terminate automatically with respect to the Business without any action of the parties upon the occurrence of the Closing. The confidentiality obligations of (a) Seller with respect to the Business, (b) the parties with respect to Business Intellectual Property Assets assigned or licensed under the Intellectual Property Agreement, and (c) proprietary information exchanged by the parties on or after Closing, shall be governed by the Intellectual Property Agreement. SECTION 13.4. Notices. All notices, consents, waivers, claims and other communications hereunder (each a "Notice") shall be in writing and shall be (a) personally delivered, (b) deposited, prepaid in a nationally established overnight delivery firm such as Federal Express, (c) mailed by certified mail, return receipt requested, or (d) transmitted by facsimile as follows: As to Seller or Parent: Honeywell International Inc. 101 Columbia Road Morristown, NJ 07962 Attn: Senior Vice President and General Counsel Fax No.: (973) 455-4413 -52- EXECUTION COPY TCAS Asset Purchase Agreement with a copy to: Honeywell International Inc. 101 Columbia Road Morristown, NJ 07962 Attn: Vice President, Corporate Development Fax No.: (973) 455-4847 As to Buyer: L-3 Communications Corporation 600 Third Avenue New York, NY 10016 Attn: Christopher C. Cambria, Esq. Fax No.: (212) 805-5494 with a copy to: Whitman Breed Abbott & Morgan, LLP 200 Park Avenue New York, NY 10166 Attn: James P. Gerkis, Esq. Fax No.: (212) 351-3131 or to any other address which such party may have subsequently communicated to the other party by a Notice given in accordance with the provisions of this Section. Each Notice shall be deemed given and effective upon receipt (or refusal of receipt). SECTION 13.5. Survival. All statements, certifications, indemnifications, representations and warranties made hereby by the parties to this Agreement, and their respective covenants, agreements and obligations to be performed pursuant to the terms hereof, shall survive the Closing Date, and the representations and warranties made hereby by the parties shall terminate on the second anniversary of the Closing Date, except to the extent a party gives written notice to the other party of any breach thereof on or before the second anniversary; provided, however, that the representations and warranties contained in (a) Section 3.5 shall survive the Closing Date indefinitely, and (b) Sections 3.4, 3.7, 3.9, 3.10 and 3.12 shall survive the Closing Date until 90 days following the expiration of any statute of limitations (or extensions thereof) applicable to the matters described therein; provided further, however, that if notice of any claim for indemnification is given within the applicable survival period, the representations and warranties that are subject to such indemnification claim shall survive until such time as such claim is finally resolved. SECTION 13.6. Entire Agreement. This Agreement, the Exhibits and Schedules attached hereto, the Confidentiality and Non-Disclosure Agreement dated October 18, 1999 between Buyer and Seller and the other Acquisition Agreements contain every obligation and understanding between the parties relating to the subject matter hereof and merge all prior discussions, negotiations and agreement, if any, between them, and none of the parties shall be bound by any representations, warranties, covenants or other understandings, other than as expressly provided herein or therein. -53- EXECUTION COPY TCAS Asset Purchase Agreement SECTION 13.7. Waiver and Amendment. Any representation, warranty, covenant, term or condition of this Agreement which may legally be waived, may be waived, or the time of performance thereof extended, at any time by the party hereto entitled to the benefit thereof, and any term, condition or covenant hereto may be amended by the parties hereto at any time. Any such waiver, extension or amendment shall be evidenced by an instrument in writing executed on behalf of the appropriate party by a Person who has been authorized by such party to execute waivers, extensions or amendments on its behalf. No waiver by any party hereto, whether express or implied, of its rights under any provision of this Agreement shall constitute a waiver of such party's rights under such provisions at any other time or a waiver of such party's rights under any other provision of this Agreement. No failure by any party hereto to take any action against any breach of this Agreement or default by another party shall constitute a waiver of the former party's right to enforce any provision of this Agreement or to take action against such breach or default or any subsequent breach or default by such other party. SECTION 13.8. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any Person other than the parties hereto, their respective successors and permitted assigns and the Indemnitees, any rights or remedies under or by reason of this Agreement. SECTION 13.9. Severability. In the event that any one or more of the provisions contained in this Agreement shall be declared invalid, void or unenforceable, the remainder of the provisions of this Agreement shall remain in full force and effect, and such invalid, void or unenforceable provision shall be interpreted as closely as possible to the manner in which it was written. SECTION 13.10. Headings and Interpretation. Titles and headings to articles and sections herein and titles to the Schedules are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. Any item or matter required to be disclosed on a particular Schedule to this Agreement shall be deemed to have been disclosed if it is disclosed to the extent required on another Schedule to this Agreement where it would be reasonably expected to appear. The inclusion of any item on a Schedule, which Schedule requires the listing of a "material" item, is not deemed to be an admission or representation that the included item is "material". SECTION 13.11. Governing Law and Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of New York without giving effect to the principles of conflicts of laws thereof. Except where equitable relief is sought, neither party shall commence any Proceeding against the other party under any Acquisition Agreement unless and until the parties shall have attempted in good faith to settle the underlying dispute through negotiation or mediation for a period of not less than 30 days. Subject to the preceding sentence, each party agrees that any action, proceeding or claim it commences against the other party pursuant to any Acquisition Agreement shall be brought in either the courts of the State of New York, sitting in New York County, or the courts of the United States for the Southern District of New York. Each party irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in -54- EXECUTION COPY TCAS Asset Purchase Agreement any such court, any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum and the right to object, with respect to any such suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party. In any such suit, action or proceeding, each party waives, to the fullest extent it may effectively do so, personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail, addressed to such party at its address set forth in Section 13.4 hereof. Each party agrees that a final non-appealable judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding. SECTION 13.12. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that this Agreement may not be assigned by either party to any Person without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, either party may assign any of its rights and obligations under this Agreement, in whole or in part, to one or more wholly owned subsidiaries of such party. Any party so assigning this Agreement shall remain fully liable to the other party for the performance by any assignee of any obligation of such party so assigned. Any purported assignment in violation of this Section 13.12 shall be void. SECTION 13.13. Taxes. Any taxes in the nature of sales or transfer taxes, documentary stamps or similar taxes payable on the sale or transfer of all or any portion of the assets, properties, business or equity interests being transferred hereunder or the consummation of any other transaction contemplated hereby, shall be paid 50% by Seller and 50% by Buyer. SECTION 13.14. Bulk Transfer Laws. The parties hereby waive compliance by Seller with the provisions of any so-called "bulk sales law" or "bulk transfer law" of any jurisdiction in connection with the transactions contemplated by this Agreement. Seller shall indemnify and hold harmless Buyer Indemnitees from and against any and all Losses that may be asserted against Buyer Indemnitees as a result of any such non-compliance. SECTION 13.15. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. SECTION 13.16. WAIVER OF TRIAL BY JURY. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR ANY OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER ACQUISITION AGREEMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.16 WITH ANY COURT AS WRITTEN -55- EXECUTION COPY TCAS Asset Purchase Agreement EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. SECTION 13.17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single agreement. SECTION 13.18. Consent Decree. Buyer acknowledges that Seller is selling the Purchased Assets to Buyer pursuant to the Consent Decree and that the Consent Decree imposes certain obligations on Seller and Buyer in connection with such sale. Accordingly, the parties hereto hereby agree as follows, notwithstanding any other provision to the contrary in any Acquisition Agreement: (a) Without limiting Sections 7.4 and 8.4 hereof, it shall be a condition to the parties' respective obligations under this Agreement that the DOJ and DOD, pursuant to the Consent Decree, shall have approved Buyer's purchase of the Purchased Assets hereunder. The aforesaid condition may not be waived by either party. (b) Buyer shall comply with the Consent Decree to the extent applicable to Buyer as the purchaser of the Purchased Assets. (c) Buyer shall reasonably cooperate with Seller in seeking the requisite approval of the DOJ and DOD referred to in paragraph (a) above, including, without limitation, (i) taking all action reasonably requested by Seller in order to facilitate and/or expedite such approval and (ii) providing the DOJ and DOD with all information they may request in connection therewith. (d) Neither the Consent Decree nor the Hold Separate Order, nor any events or circumstances arising thereunder or any actions taken in accordance therewith, shall (i) be deemed to have a Material Adverse Effect or (ii) constitute a breach by Seller of any of its agreements, representations or warranties contained in any Acquisition Agreement (including, without limitation, Sections 3.14 and 5.2 hereof). (e) Buyer and Seller acknowledge and agree that the terms of this Agreement and the other Acquisition Agreements are intended to convey, license or otherwise make available, as applicable, to Buyer the assets of the "TCAS Business", as described in the Consent Decree. Nothing herein or in any other Acquisition Agreement shall be deemed to convey, license or otherwise make available to Buyer the assets of any other "Divested Business" described in the Consent Decree. (f) Pursuant to Section IV.G of the Consent Decree, Seller hereby represents and warrants to Buyer (such representation and warranty to be deemed incorporated in Article III hereof) that the Business will be operational as of the time of transfer. (g) From and after the Closing Date, for a period not to exceed 18 months, Buyer shall have the right to reasonable access to the technical, sales, production and administrative employees of the "TCAS Business" (as defined in the Consent Decree), to the extent they are still employed by Seller. Such services shall be provided free of charge for the first six months -56- EXECUTION COPY TCAS Asset Purchase Agreement following the Closing Date. Thereafter, the charges for such services shall be set by Seller at a rate sufficient to cover its reasonable estimate of its actual costs for providing such services and, if applicable, consistent with (but not greater than) the prices it would charge to an Affiliate. ARTICLE XIV GUARANTY SECTION 14.1. Guaranty. Parent hereby guarantees absolutely, unconditionally, and irrevocably to Buyer the following: (a) the full and prompt performance of all terms, covenants, conditions and agreements to be performed and observed by Seller and all other Seller Entities (as defined in the Services Agreement) under the Acquisition Agreements, as amended from time to time; and (b) the prompt payment of all amounts, including, without limitation any damages, costs and expenses which shall at any time be payable by Seller to Buyer (including any Buyer Indemnitee) pursuant to the Acquisition Agreements or any default by Seller or any Seller Entity thereunder. SECTION 14.2. No Modification. The liability of Parent hereunder shall in no way be affected, modified or diminished by reason that (a) any one or more of the obligations guaranteed hereby is changed, altered, renewed, extended, continued, surrendered, compromised, waived or released in whole or in part, (b) any default is waived, whether or not notice thereof is given to Parent or (c) Buyer delays in exercising its rights. Parent agrees that (i) the terms of any of the obligations guaranteed hereby may be amended by Seller and Buyer without the consent of Parent; (ii) Buyer may review or extend the payment date of any of such obligations without the consent of Parent; (iii) Buyer may refrain from acting or defer action following a default by Seller in performing any such obligation and, generally, may deal with Seller as Buyer may see fit; and Parent shall remain bound under this Article XIV notwithstanding any such change, alteration, renewal, extension, continuance, surrender, compromise, waiver or release. SECTION 14.3. Absolute Guaranty. This is an absolute, unconditional, present and continuing guaranty. Parent waives any right to require that any action be brought against Seller or any other Person; provided, that if performance of an obligation other than an obligation to make payment is sought to be enforced hereunder, demand for performance shall first have been made on Seller. Parent hereby expressly waives (a) notice of acceptance; (b) demand for payment; (c) notice of default and (d) all suretyship defenses. SECTION 14.4. No Effect of Assignment. This guaranty shall not be affected by any assignment of this Agreement by Seller or by Buyer. -57- EXECUTION COPY IN WITNESS WHEREOF, each of the parties hereto has executed this Asset Purchase Agreement the day and year first above written. HONEYWELL INC. By ------------------------------------- Name: Daniel K. Clift Title: Director, Corporate Development L-3 COMMUNICATIONS CORPORATION By ------------------------------------- Name: Christopher C. Cambria Title: Vice President, Secretary & General Counsel Solely in respect of the Guaranty in Article XIV HONEYWELL INTERNATIONAL INC. By -------------------------------------- Name: Daniel K. Clift Title: Director, Corporate Development EX-10.92 15 0015.txt ASSET PURCHASE AND SALE AGREEMENT EXECUTION COPY ASSET PURCHASE AND SALE AGREEMENT DATED JANUARY 7, 2000 BY AND BETWEEN: L-3 COMMUNICATIONS CORPORATION ("BUYER") AND RAYTHEON COMPANY ("SELLER") EXECUTION COPY i INDEX OF PROVISIONS
Page Article I.........................................................................................................1 Article II.......................................................................................................12 Section 2.1. Purchase and Sale; Assumption of Liabilities......................................12 Section 2.2. Closing Documents.................................................................12 Section 2.3. Time and Place of Closing.........................................................12 Section 2.4. Allocation of Asset Purchase Consideration........................................13 Section 2.5. Purchase Price Adjustment.........................................................13 Section 2.6. Nonassignable Contracts...........................................................15 Section 2.7. Intercompany Accounts; Distributions..............................................15 Article III......................................................................................................15 Section 3.1. Incorporation; Authorization; Conflicts; Etc......................................16 Section 3.2. Financial Statements..............................................................17 Section 3.3. Undisclosed Liabilities...........................................................17 Section 3.4. Absence of Certain Changes........................................................17 Section 3.5. Properties; Title to Assets.......................................................17 Section 3.6. Real Estate.......................................................................18 Section 3.7. Litigation; Orders................................................................19 Section 3.8. Material Contracts................................................................19 Section 3.9. Licenses, Approvals, Other Authorizations, Reports, Etc...........................20 Section 3.10. Labor Matters....................................................................20 Section 3.11. Executive Management and Employees...............................................20 Section 3.12. Compliance with Laws.............................................................21 Section 3.13. Environmental Matters............................................................21 Section 3.14. Employee Benefit Plans and Related Matters.......................................21 Section 3.15. Disclaimer Regarding Assets......................................................23 Section 3.16. Brokers, Finders.................................................................24 Section 3.17. No Implied Representation........................................................24 Section 3.18. Prohibited Transactions..........................................................24 Section 3.19. Insurance........................................................................24 Section 3.20. Year 2000........................................................................25 Section 3.21. Government Contracts.............................................................25 Section 3.22. Government Furnished Equipment...................................................26 Section 3.23. Absence of Changes...............................................................26 Section 3.24. Schedules........................................................................27 Article IV.......................................................................................................27 Section 4.1. Incorporation; Authorization; Etc.................................................27 Section 4.2. Brokers, Finders, Etc.............................................................27 Section 4.3. Consents, Approvals, Other Authorizations.........................................27 i EXECUTION COPY Section 4.4. Acquisition of Subject Assets and Operation of the Businesses for Investment....................................................................28 Section 4.5. Financial Capability..............................................................28 Section 4.6. No Financing Contingency..........................................................28 Article V........................................................................................................28 Section 5.1. Investigation of Business; Access to Properties, Records..........................28 Section 5.2. Best Efforts; Obtaining Consents..................................................29 Section 5.3. Conduct of the Businesses.........................................................30 Section 5.4. Preservation of Business..........................................................32 Section 5.5. Further Assurances................................................................32 Section 5.6. Public Announcements..............................................................32 Section 5.7. Services..........................................................................32 Section 5.8. Other Offers......................................................................33 Section 5.9. Non-Compete and Non-Solicitation..................................................33 Section 5.10. Notices of Certain Events........................................................33 Section 5.11. No Inconsistent Action...........................................................34 Section 5.12. Post-Closing Confidentiality.....................................................34 Section 5.13. Government Contract Novation.....................................................34 Section 5.14. Binghamton Facility..............................................................35 Section 5.15. Buyer's SEC Financial Reporting..................................................35 Section 5.15. Sharing of Retention Commitments Amounts.........................................36 Section 5.17. Payments.........................................................................36 Section 5.18. Insurance........................................................................36 Section 5.19. Supply Contracts.................................................................36 Section 5.20. Research and Experimental Expenses...............................................36 Section 5.21. W-2 Issues.......................................................................37 Article VI.......................................................................................................37 Section 6.1. Employment of Employees of the Business...........................................37 Section 6.2. Welfare and Fringe Benefit Plans..................................................37 Section 6.3. Access to Books and Records.......................................................37 Section 6.4. Defined Benefit Plan..............................................................38 Section 6.5 Retiree Medical Benefits..........................................................40 Section 6.6 WARN Act..........................................................................40 Section 6.7 Represented Employees.............................................................40 Article VII......................................................................................................41 Section 7.1. Taxes and Refunds.................................................................41 Section 7.2. Allocation of Transfer and Property Taxes.........................................41 Section 7.3. Allowable Taxes...................................................................42 Section 7.4. Cooperation.......................................................................42 Article VIII.....................................................................................................43 Section 8.1. Representations, Warranties and Covenants of Seller...............................43 Section 8.2. Filings; Consents; Waiting Periods................................................43 Section 8.3. No Actions........................................................................43 ii EXECUTION COPY Section 8.4. Intellectual Property Agreement, Etc..............................................43 Section 8.5. Adverse Changes...................................................................44 Section 8.6. Binghamton Facility...............................................................44 Section 8.7. Certain Transfer Documents........................................................44 Section 8.8 Title Policies....................................................................44 Section 8.9. FIRPTA Certificate................................................................44 Article IX.......................................................................................................44 Section 9.1. Representations, Warranties and Covenants of Buyer................................44 Section 9.2. Filings: Consents: Waiting Periods................................................45 Section 9.3. No Actions........................................................................45 Section 9.4. Intellectual Property Agreement, Etc..............................................45 Section 9.6. Binghamton Facility...............................................................45 Article X........................................................................................................46 Section 10.1. Survival Periods.................................................................46 Section 10.2. Indemnification by Seller........................................................46 Section 10.3. Indemnification by Buyer.........................................................47 Section 10.4. Indemnification Procedures.......................................................47 Section 10.5. Certain Limitations..............................................................48 Section 10.6. Exclusive Remedy.................................................................49 Section 10.7. Set-Off..........................................................................49 Article XI.......................................................................................................49 Section 11.1. Termination......................................................................49 Section 11.2. Procedure and Effect of Termination..............................................50 Article XII......................................................................................................50 Section 12.1. Counterparts.....................................................................50 Section 12.2. Governing Law; Consent to Jurisdiction...........................................50 Section 12.3. Entire Agreement.................................................................50 Section 12.4. Expenses.........................................................................51 Section 12.5. Notices..........................................................................51 Section 12.6. Successors and Assigns...........................................................52 Section 12.7. Headings: Definitions............................................................52 Section 12.8. Amendment........................................................................52 Section 12.9. Waiver; Effect of Waiver.........................................................52 Section 12.10. Interpretation; Absence of Presumption..........................................52 Section 12.11. Specific Performance............................................................53 Section 12.12. Remedies Cumulative.............................................................53 Section 12.13. Severability....................................................................53 Section 12.14. Bulk Sales......................................................................53 Section 12.15. No Third Party Beneficiaries....................................................53 Section 12.16. Seller Acknowledgement..........................................................53 APPENDICES Appendix I: Provisions and Procedures for Accounting Neutral......................................... 55 iii EXECUTION COPY Appendix II: Preliminary and Target Net Working Capital Calculations................................. 57 Appendix III: Summary of Transition Services Agreement............................................... 61 EXHIBITS Exhibit A: Bill of Sale and Assignment............................................................... 64 Exhibit B: Intellectual Property Agreement........................................................... 66 Exhibit C: Form of Environmental Access Agreement for the Binghamton Facility....................... 108 SCHEDULES Schedule 1(a): Excluded Assets Schedule 1(b): Encumbrances Schedule 1(c): Subject Assets Schedule 2.7: Retained Receivables Schedule 3.1(e): Certain Approvals and Consents Schedule 3.2: Financial Statements Schedule 3.3: Liabilities Schedule 3.6(a): Transferred Real Estate Schedule 3.6(b): Retained Real Estate Schedule 3.7: Litigation and Orders Schedule 3.8: Material Contracts Schedule 3.9(a): Unobtained Licenses or Approvals Schedule 3.9(b): Governmental Approvals Schedule 3.10: Labor Matters Schedule 3.11(a): Executive Management Schedule 3.11(b): Absent Employees Schedule 3.12: Compliance With Laws Schedule 3.13: Environmental Matters Schedule 3.14(a): Employee Benefits Schedule 3.14(c): Multiple Employer Plans Schedule 3.14(e): Nonqualified Plans Schedule 3.14(f): Non-certified Plans Schedule 3.14(g): Events under Employee Benefit Plan Schedule 3.14(h): Withdrawal Liability Schedule 3.14(j): Funding of Employee Benefit Plans Schedule 3.14(l): Retiree Medical or Life Insurance Plans not Required by Law Schedule 3.19: Insurance Schedule 3.21(a): Government Contracts and Certain Disclosures Schedule 3.21(b): Government Contract Claims and Disputes Schedule 3.21(c): Government Contract Sanctions - Business Irregularities Schedule 3.21(e): Government Contract Rate Matters Schedule 3.22: Government Furnished Equipment Schedule 3.23: Material Changes Schedule 5.3: Conduct of Business iv EXECUTION COPY Schedule 6.1: Employees Schedule 6.4: Actuarial Assumptions and Methods. Schedule 8.2: Filings, Consents and Waiting Periods Applicable to Buyer Schedule 9.2: Filings, Consents and Waiting Periods Applicable to Seller Schedule 10.2: Buyer Representatives with Actual Knowledge
v ASSET PURCHASE AND SALE AGREEMENT THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of January 7, 2000 by and between Raytheon Company, a Delaware corporation ("Seller"), and L-3 Communications Corporation, a Delaware corporation ("Buyer"). WHEREAS, Seller, through its two separate, but interrelated Training Devices Business and its Training Services Business designs, develops, and manufactures advanced simulation and training products characterized by high-fidelity representations of cockpits, operator stations, and aircraft and vehicle simulation, and provides a broad range of training and logistics services and training device support for military training systems and principally for sale to governmental (non-commercial) customers (both of the Training Devices Business and the Training Services Business, currently managed and coordinated out of headquarters for the Training Devices and Training Services units (excluding the Raytheon commercial training unit and the NASA and MOD SIM operations), located in Arlington, Texas being herein collectively the "Businesses"); and WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Businesses and substantially all of the assets of Seller used in connection with the Businesses and Seller desires to assign to Buyer, and Buyer desires to assume from Seller, various, herein-described obligations and liabilities relating to the Businesses, all on the terms and conditions hereinafter set forth (collectively, the "Asset Purchase"); NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: Article I. Certain Definitions As used herein, unless the context otherwise requires, the following terms (or any variant in the form thereof) have the following respective meanings. Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa, and the reference to any gender shall be deemed to include all genders. Unless otherwise defined or the context otherwise clearly requires, terms for which meanings are provided herein shall have such meanings when used in any Schedule hereto and each Collateral Document (hereinafter defined) and certificate executed or required to be executed pursuant hereto or thereto or otherwise delivered, from time to time, pursuant hereto or thereto. "Access Agreement" means the Environmental Access Agreement attached as Exhibit C. "Acquisition Proposal" has the meaning set forth in Section 5.8. "Action" means any action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. 1 "Additional Purchase Price" has the meaning set forth in Section 2.5(a). "Adverse" or "Adversely" when used in conjunction with "Affect," "Change" and "Effect" shall mean, with respect to Seller or Buyer, whichever is the obligor in the context to which such term applies, any event which has or could reasonably be expected to, in a material respect, or to a material degree, (a) adversely affect the enforceability of this Agreement by the obligee, (b) adversely affect the business, properties, operation, assets, financial condition or results of operation of the Subject Assets or the Businesses taken as a whole, (c) impair the obligor's ability to fulfill its obligations under the terms of this Agreement or (d) adversely affect the aggregate rights and remedies of the obligee under this Agreement. "Affiliate" means, with respect to any Person, any other Person directly or indirectly through one or more intermediaries controlling, controlled by or under common control with, such Person, with "control" for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract or otherwise. "Agreement" means this Asset Purchase and Sale Agreement, dated as of the date first written herein above (together with the Appendices and Schedules hereto), as may from time to time be amended, modified, supplemented or waived. "Allocation" has the meaning set forth in Section 2.4(a). "Allowable Tax" has the meaning set forth in Section 7.3. "Antitrust Division" means the Antitrust Division of the United States Department of Justice. "Apportioned Obligations" has the meaning set forth in Section 7.2(b). "Asset Purchase" has the meaning set forth in the recitals to this Agreement. "Assumed Liabilities" means all Contracts, debts, claims, commitments, liabilities and obligations of Seller or any Affiliate of Seller exclusively or primarily arising out of, or in connection with, or relating to, the Businesses (including, without limitation, any assets, operations or activities as it relates to the Businesses as conducted by any predecessor of Seller) or the Subject Assets, whether or not disclosed in this Agreement, the Schedules hereto, or any Collateral Document, including without limitation, (i) any liability based on negligence, gross negligence, strict liability or any other theory of liability, whether in law (whether common or statutory) or equity, (ii) any and all Actions outstanding on the date hereof, or on or following the Closing Date exclusively or primarily arising out of or in connection with, or relating to, the Businesses or the Subject Assets, (iii) any liabilities or obligations arising under any Environmental Law and relating to events occurring in connection with the ownership or operation of the Businesses after the Closing Date, including, but not limited to: (A) liabilities for off-site treatment, transportation, or disposal after the Closing Date of Hazardous Substances; (B) increased liabilities and obligations with respect to any environmental 2 conditions existing as of the Closing Date on the Subject Assets to the extent that such increased liabilities result from actions taken by Buyer after the Closing Date which exacerbate the environmental condition giving rise thereto; and (C) new or increased environmental liabilities and obligations related to the Binghamton Facility and arising from Buyer's failure to comply with or to fulfill its obligations to Seller relating to the Binghamton Facility in this Agreement or any of the Collateral Documents; and (iv) any and all escrow, offset or warranty obligations or commitments for or incurred in connection with the sale of the Seller's (or any such predecessor's) products or services, manufactured or sold as part of the Businesses (whether shipped or rendered prior to or after the Closing). "Bill of Sale and Assignment" has the meaning set forth in Section 2.2(a) hereto. "Binghamton Facility" refers to Seller's leased facility on Colesville Road in Kirkwood, New York. "Businesses" has the meaning set forth in the recitals of this Agreement. "Buyer" has the meaning set forth in the first paragraph of this Agreement. "Buyer Indemnified Parties" has the meaning set forth in Section 10.2. "Buyer Pension Plan" has the meaning set forth in Section 6.4. "Closing" means the consummation of the transactions contemplated by Section 2.1 of this Agreement. "Closing Date" means the date which is three (3) business days after the date on which the last of each of the conditions set forth in Articles VIII and IX shall have been satisfied or waived, or if Seller and Buyer shall mutually agree on a different date for the Closing, the date upon which they shall have mutually agreed. "Closing Documents" has the meaning set forth in Section 2.2(c). "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. "Collateral Documents" means the Bill of Sale and Assignment, Intellectual Property Agreement, the Transition Services Agreement, the Access Agreement on the Binghamton Facility and any other agreements entered into in connection with the Closing, and identified as such jointly by the parties. The Collateral Documents are not part of this Agreement, for all purposes hereof. "Consideration" has the meaning set forth in Section 2.4(a). 3 "Contract" means any note, bond, mortgage, indenture, lease, contract, instrument, License, agreement, sales order, purchase order, open bid or other obligation, arrangement, undertaking, or commitment, oral or written, and all rights therein. "Covered Employees" has the meaning set forth in Section 6.4(a). "Covered Liabilities" has the meaning set forth in Section 10.2. "Disclosing Party" has the meaning set forth in Section 5.12. "Dispute Notice" has the meaning ascribed to such term in Section 2.5(c). "Employees" means the employees of the Businesses employed on the Closing Date including those on pregnancy or sick leave, temporary lay-off or short-term or long-term disability. "Employee Benefit Plans" has the meaning set forth in Section 3.14. "Entity" means any Person other than a natural Person. "Environmental Laws" means all applicable federal, state, municipal and local laws, statutes, ordinances, by-laws, codes, orders, policies, guidelines, decrees, judgements or injunctions, principles of common law and regulations and other directives and decisions rendered in any ministry, department or administrative or regulatory agency relating to environmental health and safety, pollution or protection of the environment or the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. "Environmental Permits" has the meaning set forth in Section 3.13(b). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any entity which is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code), (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code) or (iii) any affiliated service group (as defined in Section 414(m) of the Code), any of which includes Seller. "Excluded Assets" means the following: (a) all cash, cash equivalents, bank accounts and certificates of deposit held by Seller (whether or not related to the Businesses); (b) all insurance policies of Seller and its Affiliates (whether or not relating to the Subject Assets); (c) all Income Tax installments paid by Seller and the right to receive any refund of Taxes paid by Seller, as provided in Section 7.1; 4 (d) all refunds on Allowable Taxes as provided in Section 7.3; (e) any receivables to be eliminated in accordance with Section 2.7; (f) any asset listed or indicated to be retained by Seller in Schedule 1(a), Schedule 2.7, or Schedule 3.6(b); (g) any employee benefit plans or plan assets, except as expressly provided by this Agreement; (h) any other asset of Seller or its Affiliates that is identified by this Agreement, the Schedules or Collateral Documents as not part of the Subject Assets; and (i) any distributor representative or sales representative agreements. "Executive Management" refers to the persons identified on Schedule 3.11(a), together with Robert M. Hansen, Art Fisher and Stephen J. Gluck. "FAR" means the Federal Acquisition Regulation, 48 CFR Chapter 1. "FCPA" means the Foreign Corrupt Practices Act of 1977, as amended. "Final Determination" means (a) with respect to federal Income Taxes, a "determination" as defined in Section 1313(a) of the Code or execution of an Internal Revenue Service Form 870AD and, with respect to Taxes other than federal Income Taxes, any final determination of liability in respect of a Tax that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise (including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns or appeals from adverse determinations), or (b) the payment of Tax by Seller, Buyer or any of their Affiliates, whichever is responsible for payment of such Tax liability under applicable law, with respect to any item disallowed or adjusted by a Taxing Authority, provided that such responsible party determines that no action should be taken to recoup such payment and the indemnifying party, if any, agrees. "Financial Statements" has the meaning set forth in Section 3.2. "FTC" means the United States Federal Trade Commission. "GAAP" means generally accepted accounting principles in the United States. "Government Bid" means any bid, proposal or offer made by Seller or any of its Affiliates in respect to the Businesses prior to the Closing Date which, if accepted, would result or may result in a Government Contract. 5 "Government Contract" means any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, letter contract, purchase order, delivery order, change order or other Contract of any kind between the Seller or any of its Affiliates in respect of the Businesses and (i) any Governmental Authority, (ii) any prime contractor of any Governmental Authority in its capacity as a prime contractor or (iii) any subcontractor with respect to any Contract of a type described in clauses (i) or (ii) above. "Government Disclosure" means any certification, representation, warranty or statement by Seller or any of its Affiliates in that capacity, or any agent or instrumentality thereof, which in any way relates to the operation of the Businesses or the Subject Assets. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any federal, state, local or foreign Entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission, court, or instrumentality of the United States, any State of the United States or political subdivision thereof, and any tribunal or arbitral authority of competent jurisdiction, and any self-regulatory organization. "Hazardous Substances" means each and every element, compound, chemical mixture, contaminant, pollutant material, waste or other substance which is defined, determined or identified as hazardous or toxic under any Environmental Law or the Release of which is prohibited or restricted under any Environmental Law. Without limiting the generality of the foregoing, the term shall mean and include: (a) "hazardous substances" as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") (codified in scattered sections of 26 U.S.C., 33 U.S.C., 42 U.S.C., and 42 U.S.C. ss.9601 et seq.), or the Superfund Amendments and Reauthorization Act of 1986 ("SARA") (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C., and 42 U.S.C.), each as amended, and regulations promulgated thereunder; (b) "hazardous waste" as defined in the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. ss.69011 et seq.), as amended, and regulations promulgated thereunder; (c) "hazardous materials" as defined in the Hazardous Materials Transportation Act, (49 U.S.C. ss.1801 et seq.), as amended, and regulations promulgated thereunder; and (d) "chemical substance or mixture" as defined in the Toxic Substances Control Act ("TSCA") (15 U.S.C. ss.2601 et seq.), as amended, and regulations promulgated thereunder. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 6 "Income Tax" means any federal, state, provincial, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Income Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Indebtedness" means, as of any date of determination, without duplication, (a) any indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (b) any indebtedness evidenced by any note, bond, debenture or other debt security, and (c) any indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business). "Indemnity Period" has the meaning set forth in Section 10.1. "Initial Transfer Amount" has the meaning set forth in Section 6.4(c). "Initial Transfer Date" has the meaning set forth in Section 6.4(c). "IRS" means the Internal Revenue Service. "Intellectual Property" shall have the meaning assigned thereto under the terms of the Intellectual Property Agreement. "Intellectual Property Agreement" shall mean the Intellectual Property Agreement, substantially in the form attached hereto as Exhibit B, entered into between Buyer and Seller on the date hereof to become effective upon and in connection with the Closing, which shall control in the event of any conflict between the terms and provisions hereof and thereof, to the extent that said terms and provisions relate to Intellectual Property. "Knowledge" (including the term "to the knowledge of" or "to the Seller's knowledge") means the actual knowledge of the Executive Management, after due inquiry as shall be evidenced in Seller's case by obtaining appropriate certificates from Executive Management. "Laws" means (i) all constitutions, treaties, statutes, regulations, ordinances, rules, orders, codes, findings and other laws (including the common law) or authoritative pronouncements promulgated by a Governmental Authority, (ii) Governmental Approvals and (iii) orders, decisions, injunctions, judgement awards and decrees of, or other directives rendered by, or agreements with any Governmental Authority, all to the extent published or publicly available. "Leased Transferred Real Estate" has the meaning set forth in Section 3.6(a). "Licenses" means licenses, permits, registrations, approvals, franchises or other authorizations (other than any such license, permit, registration, approval, franchise or other 7 authorization relating to any Intellectual Property), and means, when used as a verb, the act of granting a License. "Lien" means a restriction on voting or transfer or a pledge, lien, mortgage, hypothecation, collateral assignment, purchase option, charge, encumbrance, easement, covenant, restriction, title defect, encroachment or security interest of any kind. "Net Working Capital" shall mean, except as provided below, as calculated in accordance with and subject to Appendix II, as of any date, the sum of (a) billed accounts receivable (including any reserves for doubtful accounts), (b) unbilled accounts receivable including related progress payments and customer advances (but excluding contract loss reserves), (c) inventory (including all related valuation reserves), and (d) current prepaid expenses; reduced by the sum of (e) accounts payable, (f) accrued payroll and related payroll taxes, and (g) accrued vacation. Net Working Capital shall be calculated in accordance with Appendix II hereto (the "Net Working Capital Calculation") "NLRA" means the National Labor Relations Act, as amended. "Novation Agreement" has the meaning set forth in Section 5.13. "Orders" means judgments, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, arbitrator or other tribunal) and whether imposed or entered by consent. "Owned Transferred Real Estate" has the meaning set forth in Section 3.6(a). "Pension Plans" has the meaning set forth in Section 3.14(e). "Permitted Liens" means: (a) Liens for Taxes, assessments and governmental charges due and being contested in good faith and diligently by appropriate proceedings and for which adequate reserves have been established; (b) servitudes, easements, restrictions, rights-of-way, encroachments and other similar rights in real property or any interest therein, provided the same are not of such nature alone or together as to Adversely interfere with or Adversely Affect the current use of the property subject thereto or Adversely Affect its value; (c) Liens for Taxes either not due and payable or due but for which notice of assessment has not been given; (d) Liens that are not material to the Businesses and constitute mechanics', carriers', workers' or like liens incurred in the ordinary course of business for sums not yet due and payable or for sums being contested in good faith; 8 (e) assignments of insurance provided to landlords (or their mortgagees) pursuant to the terms of any lease, and Liens or rights reserved in any lease for rent or for compliance with the terms of such lease; (f) security given to any public utility, municipality or government or to any statutory or public authority in connection with the operations of the Businesses, other than security for borrowed money; (g) the financing encumbrances described in Schedule 1(b), and any other liens, exceptions or encumbrances which do not, individually or in the aggregate, Adversely Affect the use or the enjoyment of the benefits of ownership of such property. "Person" means an individual, a corporation, a limited liability company, a partnership, a joint venture, association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof. "Post-Closing Tax Period" has the meaning set forth in Section 7.2(b). "Pre-Closing Tax Period" has the meaning set forth in Section 7.2(b). "Preliminary Closing Balance Sheet" has the meaning set forth in Section 2.5(a). "Preliminary Net Working Capital Calculation" has the meaning set forth in Section 2.5(a). "Purchase Price" means One Hundred Sixty Million U.S. Dollars (U.S. $160,000,000), representing the aggregate cash consideration to be paid by Buyer to Seller at Closing pursuant hereto, as adjusted in accordance with Section 2.5. "PWC Report" has the meaning set forth in Section 2.5. "Release" means any releasing, disposing, discharging, injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping, dispersal, migration, transporting, placing and the like, including the moving of any materials through, into or upon, any land, soil, surface water, ground water or air, or otherwise entering into the environment. "Represented Employees" has the meaning set forth in Section 6.7. "Resolution Period" has the meaning ascribed to such term in Section 2.5(c). "Retained Liabilities" means those contracts, debts, claims, commitments, obligations and liabilities of Seller and its Affiliates that are not Assumed Liabilities. Notwithstanding the foregoing or any other provision hereof, the following are Retained Liabilities: 9 (a) any liabilities and obligations arising under any Environmental Law and relating to events occurring in connection with the ownership or operation of the Businesses prior to the Closing Date, including, but not limited to, any liability for the off-site treatment, transportation or disposal prior to the Closing Date of Hazardous Substances; (b) any liabilities and obligations arising from any Action affecting the rates and rate schedules submitted to the U.S. Government with respect to the Government Contracts included in the Subject Assets, for years 1996, 1997, 1998, and 1999; (c) any payables to be eliminated in accordance with Section 2.7; (d) any amounts payable by Seller with respect to Taxes and for which Seller is responsible under Article 7; (e) any liabilities and obligations relating to the Excluded Assets; and (f) those items indicated on the Schedules as being Retained Liabilities. "Retained Receivables" has the meaning set forth in Section 2.7. "Returns" means returns, reports and forms required to be filed with any Governmental Authority. "Schedule" or "Schedules" means any Schedule hereto or of or pertaining to any such Schedule. The Schedules and all Appendices hereto are part of this Agreement, for all purposes hereof. "Section 4044 Amount" has the meaning set forth in Section 6.4(d). "Seller" has the meaning set forth in the first paragraph of this Agreement. "Seller Indemnified Parties" has the meaning set forth in Section 10.3. "Seller Pension Plan" has the meaning set forth in Section 6.4(a). "Seller's Agents" has the meaning set forth in Section 5.8. "Separate Counsel" has the meaning set forth in Section 10.4(b). 10 "Subject Assets" means all of the property and assets exclusively or primarily used in connection with the Businesses (other than the Excluded Assets, and other than the Intellectual Property, as to which the Intellectual Property Agreement shall control) including Transferred Real Estate and rights of every nature, kind and description, tangible and intangible (including goodwill) whether real, personal or mixed, whether accrued, contingent or otherwise and whether now existing or hereinafter acquired, including the Subject Assets set forth in Schedule 1(c). "Subsidiary" means, with respect to any Person, any Entity a majority of the capital stock ordinarily entitled to vote for the election of directors of which, or if no such voting stock is outstanding, a majority of the equity interests of which, is owned directly or indirectly, legally or beneficially, by such Person or any other Person controlled by such Person. "Supply Contracts" has the meaning set forth in Section 5.19. "Survey" has the meaning set forth in Section 8.8. "Target Net Working Capital" means $90,724,000. "Taxes" means all taxes (whether federal, state, provincial, local or foreign) based upon or measured by income and any other tax whatsoever, including, but not limited to, gross receipts, profits, capital, business, sales, use, occupation, goods and services, value added, ad valorem, transfer, franchise, withholding, payroll, employment, excise or property taxes, together with any interest or penalties imposed with respect thereto. "Third Party Claim" means any Action by or before any Governmental Authority asserted by a Person other than any party hereto or their respective Affiliates which gives rise to a right of indemnification hereunder. "Title Company" refers to First American Title Insurance Company. "Title Policy" has the meaning set forth in Section 8.8. "Transfer Taxes" has the meaning set forth in Section 7.2(a). "Transferred Employees" has the meaning set forth in Section 6.1. "Transferred Real Estate" means the land, buildings and improvements constituting the facilities identified and described on Schedule 3.6(a) hereto. "True-Up Date" has the meaning set forth in Section 6.4(c). "WARN Act" means the Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss.ss. 2101-2109, as amended. 11 Article II. Sale of Assets: Closing Section 2.1. Purchase and Sale; Assumption of Liabilities. (a) On the basis of and subject to the representations, warranties, covenants and agreements and subject to the satisfaction or waiver of the conditions set forth herein, (x) Buyer hereby agrees to purchase from Seller and in consideration of the Purchase Price Seller hereby agrees to sell, convey, transfer, assign and deliver (or cause to be delivered) to Buyer, at the Closing, free and clear of all Liens (other than Permitted Liens), all of Seller's right title and interest (including any such interest held by an Affiliate of Seller on the date hereof) in and to the Subject Assets, and (y) effective upon the Closing, Seller hereby agrees to assign and Buyer hereby agrees to unconditionally assume and agrees to pay, satisfy, discharge, perform and fulfill when due in accordance with their terms, any and all Assumed Liabilities. All transactions at the Closing shall be deemed to be effective as of 5:00 p.m. on the Closing Date (Dallas Time), and events taking place and periods ending thereafter shall be deemed to have taken place or ended after the Closing Date. (b) Notwithstanding anything to the contrary herein, Seller shall retain all rights under and liabilities with respect to the Excluded Assets and the Retained Liabilities and Buyer shall have no rights under and no liabilities with respect to the Excluded Assets or the Retained Liabilities. Section 2.2. Closing Documents. At the Closing: (a) Seller shall deliver to Buyer: (i) a General Assignment, Assumption and Bill of Sale in substantially the form attached hereto as Exhibit A (the "Bill of Sale and Assignment"), duly executed by Seller and Buyer, (ii) a special warranty deed in a form suitable for registration transferring the fee interest included in Owned Transferred Real Estate from Seller to Buyer, (iii) assignments of Seller's leasehold estates in the Leased Transferred Real Estate, and (iv) all such other good and sufficient instruments of conveyance, assignment and transfer, and such affidavits and other deeds, bills of sale, endorsements, consents, assignments, instruments, as shall be effective to transfer to and vest in Buyer all right, title and interest of Seller and its Affiliates, in and to the Subject Assets. (b) Buyer shall deliver to Seller (i) such good and sufficient instruments of assumption, as shall be effective to cause Buyer to assume the Assumed Liabilities; and (ii) pay by wire transfer the Purchase Price in immediately available funds to the account specified by Seller at least two (2) business days before the Closing. (c) Seller and Buyer shall deliver the certificates and other documents required to be delivered under Articles VIII and IX (together with the other documents otherwise referred to in this Section 2.2, the "Closing Documents"). Section 2.3. Time and Place of Closing. The Closing shall take place on the Closing Date at 10:00 A.M., local time, at the offices of BakerBotts, L.L.P., in New York, New York, or such other place or time as the parties may agree. 12 Section 2.4. Allocation of Asset Purchase Consideration. (a) The Purchase Price and the Assumed Liabilities and all other capitalizable costs (hereinafter, the "Consideration"), to the extent properly taken into account under applicable provisions of the Code, shall be allocated among each of the Subject Assets in accordance with an allocation schedule to be agreed upon between Buyer and Seller within 120 days following the Closing Date (the "Allocation"); provided, however, any allocation schedule agreed between Buyer and Seller shall not allocate more than $133 million of the Purchase Price to assets of Classes I, II, III, and IV as described in U.S. Department of Treasury Regulation ss.1.1060-1T, promulgated pursuant to the Code. Buyer and Seller agree to act in accordance with the allocations contained in the Allocation in any relevant Returns or similar filings. Any dispute regarding the Allocation not resolved within 120 days following the Closing Date, by agreement of the parties shall be resolved by the procedures set forth in Appendix I hereto. (b) Except as required by a Final Determination, Seller and Buyer agree to (i) be bound by the Allocation, (ii) act in accordance with the Allocation in the preparation of financial statements and filing of all Returns under the Code and in the course of any Tax audit, Tax review or Tax litigation relating thereto, and (iii) take no position and cause their Affiliates to take no position inconsistent with the Allocation for federal, state or provincial Income Tax purposes. Section 2.5. Purchase Price Adjustment. (a) As soon as practicable and in any event within 30 days following the Closing, Seller shall deliver to Buyer a preliminary, unaudited balance sheet (the "Preliminary Closing Balance Sheet") relating to the Businesses and a worksheet reflecting the calculation of the Net Working Capital of the Businesses as of the Closing Date (the "Preliminary Net Working Capital Calculation"). Simultaneously with the delivery to Buyer of the Preliminary Closing Balance Sheet and the Preliminary Net Working Capital Calculation, Seller shall either (i) transfer to Buyer (via wire transfer in accordance with instructions to be provided by Buyer) the amount by which Target Net Working Capital exceeds the Net Working Capital shown on the Preliminary Net Working Capital Calculation, or (ii) invoice Buyer for the amount ("Additional Purchase Price") by which the Net Working Capital on the Preliminary Net Working Capital Calculation exceeds the Target Net Working Capital. Buyer shall transfer to Seller the amount of any Additional Purchase Price (via wire transfer in accordance with instructions to be provided by Seller) within seven (7) days of the delivery of such invoice. (b) Upon completion of the Preliminary Net Working Capital Calculation, Seller shall engage Pricewaterhouse Coopers LLP ("PWC"), independent auditors for Seller, to perform an audit of the Preliminary Net Working Capital Calculation in accordance with the principles and procedures set forth in Appendix II hereto. PWC will be instructed to report on the Preliminary Net Working Capital Calculation (the "PWC Report"). The PWC Report and accompanying calculation of Net Working Capital ("Closing Date Net Working Capital") as of the Closing Date (the "Closing Date Net Working Capital Calculation") shall be delivered to Buyer within sixty (60) days following the Closing. During the preparation of the PWC Report and the period of any dispute within the contemplation of this Section 2.5, Buyer shall (i) provide Seller and Seller's authorized representatives with reasonable access to the Subject Assets and the Executive Management who accept employment with Buyer, (ii) provide Seller within fifteen (15) business days after the Closing Date with normal month-end closing financial information for the period ending on the Closing Date, 13 and (iii) reasonably cooperate with Seller and Seller's authorized representatives, including the provision on a timely basis of all information reasonably necessary to enable Seller to prepare the PWC Report. (c) Seller shall deliver a copy of the PWC Report to Buyer promptly after it has been prepared. After receipt of the PWC Report, Buyer shall have thirty (30) days to conduct its review thereof and during such time shall have access to the work papers used in preparation thereof. Buyer and its authorized representatives shall have reasonable access to all relevant books and records and employees of Seller to the extent required to complete their review of the PWC Report. Buyer may dispute only those items reflected on the PWC Report which relate to Closing Date Net Working Capital and only on the basis that such amounts were not arrived at in accordance with Appendix II. Buyer shall only be entitled to dispute the PWC Report if Buyer's good faith estimate of the Closing Date Net Working Capital differs from the Closing Date Net Working Capital as shown on the PWC Report by an amount in excess of $500,000, after taking account of any prior payment of Additional Purchase Price or remittance under Section 2.5(a). Unless Buyer delivers written notice to Seller on or prior to the 30th day after Buyer's receipt of the PWC Report specifying in reasonable detail all disputed items and the basis therefor (a "Dispute Notice") and the amount in dispute is in excess of $500,000, after taking account of any prior payment of Additional Purchase Price or remittance under Section 2.5(a), Buyer shall be deemed to have accepted and agreed to the PWC Report. If Buyer so notifies Seller of its objection to the PWC Report, Buyer and Seller shall, within thirty (30) days following such Dispute Notice (the "Resolution Period"), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding, conclusive and non-appealable. For purposes hereof, "Final Closing Date Net Working Capital" shall mean the Closing Date Net Working Capital as agreed on by Buyer and Seller or determined pursuant to the procedures of Appendix II. If following resolution of any disputed amounts by agreement on or determination of Final Closing Date Net Working Capital, there do not remain in dispute amounts the aggregate net effect of which exceeds $500,000, then all amounts remaining in dispute shall be allocated 50% to Seller and 50% to Buyer. (d) If at the conclusion of the Resolution Period the aggregate net effect of all amounts remaining in dispute exceeds $500,000, then all amounts remaining in dispute shall be submitted to binding resolution in accordance with the provision and procedures of Appendix I hereto, which provisions and procedures are hereby incorporated by reference for all applicable purposes. (e) The Purchase Price shall be (i) increased dollar for dollar to the extent the Final Closing Date Net Working Capital exceeds Net Working Capital reflected in the Preliminary Closing Balance Sheet, subject to and after taking into account any payments made to Buyer or Seller under Section 2.5(a), above or (ii) decreased dollar for dollar to the extent the Final Closing Date Net Working Capital is less than Net Working Capital reflected in the Preliminary Closing Balance Sheet, subject to and after taking into account any payments made to Buyer or Seller under Section 2.5(a). Any adjustments to the Purchase Price made pursuant to this Section 2.5 shall bear interest from the Closing Date through the date of payment at the annual rate of 8.5%. Any adjustments to the Purchase Price made pursuant to this Section 2.5 shall be paid by wire transfer in immediately 14 available funds to the account specified by the party to whom such payment is owed within five (5) business days after the Final Closing Date Net Working Capital is agreed to by Buyer and Seller or any remaining disputed items are ultimately determined by the Accounting Neutral pursuant to subsection (d), above. Section 2.6. Nonassignable Contracts. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract, or any claim, contractual obligation or authorization of a Governmental Authority, lease, commitment, sales, service or purchase order, or any claim, right or benefit arising thereunder or resulting therefrom, if the Asset Purchase would be deemed an attempted assignment thereof without the required consent, approval or novation of a third party thereto and would constitute a breach thereof, or in any way Adversely Affect the rights of Seller or Buyer thereunder. Buyer acknowledges that the ability of the parties to obtain the consents contemplated hereunder may be affected by a change in the dynamics of the relevant market resulting from the Asset Purchase by the Buyer. Notwithstanding the foregoing, if such consent, approval or novation is not obtained, or if the consummation of the Asset Purchase would Adversely Affect the rights of Seller thereunder so that Buyer would not in fact receive the benefit of all such rights, Seller shall cooperate with Buyer in any arrangement designed to provide for the benefits thereof to Buyer, including without limitation subcontracting, sublicensing or subleasing to Buyer or enforcement for the benefit of Buyer of any and all rights of Seller against a third party thereto arising out of the breach or cancellation by such third party or otherwise; and any assumption by Buyer of obligations thereunder in connection with the Asset Purchase which shall require the consent, approval or novation of any third party shall be made subject to such consent, approval or novation being obtained. Any third party cost (other than Contracts with customers of the Businesses) in connection with obtaining any such consent, approval or novation shall be borne 50% by Buyer and 50% by Seller. Nothing in this Section 2.6 should be deemed a waiver by Buyer of its rights to receive an effective assignment of all the Subject Assets. Section 2.7. Intercompany Accounts. As of the close of business on the day immediately preceding the Closing Date: (i) the Third-Party accounts receivable identified on Schedule 2.7 as being retained by Seller ("Retained Receivables") will be assigned to Seller or otherwise settled to Seller's satisfaction, and (ii) all intercompany receivables or payables and loans then existing, except for receivables and payables relating to materials sold or services rendered under Government Contracts and other Third-party Contracts (in each case to the extent reflected in the Final Closing Date Net Working Capital Calculation) between Seller (as it relates to the Businesses), on the one hand, and any other division or Affiliate of Seller, on the other hand, shall be settled to Seller's satisfaction in the case of each of (i) and (ii), by way of capital contribution (with respect to intercompany payables or loans due to any other division or Affiliate of Seller) or by way of dividend in kind (with respect to Retained Receivables). Article III. Representations and Warranties of Seller Seller hereby represents and warrants to Buyer as follows: 15 Section 3.1. Incorporation; Authorization; Conflicts; Etc. (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to transact business in each jurisdiction in which the nature of property owned or leased on behalf of Seller or the conduct of Seller requires it to be so qualified and has the requisite power and authority to own, lease and operate the Subject Assets and to conduct the Businesses, except where the failure to be in good standing or to be duly qualified to transact business, would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses or Seller. (b) Seller has all requisite corporate power and authority to own the properties and assets employed by Seller, to carry on Seller's business as it is now being conducted (including, without limitation, the Businesses), to execute and deliver this Agreement and the Collateral Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Collateral Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate proceedings on the part of Seller. This Agreement has been, and upon Closing the Collateral Documents will be, duly executed and delivered by Seller, and, assuming the due execution hereof and thereof by Buyer, this Agreement constitutes, and the Collateral Documents will constitute, the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with its respective terms. The execution, delivery and performance of this Agreement and the Collateral Documents and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or violate any provision of the organizational documents of Seller or any of its Affiliates, (ii) conflict with or violate any provision of, or be an event that is (or with the passage of time will result in) a violation or default of, or result in the acceleration of or entitle any Person to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the imposition of any Lien upon or the loss of any benefits of any of the Subject Assets pursuant to any material Contract or Order to which Seller or any of its Affiliates is a party or by which any of them is bound, or (iii) conflict with or violate any other material restriction of any kind or character to which Seller or any of its Affiliates or any of their Properties is subject, that, in the case of either of clauses (ii) or (iii), would, individually or in the aggregate, reasonably be expected to Adversely Affect the Businesses. (c) No person other than Buyer has any Contract to purchase or acquire from Seller any of the Subject Assets, other than (i) the sale of inventory in the ordinary course of the Businesses, or (ii) any such Contracts as a result of which Seller will not receive aggregate proceeds of greater than $1,000,000. (d) Subject to Section 2.6 of this Agreement, at the Closing, Seller will deliver to Buyer good and valid title to the Subject Assets free and clear of all Liens, except Permitted Liens. (e) Schedule 3.1(e) indicates all Contracts (other than Leases, which are separately scheduled) of the Businesses for which a Third Party's consent or approval is required for assignment or novation, except for Contracts for which the failure to obtain such consent or approval would not have an Adverse Effect. 16 Section 3.2. Financial Statements. Attached hereto as Schedule 3.2 are copies of unaudited balance sheet and unaudited statements of income of the Businesses as of and for the ten months ended October 31, 1999 (collectively, the "Financial Statements"). The Financial Statements have been prepared for the internal business planning purposes of Seller in the conduct of the Businesses, and do not contain the adjustments necessary to conform with GAAP. All material intercompany receivables, payables or loans have been eliminated from the Financial Statements. Section 3.3. Undisclosed Liabilities. Except as described in Schedule 3.3 or the other Schedules hereto, and except as reflected, reserved against or otherwise disclosed in the Financial Statements, (i) on October 31, 1999, to the Seller's Knowledge there were no material liabilities or obligations relating to the Businesses and (ii) since October 31, 1999 Seller has not incurred any obligations or liabilities relating to the Businesses, other than obligations and liabilities incurred in the ordinary course of business consistent with past practice of the Businesses, except for such liabilities or obligations under clause (ii) above as would not reasonably be expected to have an Adverse Effect on the Businesses. Section 3.4. Absence of Certain Changes. Since October 31, 1999, Seller has carried on the Businesses and conducted its operations and affairs only in the ordinary and normal course consistent with past practice and there has not been any (i) Adverse Change in the financial condition, assets, liabilities or operations of the Businesses (except for any change resulting from general economic, financial or market conditions, or conditions or circumstances generally affecting the industry in which the Businesses is conducted), (ii) material damage, destruction or loss (whether or not covered by insurance) affecting the Subject Assets, (iii) action taken by Seller which, if taken between the date hereof and Closing, would be prohibited by Section 5.3 hereof; or (iv) waiver of rights where such waiver would have an Adverse Change on the Businesses. Section 3.5. Properties; Title to Assets. (a) Seller has (or will have prior to the Closing Date) good and valid title to, or holds by valid and existing lease or License, all real and tangible personal property constituting the Subject Assets, free and clear of all Liens except Permitted Liens. (b) The Subject Assets will, at the Closing Date, include all right, title and interest in and to all real and personal property, tangible and intangible, and exclusively or primarily used by Seller in the operation of the Businesses as conducted on the date hereof, other than (i) the Excluded Assets, (ii) the Intellectual Property, for which the Intellectual Property Agreement will be applicable, (iii) goodwill related to Seller's trademarks, service marks and trade names, including the Trademarks as such term is defined under the Intellectual Property Agreement, and (iv) Seller's goodwill not associated with the Businesses. (c) The Subject Assets that are insurable are, in the reasonable judgment of Seller, adequately insured by financially sound and reputable insurers, except to the extent Seller self-insures on the date hereof, against all risks usually insured against by Persons owning or operating similar assets. All the Subject Assets have been adequately maintained and repaired for their continued operation and are in good working condition, subject to normal wear and tear, except where the failure to maintain and repair would not have an Adverse Effect on the Businesses. 17 Section 3.6. Real Estate. (a) Schedule 3.6(a) sets forth the legal description of the Transferred Real Estate, which Seller represents (and the Title Policy, and Survey shall confirm) includes the land, buildings and improvements utilized by Seller in the operation of the Businesses at that location. Seller has the exclusive right to possess, use and occupy (other than any Person's right to use or occupy the Transferred Real Estate as a result of a Permitted Lien), subject to the terms on any leases of Leased Transferred Real Estate. Seller has good and valid title in fee simple indefeasible to all Transferred Real Estate listed on Schedule 3.6(a) as owned by Seller ("Owned Transferred Real Estate") free and clear of all Liens of any kind other than Permitted Liens. Seller has good and valid leasehold title to all Transferred Real Estate listed on Schedule 3.6(a) as leased by Seller ("Leased Transferred Real Estate"). Seller has such utilities and such rights of ingress and egress to and from the Transferred Real Estate which are adequate for the operation of the Businesses in the ordinary course. Seller represents (and Buyer's Title Policy shall, to the extent available in Texas, affirmatively insure) that, to the Seller's Knowledge: (i) the easement and development standards set forth in exhibits B and C attached to the deeds to the Owned Transferred Real Estate are not violated in any material respect by the existing uses and improvements; and (ii) the grantor repurchase option in exhibit D to such deeds is no longer effective. Schedule 3.6(b) describes any real property interests to be retained by Seller ("Retained Real Estate"). (b) To Seller's Knowledge, Seller enjoys (and as of the Closing Date, Buyer will enjoy) peaceful and quiet possession of the Leased Transferred Real Estate. Buyer has been provided with a true and complete copy of each lease and all amendments thereto pertaining to any Leased Transferred Real Estate. The rental amounts set forth in each lease represent the actual rental being paid, and there are no separate agreements or understanding amending or modifying such rental amounts. (c) To Seller's Knowledge, there are no condemnation proceedings or eminent domain proceedings of any kind pending against the Transferred Real Estate or any portion thereof, and no notice of any threatened condemnation proceedings or eminent domain proceedings of any kind against the Transferred Real Estate Assets or any portion thereof has been received by Seller. (d) To Seller's Knowledge, all improvements comprising part of the Owned Transferred Real Estate and the present use and conditions thereof do not violate: (i) any applicable deed restrictions or applicable covenants, restrictions or other similar agreements; (ii) any existing site plan approvals, zoning or subdivision regulations; or (iii) any urban redevelopment plans, as modified by any duly issued variances. (e) No permits, licenses or certificates pertaining to the ownership or operation of all improvements comprising part of the Transferred Real Estate, other than those that will be transferred with the Transferred Real Estate, are required by any Governmental Authority having jurisdiction over the Transferred Real Estate. All improvements located on any parcel of land comprising part of the Owned Transferred Real Estate are wholly within the lot limits of such parcel and do not encroach on any adjoining premises, and there are no encroachments on such parcel by any improvements located on any adjoining premises. 18 Section 3.7. Litigation; Orders. Except as disclosed in Schedule 3.7, no Action is pending or, to the best of Seller's Knowledge, threatened against Seller, in respect of the Subject Assets or the Businesses, seeking unspecified damages, damages in excess of $100,000 or injunctive relief. Except as described in Schedule 3.7, as of the date hereof, there are no Orders against Seller or its properties or business that would, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses. Section 3.8. Material Contracts. Except as described in Schedule 3.8, the Subject Assets do not include any (a) employment or consulting agreement requiring payments of base compensation in excess of $100,000 per year, (b) distributor or manufacturer's representative Contract which is not terminable on 90 days (or less) notice, (c) partnership, joint venture or similar Contract, (d) note, mortgage, indenture, other obligation, agreement or other instrument for or relating to any Indebtedness of $500,000 or more, (e) Contracts for the purchase by Seller or, after giving effect to the Asset Purchase, Buyer of goods and/or services involving an estimated total future payment or payments in excess of $500,000, (f) Contracts for the sale by Seller, or, after giving effect to the Asset Purchase, Buyer of goods and/or services relating to the Businesses and involving an estimated total future payment or payments in excess of $500,000, (g) other Contracts entered into other than in the ordinary course of business, involving an estimated total future payment or payments in excess of $500,000 (except as to Intellectual Property, as to which the Intellectual Property Agreement shall control), (h) teaming agreements, proprietary information, non-disclosure and non-competition covenants that would be binding on Buyer after the Closing, (i) material leases, licenses, permits, franchises and Governmental Approvals (except for any relating to Environmental Laws, for which Section 3.13 is applicable, and except as may relate to Transferred Real Estate, to which Section 3.6 applies) concerning or relating to the real property used in the Businesses and the loss of which would have an Adverse Effect on the Businesses, (j) collective bargaining agreements, except as terminable on not more than 30 days' notice without penalty or premium, and other material agreements and arrangements relating to or for the benefit of sales representatives, distributors, dealers, agents or other independent contractors except as terminable on not more than 30 days' notice, (k) asset purchase agreements, stock purchase agreements and other acquisition or divestiture agreements, including any agreements relating to the sale, lease or disposal of any assets of the Businesses for consideration in excess of $250,000 (other than sales of inventory in the ordinary course of business), (l) agreements or arrangements with respect to the representation of the Businesses in foreign countries except for Seller representatives as to whom such arrangements are not included in the Businesses, (m) contracts with an Affiliate, (n) any guarantee of the payment or performance of any Person or any agreement to indemnify any Person, or act as a surety, or other agreement to be contingently or secondarily liable for the obligations of any Person other than (A) the endorsement of checks in the ordinary course of business, and (B) guarantees or agreements which individually do not exceed $50,000 or in the aggregate do not exceed $100,000; (o) any outstanding offer to sell goods and services involving an amount in excess of $1,000,000, or (p) any other material Contract, in each case, as to which Seller is the obligor or by which the Subject Assets or the Businesses may be bound. With respect to all such Contracts, except as described in Schedule 3.8, (i) Seller is not, and to Seller's Knowledge, no other party to any such Contract is in material breach thereof or material default thereunder; and (ii) there does not exist under any provision thereof any event that, with the 19 giving of notice or the lapse of time or both, would constitute such a breach or default, except for such breaches, defaults and events as to which requisite waivers or consents have been obtained or which would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses. Each Contract set forth on Schedule 3.8 is in full force and effect. Except as set forth on Schedule 3.8, to Seller's Knowledge no outstanding Government Bid or proposal (or series of related Government Bids and proposals) was bid, such that if accepted such Government Bid or proposal would reasonably be expected to generate a net loss to Seller in the performance thereof. Buyer has been furnished with access to all written Contracts included in the Subject Assets, together with all amendments, modifications or waivers thereto, with accurate summaries of oral Contracts. Section 3.9. Licenses, Approvals, Other Authorizations, Reports, Etc. (a) Except as described in Schedule 3.9(a), Seller has all Licenses (except for Licenses under Environmental Laws for which Section 3.13 is applicable, and for Intellectual Property, as to which the Intellectual Property Agreement shall control) that are required in order to permit Seller to carry on the Businesses as it is presently conducted, except where the failure to have such Licenses would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses or the Subject Assets. All such Licenses are in full force and effect, and Seller is in compliance with the terms of such Licenses, except where the failure of such Licenses to be in full force and effect, or of Seller to be in compliance with such Licenses would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses or the Subject Assets. (b) Except for the filings, notifications, licenses, permits, certificates, registrations, consents and approvals described in Schedule 3.9(b) or which relate solely to the identity of Buyer or the nature of any business carried on by Buyer, Seller is not required to make any filing with, give any notice to or to obtain any License of any Governmental Authority as a condition to the lawful consummation of the transactions contemplated by this Agreement. Section 3.10. Labor Matters. Except as described in Schedule 3.10, Seller is not a party to any collective bargaining agreement or other Contract with any labor union or employee association nor made any written commitments to or conducted any negotiations with any labor union or employee association with respect to any future agreements and to Seller's Knowledge there are no current attempts to organize or establish any labor union or employee association with respect to any employees of Seller or of any contractor or agency with which Seller has a contract for the provision to the Businesses of personnel or the services of personnel, nor is there any certification of any such union with regard to a bargaining unit. Except as described in Schedule 3.10, since January 1, 1998, (i) there has not occurred or, to the Knowledge of Seller, been threatened any material strike, slowdown, picketing, work stoppage, concerted refusal to work overtime or other similar labor activity with respect to any Employees; and (ii) there are no material grievances currently subject to any grievance procedure, arbitration or litigation and there is no representation petition pending or, to the Knowledge of Seller, threatened with respect to any Employee. Section 3.11. Executive Management and Employees. Schedule 3.11(a) lists all Executive Management of each of the Businesses. Seller has provided Buyer a complete and accurate list of the names of all Employees as of October 31, 1999. Schedule 3.11(b) lists all Employees who have been 20 absent continually from work for a period in excess of one month, as well as the reason for their absence. Section 3.12. Compliance with Laws. Except as described in Schedule 3.12, the conduct of the Businesses by Seller complies in all material respects with all Laws and Orders applicable thereto. The various projects for which the Businesses are contractors for the U.S. Government and its agencies are conducted, to the Knowledge of Executive Management, in accordance with the laws, rules and regulations applicable to government contractors, except for such violations or failures to comply, if any, as would not reasonably be expected to have an Adverse Effect on the Businesses. Neither the Executive Management of the Businesses nor to their Knowledge any agent or representative of Seller or the Businesses has offered, paid, promised to pay or authorized the payments of any money, or offer, gift, promise to give or authorization of the giving of anything of value to any person, nor does the Seller know of any such act by the Businesses, in violation of the FCPA. Section 3.13. Environmental Matters. Except as set forth on Schedule 3.13: (a) Seller, in its operation of the Businesses, to the Knowledge of Executive Management, is in compliance with all applicable Environmental Laws except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Subject Assets. (b) Seller has or has applied for all Licenses required under Environmental Laws for the operation of the Businesses as presently conducted (the "Environmental Permits") and there are no violations, and no pending, or, to the Knowledge of Seller, threatened, investigations or proceedings with respect to such Environmental Permits except where the failure to have such Environmental Permits or where the violation, investigation or proceeding relating thereto would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses. (c) Since December, 1997, no written notice, notification, demand, request for information, citation, summons, complaint or Order has been received by, is pending, or, to the Knowledge of Seller, threatened, by any Person against Seller in connection with the Businesses nor has any material penalty been assessed against Seller for any alleged violation of any Environmental Law or liability thereunder, other than where such notice, notification, demand, request for information, citation, summons, complaint or Order has been fully resolved, or where resolution would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on the Businesses or the Subject Assets. Section 3.14. Employee Benefit Plans and Related Matters. (a) Schedule 3.14(a) lists each material pension, retirement, profit-sharing, deferred compensation, bonus, phantom stock, restricted stock plan, stock option plan, stock purchase plan, deferred compensation arrangement, other incentive plan, severance pay plan or policy, supplemental executive retirement plan or policy, or other employee benefit program, arrangement, agreement or understanding, or medical, vision, dental or other health plan, or life insurance or disability plan, or 21 any other employee benefit plan, including any "employee benefit plan" as defined in Section 3(3) of ERISA, in which Seller contributes or is a party or is bound and under which it may have liability and under which employees or former employees of the Assets of the business being purchased by Buyer (or their beneficiaries) are eligible to participate or derive a benefit ("Employee Benefit Plans"). Seller has made available to Buyer true, correct and complete copies of all documents, summary plan descriptions, insurance contracts, third party administration contracts and all other documentation created to embody all Employee Benefit Plans, plus descriptions of any Employee Benefit Plans that have not been reduced to writing; (b) No material liability has been or is expected to be incurred by Seller under or pursuant to the Code or Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the code or ERISA relating to Employee Benefit Plans which could have any adverse impact upon Buyer; (c) Except as disclosed on Schedule 3.14(c) no Employee Benefit Plan is a "multiple employer plan" within the meaning of Section 413(c) of the Code, or a defined benefit plan within the meaning of Section 3(35) of ERISA; (d) Each of the Employee Benefit Plans listed in Schedule 3.14(a) is and has at all times been in compliance in all material respects with all applicable provisions of ERISA, the Code and other applicable Law; (e) Except as disclosed on Schedule 3.14(e), each Employee Benefit Plan that is an "employee pension benefit plan" as defined in Section 3(2) of ERISA (each a "Pension Plan") which is intended to meet the requirements of Section 401(a) of the Code now meet and since their inception have met, the requirements for qualification under Section 401(a) of the Code and nothing has occurred which would adversely affect the qualified status of any such Pension Plan other than such occurrences as may be corrected without resulting in an Adverse effect. Except as disclosed on Schedule 3.14(e), the IRS has issued a favorable determination letter with respect to the qualification under the Code of each Pension Plan and the IRS has not taken any action to revoke any such letter. Except as disclosed on Schedule 3.14(e), nothing has occurred since the date of the most recent IRS favorable determination letter which would reasonably be expected to cause the loss of such qualification or the imposition of any material liability or penalty under the Code; (f) Each fiduciary and every plan official of each Employee Benefit Plan is bonded to the extent required by Section 412 of ERISA. Except as disclosed on Schedule 3.14(f), those sections of all annual reports heretofore filed with the IRS, the Department of Labor and the Pension Benefit Guaranty Corporation by or on behalf of every Employee Benefit Plan which were required to be certified were only certified without qualification by the accountants or actuaries of such Employee Benefit Plan; (g) Except as specifically set forth in Schedule 3.14(g), the execution and performance of the transactions contemplated by this Agreement will not (either alone or upon the occurrence of any additional or subsequent event) constitute an event under any Employee Benefit Plan or individual agreement that will or may result in any payment (whether of severance pay or otherwise), 22 acceleration, vesting or increase in material benefits with respect to any employee, former employee, consultant, agent or director of Seller. No payment will be made by Seller to any employee, former employee, director, consultant or agent of Seller which will or could be characterized as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code; (h) Except as disclosed on Schedule 3.14(h), at no time has Seller or any ERISA Affiliate contributed to, been required to contribute to, or incurred any withdrawal liability (within the meaning of Section 4201 of ERISA) with respect to any Employee Benefit Plan which is a multi-employer plan as defined in Section 3(37) of ERISA; (i) Each Employee Benefit Plan that is a "group health plan" (within the meaning of Section 4980B of the Code) maintained by Seller or any ERISA Affiliate has been administered in material compliance with the coverage continuation requirements contained in the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and as provided under Section 4980B of the Code and any regulations promulgated or proposed under the Code; (j) With respect to all Employee Benefit Plans which are funded, or are required by applicable Law to be funded, except as disclosed on Schedule 3.14(j), the present value of all accrued benefits (vested and non vested) of each such Employee Benefit Plan as of the Closing Date, will not exceed the fair market value of the assets of each such Employee Benefit Plan as of the Closing Date; (k) Seller and ERISA Affiliate have made all contributions required to be made to each Employee Benefit Plan under the terms of the plan and applicable Law. No prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred with respect to any Employee Benefit Plan listed, which could subject any Employee Benefit Plan or any related trust, Seller, Buyer, any ERISA Affiliate, or any director or employee of any of them to any material tax or penalty imposed under Section 4975 of the Code or Section 502(i) or 502(1) of ERISA, either directly or indirectly, and whether by way of indemnity or otherwise; and (l) Except as disclosed on Schedule 3.14(l), Seller does not maintain, sponsor or contribute to any plan or program providing retiree medical or life insurance benefits, except to the extent required by applicable Law. Section 3.15. Disclaimer Regarding Assets. Except as otherwise expressly provided in this Agreement or any Collateral Document, Buyer acknowledges that Seller has not made, and Seller hereby expressly disclaims and negates, any representation or warranty, express or implied, relating to the condition of any immovable property, movable property, equipment, inventory, machinery, fixtures and personal property constituting part of the Subject Assets (including, without limitation, (i) any implied or express warranty of merchantability, (ii) any implied or express warranty of fitness for a particular purpose, (iii) any implied or express warranty of conformity to models or samples of materials, (iv) any rights of Buyer under appropriate statutes to claim diminution of consideration or return of the Purchase Price, (v) any implied or express warranty of freedom from vices or defects, whether known or unknown, (vi) any implied or express warranty of freedom from patent or trademark infringement, (vii) any and all implied warranties existing under applicable law now or 23 hereafter in effect, and (viii) any implied or express warranty regarding environmental condition) it being the express intention of Buyer and Seller that (except to the extent expressly provided herein) the immovable property, movable property, equipment, inventory, machinery, fixtures and personal property shall be acquired by or conveyed to Buyer as is and in their present condition and state of repair and Buyer represents to Seller that Buyer has made or caused to be made such inspections with respect to the immovable property, movable property, equipment, inventory, machinery, fixtures and personal property as Buyer deems appropriate (including, without limitation, the environmental condition thereof) and (except to the extent provided to the contrary herein) Buyer will accept the immovable property, movable property, equipment, inventory, machinery, fixtures and personal property as is, in their present condition and state of repair. Section 3.16. Brokers, Finders. Other than First Union Securities, Inc. (and the Bowles Hollowell Conner division of First Union Capital Markets Corp.), the fees and expenses of which will be paid by Seller, Seller has not employed nor is it subject to any valid claim of, any broker, finder, consultant or other intermediary in connection with the Asset Purchase who might be entitled to a fee or commission from Buyer in connection therewith. Section 3.17. No Implied Representation. Notwithstanding anything contained in this Agreement, it is the explicit intent of each party hereto that Seller is making no representation or warranty whatsoever, express or implied, beyond those expressly given in this Agreement or the Collateral Documents, including any implied warranty or representation as to condition, merchantability, or suitability as to any of the Subject Assets and it is understood that, except as expressly warranted in this Agreement or the Collateral Documents, Buyer takes the Subject Assets as is and where is. It is understood that any cost estimates, projections or other predictions contained or referred to in the Schedules or in the offering materials that have been provided to Buyer are not and shall not be deemed to be representations or warranties of Seller. Section 3.18. Prohibited Transactions. To the Knowledge of Seller, none of Seller, its Affiliates or any of their respective employees, officers or other representatives has offered, paid, or agreed to pay any Person, including any Governmental Authority, directly or indirectly, any money or any other thing of value for the purpose of, or with the intent of obtaining or retaining any business included in the Businesses, other than pursuant to the Contracts included in the Subject Assets. Section 3.19. Insurance. Seller has insured the Subject Assets against loss or damage in the amount, scope and coverage usually and customarily obtained in the industry in which the Businesses operates, and such insurance coverage will be continued in full force and effect to and including the Closing Date. Schedule 3.19 sets out all insurance policies (specifying the insurer, the amount of coverage, the type of insurance, the policy number and any pending claims thereunder) maintained by Seller on the Subject Assets as of the date hereof. Seller is not in default in any material respect with regard to any of the provisions contained in any such insurance policy and has not failed to give any notice or present any claim under any such insurance policy in a due and timely fashion. 24 Section 3.20. Year 2000. Seller has adopted and implemented a commercially reasonable plan to investigate and correct any "year 2000 problems" associated with (i) the operation of the Businesses; and (ii) the products manufactured and distributed by the Businesses. Seller, however, does not represent or warrant that this plan will find and correct all "year 2000 problems" which may arise in connection with the operation of the Businesses or the products manufactured thereby. Each of the computer-based systems of Seller used in connection with the Businesses, including its information data bases, accounting systems and data processing systems, as well as all other computer software or hardware owned or used by Seller in connection with the Businesses and each of the Subject Assets which are computer based, if properly operated and maintained, (a) records, stores, processes, calculates, presents and, where appropriate, inserts correctly entered and formatted time and accurate dates and calculations for calendar dates falling on or after (and if applicable, spans of time including) January 1, 2000, and records, stores, processes, calculates and presents correctly entered and formatted information or data dependent on or relating to such dates with the same functionality, data integrity and performance, as such item records, stores, processes, calculates and presents calendar dates on or before December 31, 1999, and in such fashion as to respond to two-digit date input in a way that eliminates all ambiguities as to the century of concern, and treats the year 2000 as a leap-year and correctly and accurately records and processes data and information with respect thereto; (b) loses no functionality with respect to the introduction of records, including back-up and archived information or data, containing dates falling on or after January 1, 2000; and (c) is interoperable with other software and hardware that may deliver records to such computer-based systems of Seller and computer-based Subject Assets or receive records from such computer-based systems of Seller and computer-based Subject Assets, or interact with such computer-based systems of Seller and computer-based Subject Assets, provided that such other software or hardware complies with the foregoing clauses (a) and (b) and is otherwise functional. Seller has made inquiries of each of its material suppliers used in connection with the Businesses regarding the Year 2000 readiness of all computer-based systems, software and hardware supplied to it by such suppliers, and has not received any notice that such systems, software and hardware will not be Year 2000 ready. Section 3.21. Government Contracts. (a) To the Knowledge of Executive Management, except as set forth in Schedule 3.21(a), (i) none of the Employees, consultants or agents with respect to the Businesses is or during the last three (3) years has been (except as to routine security investigations) under administrative, civil or criminal investigation, indictment or information by any Governmental Authority, (ii) there is not any pending audit or investigation of the Businesses or any of their respective Employees or representatives with respect to the Businesses resulting in any Adverse finding with respect to any alleged irregularity, misstatement or omission arising under or relating to a Government Contract or Government Bid; and (iii) during the last three years, none of the Businesses has made a Government Disclosure with respect to any alleged irregularity, misstatement or omission arising under or relating to a Government Contract or Government Bid included in the Subject Assets or relating to the Businesses, in each case of (i) through (iii), above other than routine inquiries, audits and reconciliations such as do not constitute an Adverse Change. Except as set forth in Schedule 3.21(a), to the Knowledge of Executive Management, neither the Businesses or their Employees has made misstatements or omissions (other than may have been innocent and immaterial) arising under or 25 relating to any Government Disclosure that has led or is expected to lead, either before or after the Closing Date, to any of the consequences set forth in clause (i) or (ii) of the immediately preceding sentence or any other material damage, penalty assessment, recoupment of payment or disallowance of cost. (b) Except as set forth in Schedule 3.21(b), to the Knowledge of Executive Management, there are (i) no outstanding claims against either by the U.S. Government or by any non-U.S. government or by any prime contractor, subcontractor or vendor arising under or relating to any Government Contract or Government Bid included in the Subject Assets or relating to the Businesses and (ii) no disputes between the Businesses and the U.S. Government or any non-U.S. Government under the Contract Disputes Act or any other federal statute or between the Businesses and any prime contractor, subcontractor or vendor arising under or relating to any such Government Contract or Government Bid included in the Subject Assets or relating to the Businesses, except such as in each case are not reasonably expected to have an Adverse Effect on the Businesses. (c) Except as set forth in Schedule 3.21(c), neither the Businesses nor any of their respective Employees, consultants or agents is (or during the last three years has been) suspended or debarred from doing business with the U.S. Government or any non-U.S. government or is (or during such period was) the subject of a finding of non-responsibility or ineligibility for U.S. Government or non-U.S. government contracting. (d) To Seller's Knowledge, no misstatement contained in schedules of Government-furnished equipment, provided to a Governmental Authority under any Government Contract, are reasonably expected to have an Adverse Effect. (e) Except as set forth on Schedule 3.21(e), the rates and rate schedules submitted to the U.S. Government with respect to the Government Contracts included in the Subject Assets have been closed for all years prior to 1996. Section 3.22. Government Furnished Equipment. Schedule 3.22 incorporates by reference to their location the most recent schedules delivered to the U.S. Government or any non-U.S. government which identifies by description or by inventory number certain equipment and fixtures loaned, bailed or otherwise furnished to or held by the Businesses by or on behalf of the U.S. Government or any non-U.S. government. Such schedules are maintained in the files of the respective projects and were accurate and complete and, as of the Closing Date, would contain only those additions and omit only those deletions of equipment and fixtures that have occurred in the ordinary course of business, except for such inaccuracies that could not reasonably be expected to Adversely Affect the Businesses, any of the Subject Assets, or Seller. Section 3.23. Absence of Changes. Except as set forth in Schedule 3.23, or the other Schedules hereto, since October 31, 1999, Seller has not: (a) suffered any material Adverse Effect in respect of the Subject Assets or the Business; and 26 (b) operated the Businesses other than in the ordinary course. Section 3.24. Schedules. The inclusion of any item on any Schedule to this Agreement shall not be construed as an indication that such item is material in any respect. Article IV. Representations and Warranties of Buyer Buyer hereby represents and warrants to Seller as follows: Section 4.1. Incorporation; Authorization; Etc. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. Buyer has full corporate power to execute and deliver this Agreement and the Collateral Documents, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Collateral Documents, the performance of Buyer's obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Buyer and no other corporate proceedings or actions on the part of Buyer, its Board of Directors or stockholders are necessary therefor. The execution, delivery and performance of this Agreement and the Collateral Documents will not (i) violate any provision of the charter or bylaws or similar organizational instrument of Buyer or any of its Subsidiaries, (ii) violate any provision of, or be an event that is (or with the passage of time will result in) a violation of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the imposition of any lien upon or the creation of a security interest in any of Buyer's or any of its Subsidiaries' assets or properties pursuant to any Contract or Order to which Buyer or any of its Subsidiaries is a party or by which Buyer or any of its Subsidiaries is bound, or (iii) violate or conflict with any other material restriction of any kind or character to which Buyer or any of its Subsidiaries is subject, that, in the case of either of clauses (ii) or (iii), would, individually or in the aggregate, reasonably be expected to have an Adverse Effect on Buyer or Buyer and its subsidiaries, taken as a whole. This Agreement has been, and upon Closing the Collateral Documents will be, duly executed and delivered by Buyer, and, assuming the due execution hereof and thereof by Seller, this Agreement constitutes, and the Collateral Documents will constitute, the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its respective terms. Section 4.2. Brokers, Finders, Etc. Buyer has not employed, and is not subject to the valid claim of, any broker, finder, consultant or other intermediary in connection with the transactions contemplated by this Agreement who might be entitled to a fee or commission from Seller in connection with such transactions. Section 4.3. Consents, Approvals, Other Authorizations. Other than filings under the HSR Act, no filing, notice to or authorization, consent or approval of, any Governmental Authority is required to be made, filed, given or obtained by Buyer or any of its Affiliates, in connection with the consummation of the Asset Purchase except for (i) those that become applicable solely as a result of the specific regulatory status of Seller, or (ii) the failure to make, file, give or obtain which would not, individually or in the aggregate, reasonably be expected to have an Adverse Effect on Buyer. 27 Section 4.4. Acquisition of Subject Assets and Operation of the Businesses for Investment. Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of the Businesses and the Subject Assets, its assumption of the Assumed Liabilities and its operation of the Businesses. Section 4.5. Financial Capability. Buyer has all requisite financial capacity, and without limitation has, or has received firm written commitments from financially responsible third parties to obtain, all funds necessary to consummate the Asset Purchase and to pay related fees and expenses. Section 4.6. No Financing Contingency. Buyer's financial condition is fairly reflected in its most recent Report on Form 10-Q, and Buyer's obligations under this Agreement are not subject to any contingency of financing. Article V. Covenants of Seller and Buyer Section 5.1. Investigation of Business; Access to Properties, Records. (a) Seller shall afford to representatives of Buyer reasonable access to the offices, plants, properties, books and records, employees and other representatives of Seller during normal business hours, in order that Buyer may have full opportunity to make such investigations as it desires of the affairs of Seller to the extent such affairs relate to the Businesses, the Subject Assets and the Assumed Liabilities; provided, however, that such investigation shall not unreasonably disrupt the personnel and operations of Seller. At Buyer's request and expense, Seller shall cooperate with Buyer in arranging any meetings as Buyer may reasonably request with (i) Employees; (ii) customers, suppliers, distributors or others who have a business relationship with Seller in respect of the Businesses; and (iii) auditors and accountants engaged to provide services to Seller who have knowledge of matters relating to the Businesses or the Subject Assets. Seller shall furnish, or cause to be furnished, to Buyer and its representatives financial and operating data and other information that is available or can be compiled without reasonable disruption of Seller's business relating to the Businesses as Buyer shall from time to time reasonably request. If, in the course of any investigation pursuant to this Section 5.1, any of Buyer's representatives listed on Schedule 10.2 hereof has actual knowledge of any material breach of any representation or warranty contained in this Agreement or any circumstances or conditions that upon Closing would constitute such a breach, Buyer covenants that it will inform Seller. Any failure of Buyer to inform Seller pursuant to the next preceding sentence will not affect any indemnification claim of Buyer except to the extent provided in Section 10.2(b). (b) Any information provided to Buyer or its representatives pursuant to this Agreement shall be held by Buyer and its representatives in accordance with, and shall be subject to the terms of, the Confidentiality Agreement dated October 1, 1999 by and between Seller and Buyer, which is hereby incorporated in this Agreement as though fully set forth herein. Upon the Closing, such Confidentiality Agreement shall terminate automatically without further action by the parties. (c) Buyer agrees to (i) maintain the books and records of the Businesses, consistent with past practice, and not to destroy or dispose of any thereof for a period of six (6) years from the Closing 28 Date or such longer time as may be required by Law, and (ii) following the Closing Date to afford Seller, its accountants and counsel, during normal business hours, upon reasonable request, reasonable access to such books, records and other data and to the Transferred Employees to the extent that such access may be requested for responding to Governmental Authorities, defending or prosecuting litigation and preparation of Income Tax Returns and other tax filings (in case of (ii) Seller will reimburse Buyer's actual, out-of-pocket cost). Buyer shall have the same rights, and Seller the same obligations, as are set forth above in this Section 5.1(c), with respect to any books, records and other data or personnel of Seller pertaining to the Businesses, the Subject Assets or to the Assumed Liabilities that are retained by Seller, with the exception of Returns relating to Taxes that are not the responsibility of Buyer. Section 5.2. Commercially Reasonable Efforts; Obtaining Consents. (a) Subject to the terms and conditions herein provided, each of Seller and Buyer agrees to use commercially reasonable efforts to take, or cause to be taken, all actions 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 the other in connection with the foregoing, including commercially reasonable efforts (i) to obtain all necessary waivers, consents and approvals from other parties to material Contracts and Licenses, (ii) to obtain all consents, approvals and authorizations that are required to be obtained under any Law including without limitation those under the HSR Act, (iii) to lift or rescind any Order adversely affecting the ability of the parties hereto to consummate the Asset Purchase, (iv) to effect all necessary registrations and filings including filings under the HSR Act and submissions of information requested by Governmental Authorities (it being understood by the parties that the filings required of such party or any of its subsidiaries or Affiliates under the HSR Act with respect to the transactions contemplated by this Agreement shall be filed promptly following the date of this Agreement), and (v) to fulfill all conditions to this Agreement (it being understood that such efforts shall not include any requirement of either party to expend material sums of money, divest any assets or businesses, or grant any material financial or other accommodation). Seller and Buyer shall furnish to each other such information and assistance as the other may reasonably request in connection with their preparation of any such required filings or submissions. Seller and Buyer further covenant and agree, with respect to a threatened or pending Order or Law that would adversely affect the ability of the parties hereto to consummate the Asset Purchase, to use their respective commercially reasonable efforts to prevent the entry, enactment or promulgation thereof, as the case may be (it being understood that such efforts shall not include any requirement of Seller to expend material sums of money, divest any assets or businesses, or grant any material financial or other accommodation). (b) Seller and Buyer shall cooperate to obtain third party consents to the assignment or novation of Contracts, including the software licenses listed on Schedule 3.1(e), using commercially reasonable efforts to minimize the costs to both Buyer and Seller. (c) Buyer agrees to use commercially reasonable efforts to resolve such objections, if any, as the Antitrust Division, the FTC or any other Governmental Authority may assert with respect to the Asset Purchase under any applicable law or regulation prior to the expiration of any applicable waiting periods under the HSR Act; provided, however, that Buyer shall not be required (i) to divest assets or businesses; or (ii) to provide any undertakings or comply with any condition that, in its 29 good faith judgment, would diminish Buyer's rights under this Agreement, or would materially alter the benefits to Buyer contemplated by this Agreement. (d) In case at any time after the Closing any further action is reasonably necessary or desirable to carry out the purposes of this Section 5.2, the proper officers and/or directors of Buyer or Seller, as the case may be, including, to the extent applicable, any Entity designated to hold the Subject Assets, shall take all such necessary action. (e) Either party hereto shall promptly inform the other of any material communication from the Antitrust Division, the FTC or any other Governmental Authority regarding any of the transactions contemplated hereby. If either party or any Affiliate thereof receives a request for additional information or documentary material from any such Governmental Authority with respect to the transactions contemplated hereby, then such party will endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request. Buyer will advise Seller promptly in respect of any understandings, undertakings or agreements (oral or written) which Buyer proposes to make or enter into with the Antitrust Division, the FTC or any other Governmental Authority in connection with the transactions contemplated hereby. Section 5.3. Conduct of the Businesses. From the date hereof through the Closing, except as described in Schedule 5.3 or as otherwise expressly provided for in this Agreement and, except as consented to or approved by Buyer in writing, Seller covenants and agrees that, with respect to the Businesses: (a) Seller shall conduct the Businesses in the ordinary and usual course in all material respects in accordance with past practices; (b) except as otherwise provided for in this Agreement, Seller shall not (i) assume, issue, incur or guarantee any obligation for Indebtedness, any debt securities or warrants or rights to acquire any debt securities, enter into any "keep well" or other arrangement to maintain the financial statement condition of any Person or enter into any Contract having the economic effect on the Businesses of any of the foregoing, in any case, which would constitute, or increase Buyer's obligation respecting, an Assumed Liability, (ii) cancel or compromise, except in the ordinary course of business consistent with past practice, any debts owed to it that would constitute, or decrease the value of Buyer's right respecting, a Subject Asset or (iii) waive or release any rights of material value relating to the Subject Assets or (iv) make any Tax election, make or change any method of accounting with respect to Taxes, or settle or compromise any proceeding relating to any material Tax regarding the Businesses; (c) except in the ordinary course of business and consistent with past practice, Seller shall not (i) sell, transfer, distribute as a dividend in kind or otherwise dispose of any Subject Assets (other than inventory in the ordinary course of business consistent with past practice), (ii) create or permit to exist any new Lien on any Subject Asset (other than a Permitted Lien), or (iii) enter into any joint venture, partnership or other similar arrangement or form any other new material arrangement for the conduct of the Businesses; 30 (d) except for increases in the base compensation for employees who are not officers of the Businesses or performing the duties of officers, in the ordinary course of business or as required by Law, Contract or the terms of any Plan existing on the date hereof, Seller shall not hereafter (i) increase the base compensation of, or enter into any new bonus or incentive agreement or arrangement not consistent with Seller's policies respecting such agreements with, any of the Employees; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit to any Employee, whether past or present not otherwise required by Contract or under any Plan in effect on the date hereof; (iii) enter into any new, or amend any existing, employment, severance, consulting or other compensation agreement with any Employee; or (iv) commit itself to any pension, profit sharing, deferred compensation, group insurance, severance pay, retirement or other Plan, fund or similar arrangement in addition to those in effect on the date hereof and intended exclusively for the Employees, or amend or commit itself to amend any of such Plans or similar plans intended for the benefit of Seller's employees generally if the effect thereof would exclusively benefit the Employees; provided, however, that retention agreements, bonuses, severance payments or other incentives committed to or to be committed to in connection with or in contemplation of the Asset Purchase or a similar transaction as described in Schedule 5.3 may be paid by Seller at or prior to Closing; (e) Seller shall maintain its books, accounts and records relating to the Businesses in the usual, regular and ordinary manner, on a basis consistent with past practice, and comply with and perform in all material respects all Laws and Contracts and other obligations applicable to it or the Businesses; (f) Seller shall maintain in full force and effect insurance with respect to the Subject Assets, the Employees and the Business consistent with past practices; (g) Seller shall not enter into any single, new Contract which is not terminable without penalty by Seller following Closing which involves consideration in excess of $2,000,000.00; (h) Seller shall not (i) make any prepayment or other payment on or in respect of indebtedness unless required by the terms thereof on the date of this Agreement or (ii) enter into or engage in any transaction with any Affiliate except as is required by an existing agreement and such additional arrangements as shall occur in the ordinary course of business, all as set forth or summarized in Schedule 5.3; (i) Seller shall not acquire or agree to acquire in any manner any business or any Entity; (j) Seller shall not acquire or agree to acquire any assets that are material, individually or in the aggregate, to the Businesses, or make or agree to make any capital expenditures except as may be necessary to maintain and protect that Subject Assets and which under GAAP are treated as capital expenditures; (provided that the aggregate amount of capital expenditures permitted by this exception shall not exceed $50,000 for any individual expenditure and $250,000 in the aggregate) other than as indicated on Schedule 5.3; 31 (k) Seller shall not pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction, of liabilities or obligations in the ordinary course of business consistent with past practice or in accordance with their terms as in effect on the date hereof, or transfer any rights of material value or modify or change in any document, other than in the ordinary course of business consistent with past practice; (l) Seller shall not change any material accounting principle; (m) Seller shall not make any changes in Seller's methods, practices or procedures relating to accounts receivable, accounts payable or credit policies (including without limitation extending its trade receivables or making any changes to its receivables write-off policies or changing its payables cycle policies); and (n) Seller shall not, and shall not permit any of its Affiliates to, authorize any of, or commit or agree to take any of the foregoing actions in Sections 5.3(b)-(m). Section 5.4. Preservation of Business. From the date hereof to the Closing Date, subject to the terms and conditions of this Agreement, Seller shall use commercially reasonable efforts (i) to preserve the Subject Assets and the Businesses intact, (ii) to keep available to Buyer the services of the Employees, and (iii) to preserve the good will of customers and others having business relations with Seller to the extent such business relations relate to the Subject Assets. Section 5.5. Further Assurances. Seller and Buyer agree that, from time to time, whether before, at or after the Closing Date, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be reasonably required or desirable to carry out the purposes and intent of this Agreement, including (i) allocating rights and obligations under Contracts and other arrangements, if any, relating to business of Seller and its Affiliates (other than the Businesses), on the one hand, and relating to the Businesses on the other, and (ii) allocating rights and obligations under Contracts and other arrangements, if any, relating to the Assumed Liabilities. In case at any time after the Closing Date, any further action is reasonably necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary or desirable action. Section 5.6. Public Announcements. Seller and Buyer will consult with each other before issuing, or permitting any agent or Affiliate to issue, any press releases or otherwise making or permitting any agent or Affiliate to make, any public statements with respect to this Agreement and the transactions contemplated hereby, except as may be required by applicable Law or any listing agreement with any securities exchange. Section 5.7. Services. Buyer and Seller shall negotiate in good faith on a "Transition Services Agreement" providing for the provision of the services summarized on Appendix III hereto or otherwise reasonably agreed to by Buyer and Seller as necessary for the continued operation of the Businesses, at Seller's cost (including general and administrative overhead allocation). 32 Section 5.8. Other Offers. From the date hereof until the termination of this Agreement in accordance with Article XI hereof, Seller will not, and will take reasonable actions to the end that its Affiliates will not, and will not authorize or permit any of their respective officers, directors or employees or any investment bankers, financial advisors, attorneys, accountants or other representatives (collectively, "Seller's Agents") to, directly or indirectly, (i) take any action to solicit, initiate or encourage or take any other action to facilitate (including by way of furnishing information or assistance) any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to any Acquisition Proposal (as hereinafter defined), (ii) enter into discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain an Acquisition Proposal or (iii) authorize or permit any of the Seller's Agents to take any of the foregoing prohibited actions. The term "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, the acquisition of any material portion of the Subject Assets or the Businesses, other than the transactions contemplated by this Agreement. Seller will not enter into any negotiations with respect to any Acquisition Proposal by any Person other than the Buyer. Section 5.9. Non-Compete and Non-Solicitation. (a) Prior to January 1, 2004, Seller will not, and will cause its Affiliates not to, directly or indirectly, develop, manufacture, sell, distribute, support or provide products and services that compete with the types of products and services developed, manufactured, sold, distributed, supported or serviced by the Businesses (including their predecessors) on or prior to the Closing Date; provided, however, that this provision will not restrict or prevent other units of Seller from selling the types of products or providing services which they sell or provide on the date hereof. (b) Seller agrees that for a period of twenty-four (24) months from and after the date hereof it shall not, and it shall cause each of its Affiliates not to, without Buyer's prior written consent, employ or solicit for employment any Person that it or they know to be employed by Buyer, (or any of its Affiliates) in the Businesses (at that time) and in connection with the Businesses, unless such Person's employment with Buyer or its Affiliates was terminated by Buyer or its Affiliates prior to such action by Seller, or any of its Affiliates; provided nothing herein shall apply to general advertisements or solicitation not directed at the Employees. Section 5.10. Notices of Certain Events. Each of Seller and Buyer shall promptly notify the other of: (a) any notice or other communication of which either party has knowledge from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any Actions commenced, or to the knowledge of either party, threatened against, relating to, involving or otherwise affecting, the Subject Assets or the Businesses (including the Transferred Real Estate) which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Articles III, IV or V or which relate to the consummation of the transactions contemplated by this Agreement; and 33 (c) any Adverse Change in the business, assets, condition (financial otherwise), operations of the Businesses or the Subject Assets or of any event that would materially impair Seller's ability to perform its obligations under this Agreement. Section 5.11. No Inconsistent Action. The parties hereto shall not take any action inconsistent with their obligations under this Agreement or which could materially hinder or delay the consummation of the transactions contemplated by this Agreement. None of the parties hereto shall take or omit to take any action that could result in any of their respective representations and warranties not being true in all material respects on the Closing Date. Section 5.12. Post-Closing Confidentiality. The parties agree that, for a period of ten (10) years following the Closing Date: (a) Seller will not, and will cause its Affiliates not to, disclose, give, use, or otherwise divulge any Buyer's confidential or secret information, including with respect to the Businesses or the Subject Assets, and (b) Buyer will not, and will cause its Affiliates not to, disclose, give, use or otherwise divulge any of Seller's confidential information not related to the Businesses or the Subject Assets, including in each case but not limited to any technology, process, trade secrets, know-how, other intellectual property rights, strategies, financial statements or other financial information not otherwise publicly available, forecasts, operations, business plans, prices, discounts, products, product specifications, designs, plans, data or ideas). Notwithstanding the foregoing, a party may disclose such information (i) if compelled to disclose the same by judicial or administrative process or by other requirements of applicable Law or of any national securities exchange (but subject to the following provisions of this Section), (ii) if the same currently is, or hereafter is, in the public domain through no fault of such party, (iii) if the same is later acquired by such party from another source and such party is not aware that such source is under an obligation to another Person to keep such information confidential, or (iv) if the same is independently developed by Affiliates of such party without any knowledge thereof. If such party or any of its Affiliates (the "Disclosing Party") is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any such information, the Disclosing Party shall provide the other party with prompt written notice of any such request or requirement so that the other party may seek, at its expense, a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. If, in the absence of a protective order or other remedy or the receipt of a waiver by the other party, the Disclosing Party nonetheless, based on the advice of counsel, is required to disclose such information to any tribunal, the Disclosing Party, without liability hereunder, may disclose that portion of such information which such counsel advises the Disclosing Party it is legally required to disclose. The parties agree to give reasonable notice to its employees of the ongoing requirements of this Section. Notwithstanding the foregoing, neither party shall be liable for damages for any inadvertent disclosure of any confidential or secret information of the other party where (a) the appropriate degree of care has been exercised and (b) such inadvertent disclosure does not Adversely Affect such party; provided that upon notice of such inadvertent disclosure it shall have been endeavored to correct the effects thereof and to prevent any further inadvertent disclosure. Section 5.13. Government Contract Novation. As soon as is reasonably practicable following the Closing, Seller shall, in accordance with FAR Part 42, Section 42.12, submit in writing to each Responsible Contracting Officer (as such term is defined in FAR Part 42, Section 42.102(a)), 34 a request for the U.S. Government to (i) recognize Buyer as the successor interest to all of the Government Contracts being sold, assigned, transferred and conveyed to Buyer in accordance with this Agreement, and (ii) enter into a novation agreement (the "Novation Agreement") substantially in the form contemplated by such regulations. Seller shall use commercially reasonable efforts to obtain all consents, approvals and waivers required for the purpose of processing, entering into and completing the Novation Agreement with regard to any of the Government Contracts, including responding to any reasonable requests for information by the U.S. Government with regard to such Novation Agreement. Buyer shall provide to Seller and each Responsible Contracting Officer all information reasonably necessary to obtain the consent of the U.S. Government to recognize Buyer as the successor in interest to all of the Government Contracts being sold, assigned, transferred and conveyed to Buyer in accordance with this Agreement. Buyer shall use commercially reasonable efforts to obtain all consents, approvals and waivers required for the purpose of processing, entering into and completing the Novation Agreement with regard to any of the Government Contracts including responding to any requests for information by the U.S. Government with regard to such Novation Agreement. Section 5.14. Binghamton Facility. (a) Prior to the Closing Date, Seller will use commercially reasonable efforts to assist Buyer in maintaining the operations of the Businesses at the Binghamton Facility by providing access to the Employees at the Binghamton Facility to allow Buyer to solicit those Employees to stay in the employ of the Businesses. (b) Buyer will use reasonable commercial efforts to obtain as promptly as practicable from the owner/landlord of the Binghamton Facility a lease for the continued occupancy and use of such premises in the Businesses, subject to Seller's rights under the Access Agreement, attached as Exhibit C hereto. In the event Buyer has not obtained its own lease concerning the Binghamton Facility on or before February 1, 2000, then Seller shall have a period of sixty (60) days commencing February 1, 2000 to conclude a prime lease that would permit continued use of the Binghamton Facility in the Businesses upon terms generally consistent with Seller's existing Lease for the Binghamton Facility, in which case Buyer shall enter into a sublease with Seller for such purpose, subject to the Access Agreement. In the event Seller is unable to conclude such lease within such 60-day period, then either party hereto may terminate this Agreement on notice to the other. (c) Notwithstanding anything to the contrary herein or any Collateral Document, Buyer shall not be obligated to vacate the Binghamton Facility on or before December 31, 2001, and Buyer shall not lose the benefit of any indemnification for environmental matters solely by reason of Buyer's remaining in the Binghamton Facility on or after December 31, 2001. Section 5.15. Buyer's SEC Financial Reporting. The Seller shall accord Buyer and its independent auditors full access to the books and records of the Businesses, to enable Buyer to prepare the following: (i) audited historical financial statements for the Businesses for the fiscal year ending December 31, 1999, including unaudited quarterly income statements, and (ii) unaudited historical financial statements for the Businesses for any interim period after December 31, 1999 but before the Closing Date as required, in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), for purposes of Buyer's preparation of its SEC filings or any other filings which must or may be undertaken by the Buyer in connection with the 35 consummation of transactions contemplated herein or subsequent financing transactions related thereto. Section 5.16. Sharing of Retention Commitments Amounts. Seller will reimburse Buyer for: (i) 100% of any amounts paid by Buyer to Employees at the Binghamton Facility, and to other, non-Binghamton Employees of the Businesses for those retention payments becoming due within 30 days following the Closing; and (ii) 50% of all other such amounts paid by Buyer to non-Binghamton Employees, in each case pursuant to Seller's retention agreements and commitments to Employees, as such payments are made by Buyer; provided, however, that Seller's obligation relates only to payments under Seller's original commitments prior to Closing, and not to any subsequent increase of benefits to the Employee. Seller shall pay interest at the rate of 8.5% per annum from the date that Buyer provides Seller with an invoice for such amounts if such invoices are not paid within 15 days. Section 5.17. Payments. Each party promptly shall deliver to the other any cash, checks or other instruments of payment to which the other is entitled and shall hold the same in trust for the other until such delivery. Section 5.18. Insurance. Seller shall cooperate with Buyer in order to afford Buyer the full benefit of all insurance policies and all rights thereunder (including rights to causes of action, lawsuits, claims and demands, rights of recovery and set-off) covering the Businesses and the Subject Assets, and proceeds under or with respect to such insurance policies, for periods prior to the Closing to the extent claims thereunder relate to any of the Subject Assets or the Assumed Liabilities; provided that Buyer shall be responsible for the increased out-of-pocket costs to Seller of affording such benefits to Buyer, if any. Section 5.19. Supply Contracts. In the case of each Contract (including any intercompany work order or similar support arrangement) in effect on the Closing Date under which either of the Businesses supplies any products to Seller or any of its Affiliates, or Seller or any of its Affiliates supplies any products to either of the Businesses (each such Contract being referred to hereinafter as a "Supply Contract"), Buyer and Seller shall honor, and cause their respective Affiliates to honor, all the terms (including, without limitation, pricing) of such Supply Contract for the current term of such Supply Contract. The aforesaid obligation shall also apply to the terms set forth in any written and mutually agreed proposal for the supply of products by or to the Businesses pending on the Closing Date, in the event that Seller or any of Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, enter into a Supply Contract relating to such proposal after the Closing. In the case of any new Supply Contract with respect to the Businesses entered into by Seller or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates on the other hand, after the Closing (and for which a written proposal is not pending on the Closing Date), Buyer and Seller agree that the terms thereof shall be the best commercial terms (including, without limitation, pricing) available to similarly situated buyers under similar, market-based facts and circumstances. Section 5.20. Research and Experimental Expenses. Seller will use reasonably efforts to furnish to the Buyer as reasonably practicable, but in no event more than 180 days after Closing, a letter, on Seller's letterhead, setting forth all information reasonably requested relating to the base period research expenses and any other information to allow Buyer to claim research and 36 experimental credits in accordance with the relevant sections of the Code and Treasury Regulations promulgated thereunder. If all of the requested or required information is not in Seller's possession, then Seller will use its reasonable efforts to obtain the same. Section 5.21. W-2 Issues. Seller and Buyer shall mutually agree promptly after the Closing to address W-2 issues; e.g., successor method or alternative method. Article VI. Employees and Employee Benefit Plans Section 6.1. Employment of Employees of the Business. Buyer shall offer employment, effective as of the Closing Date, to each of the Employees listed on Schedule 6.1 attached hereto and who is employed by Seller (and who is not on long-term disability, and if on short-term disability only upon a return to work), on the Closing Date, and at wages substantially comparable to his or her then current wage or salary level; provided, however, that each such Employee consents to the transfer of his or her personnel records to Buyer. Those Employees who accept such offers of employment and become employees of Buyer shall be referred to herein as the "Transferred Employees." Buyer and Seller shall cooperate and use commercially reasonable efforts to minimize all costs of severance pay and benefits, if any, to which an Employee is entitled that are incurred with respect to any such Employee who fails to become a Transferred Employee, including any refusal of such Employee to accept an offer of employment or otherwise, and Buyer and Seller shall bear equally all such costs of severance pay and benefits. Section 6.2. Certain Benefit Plan Matters. (a) Following the Closing Date and through December 31, 2000, Buyer shall provide Transferred Employees with defined benefit, defined contribution, life insurance, medical coverage and other employee welfare benefit plans (within the meaning of Section 3(1) of ERISA), on a basis substantially comparable in the aggregate to those provided Transferred Employees on the date hereof; provided however, that Buyer shall not be required to provide any of the Transferred Employees with any stock-based plans relating to equity securities (or their equivalent, such as phantom stock plans or SARs) or incentive plans based on the achievement of financial targets. Nothing herein shall preclude Seller from continuing to administer stock-based and incentive plans for service with Seller through the Closing Date. (b) For purposes of vesting and any period of service requirements or commencement of participation with respect to any employee benefit plan of Buyer, each Transferred Employee shall receive credit of his or her term of service with Seller. Section 6.3. Access to Books and Records. As soon as practicable after the Closing Date, Buyer shall receive from Seller (a) such information concerning each Transferred Employee's period of employment with Seller as Buyer may reasonably require to determine service for eligibility, vesting and benefit accrual purposes and (b) such information concerning the terms of Seller's Employee Benefit Plans and concerning each Transferred Employee's benefit utilization under welfare benefit plans as Buyer may reasonably require to comply with Section 6.2 of this Agreement. 37 Section 6.4. Defined Benefit Plan. (a) Buyer shall, effective as of the Closing Date, establish or cause to be established a defined benefit pension plan (the "Buyer Pension Plan") for the benefit of the Transferred Employees who as of the closing Date are covered by a Seller defined benefit pension plan (each a "Seller Pension Plan" and collectively, the "Seller Pension Plans") (the "Covered Employees"; the names of all Covered Employees shall be set forth on a schedule to be furnished by Buyer to Seller within 30 days after the Closing Date). (b) The Buyer Pension Plan shall provide benefits for each Covered Employee as follows: As of the Closing Date, Seller shall fully vest each such Covered Employee in his or her accrued benefit under the applicable Seller Pension Plan, with respect to employment prior to the Closing Date, and subject to the provisions of Section 6.4(c) and (d) hereof, the Buyer Pension Plan shall, in the aggregate, provide benefit levels reasonably comparable to the applicable Seller Pension Plan. The Buyer Pension Plan shall recognize for all purposes under such Plan, including eligibility, vesting and benefit accrual, all service and compensation recognized by the Seller Pension Plan on the Closing Date with respect to Transferred Employees, provided, that Seller shall have supplied Buyer with such information within a reasonable period of time, not to exceed six (6) months, after the Closing Date; and with respect to those Covered Employees who were participants in the contributory portion of the Seller's Non-Bargaining Retirement Plan as of the Closing Date, the benefit formula, employee contribution, early retirement subsidy and cost of living adjustment provisions therein will be continued under Buyer's Pension Plan through December 31, 2002. (c) Transfers of assets and liabilities from a Seller Pension Plan to Buyer Pension Plan shall be made in accordance with the provisions of this Section 6.4(c). Within 120 days of the Closing Date ("Initial Transfer Date"), Seller shall cause its appropriate pension trusts to make an initial transfer of assets in cash, equal to 85% of the amount estimated by Seller in good faith to be equal to the Final Transfer Amount (as defined below) with respect to each Seller Pension Plan (using the same assumptions and methodologies consistent with Section 6.4(d) ("Initial Transfer Amount")). In addition, prior to the Initial Transfer Date, Seller shall provide Buyer with evidence reasonably satisfactory to Buyer that the appropriate Seller Pension Plans remain qualified under Section 401(a) of the Code. As soon as practicable after the final determination of the amounts to be transferred ("True-Up Date"), Seller shall cause a second transfer to be made in cash of the True-Up Amount. The "True-Up Amount" shall be equal to the Final Transfer Amount minus Initial Transfer Amount, reduced by benefit payments after the Closing Date and then, adjusting for Earnings attributable to the assets transferred, where the Final Transfer Amount is calculated in accordance with Section 6.4(d). Earnings applied to the Final Transfer Amount shall be calculated on the basis of the earnings of all assets in Seller's trust for the period after the Closing Date through the date of the Final Transfer Amount, as offset by the Initial Transfer Amount, and with earnings of all assets in Seller's trust pro rated for the time period from the date of the Initial Transfer to the Final Transfer Date. If the Initial Transfer Amount exceeds the Final Transfer Amount with respect to any plan, as soon as practicable following such determination by Seller and after notice by Seller to Buyer, Buyer shall cause a transfer to be made to the respective Seller Pension Plan equal to the excess of the Initial Transfer Amount over the Final Transfer Amount, adjusted to reflect a pro rata portion of Earnings in Buyer's trust from the last day of the month in which the Closing occurs. The True-Up 38 Amount shall be transferred in cash. Unless the parties agree otherwise, all transfers will occur on the last business day of a month. Notwithstanding anything contained herein to the contrary, the transfers contemplated by this Section 6.4(c) shall be determined in accordance with Section 414(l) of the Code and Treasury Regulation 1.414(l)-1. (d) The Final Transfer Amount ("Final Transfer Amount") is the Actuarial Accrued Liability for the Transferred Employees, as determined under CAS412, as of the Closing Date but in no event will the amount transferred be less than the amount required to satisfy Section 414(1) of the Code. If the Actuarial Accrued Liability of all participants in the respective plan is equal to or more than the fair market value of the assets in that plan, then Seller shall instead cause its actuary to determine the Final Transfer Amount as equal to the amount of assets allocable to the liabilities of Covered Employees participating in that plan based on Section 4044 of ERISA ("Section 4044 Amount"). The Actuarial Accrued Liability shall be determined using the interest and mortality rate assumption described in the next sentence and for all other demographics (e.g., retirement, turnover, disability) those actuarial assumptions and methods used in the most recent actuarial valuation of the Seller Pension Plan, as specified in Schedule 6.4. The interest rate assumption shall be the rates promulgated by the PBGC for the valuation of plans that terminate in the month in which the Closing Date occurs (the "Interest Rate"); and the mortality rates shall be those specified in the 1983 Group Annuity Mortality Table (without margins). For purposes of these calculations all employees are 100% vested and any termination benefits shall be assumed to be payable in accordance with the rates referred to above. (e) While the transfer of the Transferred Assets is pending, Seller agrees to cause the trustee of the Seller Pension Plans to continue to pay current benefits to Covered Employees as they become due. (f) Buyer shall have the right to appoint an independent actuary ("Buyer's Actuary") for the purpose of verifying whether the calculation of the Actuarial Accrued Liability by Seller's Actuary under Section 6.4(c) and of the amount of Transferred Assets is correct (based on the method and assumptions set forth in Section 6.4(d)). Such amount as certified by Seller's Actuary shall be final, conclusive and binding on Seller and Buyer unless, within 30 days after the delivery of such certification by Seller's Actuary to Buyer's Actuary, together with such supporting information as Buyer's Actuary may reasonably request, Buyer's Actuary shall notify Seller's Actuary of its disagreement with such amount. If any such disagreement is not resolved to the satisfaction of Seller and Buyer within 60 days of Seller's receipt of such notification (or within such longer period as Seller and Buyer shall mutually agree), either Seller or Buyer may elect to have the calculation submitted for resolution to a third independent actuary appointed mutually by Seller and Buyer, whose determination shall be made in 30 days and shall be conclusive, final and binding. The expenses of Buyer's Actuary shall be borne by Buyer; the expenses of Seller's Actuary shall be borne by Seller; and the expenses of any third actuary shall be borne equally by Buyer and Seller. (g) Buyer agrees that upon the initial transfer of the Transferred Assets from the Seller Pension Plan to the Buyer Pension Plan, the Buyer Pension Plan shall assume all liability of the Seller Pension Plan for the accrued benefits of Covered Employees, and that such transfer shall be in full discharge of all obligations of the Seller Pension Plan for such benefits with respect to such Covered Employees. Seller agrees to indemnify the Buyer Pension Plan and Buyer, their trustees and 39 other fiduciaries and affiliates and each of their shareholders, officers, directors, employees, agents and attorneys and save each such person harmless against any and all liabilities, claims, damages, costs and expenses (including any and all expenses reasonably incurred in investigating, preparing or defending against litigation commenced or threatened or in settlement of any such claim), relating to or incurred in defending against (i) a claim that any of the transactions contemplated by Section 6.4 of this Agreement are not in accordance with the terms of the Seller Pension Plan or applicable law, (ii) any error in the data concerning any Covered Employee disclosed by Seller to Buyer pursuant to this Section 6.4, or (iii) any inaccuracy in the certification furnished pursuant to Section 6.4(c). Buyer agrees to indemnify the Seller Pension Plan and Seller, their trustees and other fiduciaries and affiliates and each of their officers, directors, employees, agents and attorneys and save each such person harmless against any and all liabilities, claims, damages, costs and expenses (including any and all expenses reasonably incurred in investigating, preparing or defending against litigation commenced or threatened or in settlement of any such claim) relating to or incurred in defending against any claim arising out of the failure of the Buyer Pension Plan to pay as contemplated by this Section 6.4. Section 6.5 Retiree Medical Benefits. Buyer shall provide retiree medical coverage for those Transferred Employees who, as of the Closing Date, were covered by an Employee Benefit Plan of Seller providing for such benefits. With respect to (x) those Transferred Employees who, as of the Closing Date, were participants in the contributory portion of the Raytheon Non-Bargaining Retirement Plan, and (y) those Transferred Employees who were given company-paid retiree medical benefits by contract, including but not limited to former employees of MESC Holdings, Inc., The Perkin-Elmer Corporation and Honeywell, Inc. (and their respective qualified dependents), all as required by Section (8)(d)(iv) of the Employee Matters Agreements in the Raytheon Hughes merger. Buyer will provide company-paid retiree medical benefits substantially comparable in value to such benefits as of the Closing Date for a period at least from the Closing Date through December 31, 2002, and thereafter will continue such company-paid retiree medical benefits that are substantially comparable to and for as long as retiree medical benefits are provided generally to other employees of Buyer, its successors and its subsidiaries. Subsequent to the Closing Date, Seller shall retain no liability for provision of retiree medical benefits to the Transferred Employees, all of such liability, if any, having been assumed by Buyer. Section 6.6 WARN Act. The Buyer agrees that, for a period of 60 days after the Closing Date, it will not cause any of the Transferred Employees to suffer "employment loss" for purposes of the WARN Act, and related regulations if such employment loss could create any WARN-related liability for the Seller, unless the Buyer delivers notices under the WARN Act in such a manner and at such a time that Seller bears no liability with respect thereto. Section 6.7 Represented Employees. On and after the Closing Date, the Buyer shall provide benefits to Transferred Employees in units represented for collective bargaining, works council or other collective representation purposes ("Represented Employees") in compliance with the applicable collective bargaining agreement and the requirements of applicable laws, including the NLRA. Without limitation, Buyer will honor and perform any obligation as a successor employer either through Seller's collective bargaining agreements or by operation of applicable law. Any changes in the benefits for Transferred Employees will be made only after notice to and consultation 40 with the recognized collective bargaining, works council or other applicable representative, as and to the extent required by the NLRA and any other applicable labor law. Article VII. Tax Matters Seller covenants for the benefit of Buyer, and Buyer covenants for the benefit of Seller, as follows: Section 7.1. Taxes and Refunds. (a) Seller shall be responsible for and shall pay all Taxes with respect to taxable periods (or portions thereof) ending on or before the Closing Date with respect to the Businesses or the use of the Subject Assets, and Seller shall be entitled to any refunds or credits of Taxes attributable to or arising in taxable periods ending on or before the Closing Date. (b) Buyer shall be responsible for and shall pay all Taxes with respect to taxable periods (or portions thereof) commencing on the first day after the Closing Date with respect to the Businesses or the use of the Subject Assets, and Buyer shall be entitled to any refunds or credits of Taxes attributable to or arising in taxable periods commencing on the first day after the Closing Date. Section 7.2. Allocation of Transfer and Property Taxes. (a) All excise, sales, use, value added, registration, stamp, recording, documentary, conveyancing, franchise, property, transfer, gains and similar Taxes, levies, charges and fees including any deficiencies, interest, penalties, additions to tax or additional amounts excluding any Income Taxes (collectively, "Transfer Taxes") incurred in connection with the Asset Purchase (including Transfer Taxes incurred by transactions pursuant to transfers under the Intellectual Property Agreement or other Collateral Documents) shall be borne by Seller. Buyer and Seller shall use reasonable efforts to minimize the amount of all Transfer Taxes and shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation. The party that is required by applicable law to make the filings, reports, or returns and to handle any audits or controversies with respect to any applicable Transfer Taxes shall do so, and the other party shall cooperate with respect thereto as necessary. (b) All real property taxes, personal property taxes and similar ad valorem obligations levied with respect to the Subject Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the "Apportioned Obligations") shall be apportioned between Seller and Buyer based on the number of days of such taxable period which fall on or before the Closing Date (this and any other tax period which includes one or more days falling on or before the Closing Date, a "Pre-Closing Tax Period") and the number of days of such taxable period after the Closing Date (a "Post-Closing Tax Period"). Seller shall be liable for the proportionate amount of such taxes that is attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount of such taxes that is attributable to the Post-Closing Tax Period. Upon receipt of any bill for real or personal property taxes relating to the Subject Assets, each of Seller and Buyer shall present a 41 statement to the other setting forth the amount of reimbursement to which each is entitled under this Section together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within 30 days after delivery of such statement. In the event that either Seller or Buyer shall make any payment for which it is entitled to reimbursement under this Section, the other party shall make such reimbursement promptly but in no event later than ten (10) days after the presentation of a statement setting forth the amount or reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. Section 7.3. Allowable Taxes. (a) For purposes of this Section, "Allowable Tax" shall mean the allocable share of any Tax of Seller or any of its Affiliates which is an allowable cost under FAR and associated regulations and agreements between Seller and any U.S. governmental entity, allocated based on the Seller's existing finance policy (as it is in effect on the date hereof). (b) If Seller has paid (or reimbursed Buyer for) any Allowable Tax which is attributable to a Pre-Closing Tax Period, Buyer agrees to repay to Seller promptly upon receipt any portion of such Allowable Tax that Buyer or any of its Affiliates is ultimately able to recover from the United States government. (c) If Buyer or any of its Affiliates receives a refund with respect to an Allowable Tax that is attributable to a Pre-Closing Tax Period, Buyer shall pay to Seller the amount of such refund reduced by the amount, if any, that Buyer will be required to pay to the United States government or suffer by reason of offset in accordance with FAR and associated regulations and agreements between Seller and any U.S. governmental entity. If Seller receives a refund after the Closing Date with respect to an Allowable Tax that is attributable to a Pre-Closing Tax Period, Seller will pay to Buyer the amount, if any, which Buyer will be required to pay to the U.S. government, or suffers by reason of an offset, in accordance with the foregoing regulations. (d) Seller and Buyer agree to cooperate with respect to the calculation of any amounts payable pursuant to this Section and to give each other written notice of events reasonably likely to result in the increase or decrease of any Allowable Tax attributable to a Pre-Closing Tax Period. Section 7.4. Cooperation. Buyer and Seller agree to furnish or cause to be furnished to each other, (with the requesting party reimbursing the furnishing party for the actual out-of-pocket cost of the furnishing party), upon request, as promptly as practicable, such information and assistance relating to the Subject Assets (including, without limitation, access to books and records) as is reasonably necessary for the filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax. Buyer and Seller shall retain, consistent with past practice, all books and records with respect to Taxes pertaining to the Subject Assets for a period of at least six (6) years following the Closing Date. At the end of such period, each party shall provide the other with at least sixty (60) days prior written notice before destroying any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records. Seller and Buyer shall cooperate with each other in the conduct of any audit or other proceeding relating to Taxes involving the Subject Assets. If either party becomes aware of 42 any pending or threatened assessment, official inquiry, examination or proceeding that could result in an official determination with respect to Taxes due or payable the responsibility for which rests with the other party hereto, such party shall promptly so notify the other party in writing. Article VIII. Conditions of Buyer's Obligation to Close Buyer's obligation to consummate the Asset Purchase shall be subject to the satisfaction on or prior to the Closing Date of all of the following conditions: Section 8.1. Representations, Warranties and Covenants of Seller. (a) The representations and warranties of Seller contained in this Agreement and under the Collateral Documents that are qualified by materiality (including pursuant to the definition of "Adverse") shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, in each case, on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except for representations and warranties that speak as of a specific date or time, which need only be true and correct as of such date or time). (b) Seller shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by it hereunder and under the Collateral Documents at or prior to the Closing (other than Seller's obligations under Section 2.2(a) and (c) with respect to delivery of documents of transfer of the Subject Assets at the Closing, which shall be performed in all respects). (c) Buyer shall receive at or prior to the Closing an appropriate certificate of an authorized officer of Seller, which may rely on attached certificates of the Executive Management of the Businesses, as to the matters set forth in Sections 8.1(a) and (b), dated the Closing Date. Section 8.2. Filings; Consents; Waiting Periods. All waiting periods applicable under the HSR Act shall have expired or been terminated or the required rulings, certificates or orders received and all registrations, filings, applications, notices, consents, approvals, orders, qualifications and waivers listed in Schedule 8.2 shall have been filed, made or obtained. Section 8.3. No Actions. No Action shall be pending or threatened by any Person to enjoin, restrict or prohibit the purchase and sale of the Subject Assets contemplated hereby; and there shall be no Law or Order in effect that restrains or prohibits consummation of the transactions contemplated hereby. Section 8.4. Intellectual Property Agreement, Etc. On or before the Closing Date, Seller shall enter into the Intellectual Property Agreement. Notwithstanding anything contained herein, the conveyance or licensing of, and any and all representations and warranties relating to, any and all Intellectual Property shall be in the manner and to the extent set forth under the Intellectual Property Agreement. On or before the Closing Date, Seller shall also enter into the Transition Services Agreement. 43 Section 8.5. Adverse Changes. Since October 31, 1999, there shall have been no Adverse Change in the Subject Assets or in the financial condition or results of operation of the Businesses. Section 8.6. Binghamton Facility. The Buyer will have the opportunity to enter into a lease or sublease of the Binghamton Facility to allow the Buyer to occupy the Binghamton Facility, subject to the Access Agreement set forth in Exhibit C, on terms generally consistent with Seller's existing lease. Section 8.7. Certain Transfer Documents. Seller shall have delivered to Buyer at the Closing all documents, certificates and agreements necessary to transfer to Buyer title to the Subject Assets, free and clear of any and all Liens thereon, other than Permitted Liens, including: (i) executed special warranty deed for the Owned Transferred Real Estate and a bill of sale, assignment and general conveyance with respect to the Subject Assets, each dated the Closing Date; and (ii) assignments of all Contracts, Intellectual Property, leases, and any other agreements and instruments constituting Subject Assets, dated the Closing Date, assigning to Buyer all of Seller's right, title and interest therein and thereto. Section 8.8. Title Policies. Prior to or at Closing, Buyer shall acquire from the Title Company an owner's policy of title insurance (the "Title Policy") issued to Buyer with respect to the Owned Transferred Real Estate, in the amount of the Purchase Price allocated thereto, insuring Buyer and issued as of the Closing Date by the Title Company, showing the Owned Transferred Real Estate and improvements thereon, showing no Liens or restrictions (other than Permitted Liens and standard printed exceptions). Buyer shall have received a survey (the "Survey") of the Owned Transferred Real Estate, in form and substance reasonably satisfactory to Buyer, performed by a surveyor reasonably acceptable to Buyer which shall not reflect any state of facts inconsistent in any material respect with the requirements of this Agreement and which shall be in form and substance customary for the transfer of real estate of this kind in this location. Section 8.9. FIRPTA Certificate. Buyer shall have received a certificate of Seller setting forth the name, address and federal tax identification of Seller and stating that Seller is not a "foreign person" within the meaning of Section 1445 of the Code, such certificate to be in the form set forth in the Treasury Regulations thereunder. Article IX. Conditions to Seller's Obligation to Close Seller's obligation to consummate the Asset Purchase is subject to the satisfaction on or prior to the Closing Date of all of the following conditions: Section 9.1. Representations, Warranties and Covenants of Buyer. (a) The representations and warranties of Buyer contained in this Agreement and under the Collateral Documents that are qualified by materiality (including pursuant to the definition of "Adverse") shall be true and correct, 44 and those that are not so qualified shall be true and correct in all material respects, in each case on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except for representations and warranties that speak as of a specific date or time, which need only be true and correct as of such date or time). (b) Buyer shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by it hereunder and under the Collateral Documents at or prior to the Closing (other than Buyer's obligations under Section 2.2(a), (b), and (c) with respect to delivery of the Purchase Price and documents reflecting Buyer's assumption of the Assumed Liabilities at the Closing, which shall be performed in all respects). (c) Seller shall receive at or prior to the Closing an appropriate certificate of an authorized officer of Buyer, as to the matters set forth in Sections 9.1(a) and (b), dated the Closing Date. Section 9.2. Filings: Consents: Waiting Periods. All waiting periods applicable under the HSR Act shall have expired or been terminated or the required rulings, certificates or orders received and all registrations, filings, applications, notices, consents, approvals, orders, qualifications and waivers listed on Schedule 9.2 shall have been filed, made or obtained. Section 9.3. No Actions. No Action shall be pending or threatened by any Person to enjoin, restrict or prohibit the purchase and sale of the Subject Assets contemplated hereby; and there shall be no Law or Order in effect that restrains or prohibits consummation of the transactions contemplated hereby. Section 9.4. Intellectual Property Agreement, Etc. On or before the Closing Date, Buyer shall enter into the Intellectual Property Agreement. Notwithstanding anything contained herein, the conveyance or licensing of, and any and all representations and warranties relating to, any and all Intellectual Property shall be in the manner and to the extent set forth under the Intellectual Property Agreement. On or before the Closing Date, Buyer shall also enter into the Transition Services Agreement. Section 9.5. Binghamton Facility. The Buyer will have entered into a lease or sublease of the Binghamton Facility, subject to the Access Agreement set forth in Exhibit C, on terms generally consistent with Seller's existing Lease. 45 Article X. Survival: Indemnification Section 10.1. Survival Periods. All representations and warranties contained or made in this Agreement or any Collateral Document shall survive for a period of eighteen (18) months following the Closing; provided that the representations and warranties of Section 3.13 (Environmental Matters), and Section 3.14 (Employee Benefits) shall survive the Closing for a period of twenty-four (24) months, and Sections 3.1(d) and 3.5(a) (Title to Assets) shall survive indefinitely (as applicable, the "Indemnity Period"). No claim for indemnification for breach of any representation or warranty may be asserted after the expiration of the Indemnity Period. Notwithstanding anything herein to the contrary, any representation or warranty which is the subject of a claim which is asserted in writing prior to the expiration of the Indemnity Period shall survive with respect to such claim or any dispute with respect thereto until the final resolution thereof. All covenants and agreements contained or made in, or in connection with, this Agreement or any Collateral Document shall survive the Closing. Section 10.2. Indemnification by Seller. (a) From and after the Closing Date, Seller shall indemnify and hold harmless Buyer, its Affiliates, each of their respective directors, officers, shareholders, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "Buyer Indemnified Parties") from and against any and all damages, claims, losses, expenses, costs, taxes, interest, penalties, fines, obligations and liabilities, including without limitation liabilities for all reasonable attorneys', accountants', and experts' fees and expenses including those incurred to enforce the terms of this Agreement (collectively, "Covered Liabilities"), suffered, directly or indirectly, by, or asserted against, any of the Buyer Indemnified Parties by reason of, in connection with, relating to or arising out of (i) any of the Excluded Assets or the Retained Liabilities, including any Retained Liability based on negligence, gross negligence, strict liability or any other theory of liability, whether in law (whether common or statutory) or equity, (ii) any breach by Seller of, or any inaccuracy in, any representation or warranty of Seller contained in this Agreement or in any Collateral Document, or (iii) any breach or non-performance by Seller of any covenant or obligation to be performed by it which is contained in this Agreement, any Collateral Agreement, or in any agreement, certificate or other document delivered pursuant hereto or thereto; provided, however, that in no event shall Seller be required to pay or otherwise be liable for any Covered Liabilities with respect to claims made under or relating to Section 10.2(a)(ii) hereof (other than a breach of representation contained in Section 3.5(a) hereof) unless and until the aggregate amount of all such costs and expenses hereunder exceeds 1.5% of the Purchase Price, in which case Seller shall be liable for all such amounts in excess of 1.5% thereof up to a maximum of 15% of the Purchase Price. (b) Anything in this Section to the contrary notwithstanding, in the event one of Buyer's representatives listed on Schedule 10.2 hereof has actual knowledge on or prior to the Closing Date (i) of any non-material breach, incompleteness or inaccuracy of, or non-material error in, any representation and warranty of Seller, which Seller could have cured had Buyer notified Seller as required by Section 5.2 hereof, or (ii) of any material breach, incompleteness or inaccuracy of, or material error in, any representations or warranty of Seller, then, in either such event, Buyer shall be 46 deemed to have waived any right thereafter to assert any claim for indemnification or otherwise with respect to any such material breach, incompleteness or inaccuracy or material error so known. Section 10.3. Indemnification by Buyer. From and after the Closing Date, Buyer shall indemnify and hold harmless Seller, its Affiliates, each of their respective directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "Seller Indemnified Parties") from and against, any and all Covered Liabilities suffered, directly or indirectly, by or asserted against any of the Seller Indemnified Parties by reason of, in connection with, relating to or arising out of (i) any Assumed Liability including any Assumed Liability based on negligence, gross negligence, strict liability or any other theory of liability, whether in law (whether common or statutory) or equity, (ii) any breach by Buyer of, or any inaccuracy in, any representation or warranty of Buyer contained herein or in any Collateral Document, or (iii) any breach or non-performance by Buyer of any covenant or obligation to be performed by it which is contained in this Agreement, any Collateral Documents or in any agreement, certificate or document delivered pursuant hereto or thereto; provided, however, that in no event shall Buyer be required to pay or otherwise be liable for any Covered Liabilities with respect to claims made under or relating to clause (ii) of this Section 10.3 unless and until the aggregate amount of all such costs and expenses hereunder exceeds 1.5% of the Purchase Price, in which case Buyer shall be liable for all such amounts in excess of 1.5% thereof up to a maximum of 15% of the Purchase Price. Section 10.4. Indemnification Procedures. (a) If any indemnified party receives notice of the assertion of any Third Party Claim with respect to which an indemnifying party is obligated under this Agreement to provide indemnification, such indemnified party shall give such indemnifying party written notice thereof (together with a copy of such Third Party Claim, process or other legal pleading) promptly after becoming aware of such Third Party Claim; provided, however, that the failure of any indemnified party to give notice as provided in this Section 10.4 shall not relieve any indemnifying party of its obligations under this Section 10.4, except to the extent that such indemnifying party is actually prejudiced by such failure to give prompt notice. Such notice shall describe such Third Party Claim in reasonable detail. (b) An indemnifying party, at such indemnifying party's own expense and through counsel chosen by such indemnifying party (which counsel shall be reasonably acceptable to the indemnified party), may elect to defend any Third Party Claim. If an indemnifying party elects to defend a Third Party Claim, then, within ten (10) business days after receiving notice of such Third Party Claim (or sooner, if the nature of such Third Party Claim so requires), such indemnifying party shall notify the indemnified party of its intent to do so, and such indemnified party shall reasonably cooperate in the defense of such Third Party Claim (and pending such notice and assumption of defense, an indemnified party may take such steps to defend against such Third Party Claim as, in such indemnified party's good-faith judgment, are appropriate to protect its interests). Such indemnifying party shall pay such indemnified party's reasonable out-of-pocket expenses incurred in connection with such cooperation and defense. Such indemnifying party shall keep the indemnified party reasonably informed as to the status of the defense of such Third Party Claim. After notice from an indemnifying party to an indemnified party of its election to assume the defense of a Third Party Claim, such indemnifying party shall not be liable to such indemnified party under this Section 10.4 47 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than those expenses referred to in the preceding sentence; provided, however, that such indemnified party shall have the right to employ one law firm as counsel, together with a separate local law firm in each applicable jurisdiction ("Separate Counsel"), to represent such indemnified party in any action or group of related actions (which firm or firms shall be reasonably acceptable to the indemnifying party) if, in such indemnified party's reasonable judgment at any time, either a conflict of interest between such indemnified party and such indemnifying party exists in respect of such claim, or there may be defenses available to such indemnified party which are different from or in addition to those available to such indemnifying party and the representation of both parties by the same counsel would be inappropriate, and in that event (i) the reasonable fees and expenses of such Separate Counsel and local counsel shall be paid by such indemnifying party (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one Separate Counsel (and local counsel) with respect to any Third Party Claim (even if against multiple indemnified parties)), and (ii) each of such indemnifying party and such indemnified party shall have the right to conduct its own defense in respect of such claim. If an indemnifying party elects not to defend against a Third Party Claim, or fails to notify an indemnified party of its election as provided in this Section 10.4 within the period of ten (10) business days described above, the indemnified party may defend, compromise, and settle such Third Party Claim and shall be entitled to indemnification hereunder (to the extent permitted hereunder). Notwithstanding the foregoing, the indemnifying party shall not, without the prior written consent of the indemnified party, settle or compromise any Third Party Claim or consent to the entry of any judgment which (i) does not include as an unconditional term thereof the delivery by each claimant or plaintiff to the indemnified party of a written release of the indemnified party from all liability in respect of such Third Party Claim, (ii) provides for injunctive or other non-monetary relief affecting the indemnified party or the Businesses, (iii) provides for an amount in excess of the maximum liability of the indemnifying party set forth in the proviso to Section 10.2 or 10.3, or (iv) settles or compromises any Third Party Claim in any manner that would reasonably be expected to have a material adverse effect on the indemnified party. (c) The indemnifying party, following receipt of any notice from the indemnified party requesting reimbursement or payment for a Covered Liability (which notice shall specify in reasonable detail the amount and nature of the Covered Liability), shall promptly and in case within 30 days of receipt of such notice provide such reimbursement or payment. (d) Environmental Actions. If the Seller or Seller's agent elects or is required to perform any environmental investigation or remediation activities at the Binghamton Facility after the Closing Date, such activities shall be conducted pursuant to the terms of the Access Agreement set forth in Exhibit C. Section 10.5. Certain Limitations. (a) The amount of any Covered Liabilities for which indemnification is provided under this Agreement shall be net of any amounts actually recovered by the indemnified party from third parties (including amounts actually recovered under insurance policies) with respect to such Covered Liabilities. Any netting of insurance proceeds may be satisfied by the indemnified party assigning any potential insurance claims to the indemnifying party and, in any event, the potential availability of insurance proceeds shall not permit delay by the 48 indemnifying party in the performance of its duties under this Article X. Any indemnifying party hereunder shall be subrogated to the rights of the indemnified party as against any relevant insurer upon payment in full of the amount of the relevant indemnifiable loss. If any indemnified party recovers an amount from a third party in respect of an indemnifiable loss for which indemnification is provided in this Agreement after the full amount of such indemnifiable loss has been paid by an indemnifying party or after an indemnifying party has made a partial payment of such indemnifiable loss and the amount received from the third party exceeds the remaining unpaid balance of such indemnifiable loss, then the indemnified party shall promptly remit to the indemnifying party the excess of (i) the sum of the amount theretofore paid by such indemnifying party in respect of such indemnifiable loss plus the amount received from the third party in respect thereof, less (ii) the full amount of such Covered Liabilities. (b) The amount of any other liability for which indemnification is provided under this Agreement shall be treated by Buyer and Seller as an adjustment to the Purchase Price, and Seller and Buyer agree not to take any position inconsistent therewith for any purpose. (c) No remedy under this Agreement or at law or in equity shall include, provide for or permit the payment of multiple, exemplary, punitive or consequential damages or any equitable equivalent thereof or substitute therefor ("Special Damages"); provided, however, that Special Damages shall be indemnifiable to the extent owed by Buyer or Seller, as the case may be, to a third party. Section 10.6. Exclusive Remedy. Except as otherwise provided in this Article, absent fraud, intentional misrepresentations or misconduct, or criminal activity, the indemnification provided in this Article shall be the sole and exclusive post-Closing remedy available to the Parties hereto for any claim under this Agreement (other than equitable relief if available). Section 10.7. Set-Off. If an indemnifying party shall be obligated to indemnify an indemnified party pursuant to this Article X, such indemnified party shall be entitled, in addition to any other right or remedy it may have, to exercise rights of set-off against any amounts then due and payable to such indemnifying party hereunder or that may thereafter become due and payable to the indemnifying party hereunder. Article XI. Termination Section 11.1. Termination. This Agreement may be terminated at any time prior to the Closing by: (a) The mutual written consent of Seller and Buyer; or (b) Either Seller or Buyer if the Closing has not occurred by the close of business on April 5, 2000, and if the failure to consummate the Asset Purchase on or before such date did not result from the failure by the party seeking termination of this Agreement to fulfill any undertaking or commitment provided for herein that is required to be fulfilled prior to Closing; or 49 (c) Seller, provided it is not then in breach of any of its obligations hereunder, if Buyer fails to perform in any material respect any covenant or obligation under this Agreement when performance thereof is due or Buyer shall have breached in any material respect any of the representations or warranties contained in this Agreement and does not cure the failure or breach within thirty (30) business days after Seller delivers written notice thereof; or (d) Buyer, provided it is not then in breach of any of its obligations hereunder, if Seller fails to perform in any material respect any covenant or obligation under this Agreement when performance thereof is due or Seller shall have breached in any material respect any of the representations and warranties contained in this Agreement and does not cure the failure or breach within thirty (30) business days after Buyer delivers written notice thereof. Section 11.2. Procedure and Effect of Termination. In the event of termination of this Agreement by either or both of Seller and Buyer pursuant to Section 11.1, written notice thereof shall forthwith be given by the terminating party to the other party hereto, and this Agreement shall thereupon terminate and become void and have no effect, and the transactions contemplated hereby shall be abandoned without further action by the parties hereto, except that the provisions of Sections 5.l(b) and Articles X and XII shall survive the termination of this Agreement; provided, however, that such termination shall not relieve any party hereto of any liability for any breach of this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions made pursuant to Section 4.3 shall, to the extent practicable, be withdrawn from the agency or other persons to which they were made. Article XII. Miscellaneous Section 12.1. Counterparts. This Agreement may be executed in multiple original counterparts, all of which shall be considered one and the same agreement, and shall become effective as of the date first written hereinabove upon execution and delivery hereof by both parties or upon execution of counterparts by each of the parties and delivery thereof to the other party. Section 12.2. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the choice of law principles thereof. Buyer and Seller consent to and hereby submit to the jurisdiction of any state or federal court located in the State of Delaware in connection with any action, suit or proceeding arising out of or relating to this Agreement, and each of the parties hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 12.3. Entire Agreement. This Agreement (including the Schedules and Appendices hereto), together with the Collateral Documents, contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. 50 Section 12.4. Expenses. Except as set forth in this Agreement, whether the Asset Purchase is or is not consummated, all legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses; provided that Seller shall pay all fees and Taxes relating to the transfer of the Subject Assets and the Assumed Liabilities. Section 12.5. Notices. All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below. Notices to Seller shall be addressed to: Raytheon Company 141 Spring Street Lexington, Massachusetts 02173 Attention: General Counsel Telecopy No: (781) 860-2924 with a copy (which shall not constitute notice) to: Baker Botts L.L.P. 1299 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Attention: James R. Doty, Esq. Telecopy No: (202) 639-7890 or at such other address and to the attention of such other Person as Seller may designate by written notice to Buyer. Notices to Buyer shall be addressed to: L-3 Communications Corporation 600 Third Avenue New York, NY 10016 Attention: Christopher C. Cambria, Esq. Telecopy No.: (212) 805-5494 with a copy (which shall not constitute notice) to: Whitman Breed Abbott & Morgan LLP 200 Park Avenue New York, NY 10166 Attention: James P. Gerkis, Esq. Telecopy No.: (212) 351-3131 51 or at such other address and to the attention of such other Person as Buyer may designate by written notice to Seller. Notices or other communications shall be deemed effective on receipt or refusal of receipt. Section 12.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that no party hereto will assign its rights or delegate its obligations under this Agreement without the express prior written consent of each other party hereto (it being agreed that no such assignment by a party shall relieve the assigning party of any of its obligations hereunder). Notwithstanding the foregoing, Buyer may assign this Agreement after Closing. Section 12.7. Headings: Definitions. The section and article headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement. All references to Sections or Articles contained herein mean Sections or Articles of this Agreement unless otherwise stated. Section 12.8. Amendment. This Agreement may not be amended, modified, superseded, canceled, renewed or extended except by a written instrument signed by the party to be charged therewith. Section 12.9. Waiver; Effect of Waiver. No provision of this Agreement may be waived except by a written instrument signed by the party waiving compliance. No waiver by any party hereto of any of the requirements hereof or of any of such party's rights hereunder shall release the other parties from full performance of their remaining obligations stated herein. No failure to exercise or delay in exercising on the part of any party hereto any right, power or privilege of such party shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege by such party. Section 12.10. Interpretation; Absence of Presumption. (a) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph and Schedule references are to the Articles, Sections, paragraphs and Schedules to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement means "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, (v) provisions shall apply, when appropriate, to successive events and transactions, and (vi) unless the context otherwise requires, all references to any period of days shall be deemed to be to the relevant number of calendar days. (b) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. 52 Section 12.11. Specific Performance. The parties hereto each acknowledge that, in view of the uniqueness of the subject matter hereof, the parties hereto would not have an adequate remedy at law for money damages in the event that this Agreement were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto may be entitled at law or in equity. Section 12.12. Remedies Cumulative. Except as otherwise provided in Article X, all rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. Section 12.13. Severability. If any provision of this Agreement, including any phrase, sentence, clause, Section or subsection is inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever. Section 12.14. Bulk Sales. The parties hereby waive compliance with the provisions of the bulk sales laws of any jurisdiction. Seller will indemnify and hold harmless Buyer and the other Buyer Indemnified Parties from and against any and all Covered Liabilities resulting from or arising out of any noncompliance or alleged noncompliance by Buyer or Seller with such bulk sales laws. Section 12.15. No Third Party Beneficiaries. Except as provided in Article X with respect to indemnification of the indemnified parties hereunder, nothing in this Agreement shall confer any rights upon any Person other than the parties hereto and their respective successors and permitted assigns. Section 12.16. Seller Acknowledgement. Seller acknowledges that the representations and warranties contained in this Agreement and in any document or instrument delivered to Buyer pursuant hereto or in connection herewith shall not be deemed waived by any investigation by Buyer, its officers, directors, employees, counsel, accountants, advisors, representatives and agents. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered, as an instrument under seal, in their names and on their behalf by their respective officers, thereunto duly authorized, on and as of the date first set forth above. 53 SELLER: RAYTHEON COMPANY By: ------------------------------ Franklyn A. Caine Senior Vice President BUYER: L-3 COMMUNICATIONS CORPORATION By: ------------------------------ Christopher C. Cambria Vice President 54 APPENDIX I PROVISIONS AND PROCEDURES FOR ACCOUNTING NEUTRAL Section C-1. Dispute Resolution. Subject to Sections C-2, through C-3, in the event any controversy, claim, dispute, difference, or misunderstanding (a "dispute") arises under Sections 2.4 and 2.5 of this Agreement, and the Parties have been unable to negotiate in good faith to amicably resolve such dispute in writing (i) within 120 days following the Closing Date in the case of an allocation under Section 2.4, or (ii) during the Resolution Period provided for in Section 2.5, then, in either case, each Party will, within five (5) Business Days after the expiration of such period, prepare a written position statement that summarizes the unresolved issues and such Party's proposed resolution. Such position statement must be delivered within such five (5) Business Days, or such other time period as may be mutually agreed to by the Parties. If the Parties continue to be unable to resolve the dispute, such dispute shall, within forty-five (45) days after expiration of the fifth (5th) Business Day (or last day of any other period agreed to by the Parties) referred to in the immediately preceding sentence, be submitted to an Accounting Neutral under Section C-2. Section C-2. Accounting Neutral. Section C-2.1. Disputes Covered. Disputes concerning (i) the correct Allocation under Section 2.4, or (ii) whether any adjustment of the Purchase Price is required pursuant to Section 2.5, are to be resolved solely by the Accounting Neutral. Section C-2.2. Selection. The Accounting Neutral shall be a senior audit partner of a major accounting firm, which individual and which firm shall not have been engaged on behalf of Buyer or Seller during the previous five (5) years, as shall be certified to the parties by the Accounting Neutral. The possible Accounting Neutrals will be listed prior to closing as an Addendum 1 hereto (as amended from time to time), and the Parties shall for each appropriate dispute approach them in the order listed with a request to serve as the Accounting Neutral. If none of the listed possible Accounting Neutrals is available or if none accepts the assignment and the Parties cannot otherwise mutually agree to another Accounting Neutral, an experienced audit partner of a major accounting firm, not engaged by or behalf of Buyer or Seller during the past five (5) years, will be chosen by the then Chairman of the American Institute of Certified Public Accountants ("AICPA") or his designee, to serve as the Accounting Neutral for the purposes of resolving the dispute. Unless otherwise mutually agreed by the Parties, any Person who is an officer or employee, agent, or subcontractor of, or a technical consultant to, either Party or its Affiliates will be automatically ineligible to be the Accounting Neutral. The costs of utilizing the Accounting Neutral will be shared equally by the Parties. Section C-2.3. Methodology and Decision. The Accounting Neutral shall make his decision by applying the methodology for the preparation of the PWC Report as provided in Appendix II. The Accounting Neutral will issue a written decision containing an explanation of how and why the decision was reached. The Accounting Neutral's decision will be final, binding and non-appealable 55 Section C-3. Other Remedies. Notwithstanding anything to the contrary herein contained, each Party will be entitled to pursue any equitable rights and remedies that are available at law or in equity without complying with Sections C-1 or C-2 in connection with seeking a temporary restraining order in a court having jurisdiction to preserve the status quo while such proceedings are in progress. Section C-4. Continuity of Services and Performance. Unless otherwise agreed in writing or expressly provided in this Agreement, the Parties will continue to provide service and honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions hereof with respect to all matters not subject to or dependent upon resolution of such dispute. 56 APPENDIX II NET WORKING CAPITAL CALCULATIONS Buyer and Seller shall observe and apply the following procedures and principles in the determination of Net Working Capital as that term applies in the Agreement: The difference, if any, between the Target Net Working Capital and the Preliminary Net Working Capital Calculation will be the basis for any payment to be made by Buyer or Seller as provided in Section 2.5(a). The Preliminary Net Working Capital Calculation, the Closing Date Net Working Capital Calculation and the Final Closing Date Net Working Capital Calculation will be made in the same manner as that utilized in the calculation of Target Net Working Capital, except as modified hereby. The foregoing calculations shall be at the close of business on the Closing Date determined on a pro forma basis as if Seller and Buyer had not consummated the transactions contemplated by the Agreements . As defined in the Agreement, Closing Date Net Working Capital and Final Closing Date Net Working Capital shall be more specifically determined by excluding the Excluded Assets and the following items from its scope: a) cash and cash equivalents, b) all fixed assets and related amortization and depreciation including but not limited to land and land improvements, buildings and related improvements, leasehold improvements, automotive, machinery and equipment, furniture and fixtures, construction in process, and equipment leased to others, c) all long term assets including but not limited to investments, patents, licenses and trademarks and their related amortization, goodwill and related amortization and deferred charges, d) all current and long term accrued expense other than those items specifically identified in items accounts payable, accrued payroll and related payroll taxes and accrued vacation, e) all loss and operating reserves including warranty reserves, f) all accounts or notes payable from or to Raytheon except for receivables and payables relating to materials sold or services rendered, g) any reserve, liability or asset resulting from pension benefits, retirement benefits or other post employment benefits, h) all accrued liabilities or benefits for current or deferred federal or state income taxes, and i) all equity related accounts including but not limited to common stock, additional paid in capital and retained earnings. It is further understood that the Seller shall apply the following procedures during the preparation of the Preliminary Net Working Capital Calculation, the Closing Date Net Working Capital Calculation and the Final Closing Date Net Working Capital Calculation. (i) Costs incurred on all Contracts in a loss position by the Businesses between fiscal month ended October 1999 and the Closing Date are to be recorded against loss reserves to the extent such loss reserves exist according to the "Loss Ratios" (as defined below), such that the portion of the costs incurred, determined by multiplying the costs incurred by the Loss Ratios is not recorded to Unbilled Accounts Receivable. "Contract EAC Profit (Loss) Rates" are calculated on an individual Contract (job number) basis by dividing the baseline estimate at completion (EAC) profit 57 (loss) by the baseline sell price or EAC contract value. The Contract EAC Profit (Loss) Rates are based on the rates utilized in the calculation of Target Working Capital. "Loss Ratios" are calculated from the Contract EAC Profit (Loss) Rates on an individual Contract basis by dividing the baseline total EAC loss divided by the baseline total EAC cost. Loss Ratios only apply to Contracts that are in a loss position. (ii) The Contract EAC Profit (Loss) Rates for the Businesses used to prepare the calculation of Target Net Working Capital shall be the same rates used to prepare the Preliminary Net Working Capital Calculation, Closing Date Net Working Capital Calculation and Final Closing Date Net Working Capital Calculation, even if facts and circumstances occurring on or before the Closing Date would require changes to the Contract EAC Profit (Loss) Rates. The overhead rates for the Business used to prepare the calculation of Target Net Working Capital shall be used to prepare the Preliminary Net Working Capital Calculation, Closing Date Net Working Capital Calculation and Final Closing Date Net Working Capital Calculation, even if facts and circumstances occurring on or before the Closing Date would require changes to the overhead rates. (iii) There shall be no increases to (A) the Contract EAC Profit (Loss) Rates, (B) incurred costs for each Contract, or (C) Closing Date Net Working Capital or Final Closing Date Net Working Capital, arising from an increase in Consolidated Corporate Allocations for the Fiscal Years 1999 through 2003 from Raytheon to the Businesses. (iv) The following valuation reserves and doubtful account reserves are specifically agreed to and valued in the calculation of Target Net Working Capital, the Preliminary Net Working Capital Calculation, Closing Date Net Working Capital Calculation and Final Net Working Capital Calculation. With respect to the Training Services Business, Preliminary Net Working Capital, Closing Date Net Working Capital Calculations and Final Closing Date Net Working Capital will reflect the following adjustments: (a) Billed Accounts Receivable. The allowance for doubtful accounts reserve will be increased by $1,500,000 pertaining to amounts past due greater than 180 days. (b) Unbilled Accounts Receivable. $3,500,000 of unabsorbed overhead will be written off. (c) Inventory. A reserve for unrecoverable inventoried costs in the amount of $4,000,000 will be established pertaining to Contracts (job numbers) which are inactive and/or closed-out. With respect to the Training Devices Business, Preliminary Net Working Capital, Closing Date Net Working Capital and Final Closing Date Net Working Capital Calculations will reflect the following adjustments: 58 (a) Billed Accounts Receivables. An additional reserve of $1,500,000 for past due accounts will be established and added to the current $1,000,000 allowance for doubtful accounts. (b) Unbilled Accounts Receivables. A reserve of $4,960,000 will be established for (A) $2,160,000 for unrecoverable amounts pertaining to final overhead rates that have not been settled with the Government for years 1991 through 1999, and (B) $2,800,000 for CAS settlement related to the Binghamton restructure. 59 ADDENDUM 1 POSSIBLE ACCOUNTING NEUTRALS [TO BE AGREED ON PRIOR TO CLOSING] 60 APPENDIX III SUMMARY OF TRANSITION SERVICES AGREEMENT NEED FROM RAYTHEON o *Network Services o Payroll o PC Pricing (HAC Owned?) o Medical Plan Coverage o SD&G o Retirement Plan Administration o Benefits Administration and Coverage o ERISA Compliance o *RLI Training Data Base o Travel, Agent Services, Cell Phones, Car Rental etc., for a period not to exceed 30 days o *HAC Universal Property System for fixed asset management o Right and license to continue to use the version as of the Closing of the Raytheon Integrated Development Process (IDP) and Software Tool Set (STS) for a phase out period of nine (9) months from Closing. PROVIDE TO RAYTHEON o Network Services o Commercial Training o Arlington o Troy o Romulus o Germany o Italy o Singapore o NASA *We may be able to transition away with 30 days notice prior to close. These are fairly straightforward items. 61 NEED FROM RAYTHEON o ProE licenses (RSC El Sequndo) (Software Sublicense for duration of task) o Currently borrowing 2 (res. for use on work for AIS (WACO). SUPPLY CONTRACTS BETWEEN RAYTHEON AND THE BUSINESSES: to be memorialized between Buyer and Seller (as contemplated by and in accordance with Section 5.19 of the Agreement):
(a) Buyer Prime 1/2 1. WEB CITIS FOR AVCATT (tsc Mass) 3. 2. Training Classes From RLI 3 3. SE CORE Work for AVCATT 1/2 4. TIGERS product for use on Wolverine/Grizzly 1/2 5. Comm Plus (RSC ATC) product for use on AVCATT 1 6. Data for F-16 VAE RECCE pod for use on F-16 VAE simulator program; should be no cost (RSC Danbury). 1,2,3, 6A. EZ Segunda I/F optics and radar (b) SELLER PRIME 3 1. ASTT Program Work 3 2. BCT/HFT Program Work 3 3. DD21 Program Work 1/2 4. HRB ECE S/W 3 5. GIDEP (currently free; I doubt we will get this) 6. RC135 S/C with AIS (c) Buyer Prime 1/2 7. F-18 A/C date: No cost usage lic. 1/2 8. Generic - No Cost usage ITC for RSC data for existing contacts. 62 3 8A. Future S/C with HRB for ELE and El Segundo for HUDS for F-22 program. 2 9. Air Traffic Control - uses Displays and Rightview technology 1 10. BCT - uses Rightview and Trueguide technology 2 11. Malibu Research Lab 2 12. NASA - uses Rightview technology 1 13. FT - ubyne Radio install and support on soacms (SBUD VIII Radio ECP) 14. Shared Services for TD and TS 15. Use of Raytheon logo and letterhead for some time frame 16. ISO Certification transaction support The foregoing is not an exclusive, complete or required list.
63 EXHIBIT A BILL OF SALE THIS BILL OF SALE is made, executed and delivered as of _________, 2000, by Raytheon Company, a Delaware corporation ("Seller"), to L-3 Communications Corporation, a Delaware corporation ("Buyer"). WITNESSETH: WHEREAS, Seller and Buyer have entered into that certain Asset Purchase and Sale Agreement dated as of January __, 2000 (the "Purchase Agreement"), pursuant to which Buyer has agreed to acquire the entire right, title and interest in and to the Subject Assets (as defined in Article I of the Purchase Agreement) for the consideration and on the terms and conditions set forth therein; and WHEREAS, pursuant to the Purchase Agreement, Seller has agreed to execute instruments as may be necessary or desirable to confirm said acquisition of the Subject Assets by Buyer, including without limitation this Bill of Sale; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged: Capitalized terms used herein but not defined herein shall have the meanings set forth in the Purchase Agreement. Effective as of 5:00 p.m., Dallas Time, on the date hereof, Seller, for itself and its successors and assigns, does hereby irrevocably sell, set over, convey, grant, transfer, assign and deliver unto Buyer, its successors and assigns, forever, all of its right, title and interest in and to all of the Subject Assets, including, without limitation, all right under all Contracts included in the Subject Assets. This Bill of Sale shall not apply to any of the Excluded Assets. If any instrument, contract, lease, permit or other agreement or arrangement included in the Subject Assets contains provisions requiring the consent, approval or novation of a third party to its assignment or transfer and if such consent, approval or novation has not been obtained on or before the date hereof (each a "Required Consent Asset"), then this Bill of Sale shall not constitute an agreement to assign and transfer such Required Consent Asset and the assignment and transfer shall not be deemed effective with respect to such Required Consent Asset until such time as the consent, approval or novation of such third party to the assignment and transfer of such Required Consent Asset to Buyer shall have been obtained, whereupon (a) this Bill of Sale and the Purchase Agreement shall then constitute an agreement to assign and transfer such Required Consent Asset, (b) such assignment and transfer will be deemed effective without any further action of Seller or Buyer, and (c) this Bill of Sale shall apply to such Required Consent Asset without any further action of Seller or Buyer. This Bill of Sale and the covenants and agreements contained herein shall be binding upon 64 Seller, it successors and assigns and shall inure to the benefit of Buyer, its successors and assigns. This Bill of Sale does not amend or otherwise modify or limit any of the provisions of the Purchase Agreement. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS BILL OF SALE, ANY PROVISION OF THE PURCHASE AGREEMENT OR ANY COLLATERAL DOCUMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THE PURCHASE AGREEMENT OR ANY COLLATERAL DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE SUBJECT ASSETS. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THE PURCHASE AGREEMENT OR ANY COLLATERAL DOCUMENT, THE SUBJECT ASSETS ARE BEING SOLD ON AN "AS IS, WHERE IS" BASIS. THE BILL OF SALE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed and delivered by a duly authorized officer as of the date first above written. RAYTHEON COMPANY By: ---------------------------- Name: ----------------------- Title: ---------------------- 65 EXHIBIT B INTELLECTUAL PROPERTY AGREEMENT This Intellectual Property Agreement (the "IP Agreement") is dated this 7th day of January 2000, by and between Raytheon Company, a Delaware corporation and L-3 Communications Corporation, a Delaware corporation, and shall be and become effective on and as of the Effective Date hereinafter defined. WITNESSETH WHEREAS, Seller and Buyer have entered into an Asset Purchase and Sale Agreement dated as of January 7th, 2000, (the "Asset Purchase and Sale Agreement"), wherein the parties have agreed to the mutual transfer of certain intellectual property rights; WHEREAS, Seller owns various intellectual property rights, including patents, patent applications, trademarks, copyrights, invention disclosures, and know-how, in various countries of the world, many of which, pursuant to the Asset Purchase and Sale Agreement, Seller wishes to assign to Buyer or to license to Buyer for use within the Businesses (as defined below) and Buyer wishes to be assigned or licensed such rights from Seller; WHEREAS, Buyer wishes to license Seller back certain intellectual property rights and Seller wishes to be licensed back such rights; WHEREAS, Seller and Buyer wish to provide the above-referenced assignments and licenses under the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS For purposes of this Agreement, all capitalized terms (or any variant in the form thereof) shall have the respective meanings set forth below or defined elsewhere in this Agreement. Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa, and the reference to any gender shall be deemed to include all genders. Unless otherwise defined or the context otherwise clearly requires, terms for which meanings are provided herein shall have such meanings when used in any Schedule hereto and each Collateral Document (hereinafter defined) and certificate executed or required to be executed pursuant hereto or thereto or otherwise delivered, from time to time, pursuant hereto or thereto. Unless otherwise specified, references to Sections refer to Sections of this Agreement. 66 1.1 "Affiliate" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.2 "Adverse" or "Adversely" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.3 "Assumed Liabilities" has the meaning set forth in the Asset Purchase and Sale Agreement, and further includes the meaning set forth in Article 9. 1.4 "ASTOR Contract" means the Airborne Surveillance Tracking and Observation Radar (ASTOR) contract that Seller has entered into with the United Kingdom. 1.5 "Businesses" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.6 "Buyer" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.7 "Contract" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.8 "Closing" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.9 "Copyrights" means all of the rights in copyrightable works in existence at the Closing, including any renewals and extensions of any copyright registrations, for the United States of America and all other countries foreign thereto (and including the right to apply for copyright registrations in all countries of the world), and including all copyright registrations which have been or may be granted on any of the foregoing. 1.10 "Effective Date" shall refer to the date of the Closing. 1.11 "Field of Businesses" means the fields of activity of the Businesses on or before Closing. 1.12 "Governmental Authority" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.13 "Intellectual Property" means Patents, Copyrights, Trademarks, Know-How, and any other proprietary rights. 1.14 "IP Agreement" means this IP Agreement (including the Schedules) as may from time to time be amended, modified, supplemented, or waived. 1.15 "Know-How" means all know-how, show-how, data, databases, technology, inventions (whether patentable or not), improvements, enhancements, invention disclosures, trade secrets, technical information, Software, Source Code, documentation, abandoned patent applications, notebooks and drawings that are not Patents and that are in existence at the Closing. 1.16 "Knowledge" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.17 "Patents" means all patents, utility models, and patent applications (whether 67 provisional or otherwise) that are in existence at the Closing, including any and all divisions, continuations, continuations-in-part, reissues, re-examinations and extensions thereof, for the United States of America and all other countries foreign thereto (and including the right to apply for Letters Patent in all countries of the world), and including all patents which have been or may be granted on any of the foregoing. 1.18 "Person" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.19 "Raytheon Integrated Development Process (IDP) and Software Tool Set (STS)" means the products developed by the Raytheon Interactive Technologies Support Center located in Pensacola, Florida. 1.20 "Retained Liabilities" has the meaning set forth in the Asset Purchase and Sale Agreement, and further includes the meaning set forth in Article 9. 1.21 "Seller's Retained Businesses" means all businesses owned by Seller, on or before Closing, that are not the Businesses. 1.22 "Seller's Retained Copyrights" means all Copyrights owned by Seller that in any way relate to both the Businesses and Seller's Retained Businesses, including, without limitation, those on the Retained Copyright Schedule attached hereto. 1.23 "Seller's Retained Know-How" means all Know-How owned by Seller that in anyway relates to both the Businesses and Seller's Retained Businesses, including, without limitation, Seller's Retained Software, but excludes the items on the Know-How Schedule attached hereto, Seller's Training Software, and Seller's Training Updated Software. 1.24 "Seller's Retained Patents" means the Patents listed in the Retained Patents Schedule attached hereto. 1.25 "Seller's Retained Software" means all Software owned by Seller that in anyway relates to both the Businesses and Seller's Retained Businesses, including, without limitation, the Software listed in the Retained Software Schedule attached hereto, but excludes Seller's Training Software and Seller's Training Updated Software. 1.26 "Seller's Trademarks" means all Trademarks owned by Seller, but excludes Seller's Training Trademarks. 1.27 "Seller's Training Copyrights" means all Copyrights owned by Seller and relates exclusively to the Businesses, but excludes Seller's Retained Copyrights. 1.28 "Seller's Training Intellectual Property" means Seller's Training Patents, Seller's Training Copyrights, Seller's Training Know-How, and Seller's Training Trademarks. 1.29 "Seller's Training Know-How" means all Know-How owned by Seller and relates exclusively to the Businesses, including, without limitation, the items on the Know-How Schedule attached hereto, Seller's Training Software, and Seller's Training Updated Software, but excludes Seller's Retained Software. 68 1.30 "Seller's Training Patents" means those Patents listed in the Training Patent Schedule attached hereto, but excludes Seller's Retained Patents. 1.31 "Seller's Training Software" means the Software listed in the Training Software Schedule attached hereto. 1.32 "Seller's Training Trademarks" means those Trademarks listed in the Training Trademark Schedule attached hereto, and further includes any trade dress in any of the Subject Assets that relates exclusively to the Businesses, but excludes the word "RAYTHEON," and use of the word "RAYTHEON" in any Trademarks. 1.33 "Seller's Training Updated Software" means the Software listed in the Training Updated Software Schedule attached hereto. 1.34 "Seller" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.35 "Software" means: (i) a computer program or software, in the form of executable code, consisting of a set of logical instructions and tables of information that guide the functioning of a central processing unit, including hardwired logic instructions that manipulate data in central processors, control input-output operations, and error diagnostic and recovery routines or instruction sequences in machine-readable code furnished hereunder that control call processing, peripheral equipment, and administration and maintenance functions; and (ii) any documentation furnished for use and maintenance of any Software, in each case whether contained on a magnetic or optical storage medium, in a semiconductor device, in another memory device or system memory, or in any other medium whatsoever. 1.36 "Source Code" means software in human-readable form and all documentation, such as flow charts, schematics, and annotations, that comprise the preceding detailed design specifications (which constitutes the "embodiment of the intellectual property" of the software, as such concept is referenced in Section 365(n) of the United States Bankruptcy Code, as amended), that is necessary to enable maintenance and modification of the software or any other version of software incorporating high-level or assembly language that generally is not directly executable by a processor. 1.37 "Subject Assets" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.38 "Taxes" has the meaning set forth in the Asset Purchase and Sale Agreement. 1.39 "Trademarks" means all registered and unregistered trademarks, trade dress, service marks, certification marks, collective marks, trade names, icons and logos and registrations in existence at the Closing, including any applications therefor, including, without limitation, intent-to-use applications, and including any and all renewals and extensions thereof, for the United States of America and all other countries foreign thereto (and including the right to apply for trademarks in all countries of the world), and including all registrations which have 69 been or may be granted on any of the foregoing, and further including the goodwill of the businesses associated therewith. ARTICLE 2 ASSIGNMENTS Seller hereby assigns, transfers, conveys, delivers and grants to Buyer, its successors and assigns, all of the right, title and interest which Seller owns in and to the Seller's Training Intellectual Property, including Seller's Training Trademarks and the goodwill of the business associated therewith, and including any rights to sue or recover for, and obtain injunctions against, any and all past, present and future infringement or misappropriation of the Seller's Training Intellectual Property to be held and enjoyed as fully and exclusively as such rights would have been by Seller had this assignment and transfer not been made. For recording purposes, Seller shall execute at Closing an assignment of Patents which is substantially identical to the form attached as IP Schedule 2A, and an assignment of Trademarks which is substantially identical to the form attached hereto as IP Schedule 2B. ARTICLE 3 GRANTS OF LICENSES 3.1 Except for the provisions of Sections 3.7 and 3.8, Seller hereby grants to Buyer, for use solely in the Field of the Businesses, a perpetual, royalty-free, exclusive, sublicensable, world-wide right and license in and to the Seller's Retained Patents, subject to any licenses stated in the Third Party License Schedule attached hereto. 3.2 (a) Except for the provisions of Sections 3.7 and 3.8, Seller hereby grants to Buyer, for use solely in the Field of the Businesses, a perpetual, royalty-free, non-exclusive, sublicensable, world-wide right and license in and to the Seller's Retained Know-How and the Seller's Retained Copyrights, subject to any licenses stated in the Third Party License Schedule attached hereto. (b) Except for the provisions of Sections 3.7 and 3.8, Seller hereby grants to Buyer, for use solely in commercial applications of the Businesses as conducted at or before Closing (i.e. sale of the products or provision of the services of the Businesses to commercial (non-governmental) customers), a perpetual, royalty-free, non-exclusive, sublicensable, world-wide right and license in and to Seller's Retained Patents, Seller's Retained Know-How and the Seller's Retained Copyrights, subject to any licenses stated in the Third Party License Schedule attached hereto. 3.3 Buyer hereby grants back to Seller a perpetual, royalty-free, sublicensable, non-exclusive, world-wide right and license in and to the Seller's Training Patents, Seller's Training Know-How, and Seller's Training Copyrights, for use solely in Seller's Retained Businesses outside the Field of the Businesses. 3.4 Buyer hereby grants back to Seller a perpetual, royalty-free, sublicensable, non- 70 exclusive, world-wide right and license in and to the Seller's Training Software, for use solely in Seller's Retained Businesses outside the Field of the Businesses. 3.5 Buyer hereby grants back to Seller a perpetual, royalty-free, sublicensable, non-exclusive, world-wide right and license in and to the Seller's Training Updated Software and all improvements, updates, and/or fixes to Seller's Training Updated Software, for use solely in Seller's Retained Businesses outside the Field of the Businesses. 3.6 Notwithstanding Section 5.9 of the Asset Purchase and Sale Agreement, Buyer hereby grants back to Seller a perpetual, royalty-free, sublicensable, non-exclusive, world-wide right and license in and to Seller's Training Intellectual Property necessary for Seller to perform its obligations under the ASTOR Contract, but only to the extent such rights are necessary to perform Seller's obligations under the ASTOR Contract. Buyer further agrees that Seller may use Seller's Retained Patents, Seller's Retained Know-How and Seller's Retained Copyrights to the extent necessary to perform Seller's obligations under the ASTOR Contract. 3.7 Notwithstanding anything in this IP Agreement (including the schedules and exhibits attached hereto) to the contrary, this IP Agreement shall not interfere with, shall not result in any transfer of, and shall not otherwise affect any Intellectual Property rights relating to any aspect of the Raytheon Integrated Development Process (IDP) and Software Tool Set (STS). 3.8 Notwithstanding anything in this IP Agreement (including the schedules and exhibits attached hereto) to the contrary, Seller does not intend to transfer, assign, or license to Buyer any Intellectual Property where such transfer, assignment, or license is specifically prohibited by an agreement between Seller and a third party (including, without limitation, where said third party is Hughes Electronics Corporation, Telecom, and Texas Instruments Incorporated). Any purported transfer, assignment or license to Buyer in this IP Agreement that is prohibited by such an agreement between Seller and a third party, is to be given no effect. 3.9 (a) Upon Closing, and thereafter, Buyer will attach labels or such other notifications to packaging, documents, inventory, products, works-in-progress, brochures, Software, Know-How, or any other products, printed materials or publications, to cover and/or remove any of Seller's Trademarks, as may be commercially reasonable, practical, necessary, or required by law, to reflect that Buyer is the manufacturer and/or source of such products and/or documents; provided however, that Buyer may, for a reasonable transitional period not to exceed two (2) months, continue to use stationery and printed materials on hand in the Businesses that bears Seller's Trademarks subject to the requirement that Buyer includes on all such stationery and printed materials a clear and prominent statement that Seller is no longer affiliated with the Businesses (e.g., by use of an appropriate sticker). (b) Buyer shall indemnify Seller and its Affiliates, and their respective employees, officers and directors, and hold them harmless from and against any claims, damages, judgments, losses, costs and expenses, including reasonable attorney's fees, that arise out of any claim, threat of litigation or litigation relating to or arising from Buyer's use of Seller's Trademarks, whether alone or in combination with other words or designs, under Section 3.9(a) 71 of this IP Agreement. The indemnity under this Section 3.9(b) does not cover liability for any consequential or punitive damages. (c) Except for such permitted uses authorized under Section 3.9(a) of this IP Agreement, no rights or licenses are granted to Buyer with respect to the Seller's Trademarks, whether alone or in combination with other words or designs. (d) Buyer acknowledges that: (i) Seller is the owner of all right, title and interest in and to the Seller's Trademarks, whether alone or in combination with other words or designs, and Buyer shall not use the Seller's Trademarks except as expressly authorized by this Agreement; and (ii) after Closing, Buyer will not and will not permit its Affiliates to (1) take any action which would interfere with Seller's registration and/or use of the Seller's Trademarks throughout the world; (2) take any action which would diminish or dilute the distinctiveness or validity of the Seller's Trademarks; (3) challenge Seller's ownership of the Seller's Trademarks and/or registrations thereof; or (4) attempt to register the Seller's Trademarks or any mark confusingly similar thereto, alone or in combination with other words or designs, as a Trademark in its own name anywhere in the world. 3.10 (a) Up until Closing, and ten (10) years thereafter, if Buyer or Seller identifies Intellectual Property that is owned by Seller, transferable, and relates to the Field of the Businesses, as reasonably confirmed by Seller, but is not expressly identified as being licensed or assigned under this IP Agreement, the parties agree to amend this IP Agreement such that: (a) if said Intellectual Property relates exclusively to the Field of the Businesses, said Intellectual Property is assigned to Buyer pursuant to Article 2 and is included under the appropriate defined term and/or schedule such that said Intellectual Property is subject (if applicable) to the appropriate license back to Seller under Article 3; and (b) if said Intellectual Property in any way relates to both the Field of the Businesses and Seller's Retained Businesses, such Intellectual Property is licensed to Buyer pursuant to Article 3 and is included under the appropriate defined term and/or schedule. (b) To the extent that Seller or any of its Affiliates has any right of a contractual or equitable nature to any Intellectual Property relating exclusively to the Field of the Businesses, which right has not been perfected to confer title in the Intellectual Property to Seller, Seller shall cooperate with Buyer to cause said title to be conveyed to and perfected in Buyer. Buyer and Seller shall bear equally the out of pocket expenses of conveying and perfecting title in Buyer, provided however, that Seller's obligations under this Section 3.10(b) shall not exceed, in the aggregate, two-hundred and fifty thousand ($250,000) dollars. 3.11 Any license granted in this IP Agreement shall expire when the subject rights in the relevant Intellectual Property expires or is abandoned, whichever is earlier; provided however that if either party elects at any time to abandon, or permit to expire or lapse, any Patents that are the subject of this IP Agreement, then said party owning said Patents shall first notify the party being licensed said Patents in writing of this fact, and said party being licensed said Patents shall have the right to be assigned the aforesaid Patents without cost. 72 3.12 (a) Subject to the provisions of Section 3.12(b) and (c) below, Buyer shall be solely responsible for, and bear all costs associated with and retain all recoveries obtained from, but not be obligated to, the enforcement of the Intellectual Property licensed to Buyer under this IP Agreement in the Field of the Business using counsel selected by Buyer and reasonably acceptable to Seller. Seller shall be solely responsible for, and bear all costs associated with and retain all recoveries obtained from, but not be obligated to, the enforcement of the Intellectual Property licensed to Buyer under this IP Agreement outside the Field of the Business. (b) Each party shall cooperate with the other in the enforcement and defense of the Intellectual Property licensed in the present IP Agreement. Each agrees to give the other notice of any claims, suits or proceedings challenging the validity or enforceability of any of the Intellectual Property licensed under this IP Agreement. (c) Each party shall permit itself to be named, at the sole expense of the other party, as an additional plaintiff in any suit or proceeding brought by the other party hereto pursuant to 3.12(a) hereof, against a third party asserting infringement of any of the Intellectual Property licensed under this Agreement, if doing so is necessary in order to bring or maintain such suit. Such other party shall give the party being named at least thirty (30) days prior written notice before naming it as an additional plaintiff and shall indemnify and hold such named party harmless against costs, damages, penalties or expenses incurred by or awarded against it (including reasonable attorneys' fees, expert fees and costs) as a result of such suit or proceeding. Buyer and Seller agree to obtain the other party's prior written consent of any settlement of any suit in which settlement would be adverse to the other party's interest in the Intellectual Property licensed under this Agreement. (d) If Buyer receives any recovery, including without limitation damages, settlement, fees, or license payments, from a third party based on infringement of any of the Seller's Training Intellectual Property, and to the extent that such recovery relates to the activities of the Businesses prior to Closing, after deducting reasonable applicable expenses in obtaining such recovery, such recovery shall be paid to Seller. Nothing in this Section 3.12(d) shall obligate Seller to be joined or participate in any action seeking such recovery. ARTICLE 4 THIRD PARTY INTELLECTUAL PROPERTY 4.1 Anything in this IP Agreement to the contrary notwithstanding, this IP Agreement shall not constitute an agreement to assign any Contract, or any claim, contractual obligation or authorization of a Governmental Authority, lease, commitment, sales, service or purchase order, or any claim, right or benefit arising thereunder or resulting therefrom, if this IP Agreement would be deemed an attempted assignment thereof without the required consent, approval or novation of a third party thereto and would constitute a breach thereof, or in any way Adversely Affect the rights of Seller or Buyer thereunder. Buyer acknowledges that the ability of the parties to obtain the consents contemplated hereunder may be affected by a change in the dynamics of the relevant market resulting from the IP Agreement or the Asset Purchase and Sale Agreement. Notwithstanding the foregoing, if such consent, approval or novation is not obtained, or if the consummation of this IP Agreement would Adversely Affect the rights of Seller thereunder so that Buyer would not in fact receive the benefit of all such rights, Seller shall cooperate with Buyer in any arrangement designed to provide for the benefits thereof to Buyer, including 73 without limitation subcontracting, sublicensing or subleasing to Buyer or enforcement for the benefit of Buyer of any and all rights of Seller against a third party thereto arising out of the breach or cancellation by such third party or otherwise; and any assumption by Buyer of obligations thereunder in connection with this IP Agreement which shall require the consent, approval or novation of any third party shall be made subject to such consent, approval or novation being obtained. 4.2 To the extent that costs are incurred to effect the transfer(s) contemplated in Section 4.1 and pursuant to Sections 2.6 and 5.2(b) of the Asset Purchase and Sale Agreement, such costs shall be borne equally by Buyer and Seller. To Seller's Knowledge, such Intellectual Property rights of third parties that are nontransferable or require a third party's consent to transfer said rights includes the items listed in Schedule 3.1(e) of the Asset Purchase and Sale Agreement. ARTICLE 5 PATENT PROSECUTION 5.1 Buyer shall reasonably cooperate with Seller, exclusively at Seller's cost, in the filing, prosecution, maintenance or other attempts to protect the Seller's Retained Patents, including, without limitation, by executing those documents as Seller may reasonably require from time to time to ensure that all right, title and interest in Seller's Retained Patents continues to reside with Seller. 5.2 Seller shall reasonably cooperate with Buyer, exclusively at Buyer's cost, in the filing, prosecution, maintenance or other attempts to protect the Seller's Training Patents, including, without limitation, by executing those documents as Buyer may reasonably require from time to time to ensure that all right, title and interest in Seller's Training Patents continues to reside with Buyer. ARTICLE 6 ASSIGNABILITY Neither party may assign this IP Agreement without the consent of the other party, and such consent shall not be unreasonably withheld, conditioned or delayed. This IP Agreement may be assigned without the consent of the other party in the following circumstances: (a) a change in name or legal status of either party hereto, which change does not affect the nature of the respective business activities; or (b) the sale by a party hereto of substantially all the assets of the Businesses to which the licensed rights relate or the sale of a separable business unit related to a portion of the licensed rights. ARTICLE 7 CLASSIFIED INFORMATION AND EXPORT CONTROLS 7.1 Buyer acknowledges that Know-How and other Intellectual Property to be disclosed, transferred, assigned, or licensed to Buyer pursuant to this IP Agreement and/or the 74 Asset Purchase and Sale Agreement may be considered as "classified information" by the United States Government, including information that may be classified as "technical data" under the Arms Control Export Act, and nothing in this IP Agreement or in the Asset Purchase and Sale Agreement shall require Seller to disclose such "classified information" to Buyer until such time as Buyer has received necessary clearances from the United States Government to receive same. 7.2 It is understood that Seller and certain of the Subject Patents, Copyrights and Know-How are subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979), and that Seller's obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by Buyer that Buyer shall not export data or commodities to certain foreign countries without prior approval of such agency. Seller neither represents that a license shall not be required nor that, if required, it shall be issued. ARTICLE 8 REPRESENTATIONS AND WARRANTIES 8.1 Except as noted in Sections 3.7 and 3.8 of this IP Agreement, Seller represents and warrants that: (a) to Seller's Knowledge, Seller owns the entire right, title and interest in and to all Seller's Training Intellectual Property for use in the Field of the Businesses; (b) to Seller's Knowledge, except as noted on the Third Party License Schedule attached hereto, Seller has not granted any license or other rights to Seller's Training Intellectual Property to any other Person; (c) to Seller's Knowledge, except as noted on the Third Party License Schedule attached hereto, Seller has not granted any license or other rights to Seller's Retained Patents, Seller's Retained Copyrights, or Seller's Retained Know-How to any other Person for use in the Field of the Businesses; and (d) to Seller's Knowledge, all transferable Intellectual Property actually used by Seller to conduct the Businesses as conducted at Closing is being assigned or licensed to Buyer under this IP Agreement. 8.2 EXCEPT AS OTHERWISE PROVIDED IN THIS IP AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES: (A) THAT THE INTELLECTUAL PROPERTY ASSIGNED OR LICENSED UNDER THIS IP AGREEMENT IS SUFFICIENT TO PERMIT BUYER TO OPERATE THE BUSINESSES AS CONDUCTED AT CLOSING; (B) THAT BUYER'S OPERATION OF THE BUSINESSES AFTER CLOSING WILL NOT INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER PERSON; (C) THAT ANY MANUFACTURE, SALE, OFFER TO SELL, LEASE, IMPORT, USE OR OTHER DISPOSITION OF PRODUCTS OR SERVICES AFTER THE CLOSING MADE PURSUANT TO THE INTELLECTUAL PROPERTY RIGHTS ASSIGNED OR LICENSED HEREUNDER WILL BE FREE FROM INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; (D) THAT NO OTHER PERSON IS NOT CURRENTLY INFRINGING THE INTELLECTUAL PROPERTY RIGHTS ASSIGNED OR LICENSED UNDER THIS IP AGREEMENT; (E) THAT ANY OF THE INTELLECTUAL PROPERTY 75 ASSIGNED OR LICENSED UNDER THIS IP AGREEMENT IS VALID OR ENFORCEABLE OR HAS ANY PARTICULAR SCOPE OF COVERAGE; OR (F) THAT ANY OR ALL OF THE RIGHTS OF THIRD PARTIES RECITED IN ARTICLE 4 HEREOF ARE TRANSFERABLE OR SUBLICENSABLE, OR THAT SELLER HAS OBTAINED OR CAN OBTAIN PERMISSION OR CONSENT TO ANY TRANSFERS OR SUBLICENSES CONTEMPLATED BY ARTICLE 4. 8.3 Seller hereby represents and warrants that: (a) to Seller's Knowledge, no Person has charged in writing that any aspect of the Businesses, at or before Closing, infringes any Intellectual Property of a third party, except for the items identified in IP Schedule 8.3(a); (b) to Seller's Knowledge, no aspect of the Businesses, at or before Closing, infringes any Intellectual Property rights of any third party, with the exception of the items identified in IP Schedule 8.3(a) (without admitting that the items identified in IP Schedule 8.3(a) constitute infringement); and (c) to Seller's Knowledge, no other Person is currently infringing the Intellectual Property rights assigned or licensed under this IP Agreement. ARTICLE 9 INFRINGEMENT LIABILITY 9.1 Any and all liabilities, obligations or damages for infringement of Intellectual Property rights of another Person arising from the operation of the Businesses before the Closing shall be deemed a Retained Liability under the Asset Purchase and Sale Agreement for all applicable purposes of the Asset Purchase and Sale Agreement. 9.2 Any and all liabilities, obligations or damages for infringement of Intellectual Property rights of another Person arising from the operation of the Businesses after the Closing shall be deemed an Assumed Liability under the Asset Purchase and Sale Agreement for all applicable purposes of the Asset Purchase and Sale Agreement. ARTICLE 10 TERMINATION Prior to Closing, this IP Agreement may be terminated: (i) by the express written consent of both parties; or (ii) automatically upon termination of the Asset Purchase and Sale Agreement. ARTICLE 11 NOTICES AND OTHER COMMUNICATIONS All notices hereunder shall be sufficiently given for all purposes hereunder if in accordance with Section 12.5 of the Asset Purchase and Sale Agreement. ARTICLE 12 MISCELLANEOUS PROVISIONS 12.1 In construing this IP Agreement, the following principles shall be followed: (i) no 76 consideration shall be given to the captions of the articles, sections, subsections or clauses, which are inserted for convenience in locating the provisions of this IP Agreement and not as an aid in construction: (ii) no consideration shall be given to the fact or presumption that any of the parties had a greater or lesser hand in drafting this IP Agreement; (iii) examples shall not be construed to limit, expressly or by implication, the matter they illustrate; (iv) the word "includes" and its syntactic variants mean "includes, but is not limited to" and corresponding syntactic variant expressions; (v) the plural shall be deemed to include the singular, and vice versa; (vi) each gender shall be deemed to include the other gender; and (vii) each exhibit, appendix, attachment and schedule to this IP Agreement is a part of this IP Agreement. 12.2 Except as set forth in this IP Agreement, whether this IP Agreement is or is not consummated, all legal and other costs and expenses incurred in connection with this IP Agreement and the transactions contemplated hereby shall be borne equally and shared between Buyer and Seller; provided, however, that Seller shall pay all fees and Taxes relating to the transfer of or recordation of transfer of Intellectual Property provided for under this IP Agreement. 12.3 At and after Closing, each party hereto will execute and deliver any deeds, bills of sale, assignments, licenses, or assurances, and take and do any other actions reasonably necessary to vest, perfect or confirm of record or otherwise, in the other party, any and all right, title and interest in, to and under any of the rights or benefits acquired or to be acquired by the other party as a result of, or in connection with, this IP Agreement. 12.4 Seller and Buyer further agree for themselves and for their successors and assigns, to execute and deliver without further consideration any further applications, assignments, licenses and other documents, and to perform such other acts as may be deemed reasonably necessary by the other, its successors, assigns, and nominees, fully to secure its interest in all of the aforesaid assignments, licenses, and other grants of benefits by said parties. 12.5 The parties hereto agree that any products covered by Patents licensed under this IP Agreement shall be marked in such a manner as to conform with the patent laws and practice of the country of manufacture or sale. 12.6 The parties hereto agree to make its respective employees reasonably available to the other party, at the other party's expense, to reasonably assist and otherwise reasonably cooperate in the preparation and prosecution of applications for Patents, Trademarks, and Copyrights, and to execute any and all applications, assignments, affidavits and any other papers in connection therewith necessary to perfect such rights. 12.7 In the event of a conflict between the terms and provisions of this IP Agreement and the terms and provisions of the Asset Purchase and Sale Agreement, the terms and provisions of the Asset Purchase and Sale Agreement shall take precedence, unless and except if the terms and provisions in conflict relate directly to Intellectual Property, in which case the terms and provisions of this IP Agreement shall take precedence. 77 12.8 This IP Agreement shall be governed by and construed in accordance with the contract law of the State of Delaware, excluding questions affecting the construction and effect of any Patent, the latter of which shall be determined by the law of the country in which the Patent was granted. Buyer and Seller consent to and hereby submit to the jurisdiction of any state or federal court located in the State of Delaware in connection with any action, suit or proceeding arising out of or relating to this IP Agreement, and each of the parties hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 12.9 The parties hereto acknowledge that the Asset Purchase and Sale Agreement and this IP Agreement, and the schedules and exhibits thereto, sets forth the entire agreement and understanding of the parties hereto as to the subject matter hereof, and shall not be subject to any change or modification except by the execution of a written instrument subscribed to by the parties hereto. 12.10 If any provision of this IP Agreement, including any phrase, sentence, clause, Section or subsection is inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever. 12.11 No provision of this IP Agreement may be waived except by a written instrument signed by the party waiving compliance. No waiver by any party hereto of any of the requirements hereof or of any of such party's rights hereunder shall release the other parties from full performance of their remaining obligations stated herein. No failure to exercise or delay in exercising on the part of any party hereto any right, power or privilege of such party shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege by such party. 12.12 Except as provided in Article 9 with respect to indemnification of the indemnified parties hereunder, nothing in this IP Agreement shall confer any rights upon any Person other than the parties hereto and their respective successors and permitted assigns. 12.13 This IP Agreement may be executed in multiple original counterparts, all of which shall be considered one and the same agreement. 12.14 Except as modified below, the confidentiality clause of Section 5.12 of the Asset Purchase and Sale Agreement shall apply to this IP Agreement and herein be incorporated. For purposes of this Section, any confidential or secret information that is being assigned to Buyer under this IP Agreement shall be deemed the confidential or secret information of Buyer and any confidential or secret information that is being licensed to Buyer under this IP Agreement shall be deemed the confidential or secret information of Seller. Both sides may use any confidential 78 or secret information (relating to Intellectual Property licensed under this IP Agreement) of the other party during the reasonable course of conducting its business (of which is licensed under this IP Agreement), provided however, that any disclosures of such confidential or secret information made to third parties include an obligation to keep such confidential or secret information confidential. 12.15 In the event of a material breach or threatened material breach by Buyer of the field of use restrictions imposed on Buyer in Sections 3.1 or 3.2 of this IP Agreement, Seller shall be entitled to seek an injunction prohibiting any such breach or threatened breach without the posting of any bond or other security. In addition to injunctive relief, the injured party shall have all other rights and remedies afforded it by law. 12.16 The non-compete clause of Section 5.9 of the Asset Purchase and Sale Agreement shall apply to this IP Agreement and herein be incorporated. 12.17. This IP Agreement shall become effective on the Effective Date and if the Closing does not occur, this Agreement shall be null and void as if this IP Agreement never existed. 79 IN WITNESS WHEREOF, the parties hereto have caused this IP Agreement to be executed and delivered, as an instrument under seal, in their names and on their behalf by their respective officers, thereunto duly authorized, on and as of the date first set forth above, and to be and become effective on and as of the Effective Date. SELLER: RAYTHEON COMPANY By: -------------------------------------- Name: Franklyn A. Caine Title: Senior Vice President BUYER: L-3 COMMUNICATIONS CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President 80 TRAINING PATENTS SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- 970012 Federated Input Circuit Card Assembly 06/18/97 5,933,656 08/03/99 DD Hansen - ----------------------------------------------------------------------------------------------------------------------------------- C96011 Competing Opposing Stimulus Simulator 12/03/96 5,829,446 11/03/98 JR Tiffany Sickness Reduction Technique - ----------------------------------------------------------------------------------------------------------------------------------- 95457 Calibration System and Method for Optical 12/10/96 5,803,570 09/08/98 DA Ansley, CW Chen, JD System Zimmerman - ----------------------------------------------------------------------------------------------------------------------------------- C95005 Preventive Maintenance and Diagnostic System 02/29/96 5,754,451 05/19/98 CR Williams - ----------------------------------------------------------------------------------------------------------------------------------- 094458 Catadioptric One-to-One Telecentric Image 03/26/96 5,748,365 05/05/98 CW Chen Combining System - ----------------------------------------------------------------------------------------------------------------------------------- C96007 Helmet/Head Mounted Projector System 10/07/96 5,726,671 03/10/98 DA Ansley, CW Chen - ----------------------------------------------------------------------------------------------------------------------------------- C94003 Lenseless Helmet/Head Mounted Display 12/03/96 5,715,094 02/02/98 DA Ansley, CW Chen, RG Hegg - ----------------------------------------------------------------------------------------------------------------------------------- C95003 Target Projector Automated Alignment System 06/24/96 5,707,128 01/13/98 JL Dugdale - ----------------------------------------------------------------------------------------------------------------------------------- C92011 A Rendering and Warping Image Generation 11/27/95 5,684,935 11/04/97 KR Martin, JR Wright, KS System and Method Herberger, NP Demesa III - ----------------------------------------------------------------------------------------------------------------------------------- C92011A A Rendering and Warping Image Generation 02/25/93 5,684,935 11/04/97 KR Martin, JR Wright, KS and System and Method Herberger, NP Demesa III - ----------------------------------------------------------------------------------------------------------------------------------- 095C03 Two Stage Projection System 03/28/96 5,677,788 10/14/97 DA Ansley, CW Chen, JD Zimmerman - ----------------------------------------------------------------------------------------------------------------------------------- C93006 Rear Project Screen for High Ambient Light 07/17/94 5,546,202 08/13/96 DA Ansley Environments Having a Pinhole Area Substantially Equal to Luminous Area. - ----------------------------------------------------------------------------------------------------------------------------------- C94002 Uniform-Brightness, High-Gain Display 11/18/94 5,541,769 07/30/96 DA Ansley, AA Sisodia, JD Structures and Methods Zimmerman - ----------------------------------------------------------------------------------------------------------------------------------- C92007 A Method of Backscreen Fabrication Using 10/03/94 5,525,272 06/11/96 JL Dugdale Pre-Coated Material - ----------------------------------------------------------------------------------------------------------------------------------- 81 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C92008 Method and Apparatus for Aligning Visual 03/01/93 5,424,839 06/13/95 R Lindly, JL Dugdale Images with Visual Display Devices - ----------------------------------------------------------------------------------------------------------------------------------- C91015 CGSI Pipeline Performance Improvement 02/22/94 5,420,940 05/30/95 DD Hansen, GG Sanford, MF Sedlar - ----------------------------------------------------------------------------------------------------------------------------------- C91015A CGSI Pipeline Performance Improvement 06/16/92 5,420,940 05/30/95 DD Hansen, GG Sanford, MF Sedlar - ----------------------------------------------------------------------------------------------------------------------------------- 091092 Dynamic Distortion Correction Apparatus 09/12/91 5,414,521 05/09/95 DA Ansley Method - ----------------------------------------------------------------------------------------------------------------------------------- C92002 Portable Exploitation and Control System 07/21/94 5,386,371 01/31/95 M Mather, S Haumersen, RL Eastey - ----------------------------------------------------------------------------------------------------------------------------------- C92002A Portable Exploitation and Control System 03/24/94 5,386,371 01/31/95 M Mather, S Haumersen, RL Eastey - ----------------------------------------------------------------------------------------------------------------------------------- C92005 Terrain and Culture Generation System and 02/04/93 5,359,526 10/25/94 J Nguyen, JG Paffor, RC Method Whittington - ----------------------------------------------------------------------------------------------------------------------------------- C91009 Target Image Rendering With Color 04/08/93 5,351,097 09/27/94 KR Brooke Transparencies - ----------------------------------------------------------------------------------------------------------------------------------- C92006 Texture Method for Producing Fluid Effects in 09/16/92 5,325,480 06/26/94 JT Rice Real-Time Simulation - ----------------------------------------------------------------------------------------------------------------------------------- C92009 Interactive Aircraft Training System and 09/23/92 5,320,538 06/14/94 DR Baum Method - ----------------------------------------------------------------------------------------------------------------------------------- 084077A Digital Visual and Sensor Simulation System 08/10/90 5,317,689 05/31/94 A Rosman, GN Landis, ML for Generating Realistic Scenes Nack, NL Moise, RJ McMillen, TO Ellis, C Yang - ----------------------------------------------------------------------------------------------------------------------------------- C89010 Multiple Object Pipeline Display System 08/18/92 5,315,692 05/24/94 DD Hansen, JN Clay Jr, MD Sedler - ----------------------------------------------------------------------------------------------------------------------------------- C89010B Multiple Object Pipeline Display System 07/22/88 5,315,692 05/24/94 DD Hansen, JN Clay Jr., MD Sedler - ----------------------------------------------------------------------------------------------------------------------------------- 82 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C89011 Multiple Object Pipeline Display System 12/03/90 5,315,692 05/24/94 DD Hansen, JN Clay Jr, MD Sedler - ----------------------------------------------------------------------------------------------------------------------------------- C90002 Method and System for Authoring, Editing, and 10/30/90 5,287,489 02/15/94 GA Nimmo, MH Johnson, P Testing Instruction Materials for Use in Hedger Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- C90001 Trainer Using Video Photographs and Overlays 12/22/92 5,286,202 02/15/94 VS Degyarfas, R Saunders for Reconfigurable Hardware Simulation - ----------------------------------------------------------------------------------------------------------------------------------- C90015 Tactical Navigation and Target Assessment 05/13/91 5,270,920 12/14/93 D Pearse, W Jones System - ----------------------------------------------------------------------------------------------------------------------------------- C91012 Method and Apparatus for Generating High 02/18/92 5,270,756 12/14/93 SN Busenberg Resolution Vidicon Camera Images - ----------------------------------------------------------------------------------------------------------------------------------- 089387A Non-interfering viewing systems for use in 06/12/92 5,267,061 11/20/93 EC Hazeltine, DA Ansley catadioptric projection systems - ----------------------------------------------------------------------------------------------------------------------------------- C92001 Split Static Surround Display System 06/03/92 5,264,881 11/23/93 KR Brooke - ----------------------------------------------------------------------------------------------------------------------------------- C91001 Digital Computer Graphics Processing Method 07/24/91 5,261,030 11/09/93 KR Brooke and Apparatus - ----------------------------------------------------------------------------------------------------------------------------------- C90010 Facsimile Encryption Device 02/07/91 5,259,037 11/02/93 GW Plunk - ----------------------------------------------------------------------------------------------------------------------------------- C91011 Tunnel Vision Video Display System 02/24/92 5,253,049 10/12/93 KR Brooke - ----------------------------------------------------------------------------------------------------------------------------------- C91013 Method and Apparatus for Generating High 02/18/92 5,251,037 10/05/93 SN Busenberg Resolution CCD Camera Images - ----------------------------------------------------------------------------------------------------------------------------------- C91005 Physically Reconfigurable Interactive Control 10/16/92 5,243,494 09/07/93 DW Miles, HJ Cotner, TG System Halvorsen - ----------------------------------------------------------------------------------------------------------------------------------- C91005 Physically Reconfigurable Interactive Control 06/25/91 5,243,494 09/07/93 DW Miles, HJ Cotner, TG System Halvorsen - ----------------------------------------------------------------------------------------------------------------------------------- C90017 Condition Monitor Request Processing System 07/15/91 5,240,419 08/31/93 V Degyarfas - ----------------------------------------------------------------------------------------------------------------------------------- 090350 Optics Approach to Low Side Compliance 02/11/91 5,228,856 07/20/93 DB Chang, I Shih Simulation - ----------------------------------------------------------------------------------------------------------------------------------- 83 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C90004 Training Device Onboard Instruction Station 09/17/90 5,224,861 07/06/93 RT Obrien, A Plavnieks, CG Smith III, GD Smith, RH Glass, WT Tilghman - ----------------------------------------------------------------------------------------------------------------------------------- C90016 Tactical Route Planning Method for Use in 06/12/91 5,187,667 02/16/93 LO Short Simulated Tactical Engagements - ----------------------------------------------------------------------------------------------------------------------------------- C91003 Near-Infinity Image Display System 07/16/91 5,157,503 10/20/92 JL Dugdale - ----------------------------------------------------------------------------------------------------------------------------------- C89002 3-D Weather for Digital Radar Landmass 06/28/90 5,135,397 08/04/92 CS Yen Simulation - ----------------------------------------------------------------------------------------------------------------------------------- 085259 Event Tagging Time Delay 02/16/90 5,033,066 07/16/91 DM DeVore - ----------------------------------------------------------------------------------------------------------------------------------- 095673L Method and Apparatus for Processing 07/18/89 4,918,625 04/17/90 JK Yan Translucent Objects - ----------------------------------------------------------------------------------------------------------------------------------- 084260A Calligraphic Control for Image Superimposition 11/25/88 4,882,577 11/21/89 DM DeVore - ----------------------------------------------------------------------------------------------------------------------------------- 095669L Video Processor Architecture With Distance 12/05/84 4,748,572 05/31/88 RW Lath Sorting Capability - ----------------------------------------------------------------------------------------------------------------------------------- 095668L Log Mixer Circuit 01/09/85 4,734,875 03/29/88 JK Florence, JW Lath, MA Rohn - ----------------------------------------------------------------------------------------------------------------------------------- 096667L Video Processor for a Real Time Operation 12/05/84 4,703,439 10/27/87 RW Lotz Without Overload in a Computer-Generated Image System - ----------------------------------------------------------------------------------------------------------------------------------- 095666L High Performance Multi-Processor System 02/18/86 4,691,280 09/01/87 WS Bennett - ----------------------------------------------------------------------------------------------------------------------------------- 095665L Computer-Generated Image System to Display 04/30/84 4,679,040 07/07/87 JK Yan Translucent Features With Anti-Aliasing - ----------------------------------------------------------------------------------------------------------------------------------- 095663L Digital Distortion-Correcting Circuit for 04/01/85 4,656,521 04/07/87 JA Turner, JR Trzeciak Projecting A Flat Image on a Curved Screen from a Digital Data Source For A. . . - ----------------------------------------------------------------------------------------------------------------------------------- 095661L Method and Apparatus for Texture Generation 08/02/83 4,615,013 09/30/86 JK Yan, JS Szabo, LY Chen - ----------------------------------------------------------------------------------------------------------------------------------- 84 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- 095660L Raster-Scan/Calligraphic Combined Display 07/18/83 4,614,941 09/30/86 KM Jarvis system for High Speed Processing of Flight Simulation Data - ----------------------------------------------------------------------------------------------------------------------------------- 095659L Signature Analyzer Card 03/19/84 4,608,691 08/26/86 J Lynch - ----------------------------------------------------------------------------------------------------------------------------------- C89020 Input/Output System and Method for Digital 06/06/83 4,591,973 05/27/86 FO Ferris, HG Prival Computers - ----------------------------------------------------------------------------------------------------------------------------------- 095658L Wide angle Area-OF-Interest Visual Image 01/16/84 4,588,382 051/3/86 DL Peters Projection System - ----------------------------------------------------------------------------------------------------------------------------------- 095657L Data Word Normalization 12/13/82 4,586,154 04/29/86 DN Berry - ----------------------------------------------------------------------------------------------------------------------------------- 095656L Modular Digital Image Generator 07/01/82 4,570,233 02/11/86 JK Yan, JK Florence - ----------------------------------------------------------------------------------------------------------------------------------- C89018 Programmable Integrated Circuit AC Resistor 01/21/83 4,551,705 11/05/85 RD Anderson Network - ----------------------------------------------------------------------------------------------------------------------------------- C89018 Programmable Integrated Circuit AC Resistor 01/21/83 4,551,705 11/05/85 RD Anderson Network - ----------------------------------------------------------------------------------------------------------------------------------- 095652L Spherical Projection-Type Screen for Use in a 06/21/82 4,514,347 04/30/85 JT Reed Vehicle Simulator - ----------------------------------------------------------------------------------------------------------------------------------- 095650L High Performance Control Loading System for 12/20/82 4,504,233 03/12/85 BE Sill, DM Galus Manually-Operable Controls in a Vehicle Simulator - ----------------------------------------------------------------------------------------------------------------------------------- 095646L Angle Visual System 03/03/81 4,479,784 10/30/84 DI Peters, KS Seity, RA Mechlenbor, RB Mallinson - ----------------------------------------------------------------------------------------------------------------------------------- 095643L Electronic Compensator for an Electrohydraulic 12/07/81 4,451,769 05/29/84 CL Applegate, GE Minnich Servovalve - ----------------------------------------------------------------------------------------------------------------------------------- 095641L Compensation Apparatus for an 12/07/81 4,439,716 03/27/84 GE Minnich Electrohydraulic Servovalve - ----------------------------------------------------------------------------------------------------------------------------------- 095640L Video Projector Adjustable Support 12/29/80 4,433,824 02/28/84 M Koosha - ----------------------------------------------------------------------------------------------------------------------------------- 095639L Servo Control Circuit 11/09/81 4,423,365 12/27/83 JA Turner - ----------------------------------------------------------------------------------------------------------------------------------- 85 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C89017 Incandescent Lamp Driver Circuit 07/01/82 4,417,183 11/22/83 EE Popard, GW Davison, MF Seldar - ----------------------------------------------------------------------------------------------------------------------------------- 095638L Ordering System for Pairing Feature 05/15/81 4,414,643 11/08/83 JW Meyer Intersections on a Simulated Radar Sweepline - ----------------------------------------------------------------------------------------------------------------------------------- 095635L Landing Light Pattern Generator For Simulator 11/07/80 4,404,553 09/13/83 PRP Cuffia with Selective Addressing for Memory - ----------------------------------------------------------------------------------------------------------------------------------- 095634L Digital Control Circuit for an Analog Servo 08/07/80 4,398,241 08/09/83 EB Baker, JA Turner - ----------------------------------------------------------------------------------------------------------------------------------- 095629L Servo Control System 09/02/80 4,369,400 01/18/83 JC Stubbart, JA Turner - ----------------------------------------------------------------------------------------------------------------------------------- 095627L Front Projection Screen with Precision Gain 03/23/81 4,354,738 10/19/82 FN Forehand, RA Mecklenbor Control - ----------------------------------------------------------------------------------------------------------------------------------- 095626L Variable Gain Screen Permitting Off-Axis 09/29/80 4,354,737 10/19/82 DL Peters, M Kotskso, RE Viewing With Image Brightness Remaining Kiemm Constant - ----------------------------------------------------------------------------------------------------------------------------------- 095625L Circuit Board Connector Indexing Key 07/31/80 4,354,724 10/19/82 HJ Jarmy - ----------------------------------------------------------------------------------------------------------------------------------- 095624L Dome field of View Scene Extenders 12/05/80 4,350,489 09/21/82 DP Gdovin - ----------------------------------------------------------------------------------------------------------------------------------- 095623L Laser Spatial Stabilization Transmission System 01/07/80 4,349,732 09/14/82 CM Whitby - ----------------------------------------------------------------------------------------------------------------------------------- 095622L Aerial Image Visual Display 07/31/80 4,348,187 09/07/82 M Dotsko - ----------------------------------------------------------------------------------------------------------------------------------- 095621L Landing Light Pattern Generator for Digital 11/04/80 4,348,184 09/07/82 RW Moore Image Systems - ----------------------------------------------------------------------------------------------------------------------------------- 095620L Simulator Structure 07/02/80 4,347,055 08/31/82 RJ Geiger - ----------------------------------------------------------------------------------------------------------------------------------- 095619L Wide Angle Display Device 06/02/80 4,345,817 08/24/82 EC Gwynn - -----------------------------------------------------------------------------------------------------------------------------------
86 TRAINING PATENTS SCHEDULE (CONTINUED) PENDING PATENTS
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING DATE SERIAL NO INVENTOR(S) - ----------------------------------------------------------------------------------------------------------------------------------- C92003 Database Correlatable Chart Generation 09/08/92 07/941,466 S Nathman, RC Whittington System and Method - ----------------------------------------------------------------------------------------------------------------------------------- C96001 Avionic Computer Software Interpreter 05/14/96 08/645,988 JE Shibata - ----------------------------------------------------------------------------------------------------------------------------------- C96002 Backscreen Edge Contouring for Off-Axis 05/31/96 08/656,674 JA Turner Large Field of View Displays - ----------------------------------------------------------------------------------------------------------------------------------- C94001 Multiple Participant Interactive Interface 10/15/96 08/731,354 JT Rice, LA Rosser - ----------------------------------------------------------------------------------------------------------------------------------- C95004 Rotating Backscreen and/or Projectors for 10/30/96 08/741,064 JA Turner, JL Dugdale LFF-Axis Large Field of View Display - ----------------------------------------------------------------------------------------------------------------------------------- C96010 Automated Adaptive Interfaces for Training 06/05/98 09/092,107 RF Jones Systems - ----------------------------------------------------------------------------------------------------------------------------------- 970364 Head Mounted Projector Using Tapered 07/17/97 09/119,923 AA Sisodia, RE Yaffe Fiber Optic Relay and Image Combining System - ----------------------------------------------------------------------------------------------------------------------------------- 970569 Automated Self Adaptive Multimodal User 02/11/97 09/249,224 JR Tiffany, JS Hartman, DJ Jennings Interface - ----------------------------------------------------------------------------------------------------------------------------------- 970332 Illumination System Including an Angular 04/17/98 09/761,722 CW Chen, EC Fest Radiation Converter - -----------------------------------------------------------------------------------------------------------------------------------
87 TRAINING PATENTS SCHEDULE (CONTINUED) FOREIGN PATENTS
- ----------------------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY CORRESPONDING ISSUE FOREIGN PAT. PENDING STATES U.S. DATE NUMBER - ----------------------------------------------------------------------------------------------------------------------------------- System and Technique for Making Holographic Canada 5,151,799 08/25/98 2,058,802 Projection Screens - ----------------------------------------------------------------------------------------------------------------------------------- System and Technique for Making Holographic Japan 5,151,799 04/16/96 2,510,370 Projection Screens - ----------------------------------------------------------------------------------------------------------------------------------- System and Technique for Making Holographic Europe 5,151,799 04/09/97 499,372 FRA / GFR / GBT Projection Screens - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and Canada 5,287,489 01/25/97 2,052,147 Testing Instruction Materials for Use in Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and Israel 5,287,489 08/31/94 99,590 Testing Instruction Materials for Use in Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and Japan 5,287,489 03/13/96 2,502,861 Testing Instruction Materials for Use in Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and South 5,287,489 10/17/95 90,380 Testing Instruction Materials for Use in Korea Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and Taiwan 5,287,489 06/15/93 60,969 Testing Instruction Materials for Use in Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Method and System for Authoring, Editing and Europe 5,287,489 12/27/96 483,991 GFR / GBT Testing Instruction Materials for Use in Simulated Training Systems - ----------------------------------------------------------------------------------------------------------------------------------- Helmet/Head Mounted Projector System Canada 5,726,671 (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- Helmet/Head Mounted Projector System Europe 5,726,671 (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- 88 - ----------------------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY CORRESPONDING ISSUE FOREIGN PAT. PENDING STATES U.S. DATE NUMBER - ----------------------------------------------------------------------------------------------------------------------------------- Avionic Computer Software Interpreter Canada 08/645,988 (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- Software Interpreter for Aviation Electronics Japan 08/645,988 04/10/98 JP 10091598 A Computer - ----------------------------------------------------------------------------------------------------------------------------------- Avionic Computer Software Interpreter Israel 08/645,988 (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- Avionic Computer Software Interpreter Europe 08/645,988 11/19/97 EP 807882A2 DE/FR/GB - ----------------------------------------------------------------------------------------------------------------------------------- Device for Reducing Competing and Opposite Japan 5,829,446 12/8/98 JP1032668A Stimulus Simulator Sickness - ----------------------------------------------------------------------------------------------------------------------------------- Apparatus for Reducing Video Simulator Europe 5,829,446 11/03/98 EP84702742 Induced Sickness - ----------------------------------------------------------------------------------------------------------------------------------- Avionic Computer Software Interpreter Europe (pending) 04/15/98 EP807862A3 - -----------------------------------------------------------------------------------------------------------------------------------
89 RETAINED PATENTS SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C96008 Wide-FOV Simulator Heads-Up Display With 01/27/97 5,907,416 05/25/99 CW Chen, JE Gunther, DD Selective Holographic Reflector Combiner Hansen, RG Hegg - ----------------------------------------------------------------------------------------------------------------------------------- 970333 Novel Anamorphic Projection Optical System 12/10/97 5,890,788 04/06/99 CW Chen, RG Hegg, JL Dugdale, JW Schaefer - ----------------------------------------------------------------------------------------------------------------------------------- 095296 Chromatic Aberration Correction for Display 05/21/97 5,889,625 03/30/99 CW Chen, RE Yaffe, KE Systems Bentley - ----------------------------------------------------------------------------------------------------------------------------------- C96003A System and Method for Multimodal Interactive 04/09/96 5,885,083 03/23/99 JG Ferrell Speech and Language Training - ----------------------------------------------------------------------------------------------------------------------------------- 093036 Distortion Corrected Display 01/10/95 5,748,264 05/05/98 RG Hegg - ----------------------------------------------------------------------------------------------------------------------------------- 092625 Modular Helmut-Mounted Display 01/10/95 5,677,795 10/14/97 RG Hegg - ----------------------------------------------------------------------------------------------------------------------------------- C92017 A Color Helmet Mountable Display 04/22/96 5,612,708 03/18/97 DA Ansley, WS Beamon III - ----------------------------------------------------------------------------------------------------------------------------------- 095677L Head Mounted Visual Display 12/05/94 5,581,271 12/03/96 W. Kraemer - ----------------------------------------------------------------------------------------------------------------------------------- C92015 LCD With Integral Light Confinement Having a 12/12/95 5,574,580 11/12/96 DA Ansley Pair of Afocal Lenslets Positioned Between Liquid Crystal Cells and Color Polarizers - ----------------------------------------------------------------------------------------------------------------------------------- C93003 Fiber optic ribbon display 12/16/94 5,546,492 08/13/95 DA Ansley, AA Sisodia - ----------------------------------------------------------------------------------------------------------------------------------- C92016 Ultra-Wide Field of View, Broad Spectral Band 10/01/93 5,499,139 03/13/96 CW Chen, KE Bentley Helmet Visor Display Optical System - ----------------------------------------------------------------------------------------------------------------------------------- C93003 Fiber optic ribbon subminiature display for 01/28/94 5,416,876 05/16/95 DA Ansley, AA Sisodia head/helmet mounted display - ----------------------------------------------------------------------------------------------------------------------------------- C93004 Computer-based data integration and 02/28/94 5,416,694 05/16/95 R Freundenbe, A Scsigulinsky, management process for workforce planning EJ Parrish, R Cho and occupational readjustment - ----------------------------------------------------------------------------------------------------------------------------------- C92004 Helmet Mounted Display Including 09/16/92 5,319,490 06/07/94 DA Ansley Synchronously Moving Tilted Mechanisms - ----------------------------------------------------------------------------------------------------------------------------------- 90 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING PATENT ISSUE INVENTOR(S) DATE NO DATE - ----------------------------------------------------------------------------------------------------------------------------------- C89007 Architecture for Utilizing Coprocessing Systems 02/19/93 5,283,828 02/01/94 R Saunders, EC Francisco to Increase Performance in Security Adapted Computer Systems - ----------------------------------------------------------------------------------------------------------------------------------- C89006 System for Providing High Security for Personal 03/01/91 5,263,147 11/16/93 R Saunders, EC Francisco Computers and Workstations - ----------------------------------------------------------------------------------------------------------------------------------- 091114 Non-Interfering Color Viewing System Using 09/23/91 5,260,729 11/09/93 DA Ansley Spectral Multiplexing - ----------------------------------------------------------------------------------------------------------------------------------- 090180 System Techniques for Making Holographic 02/11/91 5,151,799 09/29/92 DA Ansley Projection Screens Graphical User Interface System for 5,740,037 Manportable Applications - -----------------------------------------------------------------------------------------------------------------------------------
Foreign Patent - ----------------------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY CORRESPONDING ISSUE FOREIGN PAT. PENDING STATES U.S. DATE NUMBER - ----------------------------------------------------------------------------------------------------------------------------------- Graphical User Interface System for Europe 5,740,037 04/14/98 EP817994A1 - ----------------------------------------------------------------------------------------------------------------------------------- Manportable Applications - -----------------------------------------------------------------------------------------------------------------------------------
91 RETAINED PATENTS SCHEDULE (CONTINUED) PENDING PATENTS
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE FILING DATE SERIAL NO INVENTOR(S) - ----------------------------------------------------------------------------------------------------------------------------------- C92010A Interactive Computerized Witness 08/06/92 08/442,689 ME Stickney, WE Kemp Jr Interrogation Recording Tool - ----------------------------------------------------------------------------------------------------------------------------------- C96012 Computer-Based Data Integration and 03/21/97 08/823,292 CR Beck, DS Boyer, KH Roadman, PA Irvin, Management Processing System and Method SS Arnold, WH Wetzel for Producing Employee Development Plans (Predictor TM) - ----------------------------------------------------------------------------------------------------------------------------------- 970271 Method and Apparatus for Modeling 06/01/98 09/088,171 JG Ferrell Individual Learning Styles - -----------------------------------------------------------------------------------------------------------------------------------
92 KNOW-HOW SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE DOCKETING SERIAL NUMBER (IF INVENTOR(S) DATE AN ABANDONED APPLICATION) - ----------------------------------------------------------------------------------------------------------------------------------- 970223 Keyboard Down Slope 06/03/98 09/089,633 TV Alsfeld - ----------------------------------------------------------------------------------------------------------------------------------- 970630 High Resolution Light Point Enhancement 11/19/97 JA Turner - ----------------------------------------------------------------------------------------------------------------------------------- 970631 Virtual Vignetting for Simulated head-up Displays 11/19/97 RG Hegg - ----------------------------------------------------------------------------------------------------------------------------------- 970504 Digital Light Processing Elements Used in Lieu of 09/23/97 VG Bonilla, DD Hansen Multiple Function Displays for Simulators - ----------------------------------------------------------------------------------------------------------------------------------- 970383 The Weapons Director Visualization Trainer 07/31/97 P Russo, VG Bonilia - ----------------------------------------------------------------------------------------------------------------------------------- C91007A Performance Support System to Aid Human 06/24/96 08/728,135 DB Cleland, HD Ryng, M Reakes Resource Administrators - ----------------------------------------------------------------------------------------------------------------------------------- C96005 Distributed Simulation Contact Anticipation 03/18/96 HJ Smith, J Policella Algorithm - ----------------------------------------------------------------------------------------------------------------------------------- C95012 Hyperbolic Visual Screens 12/15/95 RJ Gieger - ----------------------------------------------------------------------------------------------------------------------------------- C95010 Software Emulation of An Aydin Display System 11/06/95 JA Lodden, KE Hurley, LH Velasquez, R Patel, RP Addsen - ----------------------------------------------------------------------------------------------------------------------------------- C95006 Sibiess Design 09/07/95 D Thorton, CM Cheatham, R Horton - ----------------------------------------------------------------------------------------------------------------------------------- C95007 Motion Base Test Approach 09/07/95 DC Gaines - ----------------------------------------------------------------------------------------------------------------------------------- 95676L Large Lightweight Curved Mirror Especially for 12/20/94 08/359,846 AC WU Simulation - ----------------------------------------------------------------------------------------------------------------------------------- C90009A Oblique Photographic Database Generation 08/09/93 08/106,770 GW Plunk - ----------------------------------------------------------------------------------------------------------------------------------- C93005 Jobmap Software Tool 08/06/93 R Freundenbe, A Scsigulinsky, EJ Parrish, R Cho - ----------------------------------------------------------------------------------------------------------------------------------- C93002 Process for Generating Terrain Elevation Data from 06/28/93 JA Gipson, JT Rice Synthetic Visual Environments - ----------------------------------------------------------------------------------------------------------------------------------- C91004A Time-Division Multiplexed Image Generation 03/13/93 08/034,005 KR Brooke - ----------------------------------------------------------------------------------------------------------------------------------- C92012 Enhanced Resolution for Visual Simulation 08/17/92 CH Waldhauer J - ----------------------------------------------------------------------------------------------------------------------------------- 93 - ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE DOCKETING SERIAL NUMBER (IF INVENTOR(S) DATE AN ABANDONED APPLICATION) - ----------------------------------------------------------------------------------------------------------------------------------- C91014A Improved Display System 06/30/92 07/907,770 KR Brooke - ----------------------------------------------------------------------------------------------------------------------------------- 91223 Virtual Image Entertainment 02/24/92 07/810,219 AF Harvard - ----------------------------------------------------------------------------------------------------------------------------------- C91016 Remote Reset Circuitry 11/15/91 DS Stoica, EC Francisco - ----------------------------------------------------------------------------------------------------------------------------------- C91010 Automated Industrial Process Simulator 10/23/91 07/781,795 RA Raone, RE Powers, VS Degyarfas - ----------------------------------------------------------------------------------------------------------------------------------- C90014 Expert System Scheduler and Scheduling Method 08/15/91 07/745,566 K Hamling - ----------------------------------------------------------------------------------------------------------------------------------- C90018 Efficient Storage of Geographic Data for Visual 08/15/91 07/745,633 MH Johnson Displays - ----------------------------------------------------------------------------------------------------------------------------------- C90008 Image Enhancement System for Color Video 05/20/91 07/704,566 CH Waldhauer J., R Saunders Display - ----------------------------------------------------------------------------------------------------------------------------------- C91006 Universal Alignment Stand 04/11/91 DC Johnson, MS Freeman - ----------------------------------------------------------------------------------------------------------------------------------- C91002 Real Time Interactive Entertainment Simulation 02/15/91 JW Dewey, RU Walzer Center - ----------------------------------------------------------------------------------------------------------------------------------- C90013 Expandable Microsphere Expansion Through 09/14/90 TA Krueger Controlled Exotherm - ----------------------------------------------------------------------------------------------------------------------------------- C90009A Oblique Photographic Database Generation 08/31/90 08/106,770 GW Plunk - ----------------------------------------------------------------------------------------------------------------------------------- C90011 Rear Projection Faceted Dome 08/09/90 TA Krueger - ----------------------------------------------------------------------------------------------------------------------------------- C90007 Technique for Simulating Radiated Energy 06/04/90 RJ Morrow Reflection from Complex Surfaces - ----------------------------------------------------------------------------------------------------------------------------------- C89009 * Abstract Visual Database Format 05/11/89 RB Adams II - ----------------------------------------------------------------------------------------------------------------------------------- C89008 * Deaomm Hypercard Application 05/01/89 LD Roane - ----------------------------------------------------------------------------------------------------------------------------------- C89001 Solid State Finger Tip Input Device 01/30/89 BW Yeager, GH Dewitz - ----------------------------------------------------------------------------------------------------------------------------------- C89004 Scanned Image Stabilization System 01/30/89 CH Waldhauer Jr, HC Gallaher - ----------------------------------------------------------------------------------------------------------------------------------- C89005 Relative Motion Detector for Camera Model 01/30/89 CH Waldhauer J, HC Callaher Indexer - -----------------------------------------------------------------------------------------------------------------------------------
* Confidential Information / Trade Secret 94 TRAINING TRADEMARK SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- MARK COUNTRY OF APPL. FILING DATE SERIAL NUMBER REGISTRATION DATE REG. NUMBER RENEWAL DATE - ----------------------------------------------------------------------------------------------------------------------------------- LINK United States 04/10/1946 71-499955 05/04/1948 438,568 05/04/2008 - ----------------------------------------------------------------------------------------------------------------------------------- LINK United States 01/25/1965 72-210556 08/09/1966 812,505 08/09/2006 - ----------------------------------------------------------------------------------------------------------------------------------- LINK United States 01/19/1965 72-210204 05/20/1969 869,653 05/20/2009 - ----------------------------------------------------------------------------------------------------------------------------------- AST United States 11/02/1978 73-191791 11/03/1981 1,175,887 11/03/2001 - ----------------------------------------------------------------------------------------------------------------------------------- LINK (design) United States 12/10/1991 74-228994 11/30/1993 1,807,131 11/03/2003 - ----------------------------------------------------------------------------------------------------------------------------------- SIMUSPHERE(1) United States 05/21/1999 75-710965 (pending) (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- CLEARVUE(2) United States 08/11/1998 75-533887 (pending) (pending) (pending) - ----------------------------------------------------------------------------------------------------------------------------------- LINK Australia A329,527 03/01/2000 - ----------------------------------------------------------------------------------------------------------------------------------- LINK Denmark 0667/1968 03/08/2008 - ----------------------------------------------------------------------------------------------------------------------------------- LINK France 1,471,111 06/14/2008 - ----------------------------------------------------------------------------------------------------------------------------------- LINK Spain(3) 512,313 04/06/2008 - ----------------------------------------------------------------------------------------------------------------------------------- LINK United Kingdom 1,109,507 02/14/2000 - ----------------------------------------------------------------------------------------------------------------------------------- AMI Common Law - ----------------------------------------------------------------------------------------------------------------------------------- ARTS Common Law - ----------------------------------------------------------------------------------------------------------------------------------- BRITESTAR Common Law - ----------------------------------------------------------------------------------------------------------------------------------- GEOMENTOR Common Law - ----------------------------------------------------------------------------------------------------------------------------------- ITEMS Common Law - ----------------------------------------------------------------------------------------------------------------------------------- pDRLMS Common Law - ----------------------------------------------------------------------------------------------------------------------------------- SEMS Common Law - ----------------------------------------------------------------------------------------------------------------------------------- TRUEGUIDE Common Law - ----------------------------------------------------------------------------------------------------------------------------------- TRUELINK Common Law - ----------------------------------------------------------------------------------------------------------------------------------- TRUESOUND Common Law - -----------------------------------------------------------------------------------------------------------------------------------
- -------- (1) This application is pending under section 1(b) (2) This application is pending under section 1(b) (3) Payment of next tax is due on March 6, 2003 95 RETAINED SOFTWARE SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PROGRAM ITEM DESCRIPTION VERSION/PART# TYPE - ----------------------------------------------------------------------------------------------------------------------------------- F-22 PTD A2A Assembly to Ada software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD J2A Jovial to Ada Software - -----------------------------------------------------------------------------------------------------------------------------------
96 TRAINING UPDATED SOFTWARE SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PROGRAM ITEM DESCRIPTION VERSION/ PART # TYPE - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W SEMS Software Engineering Management System (SEMS) 6.1.4 Software - ----------------------------------------------------------------------------------------------------------------------------------- ATC RightView Real-time and control software for radar simulation Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 TrueForce ECL operating system Software - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W TrueGuide TrueGuide IOS 2.1 Software - -----------------------------------------------------------------------------------------------------------------------------------
97 SELLER'S TRAINING SOFTWARE SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PROGRAM ITEM DESCRIPTION ERSION/ PART # TYPE - ----------------------------------------------------------------------------------------------------------------------------------- F-18 Lrip Agr Database Air to Ground Radar Database Software Database - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP AGR RT SW Air to Ground Radar Real-time software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP AGR Tools Air to Ground Radar Off-line Tools Software - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W Approach Map Common IOS approach Map Software 2.3 Software - ----------------------------------------------------------------------------------------------------------------------------------- B-2 ARMS Advanced Radar Modeling Systems Software - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W ARTS Ada Real-Time Systems (ARTS) 2.1.4 Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 ARTS Ada Real-Time Systems (ARTS) 2.1 Software - ----------------------------------------------------------------------------------------------------------------------------------- F-117 ARTS Ada Real-Time Systems (ARTS) A1 Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF ARTS Ada Real-Time Systems (ARTS) Software - ----------------------------------------------------------------------------------------------------------------------------------- B-2 CMTK Common Map Toolkit Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP Common IOS IOS software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP CompuScene to CompuScene format to RightView format Software RightView - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF DIS DIS libraries Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF Engine Engine Simulator software Software - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W GCG Graphics code generator A1 Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF GCG Graphics Translator Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD GPI Generic Panel Interface software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP IDB Internal Database Format Software Database - ----------------------------------------------------------------------------------------------------------------------------------- B-2 IMDB Interface Management Database Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP IOS Toolkit IOS toolkit Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD JARM D/B Editor JARM database editor Software Bahrain - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD JARM D/B Editor JARM database editor Software Korea - ----------------------------------------------------------------------------------------------------------------------------------- 98 - ----------------------------------------------------------------------------------------------------------------------------------- PROGRAM ITEM DESCRIPTION ERSION/ PART # TYPE - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP MCE Mission Computer Emulator Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF MSS MSS software Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 MST Microprocessor simulation technology motion equations Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 pDRLMS Real-time and control software for radar simulation Software - ----------------------------------------------------------------------------------------------------------------------------------- E2C France pDRLMS Real-time and control software for radar simulation Software - ----------------------------------------------------------------------------------------------------------------------------------- E2C Navy pDRLMS Real-time and control software for radar simulation Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF pDRLMS Real-time and control software for radar simulation Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP RightTools Visual software tools Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RightView Real-time and control software for visual software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RightView Real-time and control software for visual software Software Bahrain - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RightView Real-time and control software for visual software Software Egypt - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RightView Real-time and control software for visual software Software Korea - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP RightView Real-time and control software for visual software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-22 PTD RightView Real-time and control software for visual software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-18 LRIP RightView to RightView format to CompuScene format Software CompuScene - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RWR Radar Warning Receiver (RWR) Software (items interface) Software Bahrain - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RWR Radar Warning Receiver (RWR) Software (items interface) Software Egypt - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD RWR Radar Warning Receiver (RWR) Software (items interface) Software Korea - ----------------------------------------------------------------------------------------------------------------------------------- B-2 sDRLMS Soft DRLMS Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD sDRLMS Soft DRLMS Software Egypt - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W SEMS Software Engineering Management System (SEMS) for IOS 6.1.3 Software - ----------------------------------------------------------------------------------------------------------------------------------- AH-1W SEMS Software Engineering Management System (SEMS) A1 Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF SEMS Software Engineering Management System (SEMS) Software - ----------------------------------------------------------------------------------------------------------------------------------- 99 - ----------------------------------------------------------------------------------------------------------------------------------- PROGRAM ITEM DESCRIPTION ERSION/ PART # TYPE - ----------------------------------------------------------------------------------------------------------------------------------- F-22 PTD Simulator HUD Simulator specific Optical HUD (Optical Barrel Assembly) 506582 Data - ----------------------------------------------------------------------------------------------------------------------------------- MULTI SMARTS Software Management Activity Report Tracking System Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF Symbol Dictionary FORTRAN Symbol Dictionary Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 UTD TCE Model Tactical Combat Environment models Software Egypt - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF TRACK Point Track software Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 TrueLink Signal conditioning equipment support software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-16 TAF TrueLink Signal conditioning equipment support software Software - ----------------------------------------------------------------------------------------------------------------------------------- F-22 PTD TrueLink Signal conditioning equipment support software Software - ----------------------------------------------------------------------------------------------------------------------------------- C-130 H2/3 TrueSound Aural cue/communications programmable digital sound Software generation software - -----------------------------------------------------------------------------------------------------------------------------------
100 RETAINED COPYRIGHT SCHEDULE All Copyrights in and to any Seller's Retained Software. 101 THIRD PARTY LICENSE SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------- PD NO TITLE PATENT NO LICENSE OBLIGATION - ----------------------------------------------------------------------------------------------------------------------------------- C93004 Computer-based data integration and management process for workforce 5,416,694 License to TRW planning and occupational readjustment - ----------------------------------------------------------------------------------------------------------------------------------- 090180 System Techniques for Making Holographic Projection Screens 5,151,799 Pending license to a third party - ----------------------------------------------------------------------------------------------------------------------------------- 091114 Non-Interfering Color Viewing System Using Spectral Multiplexing 5,260,729 Pending license to a third party - -----------------------------------------------------------------------------------------------------------------------------------
Each item of the Intellectual Property transferred under this IP agreement may be subject to such rights, if any, as the United States Government has. 102 IP SCHEDULE 2A ASSIGNMENT WHEREAS, RAYTHEON COMPANY, a corporation organized and existing under the laws of the State of Delaware (the "ASSIGNOR"), is the sole and exclusive owner, by assignment, of certain United States Letters Patents, Letters Patents of foreign countries, and United States and foreign patent applications, listed in the attached Training Patents Schedule, and WHEREAS, L-3 COMMUNICATIONS CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "ASSIGNEE"), is desirous of acquiring the entire right, title, and interest in and to such United States Letters Patents, Letters Patents of foreign countries, and United States and foreign patent applications; NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the ASSIGNOR, the ASSIGNOR does hereby assign, transfer, convey, deliver and grant unto the ASSIGNEE, all right, title, and interest in and to the United States Letters Patents, Letters Patents of foreign countries, and United States and foreign patent applications, listed in the attached Training Patents Schedule, including the right to sue and recover for all past, present and future infringement of any of said Patents; And the ASSIGNOR hereby agrees to sign all lawful documents and make all rightful oaths and declarations relating to the United States Letter Patents, Letters Patents of foreign countries, and United States and foreign patent applications, when reasonably requested to do so by the ASSIGNEE; And the ASSIGNOR hereby authorizes and requests the Commissioner of Patents and Trademarks or any other proper officer or agency of any country to issue all the Letters Patent to the ASSIGNEE. WHEREIN, the ASSIGNOR'S agent sets its hand and seal: Date: RAYTHEON COMPANY -------------------- By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 103 NOTARY State of _______________ ) ) ss. County of ______________ ) On this _____________ day of ____________, 2000, before me personally came ____________________________, to me known to be __________________________ of RAYTHEON COMPANY, a corporation organized and existing under the laws of the State of Delaware, the ASSIGNOR above-named, and acknowledged that he/she executed the foregoing instrument named, and acknowledged that he/she executed the foregoing instrument as his/her free act on behalf of the ASSIGNOR and pursuant to authority duly received. Notary Public My Commission Expires (SEAL) 104 IP SCHEDULE 2B ASSIGNMENT WHEREAS, RAYTHEON COMPANY, a corporation organized and existing under the laws of the State of Delaware (the "ASSIGNOR"), has adopted and is using the marks listed in the attached Training Trademark Schedule, which are registered in the United States Patent and Trademark Office or has applied for registration in the United States Patent and Trademark Office (including applications under ss.1(b)) or has rights under common law; WHEREAS, L-3 COMMUNICATIONS CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "ASSIGNEE"), is desirous of acquiring the marks and the associated applications, registrations, and rights and the assets relating to the ongoing and existing business of ASSIGNOR to which the marks pertain and the underlying goodwill of the portion of the business associated with and symbolized by the marks; NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the ASSIGNOR, the ASSIGNOR does hereby assign, transfer, convey, deliver and grant assign unto the ASSIGNEES, all right, title, and interest in and to the marks and the associated applications, registrations, and rights and the assets relating to the ongoing and existing businesses of ASSIGNOR to which the marks pertain (the details of which are set out in a separate instrument), and the underlying goodwill of the portion of the business associated with and symbolized by the marks listed in the attached Training Trademark Schedule; And the ASSIGNOR hereby agrees to sign all lawful documents and make all rightful oaths and declarations relating to the marks when reasonably requested to do so by the ASSIGNEE. WHEREIN, the ASSIGNOR'S agent sets its hand and seal: Date: RAYTHEON COMPANY -------------------- By: --------------------------------- Name: ------------------------------- Title: ------------------------------ 105 NOTARY State of _______________ ) ) ss. County of ______________ ) On this _____________ day of ____________, 2000, before me personally came _______________________, to me known to be __________________________ of RAYTHEON COMPANY, a corporation organized and existing under the laws of the State of Delaware, the ASSIGNOR above-named, and acknowledged that he/she executed the foregoing instrument named, and acknowledged that he/she executed the foregoing instrument as his/her free act on behalf of the ASSIGNOR and pursuant to authority duly received. Notary Public My Commission Expires (SEAL) 106 IP SCHEDULE 8.3(A) Letter from Levin & Hawes dated November 3, 1999, offering a license. Letter from AVKM Company dated December 17, 1999, identifying U.S. Patent No. 5,999,232. 107 EXHIBIT C FORM OF ENVIRONMENTAL ACCESS AGREEMENT FOR THE BINGHAMTON FACILITY THIS ENVIRONMENTAL ACCESS AGREEMENT (the "Access Agreement"), dated as of ______, is by and between Raytheon Company, a Delaware corporation ("Raytheon"), L-3 Communications Corporation, a Delaware corporation ("L-3"), and the Broome County Industrial Development Agency ("Broome County"). WHEREAS, Raytheon and L-3 have executed an Asset Purchase and Sale Agreement dated ____ pursuant to which L-3 will acquire from Raytheon, among other things, assets relating to the Businesses that are currently being conducted by Raytheon at the land and building(s) included in a leased facility in the Kirkwood Industrial Park on Colesville Road in Kirkwood, New York (the "Facility") that is owned by Broome County; and WHEREAS, Raytheon desires to conduct environmental investigations at the Facility before and after the acquisition by L-3 that may result in Raytheon (or third parties acting at Raytheon's request) undertaking additional environmental investigations and environmental remediation activities at the Facility; NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereto hereby agree as follows: Section 1. Raytheon shall have the right of access to and use of the Facility in accordance with the terms and subject to the conditions described herein for the purposes of: (A) performing environmental inspections and investigations at the Facility, including, but not limited to, the sampling of soil, soil vapor and groundwater, in accordance with standard sampling and testing protocols, and * (B) performing environmental remediation activities at the Facility, including, but not limited to, the installation and operation of soil and groundwater remediation systems and associated monitoring activities. Section 2. In the event that Raytheon performs sampling activities at the Facility pursuant to Section 1(A) of this Access Agreement: (A) Raytheon shall be obligated, upon the request of Broome County, to provide Broome County with "matched" or "paired" samples, in accordance with standard sampling and testing protocols, of any materials that are obtained. Broome County shall have no obligation, however, to take any action whatsoever with respect to such samples. Any waste materials that are 108 generated from on-site testing or sampling activities shall be promptly disposed of off-site by Raytheon in accordance with applicable environmental requirements, provided, however, that Broome County, as the owner of the Facility, shall be designated on the manifests as the generator of such materials and shall sign such manifests. (B) Raytheon shall also promptly provide Broome County and L-3 with a copy of any final reports prepared by it or its consultants or agents, including, if requested by Broome County, copies of field data, field reports, laboratory analyses, logs, laboratory reports, and other environmental testing material or information. In the event Raytheon becomes aware of any condition posing a health and safety threat to L-3's employees, Raytheon shall immediately inform L-3 of this finding. Section 3. Raytheon shall obtain all required governmental licenses, permits and approvals for any work or activities of Raytheon on the Facility. Both Broome County and L-3 shall execute such other documents as reasonably may be required for Raytheon to exercise its rights under this Access Agreement and shall otherwise cooperate with Raytheon, as reasonably necessary, for Raytheon to obtain such licenses, permits and approvals. L-3 shall not be required to execute any document or consent that in any manner causes it to incur liability for any environmental condition existing or events occurring prior to the date of this Access Agreement that is not subject to indemnification by Raytheon under the Asset Purchase and Sale Agreement. Section 4. L-3 shall be entitled to make any use of the Facility that is permitted by its lease with Broome County, but shall use commercially reasonable efforts to avoid interfering in any material respect with the use of the Facility by Raytheon for the purposes described above. Section 5. Subject to United States government security requirements, Raytheon's access under this Access Agreement after L-3's acquisition of the business operations at the Facility shall be granted upon five (5) days prior notice from Raytheon to Broome County and L-3 and at such times and in such manner as is appropriate to reduce, so far as may be reasonable under the circumstances, any disturbance to L-3's operations at the Facility. Nevertheless, L-3 acknowledges and agrees that in Raytheon's exercise of its environmental access rights, L-3's possession and operations may be disturbed from time to time. Section 6. In developing and implementing plans for environmental investigations or environmental remediation activities, Raytheon shall keep both Broome County and L-3 apprised of Raytheon's plans and any material changes or developments therein and Raytheon shall consider in good faith any suggestions proposed by Broome County or L-3 that do not materially and adversely impact the ability of Raytheon to exercise its environmental access rights under this Access Agreement. Section 7: It is understood and agreed that, except where required under applicable law, Raytheon, Broome County and L-3 shall maintain the confidentiality of and shall not disclose or release any non-public environmental information collected pursuant to this Access Agreement to any third party without the prior written consent of the other parties to this Access Agreement, 109 except, however, Raytheon may disclose any environmental information it collects to CAE-LINK Corporation, CAE, Inc., any entity affiliated with either CAE-LINK Corporation or CAE, Inc., and their authorized representatives without approval from or prior notice to any other party. If disclosure is required by an applicable law, the parties will provide one another with at least thirty (30) days written notice prior to the disclosure, or if the disclosure is required prior to expiration of such thirty day period, the parties will provide as much written notice as is practicable under the circumstances. The enumerated exceptions of clauses (i) through (iv) of Section 5.12 of the Asset Purchase and Sale Agreement shall apply to any such disclosure. Section 8: Raytheon hereby agrees to indemnify, release, and hold harmless Broome County and its respective officers, directors, employees, agents, successors and assigns from and against any and all claims, liabilities, damages, losses, orders, penalties, fines, costs, charges and expenses (including attorneys' fees and disbursements, and costs of experts and expert witnesses) directly resulting from the entry of Raytheon or its environmental consultant onto the Facility. Raytheon shall repair significant physical damage to any improvements located on the Facility caused by its entry or activities upon the Facility and shall restore such improvements to the extent reasonably practicable to their previous condition prior to any such physical damage unless the parties hereto agree otherwise. Executed this ___ day of January, 2000. RAYTHEON COMPANY By: ------------------------ Name: ------------------------ Title: ------------------------ BROOME COUNTY INDUSTRIAL DEVELOPMENT AGENCY By: ------------------------ Name: ------------------------ Title: ------------------------ L-3 COMMUNICATIONS CORPORATION By: ------------------------ Name: ------------------------ Title: ------------------------ 110 EX-12 16 0016.txt RATIO OF EARNINGS TO FIXED CHARGES
L-3 PREDECESSOR COMPANY -------------------------------------------------------- ---------------------------- NINE MONTHS THREE MONTHS YEAR ENDED ENDED ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31, 2000 1999 1998 1997 1997 1996 --------- --------- --------- --------- --------- --------- Earnings: Income before income taxes $ 134,079 $ 95,430 $ 53,450 $ 22,992 $ (505) $ 19,494 Add: Interest expense 87,308 56,686 47,015 29,884 8,441 24,197 Amortization of debt expense 5,724 3,904 2,564 1,517 - - Interest component of rent expense 11,882 7,500 - 3,213 851 2,832 --------- --------- --------- --------- --------- --------- Earnings $ 238,993 $ 163,520 $ 103,029 $ 57,606 $ 8,787 $ 46,523 --------- --------- --------- --------- --------- --------- Fixed charges: Interest expense 87,308 56,686 47,015 29,884 8,441 24,197 Amortization of debt expense 5,724 3,904 2,564 1,517 - - Interest component of rent expense 11,882 7,500 - 3,213 851 2,832 --------- --------- --------- --------- --------- --------- Fixed charges $ 104,914 $ 68,090 $ 49,579 $ 34,614 $ 9,292 $ 27,029 --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges 2.3x 2.4x 2.1x 1.7x n.a.(a) 1.7x ========= ========= ========= ========= ========= =========
(a) For the three months ended March 31, 1997, earnings were insufficient to cover fixed charges by $.5 million. EX-21 17 0017.txt LIST OF SUBSIDIARIES L-3 COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2000
L-3 Communications Holdings, Inc. Delaware L-3 Communications Corporation Delaware AMI Instruments, Inc. Oklahoma C3-ilex, LLC (31.5% or 35%) California Cardiovascular Computer Systems, Ltd. (85%) Wisconsin Coleman Research Corporation Florida Delsub, Inc. Delaware Digital Technics, L.L.C. Delaware Digital Technics, L.P. (25% + 75%) Delaware Electrodynamics, Inc. Arizona Honeywell TCAS Inc. Delaware Hygienetics Environmental Services, Inc. Delaware Interstate Electronics Corporation California L-3 Communications Ancot Corporation Delaware L-3 Communications Atlantic Science & Technology Corporation New Jersey L3 Communications Australia Proprietary Limited Australia L-3 Communications Aydin Corporation Delaware Aydin Foreign Sales Limited Guam Aydin Investments, Inc. Delaware Aydin S.A (19%) Argentina Aydin Yazilim ve Elektronik Sanayi A.S. (40%) Turkey L-3 Communications Global Network Solutions U.K. Ltd. United Kingdom L-3 Communications DBS Microwave, Inc. California L-3 Communications ESSCO, Inc. Delaware Electronic Space Systems International Corp. U.S. Virgin Islands Electronic Space Systems (UK) Limited (90%) United Kingdom ESSCO Collins Limited (99.99%) Republic of Ireland ESSCO Satellite Systems Corp. Delaware L-3 Communications Holding GmbH Federal Republic of Germany L-3 Communications ELAC Nautik GmbH Federal Republic of Germany Arbeitsmedizinische Betreungsgesellschaft Kieler Bertriebe mbH (50%) Federal Republic of Germany ELAC Nautik Untersttzungskae GmbH Federal Republic of Germany Power Paragon (Deutschland) Holding GmbH (99% +1%) Federal Republic of Germany EuroAtlas Gesellschaft fr Leistungselektronik mbH Federal Republic of Germany JovyAtlas Elektrische Umformtechnik GmbH Federal Republic of Germany Astrid Energy Enterprises S.R.L (10%) Italy Narda Safety Test Solutions GmbH Federal Republic of Germany L-3 Communications ILEX Systems, Inc. Delaware Itel Solutions, LLC (50%) Delaware L-3 Communications Secure Information Technology, Inc. Delaware L-3 Communications Network Security Systems, LLC (63.9535%) Delaware L-3 Communications Security Systems Corporation Delaware L-3 Communications SPD Technologies, Inc. Delaware SPD Holdings, Inc. Delaware Henschel Inc. Delaware Pac Ord Inc. Delaware Power Paragon, Inc. Delaware SPD Electrical Systems, Inc. Delaware SPD Switchgear Inc. Delaware L-3 Communications Storm Control Systems, Inc. California L-3 Communications U.K. Ltd. United Kingdom Storm Control Systems Limited United Kingdom L-3 Management Corp. Delaware L-3 Microdyne Holdings Corporation Maryland LogiMetrics, Inc. (53.5%) Delaware Logimetrics FSC, Inc. (53.5%) U.S. Virgin Islands mmTECH, INC. (53.5%) New Jersey Medical Education Technologies, Inc. (33.3%) Delaware Microdyne Corporation Maryland Microdyne Communications Technologies Incorporated Maryland MCTI Acquisition Corporation Maryland Apcom, Inc. Maryland Celerity Systems Incorporated California Microdyne Ltd. U.S. Virgin Islands Microdyne Outsourcing Incorporated Maryland Microdyne UK, Inc. Delaware MPRI, Inc. Delaware Southern California Microwave, Inc. California SpaceTel Communications Corp. Delaware TrexCom (Asia) PTE, Ltd. Unknown
EX-23.1 18 0018.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.1 March 9, 2001 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference to the registration statements of L-3 Communications Holdings, Inc. and subsidiaries (the "Company") on Forms S-8 (File No.'s 333-59281 and 333-64389) of our report dated February 6, 2001 on our audits of the consolidated financial statements of the Company as of December 31, 2000 and 1999 and for the three years ended December 31, 2000, which report is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP New York, New York -----END PRIVACY-ENHANCED MESSAGE-----