10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2004

    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 incorporation or organization)				(I.R.S. Employer Identification Nos.)
600 Third Avenue, New York NY				10016
(Address of principal executive offices)				(Zip Code)

(212) 697-1111

(Telephone number)

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            No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

    Yes            No

There were 115,157,785 shares of L-3 Communications Holdings, Inc. common stock with a par value of $0.01 outstanding as of the close of business on October 29, 2004.

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q
For Quarterly period ended September 30, 2004

PART I — FINANCIAL INFORMATION

								Page No.
ITEM 1.				Financial Statements
				Unaudited Condensed Consolidated Balance Sheets as of September 30, 2004     and December 31, 2003					1
				Unaudited Condensed Consolidated Statements of Operations for the Three and     Nine Months ended September 30, 2004 and September 30, 2003					2
				Unaudited Condensed Consolidated Statements of Cash Flows for the Nine     Months ended September 30, 2004 and September 30, 2003					4
				Notes to Unaudited Condensed Consolidated Financial Statements					5
ITEM 2.				Management's Discussion and Analysis of Results of Operations and Financial     Condition					31
ITEM 3.				Quantitative and Qualitative Disclosures About Market Risk					49
ITEM 4.				Controls and Procedures					50
PART II — OTHER INFORMATION
ITEM 1.				Legal Proceedings					51
ITEM 6.				Exhibits					53
Signatures									54

i

PART I — FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

				September 30, 2004				December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents				$	367,338			$	134,876
Contracts in process					1,857,740				1,615,348
Deferred income taxes					107,473				152,785
Other current assets					63,416				34,693
Total current assets					2,395,967				1,937,702
Property, plant and equipment, net					503,238				519,749
Goodwill					3,762,905				3,652,436
Identifiable intangible assets					155,287				162,156
Deferred income taxes					73,465				100,482
Deferred debt issue costs					38,389				48,572
Other assets					73,966				71,793
Total assets				$	7,003,217			$	6,492,890
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade				$	255,495			$	195,548
Accrued employment costs					310,677				239,690
Accrued expenses					64,038				72,880
Customer advances					80,562				58,078
Income taxes					101,193				70,159
Other current liabilities					272,508				287,857
Total current liabilities					1,084,473				924,212
Pension and postretirement benefits					371,789				359,020
Other liabilities					105,800				101,651
Long-term debt					2,157,501				2,457,300
Total liabilities					3,719,563				3,842,183
Commitments and contingencies
Minority interests					79,106				76,211
Shareholders' equity:
L-3 Holdings' common stock $.01 par value; authorized 300,000,000 shares; issued and outstanding 107,210,608 and 97,077,495 shares (L-3 Communications common stock: $.01 par value, 100 shares authorized, issued and outstanding)					2,294,507				1,893,488
Retained earnings					988,186				757,467
Unearned compensation					(5,057	)			(3,622	)
Accumulated other comprehensive loss					(73,088	)			(72,837	)
Total shareholders' equity					3,204,548				2,574,496
Total liabilities and shareholders' equity				$	7,003,217			$	6,492,890

See notes to unaudited condensed consolidated financial statements.

1

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

				Three Months Ended September 30,
				2004				2003
Sales:
Contracts, primarily U.S. Government				$	1,586,043			$	1,108,600
Commercial, primarily products					198,089				156,011
Total sales					1,784,132				1,264,611
Costs and expenses:
Contracts, primarily U.S. Government					1,401,971				966,838
Commercial, primarily products:
Cost of sales					127,687				90,444
Selling, general and administrative expenses					37,082				39,204
Research and development expenses					18,032				15,753
Total costs and expenses					1,584,772				1,112,239
Operating income					199,360				152,372
Other expense (income), net					(1,687	)			(767	)
Interest expense					34,854				32,360
Minority interests in net income of consolidated subsidiaries					4,791				1,862
Income before income taxes					161,402				118,917
Provision for income taxes					58,912				42,810
Net income				$	102,490			$	76,107
L-3 Holdings' earnings per common share:
Basic				$	0.96			$	0.79
Diluted				$	0.93			$	0.74
L-3 Holdings' weighted average common shares outstanding:
Basic					107,005				96,435
Diluted					110,010				106,575

See notes to unaudited condensed consolidated financial statements.

2

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

				Nine Months Ended September 30,
				2004				2003
Sales:
Contracts, primarily U.S. Government				$	4,462,028			$	3,131,984
Commercial, primarily products					523,733				448,555
Total sales					4,985,761				3,580,539
Costs and expenses:
Contracts, primarily U.S. Government					3,977,820				2,763,232
Commercial, primarily products:
Cost of sales					320,863				278,498
Selling, general and administrative expenses					107,454				108,559
Research and development expenses					50,544				40,295
Total costs and expenses					4,456,681				3,190,584
Operating income					529,080				389,955
Other expense (income), net					1,728				(2,088	)
Interest expense					106,779				98,232
Minority interests in net income of consolidated subsidiaries					7,078				2,550
Loss on retirement of debt					—				11,225
Income before income taxes					413,495				280,036
Provision for income taxes					150,926				100,813
Net income				$	262,569			$	179,223
L-3 Holdings' earnings per common share:
Basic				$	2.48			$	1.87
Diluted				$	2.41			$	1.77
L-3 Holdings' weighted average common shares outstanding:
Basic					105,883				95,743
Diluted					109,113				105,755

See notes to unaudited condensed consolidated financial statements.

3

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

				Nine Months Ended September 30,
				2004				2003
Operating activities:
Net income				$	262,569			$	179,223
Loss on retirement of debt					—				11,225
Depreciation					68,342				57,746
Amortization of intangibles and other assets					21,151				13,465
Amortization of deferred debt issue costs (included in interest expense)					5,454				5,970
Deferred income tax provision					76,516				68,015
Minority interests in net income of consolidated subsidiaries					7,078				2,550
Contributions to employee savings plans in L-3 Holdings' common stock					37,575				28,473
Other non-cash items					3,189				(6,729	)
Subtotal					481,874				359,938
Changes in operating assets and liabilities, excluding acquired amounts:
Contracts in process					(216,085	)			(101,463	)
Other current assets					(25,366	)			(3,832	)
Other assets					(8,162	)			(7,348	)
Accounts payable					52,569				(11,695	)
Accrued employment costs					62,042				33,753
Accrued expenses					(7,512	)			1,764
Customer advances					19,417				(12,119	)
Income taxes					41,802				16,052
Other current liabilities					460				13,277
Pension and postretirement benefits					9,169				15,067
Other liabilities					(1,048	)			17,137
All other operating activities, principally foreign currency translation					(1,195	)			6,548
Subtotal					(73,909	)			(32,859	)
Net cash from operating activities					407,965				327,079
Investing activities:
Acquisition of businesses, net of cash acquired					(134,566	)			(261,385	)
Capital expenditures					(53,482	)			(53,972	)
Disposition of property, plant and equipment					9,504				1,092
Other investing activities					(5,381	)			(2,500	)
Net cash used in investing activities					(183,925	)			(316,765	)
Financing activities:
Proceeds from sale of senior subordinated notes					—				398,160
Redemption of senior subordinated notes					(187	)			(187,650	)
Debt issue costs					(1,906	)			(7,689	)
Cash dividends paid on common stock					(31,850	)			—
Proceeds from employee stock purchase plan					22,296				18,625
Proceeds from exercise of stock options					36,354				10,567
Distributions paid to minority interests					(4,183	)			(1,505	)
Other financing activities					(12,102	)			1,588
Net cash from financing activities					8,422				232,096
Net increase in cash					232,462				242,410
Cash and cash equivalents, beginning of the period					134,876				134,856
Cash and cash equivalents, end of the period				$	367,338			$	377,266

See notes to unaudited condensed consolidated financial statements.

4

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

1.    Description of Business

L-3 Communications Holdings, Inc. conducts its operations and derives all its operating income and cash flow through 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 leading supplier of a broad range of products used in a substantial number of aerospace and defense platforms. L-3 also is a major supplier of subsystems on many platforms, including those for secure communication networks, mobile satellite communications, information security systems, shipboard communications, naval power systems, fuzes and safety and arming devices for missiles and munitions, microwave assemblies for radars and missiles, telemetry and instrumentation and airport security systems. The Company also is a prime system contractor for aircraft modernization and operations & maintenance (O&M), Intelligence, Surveillance and Reconnaissance (ISR) collection platforms, simulation and training, and government systems support services. The Company's customers include the U.S. Department of Defense (DoD) and its prime contractors, the U.S. Department of Homeland security (DHS), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other U.S. federal, state and local government agencies.

The Company has four reportable segments: (1) Secure Communications & ISR; (2) Training, Simulation & Government Services; (3) Aircraft Modernization, O&M and Products (formerly known as Aviation Products & Aircraft Modernization); and (4) Specialized Products.

Secure Communications & ISR.    The businesses in this segment provide products and services for the global ISR market, specializing in signals intelligence (SIGINT) and communications intelligence (COMINT) systems. These products and services provide to the warfighter in real-time the unique ability to collect and analyze unknown electronic signals from command centers, communication nodes and air defense systems for real-time situation awareness and response. The businesses in this segment also provide secure, high data rate communications systems for military and other U.S. Government and foreign government reconnaissance and surveillance applications. The Company believes that its systems and products are critical elements for a substantial number of major communication, command and control, intelligence gathering and space systems. The Company's systems and 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 major secure communications programs and systems include:

	•	secure data links for airborne, satellite, ground and sea-based remote platforms, both manned and unmanned, for real-time information collection and dissemination to users;

	•	highly specialized fleet management and support, including procurement, systems integration, sensor development, modifications and maintenance for signals intelligence and ISR special mission aircraft and airborne surveillance systems;

	•	strategic and tactical signals intelligence systems that detect, collect, identify, analyze and disseminate information;

	•	secure terminal and communication network equipment and encryption management; and

	•	communication systems for surface and undersea vessels and manned space flights.

Training, Simulation & Government Services.    The businesses in this segment provide a full range of training, simulation and support services, including:

	•	services designed to meet customer training requirements for aircrews, navigators, mission operators, gunners and maintenance technicians for virtually any platform, including military fixed and rotary wing aircraft, air vehicles and various ground vehicles;

5

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

	•	communication software support, information technology services and a wide range of engineering development services and integration support;

	•	high-end engineering and information support services used for command, control, communications and ISR architectures, as well as for air warfare modeling and simulation tools for applications used by the DoD, DHS and U.S. Government intelligence agencies, including missile and space systems, Unmanned Aerial Vehicles (UAVs) and military aircraft; and

	•	developing and managing extensive programs in the United States and internationally that focus on teaching, training and education, logistics, strategic planning, organizational design, democracy transition and leadership development.

Aircraft Modernization, Operations and Maintenance (O&M) and Products.    The businesses in this segment provide aviation products, aircraft modernization and operations & maintenance services, including:

	•	engineering, modification, maintenance, logistics and upgrades for aircraft, vehicles and personnel equipment;

	•	turnkey aviation life cycle management services that integrate custom developed and commercial off-the-shelf products for various military fixed and rotary wing aircraft, including heavy maintenance and structural modifications and interior modifications and constructions;

	•	aerospace and other technical services related to large fleet support, such as aircraft and vehicle modernization, maintenance, repair and overhaul, logistics support, and supply chain management, primarily for military training, tactical, cargo and utility aircraft, and the Patriot Missile System and M1 Abrams Main Battle Tank.

	•	advanced cockpit avionics products and specialized avionics repair and overhaul services for various segments of the aviation market;

	•	airborne traffic and collision avoidance systems (TCAS) for commercial and military applications;

	•	commercial, solid-state, crash-protected cockpit voice recorders, flight data recorders and cruise ship hardened voyage recorders; and

	•	ruggedized custom cockpit displays for military and high-end commercial applications.

Specialized Products.    The businesses in this segment supply products, including components, subsystems and systems, to military and commercial customers in several niche markets. These products include:

	•	naval warfare products, including acoustic undersea warfare products for mine hunting, dipping and anti-submarine sonars and naval power distribution, conditioning, switching and protection equipment for surface and undersea platforms;

	•	ruggedization and integration of commercial off-the-shelf technology for displays, computers and electronic systems for military and commercial applications;

	•	security and surveillance systems for aviation, port and border applications, including those for perimeter security and for detection of explosives, concealed weapons, contraband and illegal narcotics, and to inspect agricultural products and to examine cargo;

	•	telemetry, instrumentation, space and navigation products, including products for tracking and flight termination;

6

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

	•	premium fuzing products and safety and arming devices for missiles and munitions;

	•	microwave components used in radar communication satellites, wireless communication equipment, electronic surveillance, communication and electronic warfare applications and countermeasure systems;

	•	high performance antennas and ground based radomes;

	•	training devices and motion simulators which produce advanced virtual reality simulation and high-fidelity representations of cockpits and mission stations for fixed and rotary wing aircraft and land vehicles; and

	•	precision stabilized electro-optic surveillance systems, including high magnification lowlight, daylight and forward looking infrared sensors, laser range finders, illuminators and designators, and digital and wireless communication systems.

2.    Basis of Presentation

These unaudited condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements of L-3 Holdings and L-3 Communications for the fiscal year ended December 31, 2003, included in their Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

The unaudited condensed consolidated financial statements comprise the unaudited condensed consolidated financial statements of L-3 Holdings and L-3 Communications. At September 30, 2004, L-3 Holdings' only asset is its investment in the common stock of L-3 Communications, its wholly-owned subsidiary, and its only obligations are the 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 (CODES). See Note 8 for discussion of the conversion of substantially all of the CODES into shares of L-3 Holdings common stock, which occurred during October 2004. L-3 Holdings has also guaranteed the borrowings under the senior credit facilities of L-3 Communications. L-3 Holdings' obligations have been jointly, severally, fully and unconditionally guaranteed by L-3 Communications and certain of its domestic subsidiaries, and accordingly, such debt has been reflected as debt of L-3 Communications in its unaudited condensed consolidated financial statements in accordance with the U.S. Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) 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 unaudited condensed consolidated financial statements of L-3 Communications. As a result, the unaudited condensed consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. See Note 17 for additional information.

The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States of America for a complete set of financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation of the results for the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year.

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

7

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

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 revenue and profit or loss recognition, market values for inventories reported at lower of cost or market, pension and postretirement benefit obligations, preliminary purchase price allocations for the acquired assets and assumed liabilities of acquired businesses, recoverability and valuation of recorded amounts of long-lived assets, identifiable intangible assets, goodwill, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations. Changes in estimates are reflected in the periods during which they become known. Actual amounts will differ from these estimates. For a more complete discussion of these estimates and assumptions, see the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

On the statements of operations, the Company presents its sales and costs and expenses in two categories, "Contracts, primarily U.S. Government" and "Commercial, primarily products."

Contracts primarily U.S. Government.    Sales and costs and expenses for the Company's businesses that are primarily U.S. Government contractors are presented as "Contracts, primarily U.S. Government." The sales for the Company's U.S. Government contractor businesses are transacted using written revenue arrangements, or contracts, which primarily require the Company to design, develop, manufacture, modify, upgrade, test and integrate complex aerospace and electronic equipment, and to provide related engineering and technical services according to the buyer's specifications. Such buyers are predominantly the U.S. Department of Defense and other agencies of the U.S. Government, foreign government ministries of defense and defense prime contractors. These contracts are covered by the American Institute of Certified Public Accountants (AICPA) Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP 81-1), Accounting Research Bulletin No. 43, Chapter 11, Section A, Government Contracts, Cost-Plus-Fixed Fee Contracts (ARB 43) and Accounting Research Bulletin No. 45, Long-Term Construction Type Contracts (ARB 45). Sales reported under "Contracts, primarily U.S. Government" also include certain sales from contracts with domestic and foreign commercial customers, which also are covered by SOP 81-1 and ARB 45. Additionally, certain fixed price contracts require the Company to perform services that are not related to production or construction of tangible assets, which are not covered by SOP 81-1, and these sales are recognized in accordance with SAB No. 104, Revenue Recognition.

Commercial, primarily products.    Sales and costs and expenses for the Company's businesses whose customers are primarily commercial business enterprises are presented as "Commercial, primarily products." These sales are recognized in accordance with the SEC's SAB No. 104, and substantially all of the related revenue arrangements are not covered by SOP 81-1, ARB 43 or ARB 45. The Company's commercial businesses are substantially comprised of Aviation Communication & Surveillance Systems (ACSS), Aviation Recorders, Avionics Systems, Microwave Components and Security & Detection Systems.

Reclassifications.    Effective January 1, 2004, the Company combined its explosives detection systems (EDS) business into L-3 Security and Detection Systems, and its IMC business into L-3 Government Services, Inc. As a result of these business realignments, reclassifications have been made to the prior period sales and operating income amounts to conform them to the current period presentation. Specifically, for the three months ended September 30, 2003, $6,928 of sales and $6,064 of operating income was reclassified from "Contracts, primarily U.S. Government," to "Commercial, primarily products" and $4,314 of sales and $411 of operating loss was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government." For the nine months ended September 30, 2003, $50,099 of sales and $11,759 of operating income was reclassified from "Contracts, primarily U.S. Government" to "Commercial, primarily products," and $24,997 of sales and $419 of operating income

8

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government". In addition, certain reclassifications have been made to the unaudited condensed consolidated balance sheet to conform prior period amounts to the current period balance sheet presentation. See Notes 6 and 15.

3.    Stock-Based Compensation

The Company accounts for employee stock-based compensation under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Compensation expense for employee stock-based compensation is recognized in income based on the excess, if any, of the fair value of the L-3 Holdings' 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-based compensation arrangements 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 elected not to adopt the fair value based method of accounting for stock-based employee compensation as permitted by the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS No. 123. Had the Company adopted the fair value based method provisions of SFAS 123 for all of its stock-based compensation, it would have recorded a non-cash expense for the estimated fair value of the stock-based compensation arrangements that the Company has granted to its employees amortized over the vesting period of the grants. Stock-based employee compensation is a non-cash expense, because the Company settles its stock-based compensation obligations by issuing shares of common stock instead of settling such obligations with cash payments. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations.

The table below presents the "as reported" net income and L-3 Holdings earnings per share (EPS), and the "pro forma" net income and L-3 Holdings EPS that the Company would have reported if the Company had elected to recognize non-cash compensation expense in accordance with the fair value based method of accounting of SFAS 123.

				Three Months Ended September 30,
				2004				2003
Net income:
As reported				$	102,490			$	76,107
Less: Stock-based employee compensation expense under the fair value based method, net of income taxes					(4,936	)			(4,648	)
Pro forma				$	97,554			$	71,459
L-3 Holdings' Basic EPS:
As reported				$	0.96			$	0.79
Pro forma					0.91				0.74
L-3 Holdings' Diluted EPS:
As reported				$	0.93			$	0.74
Pro forma					0.89				0.69

9

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

				Nine Months Ended September 30,
				2004				2003
Net income:
As reported				$	262,569			$	179,223
Less: Stock-based employee compensation expense under the fair value based method, net of income taxes					(18,455	)			(14,221	)
Pro forma				$	244,114			$	165,002
L-3 Holdings' Basic EPS:
As reported				$	2.48			$	1.87
Pro forma					2.31				1.72
L-3 Holdings' Diluted EPS:
As reported				$	2.41			$	1.77
Pro forma					2.24				1.63

4.    Acquisitions

2004 Business Acquisitions.    During the nine months ended September 30, 2004, in separate transactions, the Company acquired five businesses, discussed below, for an aggregate purchase price of $89,733 in cash, plus acquisition costs.

	•	Substantially all of the assets and certain specified liabilities of Beamhit LLC on May 13, 2004, for $40,000 in cash, plus additional consideration contingent upon the financial performance of Beamhit for each of the years ending December 31, 2004, 2005, 2006 and 2007. Any such additional consideration will be accounted for as goodwill. Beamhit is a developer and supplier of laser marksmanship training systems, and adds a series of new products to the Company's expanding role in readiness training and simulation products and services.

	•	Substantially all of the assets and liabilities of Brashear, LP on June 14, 2004, for $36,290 in cash. Brashear is a developer and supplier of complex electro-optical systems, including laser ranging and tracking systems, test range instrumentation, telescope systems, naval fire control systems and laser beam directors for military and international customers. Brashear adds new capabilities to the Company's role in advanced optics.

	•	All of the outstanding common stock of AVISYS, Inc. on June 16, 2004, for $6,555 in cash, plus additional consideration not to exceed $23,000, which is contingent upon (i) an award and funding of a certain contract from the Department of Homeland Security on or before June 30, 2005 and (ii) the financial performance of AVISYS for each of the years ending December 31, 2004, 2005 and 2006. Any such additional consideration will be accounted for as goodwill. AVISYS develops products to counter the threat of a missile attack against civilian, commercial, military, and Head of State aircraft. AVISYS products are synergistic with the Company's existing avionics and telemetry products for military and commercial markets.

	•	Certain assets and liabilities of the General Electric Driver Development (GEDD) business on May 11, 2004, and substantially all of the assets and liabilities of Bay Metals and Fabrication, Inc. on June 8, 2004. GEDD develops software for driving simulators and provides assembly and maintenance service for driving simulators. Bay Metals is a metal fabricator and structural steel supplier for all phases of marine construction, ship repairs and fabrication.

Based on preliminary purchase price allocations, the goodwill recognized for the 2004 business acquisitions described above, was $74,282, approximately $65,200 of which is expected to be deductible for income tax purposes. Goodwill of $33,668 was assigned to the Training, Simulation & Government

10

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

Services segment, $6,860 was assigned to the Aircraft Modernization, O&M and Products segment and $33,754 was assigned to the Specialized Products segment. The 2004 business acquisitions were financed with cash on hand. The purchase prices for Beamhit LLC and AVISYS, Inc. are subject to adjustment based on the closing date net assets or net working capital of the respective acquired business.

All of the acquisitions are included in the Company's results of operations from their respective effective dates of acquisition. The Company values acquired contracts in process on the date of acquisition at the remaining contract value less the Company's estimated costs to complete the contract and a reasonable profit allowance on the Company's completion effort commensurate with the profit margin that the Company earns on similar contracts. The purchase price allocations for Avionics Systems, Aeromet, Inc., Flight Systems Engineering and Klein Associates, all of which were acquired in 2003, have been finalized. The assets and liabilities recorded in connection with the purchase price allocations for Military Aviation Services (MAS), Vertex Aerospace, and certain defense and aerospace assets of IPICOM, all of which were acquired in the fourth quarter of 2003, and the 2004 business acquisitions are based upon preliminary estimates of fair values for contracts in process, inventories, estimated costs in excess of estimated contract value to complete contracts in process in a loss position, identifiable intangibles, goodwill, plant and equipment, and deferred income taxes. Actual adjustments will be based on the final purchase prices, including the payment of contingent consideration, and final appraisals and other analyses of fair values, which are in process. The Company expects to complete the purchase price allocations for MAS, Vertex Aerospace and certain defense and aerospace assets of IPICOM in the fourth quarter of 2004. The Company does not expect the differences between the preliminary and final purchase price allocations for these acquisitions to be material.

Vertex Aerospace Acquisition.    On December 1, 2003, the Company acquired Vertex Aerospace LLC (Vertex). In May of 2004, the Company and the seller of Vertex Aerospace agreed to a final purchase price of $664,750, based on the closing date net assets of Vertex Aerospace. The final purchase price represents an $11,500 increase to the contractual consideration paid prior to May of 2004 and was recorded as an increase to goodwill.

Aircraft Integration Systems Acquisition.    The Company is continuing its discussions with Raytheon Company (Raytheon) regarding the adjustment of the purchase price for the acquisition of Integration Systems (AIS), which was completed in March 2002. The AIS purchase price submitted by Raytheon to the Company amounted to approximately $1,163,000. The Company believes that, in accordance with the terms of the AIS asset purchase agreement concerning the closing date balance sheet, the purchase price for AIS submitted by Raytheon should be reduced by $100,000 to $1,063,000. In accordance with the asset purchase agreement, the Company and Raytheon have begun the formal process to settle the disagreement and engage a neutral accountant to arbitrate the final purchase price. Any amount received by the Company for a reduction to the AIS purchase price will be recorded as a reduction to goodwill.

Unaudited Pro Forma Statement of Operations Data.    Assuming the business acquisitions the Company completed during 2004 occurred on January 1, 2004, the unaudited pro forma sales, net income and diluted earnings per share would have been approximately $5,028,500, $262,300 and $2.40 for the nine months ended September 30, 2004. Assuming the business acquisitions the Company completed during 2004 and 2003 occurred on January 1, 2003, the unaudited pro forma sales, net income and diluted earnings per share would have been approximately $4,260,900, $193,700 and $1.90 for the nine months ended September 30, 2003. The pro forma results are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed the acquisitions on January 1, 2003 or January 1, 2004.

On October 8, 2004, the Company acquired the stock of D.P. Associates Inc.

11

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

The Company has also entered into agreements to acquire certain businesses for an approximate aggregate purchase price of $511,000, payable in cash. These businesses include Cincinnati Electronics, Northrop Grumman's Canadian Navigation Systems and Space Sensors System business, and the Marine Controls Division of CAE. Certain of these business acquisitions are subject to regulatory approval. The Company expects to complete the business acquisitions by December 31, 2004.

5.    Contracts in Process

The components of contracts in process are presented in the table below.

				September 30, 2004				December 31, 2003
Billed receivables, less allowances of $21,769 and $25,221				$	697,860			$	637,254
Unbilled contract receivables					855,895				676,604
Less: unliquidated progress payments					(233,879	)			(193,672	)
Unbilled contract receivables, net					622,016				482,932
Inventoried contract costs, gross					383,589				353,247
Less: unliquidated progress payments					(22,143	)			(17,624	)
Inventoried contract costs, net					361,446				335,623
Inventories at lower of cost or market					176,418				159,539
Total contracts in process				$	1,857,740			$	1,615,348

Unbilled contract receivables represent accumulated incurred costs and earned profits on contracts that have been recorded as sales, which have not yet been billed to customers. The majority of unbilled contract receivables arise from the cost-to-cost percentage-of-completion (POC) method, which is used to record sales on certain fixed-price contracts as costs are incurred at amounts equal to the ratio of cumulative costs incurred to total estimated costs at completion, multiplied by the total estimated contract revenue. Unbilled contract receivables from fixed price-type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. To a lesser extent, unbilled contract receivables also arise from cost reimbursable-type contracts and time & material-type contracts, for revenue amounts that have not been billed by the end of the accounting period due to the timing of preparation of invoices for customers.

Unliquidated progress payments arise from fixed price-type contracts with the U.S. Government that contain progress payment clauses, and represent progress payment invoices which have been collected in cash, but have not yet been liquidated. Progress payment invoices are billed to the customer as contract costs are incurred at an amount generally equal to 75% to 80% of incurred costs. Unliquidated progress payments are liquidated as deliveries or other contract performance milestones are completed, at an amount equal to a percentage of the contract sales price for the items delivered or work performed, based on a contractual liquidation rate. Therefore, unliquidated progress payments are a contra asset account, and are classified against unbilled contract receivables if revenue for the underlying contract is recorded using the cost-to-cost POC method, and against inventoried contract costs if revenue is recorded using the units-of-delivery POC method.

The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, provides additional information about the components of contracts in process (contained in Notes 2 and 4 to the Audited Consolidated Financial Statements) and contract revenue recognition (contained in Note 2 to the Audited Consolidated Financial Statements and in the Management's Discussion and Analysis of Results of Operations and Financial Condition — Critical Accounting Policies).

12

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

In accordance with SOP 81-1 and the AICPA Audit and Accounting Guide, Audits of Federal Government Contractors, the Company's inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government, also include allocated selling, general and administrative (SG&A) costs, independent research and development (IRAD) costs and bid and proposal (B&P) costs, because they are recoverable indirect contract costs under U.S. Government procurement regulations. The Company includes SG&A, IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue.

The table below presents a summary of SG&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts used in the determination of costs and expenses for "Contracts, primarily U.S. Government." The cost data in the table below does not include the SG&A and research and development expenses for the Company's businesses that are primarily not U.S. Government contractors, which are separately presented on the statements of operations under costs and expenses for "Commercial, primarily products" and are expensed as incurred.

				Three Months Ended September 30,
				2004				2003
Amounts included in inventoried contract costs at beginning of period				$	43,308			$	53,694
Add: Amounts incurred during the period(1)					148,653				115,853
Less: Amounts charged to costs and expenses during the period					(157,300	)			(128,257	)
Amounts included in inventoried contract costs at end of period				$	34,661			$	41,290

				Nine Months Ended September 30,
				2004				2003
Amounts included in inventoried contract costs at beginning of period				$	38,024			$	52,253
Add: Amounts incurred during the period(2)					433,325				354,686
Less: Amounts charged to costs and expenses during the period					(436,688	)			(365,649	)
Amounts included in inventoried contract costs at end of period				$	34,661			$	41,290

(1)	Incurred costs include IRAD and B&P costs of $35,198 for the three months ended September 30, 2004 and $33,170 for the three months ended September 30, 2003.

(2)	Incurred costs include IRAD and B&P costs of $107,962 for the nine months ended September 30, 2004 and $99,541 for the nine months ended September 30, 2003.

6.    Goodwill and Identifiable Intangible Assets

Goodwill.    During the first quarter of 2004, the Company completed its annual impairment test for the goodwill of each of its reporting units, which resulted in no impairment losses.

The table below presents the changes in goodwill allocated to the reportable segments during the nine months ended September 30, 2004. The Company reclassified the goodwill for the International Microwave Corporation (IMC) acquired business from the Specialized Products segment to the Training, Simulation & Government Services segment, in connection with the consolidation on January 1, 2004, of IMC into L-3 Government Services, Inc.

13

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

				Secure Communications & ISR				Training, Simulation & Government Services				Aircraft Modernization, O&M and Products				Specialized Products				Consolidated Total
Balance January 1, 2004				$	726,880			$	480,890			$	1,350,818			$	1,093,848			$	3,652,436
Acquisitions					9,563				34,439				27,577				38,890				110,469
Reclassifications					—				30,761				—				(30,761	)			—
Balance September 30, 2004				$	736,443			$	546,090			$	1,378,395			$	1,101,977			$	3,762,905

During the nine months ended September 30, 2004, goodwill was increased by a total of $110,469, which was comprised of (i) $74,282 for acquisitions completed during the nine months ended September 30, 2004, (ii) $33,251 for increases to purchase price payments for certain acquisitions completed prior to January 1, 2004, related to the final closing date net assets of acquired businesses and contingent purchase price adjustments or earnouts, which were resolved during the period, and (iii) $2,936 primarily related to final estimates of fair value for assets acquired and liabilities assumed in connection with acquisitions completed prior to January 1, 2004.

Identifiable Intangible Assets.    The gross carrying amount and accumulated amortization balances of the Company's identifiable intangible assets that are subject to amortization are presented in the tables below. The Company has no indefinite-lived identifiable intangible assets.

				September 30, 2004
				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Identifiable intangible assets that are subject to amortization:
Customer relationships				$	158,060			$	15,127			$	142,933
Technology					15,597				4,559				11,038
Non-compete agreements					2,000				684				1,316
Total				$	175,657			$	20,370			$	155,287

				December 31, 2003
				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Identifiable intangible assets that are subject to amortization:
Customer relationships				$	154,770			$	6,519			$	148,251
Technology					14,500				2,325				12,175
Non-compete agreements					2,000				270				1,730
Total				$	171,270			$	9,114			$	162,156

The Company recorded amortization expense for its identifiable intangible assets of $3,749 for the three months ended September 30, 2004 and $869 for the three months ended September 30, 2003. The Company recorded amortization expense for its identifiable intangible assets of $11,256 for the nine months ended September 30, 2004 and $4,405 for the nine months ended September 30, 2003, respectively. Based on the gross carrying amounts at September 30, 2004, the Company's estimates for identifiable intangible assets amortization expense for the years ending December 31, 2004 through 2008 are presented in the table below.

14

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

Year ending December 31,				Estimated Amortization Expense
2004				$	17,058
2005					18,953
2006					17,983
2007					17,086
2008					14,686

7.    Other Current Liabilities and Other Liabilities

The components of other current liabilities are presented in the table below.

				September 30, 2004				December 31, 2003
Accrued product warranty costs				$	43,013			$	41,184
Accrued interest					30,436				25,898
Billings and amounts in excess of costs incurred on contracts in process					94,396				71,235
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position					46,761				52,063
Aggregate purchase price payable for acquired businesses					2,140				28,331
Notes payable and capital lease obligations					167				9,312
Deferred revenues					3,346				7,850
Current portion of deferred gains from terminated interest rate swap agreements					4,144				4,246
Other					48,105				47,738
Total other current liabilities				$	272,508			$	287,857

The components of other liabilities are presented in the table below.

				September 30, 2004				December 31, 2003
Non-current portion of deferred gains from terminated interest rate swap agreements				$	25,184			$	29,224
Accrued workers compensation					15,785				14,549
Fair value of interest rate swap agreements					2,309				—
Notes payable and capital lease obligations					5,944				1,485
Non-current portion of accrued product warranty costs					—				4,630
Other non-current liabilities					56,578				51,763
Total other liabilities				$	105,800			$	101,651

The table below presents the changes in the Company's accrued product warranty costs for the nine months ended September 30, 2004.

Balance at January 1, 2004				$	45,814
Acquisitions during the period					342
Accruals for product warranties issued during the period					11,987
Accruals for product warranties existing before January 1, 2004(1)					2,355
Settlements made during the period					(17,485	)
Balance at September 30, 2004				$	43,013

(1)	Represents changes to estimated product warranty costs related to sales recognized prior to January 1, 2004.

15

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

8.    Debt

The components of long-term debt and a reconciliation to the carrying amount of long-term debt are presented in the table below.

				September 30, 2004				December 31, 2003
L-3 Communications:
Borrowings under Senior Credit Facilities				$	—			$	—
8% Senior Subordinated Notes due 2008					200,000				200,000
7 5/8% Senior Subordinated Notes due 2012					750,000				750,000
6 1/8% Senior Subordinated Notes due 2013					400,000				400,000
6 1/8% Senior Subordinated Notes due 2014					400,000				400,000
					1,750,000				1,750,000
L-3 Holdings:
5¼% Convertible Senior Subordinated Notes due 2009					—				298,370
4% Senior Subordinated Convertible Contingent Debt Securities due 2011					420,000				420,000
Principal amount of long-term debt				$	2,170,000			$	2,468,370
Less: Unamortized discounts					(10,190	)			(11,070	)
Fair value of interest rate swap agreements					(2,309	)			—
Carrying amount of long-term debt				$	2,157,501			$	2,457,300

L-3 Communications

Available borrowings under the Company's senior credit facilities at September 30, 2004 were $671,518, after reductions for outstanding letters of credit of $78,482. There were no outstanding borrowings under the senior credit facilities at September 30, 2004. On February 24, 2004, the maturity date of the $250,000 364-day revolving credit facility was extended to February 22, 2005.

On November 1, 2004, L-3 Communications agreed to sell $650,000 aggregate principal amount of 5 7/8% Senior Subordinated Notes due 2015 through a private placement. The notes will mature on January 15, 2015, with interest payable semi-annually at a rate of 5 7/8% per annum. The Company expects to complete the offering, subject to certain conditions, on or about November 12, 2004. The notes are being offered within the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, and, outside the United States, only to non-U.S. investors. The securities to be offered have not been registered under the Securities Act, or any state securities laws, and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Company intends to use the net proceeds to redeem the Company's outstanding $200,000 of 8% Senior Subordinated Notes due 2008 and for general corporate purposes, including payments for business acquisitions.

Depending on interest rate levels, the Company may enter into interest rate swap agreements to convert certain of its fixed interest rate debt obligations to variable interest rates, or terminate any existing interest rate swap agreements. The variable interest rate paid by the Company under the swap agreements is equal to (i) the variable rate basis, plus (ii) the variable rate spread. The table below presents the Company's interest rate swap agreement that is currently outstanding.

16

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

Inception Date

Fixed Rate Debt Obligation

Notional Amount

Variable Rate Basis

Average Variable Rate Spread

Interest Settlement Dates

March 2004

$400,000 of 6 1/8% Senior Subordinated Notes due 2014

$100,000

Six-Month USD LIBOR(1)

1.55%

January 15 and July 15

(1)	The six-month USD LIBOR interest rate was 2.20% on September 30, 2004, 1.94% on June 30, 2004 and 1.16% on March 31, 2004.

The table below presents the Company's terminated interest rate swap agreements activity through September 30, 2004.

																				Cash Proceeds Received at Termination(2)												September 30, 2004
Inception Date				Termination Date				Fixed Rate Debt Obligation				Notional Amount				Average Variable Rate Paid(1)				Interest Expense Reduction(3)				Deferred Gain (Loss)(4)				Total				Cumulative Recognized Deferred Gain (Loss)(5)				Balance of Unamortized Deferred Gain (Loss)(6)
April 2004				September 2004				$400,000 of 6 1/8% Senior Subordinated Notes due 2014				$	100,000				2.9	%		$	542			$	(542	)		$	—			$	—			$	(542	)
March 2004				September 2004				$400,000 of 6 1/8% Senior Subordinated Notes due 2014				$	100,000				3.6	%			415				(415	)			—				—				(415	)
July 2003				September 2003				$400,000 of 6 1/8% Senior Subordinated Notes due 2013				$	400,000				2.1	%			2,687				8,017				10,704				819				7,198
March 2003				June 2003				$750,000 of 7 5/8% Senior Subordinated Notes due 2012				$	200,000				4.4	%			1,578				6,727				8,305				965				5,762
January 2003				March 2003				$750,000 of 7 5/8% Senior Subordinated Notes due 2012				$	200,000				4.0	%			1,202				5,238				6,440				873				4,365
June 2002				September 2002				$750,000 of 7 5/8% Senior Subordinated Notes due 2012				$	200,000				4.1	%			1,762				12,173				13,935				2,508				9,665
November 2001				August 2002				$180,000 of 8½% Senior Subordinated Notes due 2008				$	180,000				5.3	%			1,186				(559	)			627				(559	)			—
July 2001				June 2002				$200,000 of 8% Senior Subordinated Notes due 2008				$	200,000				3.9	%			3,446				5,229				8,675				1,934				3,295
																				$	12,818			$	35,868			$	48,686			$	6,540			$	29,328

(1)	Represents the average variable interest rate L-3 paid for the interest payment period in which the interest rate swap agreements were terminated.

(2)	Cash proceeds received at termination are included in cash from operating activities on L-3's statement of cash flows in the period received.

(3)	Represents the interest expense reduction for the interest payment period in which the interest rate swap agreements were terminated.

(4)	Represents the mark-to market value of the interest rate swap agreements at termination date, which is being amortized over the remaining term of the underlying debt instrument.

(5)	Represents the cumulative amount of deferred gain recognized as a reduction to interest expense through September 30, 2004.

(6)	The current portion of unamortized deferred gains at September 30, 2004, aggregating $4,144, is included in other current liabilities. The remaining $25,184 is included in other liabilities.

17

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

L-3 Holdings

Convertible Notes.    On December 22, 2003, L-3 Holdings announced a full redemption of $300,000 of its 5.25% Convertible Senior Subordinated Notes due 2009 (Convertible Notes), which expired on January 9, 2004. At December 31, 2003, holders of approximately $1,630 of the Convertible Notes had exercised their conversion rights and converted such notes into 40,000 shares of L-3 Holdings common stock. On January 9, 2004, holders of $298,183 of the Convertible Notes exercised their conversion rights and converted such notes into 7,317,327 shares of L-3 Holdings common stock. The remaining $187 of Convertible Notes were redeemed for cash on January 12, 2004. As a result of the conversions and redemptions that occurred in January 2004, the principal amount of long-term debt decreased by $298,370 and shareholders' equity increased by $292,319, after the transfer of unamortized debt issuance costs of $5,849 from deferred debt issue costs related to the Convertible Notes.

Convertible Contingent Debt Securities. On October 5, 2004, L-3 Holdings announced a full redemption of all the $420,000 of 4.00% Senior Subordinated Convertible Contingent Debt Securities (CODES) due 2011, which expired on Thursday, October 21, 2004. On October 21, 2004, holders of $419,785 of the principal amount of CODES exercised their conversion rights and converted such CODES into 7,800,797 shares of L-3 Holdings common stock. The remaining $215 of the CODES were redeemed for cash on October 25, 2004, at a redemption price of 102.0% of the principal amount, plus accrued and unpaid interest (including contingent interest) to October 25, 2004. As a result of the conversions and redemptions of the CODES that occurred in October 2004, the carrying amount of long-term debt decreased by $418,198, and shareholders' equity increased by $430,034, including the transfer of a deferred tax liability of $20,796 and unamortized debt issue costs of $8,960 related to the CODES.

9.    Comprehensive Income

Comprehensive income for the three and nine months ended September 30, 2004 and 2003 is presented in the tables below.

				Three Months Ended September 30,
				2004				2003
Net income				$	102,490			$	76,107
Other comprehensive income (loss):
Foreign currency translation adjustments, net of $1,047 income tax expense in 2004 and $1,376 income tax benefit in 2003					1,631				(2,161	)
Unrealized gains (losses) on hedging instruments, net of $486 income tax benefit in 2004 and $166 income tax benefit in 2003					(756	)			(261	)
Comprehensive income				$	103,365			$	73,685

18

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

				Nine Months Ended September 30,
				2004				2003
Net income				$	262,569			$	179,223
Other comprehensive income (loss):
Foreign currency translation adjustments, net of $195 tax expense in 2004 and $1,840 tax benefit in 2003					328				(2,914	)
Unrealized losses on hedging instruments, net of $531 tax benefit in 2004 and $813 tax benefit in 2003					(825	)			(1,278	)
Plus: reclassification adjustment for losses realized in net income, net of $154 tax expense					246				—
Comprehensive income				$	262,318			$	175,031

The changes in the Company's accumulated other comprehensive balances for the nine months ended September 30, 2004 and for the year ended December 31, 2003 are presented in the table below.

				Foreign currency translation adjustments				Unrealized losses on securities				Unrealized gains (losses) on hedging instruments				Minimum pension liability adjustments				Accumulated other comprehensive loss
September 30, 2004
Balance at January 1, 2004				$	(3,032	)		$	(246	)		$	619			$	(70,178	)		$	(72,837	)
Period change					328				246				(825	)			—				(251	)
Balance at September 30, 2004				$	(2,704	)		$	—			$	(206	)		$	(70,178	)		$	(73,088	)
December 31, 2003
Balance at January 1, 2003				$	(2,787	)		$	(246	)		$	(277	)		$	(65,989	)		$	(69,299	)
Period change					(245	)			—				896				(4,189	)			(3,538	)
Balance at December 31, 2003.				$	(3,032	)		$	(246	)		$	619			$	(70,178	)		$	(72,837	)

19

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

10.    L-3 Holdings Earnings Per Share

A reconciliation of basic and diluted EPS is presented in the table below.

				Three Months Ended September 30,								Nine Months Ended September 30,
				2004				2003				2004				2003
Basic:
Net income				$	102,490			$	76,107			$	262,569			$	179,223
Weighted average common shares outstanding					107,005				96,435				105,883				95,743
Basic earnings per share				$	0.96			$	0.79			$	2.48			$	1.87
Diluted:
Net income				$	102,490			$	76,107			$	262,569			$	179,223
After-tax interest expense savings on the assumed conversion of Convertible Notes					—				2,588				—				7,763
Net income, including assumed conversion of Convertible Notes				$	102,490			$	78,695			$	262,569			$	186,986
Common and potential common shares:
Weighted average common shares outstanding					107,005				96,435				105,883				95,743
Assumed exercise of stock options					9,847				8,077				9,464				7,629
Assumed purchase of common shares for treasury					(6,842	)			(5,299	)			(6,448	)			(4,979	)
Assumed conversion of Convertible Notes					—				7,362				214				7,362
Common and potential common shares					110,010				106,575				109,113				105,755
Diluted earnings per share				$	0.93			$	0.74			$	2.41			$	1.77

Non-Cash Reductions to Diluted EPS From New Accounting Rule.    On September 30, 2004, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on EITF Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share, which addresses when the diluted effect of contingently convertible debt instruments should be included in diluted earnings per share (EPS). EITF 04-8 requires that contingently convertible debt instruments are to be included in the computation of diluted EPS regardless of whether the market price trigger has been met. EITF 04-8 also requires that prior period diluted EPS amounts presented for comparative purposes be restated. EITF 04-8 is expected to be effective for reporting periods ending after December 15, 2004. The Company expects to adopt the provisions of EITF 04-8 during the 2004 fourth quarter. The impact of applying EITF 04-8 to L-3 Holdings CODES will result in non-cash reductions to the Company's reported diluted EPS of $0.04 from $0.93 to $0.89 for the three months ended September 30, 2004, $0.03 from $0.74 to $0.71 for the three months ended September 30, 2003, $0.09 from $2.41 to $2.32 for the nine months ended September 30, 2004 and $0.05 from $1.77 to $1.72 for the nine months ended September 30, 2003. See Note 8 above for a discussion of the conversion and redemption of the CODES, which occurred during October 2004.

20

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

11.    Cash Dividends on L-3 Holdings Common Stock

In January of 2004, L-3 Holdings announced that its Board of Directors declared its first quarterly cash dividend of $0.10 per share. On March 15, 2004, L-3 Holdings paid cash dividends of $10,543 in aggregate to shareholders of record at the close of business on February 17, 2004.

In April of 2004, L-3 Holdings announced that its Board of Directors declared a regular quarterly dividend of $0.10 per share. On June 15, 2004, L-3 Holdings paid cash dividends of $10,624 in aggregate to shareholders of record at the close of business on May 17, 2004.

In July of 2004, L-3 Holdings announced that its Board of Directors declared a regular quarterly dividend of $0.10 per share. On September 15, 2004, L-3 Holdings paid cash dividends of $10,683 in aggregate to shareholders of record at the close of business on August 17, 2004.

On October 12, 2004, L-3 Holdings announced that its Board of Directors declared a regular quarterly dividend of $0.10 per share payable on December 15, 2004, to shareholders of record at the close of business on November 17, 2004.

12.    Contingencies

A substantial majority of the Company's revenues are generated from providing products and services under legally binding agreements, or contracts with U.S. Government customers. The U.S. Government 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. In addition, all of the Company's U.S. Government contracts are subject to audit and various pricing and cost controls, and include standard provisions for termination for the convenience of the U.S. Government. U.S. Government contracts and related orders are subject to cancellation if funds for contracts become unavailable or for termination for the convenience of the U.S. Government. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government.

Additionally, the Company has been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to its businesses. 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 liability can be reasonably estimated.

L-3 Integrated Systems and its predecessors have been involved in a litigation with Kalitta Air arising from a contract to convert Boeing 747 aircraft from passenger configuration to cargo freighters. The lawsuit was brought in the northern district of California on January 31, 1997. The aircraft were modified using Supplemental Type Certificates (STCs) issued in 1988 by the Federal Aviation Administration (FAA) to Hayes International, Inc. (Hayes/Pemco) as a subcontractor to GATX/Airlog Company (GATX). Between 1988 and 1990, Hayes/Pemco modified five aircraft as a subcontractor to GATX using

21

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

the STCs. Between 1990 and 1994, Chrysler Technologies Airborne Systems, Inc. (CTAS), a predecessor to L-3 Integrated Systems, performed as a subcontractor to GATX and modified an additional five aircraft using the STCs. Two of the aircraft modified by CTAS were owned by American International Airways, the predecessor to Kalitta Air. In 1996, the FAA determined that the engineering data provided by Hayes/Pemco supporting the STCs was inadequate and issued an Airworthiness Directive that effectively grounded the ten modified aircraft. The Kalitta Air aircraft have not been in revenue service since that date. The matter was tried in January 2001 against GATX and CTAS with the jury finding fault on the part of GATX, but rendering a unanimous defense verdict in favor of CTAS. Certain co-defendants had settled prior to trial. The U.S. Ninth Circuit Court of Appeals has reversed and remanded the trial court's summary judgment rulings in favor of CTAS regarding a negligence claim by Kalitta Air, which asserts that CTAS as an expert in aircraft modification should have known that the STCs were deficient, and excluding certain evidence at trial. In preparation for retrial, Kalitta Air has submitted to us an expert report on damages that calculated Kalitta Air's damages at either $232,000 or $602,000, depending on different factual assumptions. The Company has retained experts whose reports indicate that, even in the event of an adverse jury finding on the liability issues at trial, Kalitta Air has already recovered amounts from the other parties to the initial suit that more than fully compensated Kalitta Air for any damages it incurred. CTAS' insurance carrier has accepted defense of the matter with a reservation of its right to dispute its obligations under the applicable insurance policy in the event of an adverse jury finding. The trial relating to this matter is scheduled for January 2005. The Company believes that it has meritorious defenses and intends to continue to vigorously defend this matter. However, litigation is inherently uncertain and it is possible that an adverse decision could be rendered, which could have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

On November 18, 2002, the Company initiated a proceeding against OSI Systems, Inc. (OSI) in the United States District Court sitting in the Southern District of New York seeking, among other things, a declaratory judgment that the Company had fulfilled all of its obligations under a letter of intent with OSI (the "OSI Letter of Intent"). Under the OSI Letter of Intent, the Company was to negotiate definitive agreements with OSI for the sale of certain businesses the Company acquired from PerkinElmer, Inc. on June 14, 2002. On February 7, 2003, OSI filed an answer and counterclaims alleging, among other things, that the Company defrauded OSI, breached obligations of fiduciary duty to OSI and breached its obligations under the OSI Letter of Intent. OSI seeks damages in excess of $100,000 not including punitive damages. Under the OSI Letter of Intent, the Company proposed selling to OSI the conventional detection business and the ARGUS business that the Company acquired from PerkinElmer, Inc. Negotiations with OSI lasted for almost one year and ultimately broke down over issues regarding, among other things, intellectual property, product-line definitions, allocation of employees and due diligence. Discovery on the matter is essentially complete. The Company believes that the claims asserted by OSI in its suit are without merit and intends to vigorously defend against the OSI claims.

L-3 Communications Vertex Aerospace LLC (formerly known as Vertex Aerospace LLC and acquired by the Company on December 1, 2003) (L-3 Vertex) is named as a defendant in two wrongful death lawsuits in the United States District Court, Western District of North Carolina arising from the crash of Air Midwest Flight 5481 at Charlotte-Douglas International Airport in Charlotte, North Carolina on January 8, 2003. The crash resulted in the deaths of nineteen passengers and two crewmembers. Each of the lawsuits alleges contributing factors, including that the accident was caused by the improper maintenance of the aircraft by L-3 Vertex, and seeks to recover compensatory and punitive damages. No discovery has taken place in the lawsuits at this time. Nineteen claims resulting from this incident have previously settled. The National Transportation Safety Board (NTSB) investigated the cause of the crash and has concluded that the crash was caused by the incorrect rigging of the elevator control system

22

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

compounded by the airplane's center of gravity, which was substantially aft of the certified limit, with several other contributing factors. L-3 Vertex believes that it has meritorious defenses to the pending lawsuits, and intends to defend the cases vigorously. The actions have been tendered to L-3 Vertex's insurance carrier, who has accepted the defense of each action served upon L-3 Vertex to date. L-3 Vertex was also indemnified by Air Midwest for losses L-3 Vertex incurred arising out of its provision of maintenance services to Air Midwest. Based on the availability of insurance and the indemnification from Air Midwest, the Company does not believe it will have a material liability in this matter.

With respect to those investigative actions, items of litigation, claims or assessments of which it is aware, management of the Company believes 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 not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. However, as discussed above, the Company is a party to a number of material litigations, for which an adverse determination could have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

23

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS —
    
(Dollars in thousands, except per share data)

13.    Pension and Other Employee Benefits

The following tables summarize the components of net periodic benefit cost for the Company's pension and postretirement benefit plans.

				Three Months Ended September 30,
				2004				2003				2004				2003
				Pension Plans								Postretirement Benefit Plans
Components of net periodic benefit cost:
Service cost				$	14,009			$	11,930			$	759			$	551
Interest cost					15,143				12,970				1,718				1,657
Amortization of prior service cost					361				269				(985	)			(177	)
Expected return on plan assets					(14,143	)			(9,974	)			(316	)			(117	)
Recognized actuarial (gain) loss					2,390				4,014				(186	)			(469	)
Settlement loss (gain)					2,288				—				—				(66	)
Net periodic benefit cost				$	20,048			$	19,209			$	990			$	1,379

				Nine Months Ended September 30,
				2004				2003				2004				2003
				Pension Plans								Postretirement Benefit Plans
Components of net periodic benefit cost:
Service cost				$	43,241			$	34,087			$	3,255			$	2,975
Interest cost					43,406				36,924				6,055				5,951
Amortization of prior service cost					872				466				(2,148	)			(1,027	)
Expected return on plan assets					(40,316	)			(28,924	)			(854	)			(117	)
Recognized actuarial (gain) loss					9,137				10,181				192				(627	)
Settlement loss (gain)					2,288				—				—				(66	)
Net periodic benefit cost				$	58,628			$	52,734			$	6,500			$	7,089

The Company expects to contribute cash of approximately $59,000 to its pension plans in 2004, of which approximately $48,000 was contributed during the nine months ended September 30, 2004.

14.    Supplemental Cash Flow Information

				Nine Months Ended September 30,
				2004				2003
Interest paid				$	100,048			$	81,382
Income tax payments					34,598				21,961
Income tax refunds					3,232				4,985
Noncash transactions:
Conversion of 5¼% convertible senior subordinated notes to L-3 Holdings common stock					298,183				—

24

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

15.    Segment Information

The Company has four reportable segments: (1) Secure Communications & ISR, (2) Training, Simulation & Government Services, (3) Aircraft Modernization, O&M and Products and (4) Specialized Products, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales and operating income.

The tables below present sales, operating income, depreciation and amortization and total assets by reportable segment.

				Three Months Ended September 30,								Nine Months Ended September 30,
				2004				2003				2004				2003
Sales:
Secure Communications & ISR				$	443,387			$	375,803			$	1,243,170			$	1,056,487
Training, Simulation & Government Services					335,120				255,236	(2)			927,651				773,332	(2)
Aircraft Modernization, O&M and Products(1)					573,737				256,596				1,648,164				664,380
Specialized Products					451,876				395,079	(2)			1,226,642				1,144,295	(2)
Elimination of intersegment sales					(19,988	)			(18,103	)			(59,866	)			(57,955	)
Consolidated total				$	1,784,132			$	1,264,611			$	4,985,761			$	3,580,539
Operating Income:
Secure Communications & ISR				$	53,631			$	45,102			$	156,595			$	119,952
Training, Simulation & Government Services					33,702				25,146	(2)			100,938				85,554	(2)
Aircraft Modernization, O&M and Products(1)					79,846				38,239				183,830				92,714
Specialized Products					32,181				43,885	(2)			87,717				91,735	(2)
Consolidated total				$	199,360			$	152,372			$	529,080			$	389,955
Depreciation and Amortization:
Secure Communications & ISR				$	8,644			$	7,568			$	24,589			$	21,301
Training, Simulation & Government Services					1,831				1,879				5,465				5,857
Aircraft Modernization, O&M and Products(1)					8,368				4,309				24,880				13,322
Specialized Products					11,861				9,845				34,559				30,731
Consolidated total				$	30,704			$	23,601			$	89,493			$	71,211

				September 30, 2004				December 31, 2003
Total Assets:
Secure Communications & ISR				$	1,280,128			$	1,201,187
Training, Simulation & Government Services					897,011				781,186	(2)
Aircraft Modernization, O&M and Products					2,132,377				2,043,677
Specialized Products					2,066,596				1,961,754	(2)
Corporate					627,105				505,086
Consolidated total				$	7,003,217			$	6,492,890

(1)	During the three months ended September 30, 2004, the Company changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units that are included in this segment have not changed.

(2)

In 2004, the Company consolidated the IMC business into L-3 Government Services, Inc. As a result of this realignment, $4,314 of sales and $477 of operating loss was reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment for the three months ended September 30, 2003. For the nine months ended September 30, 2003, $23,431 of sales and $2,188 of operating income was reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment. At December 31, 2003, $40,127 of total assets were reclassified from the Specialized Products segment to the Training, Simulation & Government Services Segment.

25

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

16.    Recently Issued Accounting Standards

On September 30, 2004, the EITF reached a consensus on issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings per Shares. See Note 10 above for a description of EITF No. 04-8 and a discussion of the impact on the Company's results of operations.

In December of 2003, the FASB revised its Interpretation No. 46, Consolidation of Variable InterestEntities (FIN 46R). FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46R requires that a business enterprise review all of its legal structures used to conduct its business activities, including those to hold assets, and its majority-owned subsidiaries, to determine whether those legal structures are variable interest entities (VIEs) required to be consolidated for financial reporting purposes by the business enterprise. Generally, a VIE is a legal structure for which the holders of a majority voting equity (ownership) interest may not have a controlling financial interest in the legal structure. Variable interests in a VIE are the contractual, ownership, creditor or other pecuniary interests in the VIE that change with changes in the fair value of the net assets exclusive of variable interests. FIN 46R provides guidance for identifying legal structures which are VIEs and the variable interests in a VIE, and also provides guidance for determining whether a business enterprise shall consolidate a VIE. FIN 46R requires that a business enterprise that holds a significant variable interest in a VIE make new disclosures in its financial statements. The Company adopted the provisions of FIN 46R during the interim period ended March 31, 2004. The Company does not hold any significant interests in VIEs that require consolidation or additional disclosures.

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). This Act introduces a federal subsidy to employers who sponsor retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May of 2004, the FASB issued FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2). FSP 106-2 provides guidance on the accounting for the effects of the Act and requires certain disclosures regarding the effect of the federal subsidy provided by the Act. The guidance in FSP 106-2 applies only if (i) the prescription drug benefits under the Company's defined benefit postretirement health care plan are considered actuarially equivalent to Medicare Part D and therefore qualify for the subsidy under the Act, and (ii) the expected subsidy will reduce the Company's share of the cost of the underlying postretirement prescription drug coverage. FSP 106-2 is effective for the first interim period beginning after June 15, 2004. The Company has determined that the benefits provided by certain of its postretirement benefit plans are actuarially equivalent to Medicare Part D, but has concluded that the effects of the Act do not constitute a significant event. Therefore, the amount of the accumulated postretirement benefit obligations or net periodic benefit cost recorded in the unaudited condensed consolidated financial statements and disclosed in the accompanying notes do not include the effects of the Act. The effects of the Act will be incorporated in the measurement of the Company's postretirement benefits liability and periodic benefit cost for the year ending December 31, 2005.

17.    Unaudited Financial Information of L-3 Communications and its Subsidiaries

L-3 Communications is a wholly-owned subsidiary of L-3 Holdings. 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"). The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the "Non-Guarantor Subsidiaries") do not guarantee the

26

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

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.

The following unaudited condensed combining financial information present the results of operations, financial position and cash flows of (i) L-3 Holdings, excluding L-3 Communications, (ii) L-3 Communications, excluding its consolidated subsidiaries (the "Parent"), (iii) the Guarantor Subsidiaries, (iv) the Non-Guarantor Subsidiaries and (v) the eliminations to arrive at the information for L-3 Communications on a consolidated basis.

27

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Balance Sheets:
At September 30, 2004:
Current assets:
Cash and cash equivalents				$	—			$	357,848			$	(36,570	)		$	46,060			$	—			$	367,338
Contracts in process					—				579,044				1,032,420				246,276				—				1,857,740
Other current assets					—				119,140				46,640				5,109				—				170,889
Total current assets					—				1,056,032				1,042,490				297,445				—				2,395,967
Goodwill					—				834,471				2,518,241				410,193				—				3,762,905
Other assets					—				301,088				429,798				113,459				—				844,345
Investment in and amounts due from consolidated subsidiaries					3,622,746				3,926,418				797,454				27,109				(8,373,727	)			—
Total assets				$	3,622,746			$	6,118,009			$	4,787,983			$	848,206			$	(8,373,727	)		$	7,003,217
Current liabilities				$	—			$	471,332			$	451,735			$	161,406			$	—			$	1,084,473
Other long-term liabilities					—				284,628				167,683				25,278				—				477,589
Long-term debt					418,198				2,157,501				—				—				(418,198	)			2,157,501
Minority interests					—				—				—				79,106				—				79,106
Shareholders' equity					3,204,548				3,204,548				4,168,565				582,416				(7,955,529	)			3,204,548
Total liabilities and shareholders' equity				$	3,622,746			$	6,118,009			$	4,787,983			$	848,206			$	(8,373,727	)		$	7,003,217
At December 31, 2003:
Current assets:
Cash and cash equivalents				$	—			$	155,375			$	(41,291	)		$	20,792			$	—			$	134,876
Contracts in process					—				528,056				817,547				269,745				—				1,615,348
Other current assets					—				159,194				21,928				6,356				—				187,478
Total current assets					—				842,625				798,184				296,893				—				1,937,702
Goodwill					—				805,388				2,425,591				421,457				—				3,652,436
Other assets					—				343,914				446,403				112,435				—				902,752
Investment in and amounts due from consolidated subsidiaries					3,290,873				3,708,989				596,696				21,052				(7,617,610	)			—
Total assets				$	3,290,873			$	5,700,916			$	4,266,874			$	851,837			$	(7,617,610	)		$	6,492,890
Current liabilities				$	—			$	396,868			$	370,468			$	156,876			$	—			$	924,212
Other long-term liabilities					—				272,252				167,275				21,144				—				460,671
Long-term debt					716,377				2,457,300				—				—				(716,377	)			2,457,300
Minority interests					—				—				—				76,211				—				76,211
Shareholders' equity					2,574,496				2,574,496				3,729,131				597,606				(6,901,233	)			2,574,496
Total liabilities and shareholders' equity				$	3,290,873			$	5,700,916			$	4,266,874			$	851,837			$	(7,617,610	)		$	6,492,890

28

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Statements of Operations:
For the nine months ended September 30, 2004:
Sales				$	—			$	1,471,076			$	2,934,212			$	600,525			$	(20,052	)		$	4,985,761
Costs and expenses					—				1,290,523				2,660,095				526,115				(20,052	)			4,456,681
Operating income					—				180,553				274,117				74,410				—				529,080
Other expense (income), net					—				(11,738	)			783				3,545				9,138				1,728
Interest expense					13,630				106,030				410				9,477				(22,768	)			106,779
Minority interests in net income of consolidated subsidiaries					—				—				—				7,078				—				7,078
Provision (benefit) for income taxes					(4,975	)			31,486				99,617				19,823				4,975				150,926
Equity in net income of consolidated subsidiaries					271,224				207,794				—				—				(479,018	)			—
Net income				$	262,569			$	262,569			$	173,307			$	34,487			$	(470,363	)		$	262,569
For the nine months ended September 30, 2003:
Sales				$	—			$	1,371,589			$	1,949,595			$	273,778			$	(14,423	)		$	3,580,539
Costs and expenses					—				1,190,205				1,772,920				241,882				(14,423	)			3,190,584
Operating income					—				181,384				176,675				31,896				—				389,955
Other expense (income), net					—				(9,042	)			148				1,232				5,574				(2,088	)
Interest expense					24,763				97,369				396				6,041				(30,337	)			98,232
Minority interest in net income of consolidated subsidiaries					—				—				—				2,550				—				2,550
Loss on retirement of debt					—				11,225				—				—				—				11,225
Provision (benefit) for income taxes					(8,915	)			29,460				63,407				7,946				8,915				100,813
Equity in net income of consolidated subsidiaries					195,071				126,851				—				—				(321,922	)			—
Net income				$	179,223			$	179,223			$	112,724			$	14,127			$	(306,074	)		$	179,223
For the three months ended September 30, 2004:
Sales				$	—			$	532,908			$	1,041,919			$	215,674			$	(6,369	)		$	1,784,132
Costs and expenses					—				469,148				940,637				181,356				(6,369	)			1,584,772
Operating income					—				63,760				101,282				34,318				—				199,360
Other expense (income), net					—				(3,599	)			(25	)			(1,194	)			3,131				(1,687	)
Interest expense					4,590				34,629				153				3,203				(7,721	)			34,854
Minority interests in net income of consolidated subsidiaries					—				—				—				4,791				—				4,791
Provision (benefit) for income taxes					(1,675	)			11,947				36,921				10,044				1,675				58,912
Equity in net income of consolidated subsidiaries					105,405				81,707				—				—				(187,112	)			—
Net income				$	102,490			$	102,490			$	64,233			$	17,474			$	(184,197	)		$	102,490
For the three months ended September 30, 2003:
Sales				$	—			$	463,341			$	726,484			$	77,799			$	(3,013	)		$	1,264,611
Costs and expenses					—				392,084				657,630				65,538				(3,013	)			1,112,239
Operating income					—				71,257				68,854				12,261				—				152,372
Other expense (income), net					—				(2,966	)			22				247				1,930				(767	)
Interest expense					8,137				32,047				173				2,070				(10,067	)			32,360
Minority interest in net income of consolidated subsidiaries					—				—				—				1,862				—				1,862
Provision (benefit) for income taxes					(2,930	)			15,184				24,717				2,909				2,930				42,810
Equity in net income of consolidated subsidiaries					81,314				49,115				—				—				(130,429	)			—
Net income				$	76,107			$	76,107			$	43,942			$	5,173			$	(125,222	)		$	76,107

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L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Statements of Cash Flows:
For the nine months ended September 30, 2004:
Operating activities:
Net cash from operating activities				$	—			$	113,509			$	239,724			$	54,732			$	—			$	407,965
Investing activities:
Acquisition of businesses, net of cash acquired					—				(57,483	)			(76,860	)			(223	)			—				(134,566	)
Other investing activities					(108,700	)			(93,546	)			(26,787	)			(6,109	)			185,783				(49,359	)
Net cash used in investing activities					(108,700	)			(151,029	)			(103,647	)			(6,332	)			185,783				(183,925	)
Financing activities:
Net cash from (used in) financing activities					108,700				239,993				(131,356	)			(23,132	)			(185,783	)			8,422
Net increase in cash					—				202,473				4,721				25,268				—				232,462
Cash and cash equivalents, beginning of period					—				155,375				(41,291	)			20,792				—				134,876
Cash and cash equivalents, end of period				$	—			$	357,848			$	(36,570	)		$	46,060			$	—			$	367,338
For the nine months ended September 30, 2003:
Operating activities:
Net cash from (used in) operating activities				$	—			$	186,011			$	157,035			$	(15,967	)		$	—			$	327,079
Investing activities:
Acquisition of businesses, net of cash acquired					—				(44,121	)			(215,103	)			(2,161	)			—				(261,385	)
Other investing activities					(67,810	)			(244,349	)			(21,441	)			(6,854	)			285,074				(55,380	)
Net cash used in investing activities					(67,810	)			(288,470	)			(236,544	)			(9,015	)			285,074				(316,765	)
Financing activities:
Proceeds from sale of senior subordinated notes					—				398,160				—				—				—				398,160
Redemption of senior subordinated notes					—				(187,650	)			—				—				—				(187,650	)
Other financing activities					67,810				153,716				62,080				23,054				(285,074	)			21,586
Net cash from financing activities					67,810				364,226				62,080				23,054				(285,074	)			232,096
Net increase (decrease) in cash					—				261,767				(17,429	)			(1,928	)			—				242,410
Cash and cash equivalents, beginning of period					—				126,421				(7,248	)			15,683				—				134,856
Cash and cash equivalents, end of period				$	—			$	388,188			$	(24,677	)		$	13,755			$	—			$	377,266

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

We are a leading supplier of a broad range of products used in a substantial number of aerospace and defense platforms. We also are a major supplier of subsystems on many platforms, including those for secure communication networks and communication products, mobile satellite communications, information security systems, shipboard communications, naval power systems, fuzes and safety and arming devices for missiles and munitions, microwave assemblies for radars and missiles, telemetry and instrumentation, and airport security systems. We also are a prime system contractor for aircraft modernization and operations & maintenance (O&M), Intelligence, Surveillance and Reconnaissance (ISR) collection platforms, simulation and training, and government systems support services. The substantial majority of our sales are generated using written revenue arrangements, or contracts. Most of these contracts require us to design, develop, manufacture, modify, upgrade, test and integrate complex aerospace and electronic equipment, and to provide related engineering and technical services according to the buyer's specifications. Our primary customer is the U.S. Department of Defense (DoD). Our other customers include the U.S. Department of Homeland Security (DHS), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign government ministries of defense, commercial customers and certain other U.S. federal, state and local government agencies.

We have four reportable segments: (1) Secure Communications & ISR; (2) Training, Simulation & Government Services; (3) Aircraft Modernization, O&M and Products (formerly known as Aviation Products & Aircraft Modernization); and (4) Specialized Products.

Our Secure Communications & ISR segment provides products and services for the global ISR market as well as secure, high data rate communications systems and equipment primarily for military and other U.S. Government and foreign government reconnaissance and surveillance applications. We believe our systems and products are critical elements for a substantial number of major communication, command and control, intelligence gathering and space systems. Our systems and 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 Training, Simulation & Government Services segment produces training systems and related support services, and provides a wide range of engineering development services and integration support, and a full range of teaching, training, logistics and communication software support services. Our Aircraft Modernization, O&M and Products segment provides our TCAS products, cockpit voice, flight data and cruise ship hardened voyage recorders, advanced cockpit avionics products, ruggedized custom cockpit displays and specialized aircraft modernization, upgrade and maintenance services. Our Specialized Products segment provides naval warfare products, telemetry, instrumentation, space and navigation products, premium fuzing products, security and surveillance systems, training devices and motion simulators, ruggedized commercial off-the-shelf technology and microwave components.

This Management's Discussion and Analysis of Results of Operations and Financial Condition (MD&A) should be read in conjunction with our MD&A for the fiscal year ended December 31, 2003, included in L-3's Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

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Acquisitions

The table below summarizes all of the acquisitions that we have completed during the year ended December 31, 2003 and the nine-month period ended September 30, 2004.

Acquired Business				Date Acquired				Purchase Price(1)
								(in millions)
Avionics Systems business of Goodrich Corporation(2)				March 28, 2003				$	188.7
Aeromet, Inc.				May 30, 2003				$	18.4
Flight Systems Engineering.				June 30, 2003				$	0.5
Klein Associates Inc.				September 30, 2003				$	29.4
Military Aviation Services business of Bombardier, Inc. (MAS)				October 31, 2003				$	89.6	(3)
Vertex Aerospace LLC (Vertex)				December 1, 2003				$	664.8	(4)
Certain defense and aerospace assets of IPICOM, Inc.				December 10, 2003				$	27.6
General Electric Driver Development (GEDD) business				May 11, 2004				$	3.5
Beamhit LLC				May 13, 2004				$	40.0	(5)(6)
Bay Metals and Fabrication, Inc.				June 8, 2004				$	3.4	(7)
Brashear, LP				June 14, 2004				$	36.3
AVISYS, Inc.				June 16, 2004				$	6.6	(5)(8)

(1)	The purchase price represents the contractual consideration for the acquired business, excluding adjustments for net cash acquired and acquisition costs.

(2)	Following the acquisition, we changed the name of Avionics Systems to L-3 Communications Avionics Systems, Inc.

(3)	Includes a $2.2 million final purchase price adjustment paid in October of 2004, which was based on the actual closing date net assets of MAS.

(4)	Includes a $3.3 million purchase price adjustment paid on the closing date and a $11.5 million final purchase price adjustment paid during the second quarter of 2004.

(5)	The purchase price is subject to adjustment based on actual closing date net assets or net working capital of the acquired business.

(6)	Excludes additional purchase price, which is contingent upon the financial performance of Beamhit for the years ending December 31, 2004, 2005, 2006 and 2007.

(7)	Excludes additional purchase price, not to exceed $1.7 million, which is contingent upon the financial performance of Bay Metals for the fiscal years ending June 8, 2005, 2006 and 2007.

(8)	Excludes additional purchase price, not to exceed $23.0 million, which is contingent upon (i) an award and funding of a certain contract from the U.S. Department of Homeland Security on or before June 30, 2005, and (ii) the financial performance of AVISYS for the years ending December 31, 2004, 2005 and 2006.

All of our business acquisitions are included in our consolidated results of operations from their respective effective dates of acquisitions. We regularly evaluate potential business acquisitions and joint venture transactions. On October 8, 2004, we acquired the stock of D.P. Associates Inc. We have also entered into agreements to acquire certain businesses for an approximate aggregate purchase price of $511 million, payable in cash. These businesses include Cincinnati Electronics, Northrop Grumman's Canadian Navigation Systems and Space Sensors System business and the Marine Controls Division of CAE. We have not entered into any other agreements with respect to any material transactions at this time. Certain of these business acquisitions are subject to regulatory approval. We expect to complete the business acquisitions by December 31, 2004, and will finance them using cash on hand and a portion of the proceeds from the expected notes offering discussed below under "Statement of Cash Flows—Financing Activities."

Results of Operations

The following information should be read in conjunction with our unaudited condensed consolidated financial statements. Our results of operations for the periods presented are impacted significantly by our acquisitions. See Note 3 to the consolidated financial statements for the year ended December 31, 2003 included in our Annual Report on Form 10-K for a discussion of our acquisitions.

Presentation of Sales and Costs and Expenses.    On the statements of operations, L-3 presents its sales and costs and expenses in two categories "Contracts, primarily U.S. Government" and "Commercial, primarily products." For a detailed description of these two categories, refer to Note 2 to the Unaudited Condensed Consolidated Financial Statements.

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Three Months Ended September 30, 2004 Compared with Three Months Ended September 30, 2003

The tables below provide two presentations of sales, operating income and operating margin data for L-3 for the three months ended September 30, 2004 (2004 Third Quarter) and September 30, 2003 (2003 Third Quarter). The first table presents the selected data segregated between L-3's U.S. Government contractor businesses and L-3's commercial businesses. See Note 2 to the unaudited condensed consolidated financial statements. The second table presents the selected data by reportable segment. See Note 15 to the unaudited condensed consolidated financial statements.

				Three Months Ended September 30,
				2004				2003
				(dollars in millions)
Statement of Operations Presentation
Sales:
Contracts, primarily U.S. Government				$	1,586.1			$	1,108.6	(1)
Commercial, primarily products					198.1				156.0	(1)
Consolidated				$	1,784.2			$	1,264.6
Operating income:
Contracts, primarily U.S. Government				$	184.1			$	141.8	(1)
Commercial, primarily products					15.3				10.6	(1)
Consolidated				$	199.4			$	152.4
Operating margin(2):
Contracts, primarily U.S. Government					11.6	%			12.8	%
Commercial, primarily products					7.7	%			6.8	%
Consolidated					11.2	%			12.0	%
Reportable Segment Presentation
Sales(3):
Secure Communications & ISR				$	442.4			$	375.6
Training, Simulation & Government Services					329.4				249.3	(5)
Aircraft Modernization, O&M and Products(4)					573.6				256.4
Specialized Products					438.8				383.3	(5)
Consolidated				$	1,784.2			$	1,264.6
Operating income:
Secure Communications & ISR				$	53.6			$	45.1
Training, Simulation & Government Services					33.7				25.2	(5)
Aircraft Modernization, O&M and Products(4)					79.9				38.2
Specialized Products					32.2				43.9	(5)
Consolidated				$	199.4			$	152.4
Operating margin(2):
Secure Communications & ISR					12.1	%			12.0	%
Training, Simulation & Government Services					10.2	%			10.1	%
Aircraft Modernization, O&M and Products(4)					13.9	%			14.9	%
Specialized Products					7.3	%			11.4	%
Consolidated					11.2	%			12.0	%

(1)

Effective January 1, 2004, we combined our explosives detection systems (EDS) business into L-3 Security and Detection Systems, and our IMC business into L-3 Government Services, Inc. As a result of these business realignments, reclassifications have been made to the prior period sales and operating income amounts to conform them to the current period presentation. Specifically, $6.9 million of sales and $6.1 million of operating income was reclassified from "Contracts, primarily U.S. Government" to "Commercial, primarily products", and $4.3 million of sales and $0.4 million of operating loss was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government."

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(2)	Operating margin is equal to operating income as a percentage of sales.

(3)	Sales are after intersegment eliminations. See Note 15 to the unaudited condensed consolidated financial statements.

(4)	During the 2004 Third Quarter, we changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units included in this reportable segment were not changed.

(5)	Effective January 1, 2004, we combined our IMC business into L-3 Government Services, Inc. As a result of this realignment, $4.3 million of sales and $0.5 million of operating loss were reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment.

Consolidated sales increased by $519.6 million, or 41.1%, to $1,784.2 million for the 2004 Third Quarter from $1,264.6 million for the 2003 Third Quarter. Organic sales growth for our defense businesses was 17.3%, or $193.4 million, driven by continued strong demand for L-3's secure communications and ISR systems, aircraft modernization, aviation products, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth for our commercial and other non-military businesses was 27.4%, or $39.6 million, primarily due to increased volume for commercial aviation products and for security products and maintenance services. The increase in consolidated sales from acquisitions was $286.6 million, or 22.7%. We define "organic sales growth," as the increase or decrease in sales for the current period compared to the prior period, excluding the increase in sales attributable to acquired businesses to the extent the acquired businesses were not included in L-3's results of operations for the entire current period and prior period. Our increases to sales from acquired businesses include all of L-3's acquired businesses regardless of their size. Our sales for "defense businesses" include our U.S. Government contractor businesses, all of which are presented under "Contracts, primarily U.S. Government" and commercial aviation products sold to military customers, which is presented under "Commercial, primarily products."

Sales from "Contracts, primarily U.S. Government" increased by $477.5 million, or 43.1%, to $1,586.1 million for the 2004 Third Quarter from $1,108.6 million for the 2003 Third Quarter. The increase in sales from acquired businesses was $286.6 million, or 25.9%. The acquired businesses include Klein, MAS, Vertex, and certain defense and aerospace assets of IPICOM, Inc., all of which were acquired in 2003, and AVISYS, Bay Metals, Beamhit, Brashear and the GEDD business, all of which were acquired in the second quarter of 2004. Organic sales growth was $190.9 million, or 17.2%, primarily because of higher sales volume for our secure network communications, ISR systems and communications products, aircraft modernization, operations and maintenance, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth does not include the portion of the U.S. Army Aviation and Missile Command (AMCOM) contract sales for maintenance and logistics support of rotary-wing aircraft at Fort Rucker, Alabama of $29.5 million attributable to Vertex's pre-acquisition ownership interest of 40% in the AMCOM contract, which is included in sales from acquired businesses.

Sales from "Commercial, primarily products" increased by $42.1 million, or 27.0%, to $198.1 million for the 2004 Third Quarter from $156.0 million for the 2003 Third Quarter. The increase was driven by organic sales growth for commercial aviation products and security products. There were no business acquisitions that affected the changes in these results.

Consolidated costs and expenses increased by $472.6 million, or 42.5%, to $1,584.8 million for the 2004 Third Quarter from $1,112.2 million for the 2003 Third Quarter, primarily as a result of the increase in sales.

Costs and expenses for "Contracts, primarily U.S. Government" increased by $435.2 million, or 45.0%, to $1,402.0 million for the 2004 Third Quarter from $966.8 million for the 2003 Third Quarter. The costs and expenses related to the increase in sales from acquired businesses was $260.1 million. The remaining increase is primarily attributed to costs and expenses associated with the organic sales growth of our defense businesses. Costs and expenses for our sales from contracts with the U.S. Government include selling, general and administrative (SG&A), independent research and development (IRAD) and bid and proposal (B&P) costs. These SG&A, IRAD and B&P costs are allowable indirect contract costs that are allocated to our U.S. Government contracts in accordance with U.S. Government regulations. We report SG&A, IRAD and B&P costs allocated to U.S. Government contracts as costs and expenses when the related contract sales are recognized as revenue. SG&A, IRAD and B&P costs included in costs and

34

expenses for "Contracts, primarily U.S. Government" were $157.3 million for the 2004 Third Quarter and $128.3 million for the 2003 Third Quarter. See Note 5 to our unaudited condensed consolidated financial statements.

Costs and expenses for "Commercial, primarily products" increased by $37.4 million, or 25.7%, to $182.8 million for the 2004 Third Quarter from $145.4 million for the 2003 Third Quarter. Cost of sales increased by $37.3 million to $127.7 million for the 2004 Third Quarter from $90.4 million for the 2003 Third Quarter. The increase in cost of sales was primarily due to organic sales growth. SG&A expenses decreased by $2.1 million to $37.1 million for the 2004 Third Quarter from $39.2 million for the 2003 Third Quarter, and declined as a percentage of sales to 18.7% from 25.1% due to cost and expense reductions and sales volume increases. Research and development (R&D) expenses increased by $2.2 million to $18.0 million for the 2004 Third Quarter from $15.8 million for the 2003 Third Quarter, primarily due to development expenditures for Smartdeck^TM at our Avionics Systems business.

Consolidated operating income increased by $47.0 million, or 30.8%, to $199.4 million for the 2004 Third Quarter from $152.4 million for the 2003 Third Quarter. The increase was primarily due to higher sales for all of our segments. Consolidated operating income as a percentage of sales (operating margin) decreased to 11.2% for the 2004 Third Quarter, compared to 12.0% for the 2003 Third Quarter. The decrease was principally due to lower margins for the Vertex Aerospace business, which was acquired on December 1, 2003, and changes in product sales mix for certain businesses within our Specialized Products segment. The changes in the operating margins are explained in our segment results discussed below.

Operating income for "Contracts, primarily U.S. Government" increased by $42.3 million, or 29.8%, to $184.1 million for the 2004 Third Quarter from $141.8 million for the 2003 Third Quarter. Operating margin decreased by 1.2 percentage points to 11.6% for the 2004 Third Quarter from 12.8% for the 2003 Third Quarter. Operating margin decreased primarily because of lower operating margins from the Vertex Aerospace acquired business and lower sales for fuzing products. The 2003 Third Quarter operating income also included a $4.5 million gain related to the settlement of a claim.

Operating income for "Commercial, primarily products" increased by $4.7 million, or 44.3%, to $15.3 million for the 2004 Third Quarter from $10.6 million for the 2003 Third Quarter. Operating margin increased by 0.9 percentage points to 7.7% for the 2004 Third Quarter from 6.8% for the 2003 Third Quarter primarily because of cost reductions for microwave components and higher sales volume for commercial aviation products.

Interest expense increased by $2.5 million to $34.9 million for the 2004 Third Quarter from $32.4 million for the 2003 Third Quarter because of higher levels of outstanding debt during the 2004 Third Quarter compared to the levels of outstanding debt during the 2003 Third Quarter due to the sale of $400.0 million of 6 1/8% senior subordinated notes in December of 2003, which was partially offset by the conversions and redemptions of our $300.0 million of 5¼% convertible senior subordinated notes in January of 2004.

For the 2004 Third Quarter, other expense (income), net, includes $1.4 million of interest income.

The income tax provision for the 2004 Third Quarter was based on an estimated effective income tax rate of 36.5%. During October 2004, the U.S. Congress enacted a new tax law that restored the U.S. Federal income tax credit for research and experimentation expenses (R&E Tax Credit), retroactively from July 1, 2004 and continuing to December 31, 2005. As a result of applying the R&E Tax Credit to all of 2004, the estimated effective income tax rate for the full year 2004 is expected to decline from 36.5% to 36.0%. The lower tax rate will be included in our results for the 2004 fourth quarter and for the year ending December 31, 2004.

Basic earnings per share (EPS) increased by $0.17 to $0.96 for the 2004 Third Quarter from $0.79 for the 2003 Third Quarter. Diluted EPS increased by $0.19, or 25.7%, to $0.93 for the 2004 Third Quarter from $0.74 for the 2003 Third Quarter.

Non-Cash Reductions to Diluted EPS From New Accounting Rule.    On September 30, 2004, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on EITF Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per

35

Share, which addresses when the diluted effect of contingently convertible debt instruments should be included in diluted EPS. EITF 04-8 requires that contingently convertible debt instruments are to be included in the computation of diluted EPS regardless of whether the market price trigger has been met. EITF 04-8 also requires that prior period diluted EPS amounts presented for comparative purposes be restated. EITF 04-8 is expected to be effective for reporting periods ending after December 15, 2004. We expect to adopt the provisions of EITF 04-8 during the 2004 fourth quarter. The impact of applying EITF 04-8 to our CODES will result in non-cash reductions to our reported diluted EPS for the 2004 Third Quarter of $0.04 from $0.93 to $0.89 and $0.03 from $0.74 to $0.71 for the 2003 Third Quarter. See Liquidity and Capital Resources—Statement of Cash Flows Financing Activities below and Note 8 to the unaudited condensed consolidated financial statements for a discussion of the conversion and redemption of our CODES, which occurred during October 2004.

Secure Communications & ISR

Sales within our Secure Communications & ISR segment increased by $66.8 million, or 17.8%, to $442.4 million for the 2004 Third Quarter from $375.6 million for the 2003 Third Quarter. Organic sales growth was $63.0 million, or 16.8%, reflecting continued strong demand from the DoD and other U.S. Government agencies for our secure network communications, ISR systems and communications products. The increase in sales from acquired businesses was $3.8 million. The acquired businesses include certain defense and aerospace assets of IPICOM, Inc., which was acquired in 2003.

Operating income increased by $8.5 million to $53.6 million for the 2004 Third Quarter from $45.1 million for the 2003 Third Quarter. Operating margin increased slightly by 0.1 percentage points to 12.1% for the 2004 Third Quarter from 12.0% for the 2003 Third Quarter. These increases were primarily due to slightly higher operating margins for communications products resulting from sales growth.

Training, Simulation & Government Services

Sales within our Training, Simulation & Government Services segment increased by $80.1 million, or 32.1%, to $329.4 million for the 2004 Third Quarter from $249.3 million for the 2003 Third Quarter. Organic sales growth was $77.4 million, or 31.0%, driven by increased sales of training and government services. The increase in sales from acquired businesses was $2.7 million. The acquired businesses include Beamhit and the GEDD business, which were both acquired during the second quarter of 2004.

Operating income increased by $8.5 million to $33.7 million for the 2004 Third Quarter from $25.2 million for the 2003 Third Quarter because of higher sales volume for training and operations services. Operating margin increased slightly by 0.1 percentage points to 10.2% for the 2004 Third Quarter from 10.1% for the 2003 Third Quarter.

Aircraft Modernization, O&M and Products

Sales within our Aircraft Modernization, O&M and Products segment increased by $317.2 million, or 123.7%, to $573.6 million for the 2004 Third Quarter from $256.4 million for the 2003 Third Quarter. The increase in sales from acquired businesses was $262.9 million. The acquired businesses include Vertex and MAS, which were acquired during 2003, and AVISYS, which was acquired during the second quarter of 2004. Organic sales growth was $54.3 million, or 21.2%, driven by sales of $44.2 million from the AMCOM contract and an increase in volume for commercial aviation products.

Operating income increased by $41.7 million to $79.9 million for the 2004 Third Quarter from $38.2 million for the 2003 Third Quarter because of higher sales volume partially offset by lower operating margin. Operating margin declined by 1.0 percentage points to 13.9% for the 2004 Third Quarter from 14.9% for the 2003 Third Quarter. Margins from acquired businesses, primarily Vertex, decreased operating margin by 3.2 percentage points. This decrease was partially offset by 0.8 percentage points for the incentives and award fees earned on the AMCOM contract and by 1.4 percentage points, primarily from commercial aviation products. The operating margin increase from commercial aviation products was due to higher sales volume, which was partially offset by certification costs for new product introductions.

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Specialized Products

Sales within our Specialized Products segment increased by $55.5 million, or 14.5%, to $438.8 million for the 2004 Third Quarter from $383.3 million for the 2003 Third Quarter. Organic sales growth was $38.3 million, or 10.0%. The increase was primarily driven by increased sales of training devices, imaging products, naval power equipment and services, security products and maintenance of security systems. These increases were partially offset by lower sales volume for fuzing products because of additional acceptance testing that delayed shipments and product remediation efforts for undersea dipping sonar products, which reduced production and sales volume. The increase in sales from acquired businesses was $17.2 million. The acquired businesses include Klein, which was acquired in September 2003, and Bay Metals and Brashear, which were both acquired during the second quarter of 2004.

Operating income decreased by $11.7 million to $32.2 million for the 2004 Third Quarter from $43.9 million for the 2003 Third Quarter primarily because of lower sales volume and additional acceptance testing for certain fuzing products, changes in product sales mix for security products, including fewer than expected sales of higher margin explosives detection systems (EDS) and production delays for undersea dipping sonar products caused by efforts to improve the reliability of certain products. The 2003 Third Quarter operating income also included a $4.5 million gain related to the settlement of a claim. These decreases to operating income were partially offset by cost reductions and volume increases for imaging products, naval power equipment and services and microwave components. Operating margin decreased by 4.1 percentage points to 7.3% for the 2004 Third Quarter from 11.4% for the 2003 Third Quarter. Operating margin decreased by 1.4 percentage points due to lower margins for security products, 1.8 percentage points due to volume decreases and additional costs for fuzing and undersea dipping sonar products and 0.9 percentage points primarily due to a gain of $4.5 million recorded in the 2003 Third Quarter related to the settlement of a claim.

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

The tables below provide two presentations of sales, operating income and operating margin data for L-3 for the nine months ended September 30, 2004 (2004 Nine Month Period) and September 30, 2003 (2003 Nine Month Period). The first table presents the selected data segregated between L-3's U.S. Government contractor businesses and L-3's commercial businesses. See Note 2 to the unaudited condensed consolidated financial statements. The second table presents the selected data by reportable segment. See Note 15 to the unaudited condensed consolidated financial statements.

				Nine Months Ended September 30,
				2004				2003
				(dollars in millions)
Statement of Operations Presentation
Sales:
Contracts, primarily U.S. Government				$	4,462.0			$	3,132.0	(1)
Commercial, primarily products					523.8				448.5	(1)
Consolidated				$	4,985.8			$	3,580.5
Operating income:
Contracts, primarily U.S. Government				$	484.2			$	368.8	(1)
Commercial, primarily products					44.9				21.2	(1)
Consolidated				$	529.1			$	390.0
Operating margin(2):
Contracts, primarily U.S. Government					10.9	%			11.8	%
Commercial, primarily products					8.6	%			4.7	%
Consolidated					10.6	%			10.9	%

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				Nine Months Ended September 30,
				2004				2003
				(dollars in millions)
Reportable Segment Presentation
Sales(3):
Secure Communications & ISR				$	1,240.3			$	1,055.9
Training, Simulation & Government Services					911.4				750.6	(5)
Aircraft Modernization, O&M and Products(4)					1,647.4				662.5
Specialized Products					1,186.7				1,111.5	(5)
Consolidated				$	4,985.8			$	3,580.5
Operating income:
Secure Communications & ISR				$	156.6			$	120.0
Training, Simulation & Government Services					100.9				85.6	(5)
Aircraft Modernization, O&M and Products(4)					183.9				92.7
Specialized Products					87.7				91.7	(5)
Consolidated				$	529.1			$	390.0
Operating margin(2):
Secure Communications & ISR					12.6	%			11.4	%
Training, Simulation & Government Services					11.1	%			11.4	%
Aircraft Modernization, O&M and Products(4)					11.2	%			14.0	%
Specialized Products					7.4	%			8.3	%
Consolidated					10.6	%			10.9	%

(1)

Effective January 1, 2004, we combined our EDS business into L-3 Security and Detection Systems, and our IMC business into L-3 Government Services, Inc. As a result of these business realignments, reclassifications have been made to the prior period sales and operating income amounts to conform them to the current period presentation. Specifically, $50.1 million of sales and $11.8 million of operating income was reclassified from "Contracts, primarily U.S. Government" to "Commercial, primarily products", and $25.0 million of sales and $0.4 million of operating income was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government."

(2)	Operating margin is equal to operating income as a percentage of sales.

(3)	Sales are after intersegment eliminations. See Note 15 to the unaudited condensed consolidated financial statements.

(4)	During the 2004 Third Quarter, we changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units included in this reportable segment were not changed.

(5)	Effective January 1, 2004, we combined our IMC business into L-3 Government Services, Inc. As a result of this realignment, $23.4 million of sales and $2.2 million of operating income were reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment.

Consolidated sales increased by $1,405.3 million, or 39.2%, to $4,985.8 million for the 2004 Nine Month Period from $3,580.5 million for the 2003 Nine Month Period. Organic sales growth for our defense businesses was 16.3%, or $513.6 million, driven by continued strong demand for L-3's secure communications and ISR systems, aircraft modernization, aviation products, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth for our commercial and other non-military businesses was 9.9%, or $42.2 million, principally due to increased volume for commercial aviation products. The increase in consolidated sales from acquired businesses was $849.5 million, or 23.7%.

Sales from "Contracts, primarily U.S. Government" increased by $1,330.0 million, or 42.5%, to $4,462.0 million for the 2004 Nine Month Period from $3,132.0 million for the 2003 Nine Month Period. The increase in sales from acquired businesses was $822.1 million, or 26.2%. The acquired businesses include Aeromet, Klein, MAS, Vertex, and certain defense and aerospace assets of IPICOM, Inc., all of which were acquired in 2003, and AVISYS, Bay Metals, Beamhit, Brashear and the GEDD business, all of which were acquired in the second quarter of 2004. Organic sales growth was $507.9 million, or 16.2%, primarily because of higher sales volume for our secure network communications, ISR systems and communications products, aircraft modernization, operations and maintenance, training and government

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services, training devices, imaging products, military aviation products and naval power equipment and services. Organic sales growth does not include the portion of the AMCOM contract sales of $73.2 million attributable to Vertex's pre-acquisition ownership interest of 40% in the contract, which is included in sales from acquired businesses.

Sales from "Commercial, primarily products" increased by $75.3 million, or 16.8%, to $523.8 million for the 2004 Nine Month Period from $448.5 million for the 2003 Nine Month Period. The increase in sales from the Avionics Systems and Flight Systems Engineering acquired businesses, both acquired in 2003, was $27.4 million. Organic sales increased by 10.7%, or $47.9 million, primarily due to the increased volume for commercial aviation products.

Consolidated costs and expenses increased by $1,266.2 million, or 39.7%, to $4,456.7 million for the 2004 Nine Month Period from $3,190.5 million for the 2003 Nine Month Period, primarily as a result of the increase in sales.

Costs and expenses for "Contracts, primarily U.S. Government" increased by $1,214.6 million, or 44.0%, to $3,977.8 million for the 2004 Nine Month Period from $2,763.2 million for the 2003 Nine Month Period. The costs and expenses related to the increase in sales from acquired businesses was $750.2 million. The remaining increase is primarily attributed to costs and expenses associated with the organic sales growth of our defense businesses. SG&A, IRAD and B&P costs included in costs and expenses for "Contracts, primarily U.S. Government" were $436.7 million for the 2004 Nine Month Period and $365.6 million for the 2003 Nine Month Period. See Note 5 to our unaudited condensed consolidated financial statements.

Costs and expenses for "Commercial, primarily products" increased by $51.6 million, or 12.1%, to $478.9 million for the 2004 Nine Month Period from $427.3 million for the 2003 Nine Month Period. Cost of sales increased by $42.5 million to $320.9 million for the 2004 Nine Month Period from $278.4 million for the 2003 Nine Month Period. The increase in cost of sales was primarily due to increased costs attributable to the Avionics Systems acquired business and higher sales volume for our commercial aviation products, services related to security products and maintenance of security systems. SG&A expenses decreased by $1.1 million to $107.5 million for the 2004 Nine Month Period from $108.6 million for the 2003 Nine Month Period, and declined as a percentage of sales to 20.5% from 24.2% due to cost and expense reductions and sales volume increases. R&D expenses increased by $10.2 million to $50.5 million for the 2004 Nine Month Period from $40.3 million for the 2003 Nine Month Period, primarily due to development expenditures for Smartdeck^TM.

Consolidated operating income increased by $139.1 million, or 35.7%, to $529.1 million for the 2004 Nine Month Period from $390.0 million for the 2003 Nine Month Period. The increase was primarily due to higher sales from all of our segments. Consolidated operating margin decreased to 10.6% from 10.9% for the 2004 Nine Month Period compared to the 2003 Nine Month Period. The changes in the operating margins for our segments are discussed below.

Operating income for "Contracts, primarily U.S. Government" increased by $115.4 million, or 31.3%, to $484.2 million for the 2004 Nine Month Period from $368.8 million for the 2003 Nine Month Period. Operating margin declined by 0.9 percentage points to 10.9% for the 2004 Nine Month Period from 11.8% for the 2003 Nine Month Period. Operating margin decreased primarily because of lower operating margins from the Vertex Aerospace acquired business and lower sales for fuzing products. The 2003 Nine Month Period operating income also included a $4.5 million gain related to the settlement of a claim.

Operating income for "Commercial, primarily products" increased by $23.7 million, or 111.8%, to $44.9 million for the 2004 Nine Month Period from $21.2 million for the 2003 Nine Month Period. Operating margin increased by 3.9 percentage points to 8.6% for the 2004 Nine Month Period from 4.7% for the 2003 Nine Month Period primarily because of cost reductions for microwave components, higher sales volume for commercial aviation products and cost and expense reductions at our PrimeWave Communications business. These increases were partially offset by development expenditures for Smartdeck^TM, certification costs for new commercial aviation products and fewer than expected sales of higher margin EDS systems.

Interest expense increased by $8.6 million to $106.8 million for the 2004 Nine Month Period from $98.2 million for the 2003 Nine Month Period because of higher levels of outstanding debt during the 2004

39

Nine Month Period compared to the levels of outstanding debt during the 2003 Nine Month Period. Our outstanding debt increased as a result of the sale of $400.0 million of 6 1/8% senior subordinated notes in December of 2003 and the sale of $400.0 million of 6 1/8% senior subordinated notes in May of 2003. This increase was partially offset by the early retirement of our $180.0 million of 8½% senior subordinated notes in June of 2003 and the conversions and redemptions of our $300.0 million of 5¼% convertible senior subordinated notes in January of 2004.

For the 2004 Nine Month Period, other expense (income), net, includes a $2.6 million loss for our pro rata share of the losses related to our investments accounted for using the equity method, a $1.5 million loss related to an increase in the liability that represents the fair value assigned to the embedded derivatives related to the CODES, and $2.9 million of interest income.

The income tax provision for the 2004 Nine Month Period was based on an estimated effective income tax rate of 36.5%.

Basic EPS increased by $0.61 to $2.48 for the 2004 Nine Month Period from $1.87 for the 2003 Nine Month Period. Diluted EPS increased by $0.64 to $2.41 for the 2004 Nine Month Period from $1.77 for the 2003 Nine Month Period. Net income for the 2003 Nine Month Period includes an after-tax charge of $7.2 million, or $.07 per diluted share, for the early retirement of our $180.0 million of 8½% senior subordinated notes. Excluding this debt retirement charge, diluted EPS would have increased by $0.57 for the 2004 Nine Month Period compared to the 2003 Nine Month Period.

The impact of applying EITF 04-8 to our CODES will result in non-cash reductions to our reported diluted EPS for the 2004 Nine Month Period of $0.09 from $2.41 to $2.32 and $0.05 from $1.77 to $1.72 for the 2003 Nine Month Period. See the discussion above concerning the 2004 Third Quarter results of operations.

Secure Communications & ISR

Sales within our Secure Communications & ISR segment increased by $184.4 million, or 17.5%, to $1,240.3 million for the 2004 Nine Month Period from $1,055.9 million for the 2003 Nine Month Period. Organic sales growth was $157.7 million, or 14.9%, reflecting continued strong demand from the DoD and other U.S. Government agencies for our secure network communications, ISR systems and communications products. The increase in sales from acquired businesses was $26.7 million, or 2.5%. The acquired businesses include Aeromet and certain defense and aerospace assets of IPICOM, Inc., which were acquired in 2003.

Operating income increased by $36.6 million to $156.6 million for the 2004 Nine Month Period from $120.0 million for the 2003 Nine Month Period because of higher sales volume for communications products and ISR systems and lower operating losses for the PrimeWave Communications business due to cost and expense reductions. Operating margin increased by 1.2 percentage points to 12.6% for the 2004 Nine Month Period from 11.4% for the 2003 Nine Month Period, primarily because of organic sales growth for ISR systems and communications products and cost reductions and lower operating losses for the PrimeWave Communications business. These improvements to operating margin were partially offset by a loss related to the design, development and testing activities on a production contract for transportable tactical satellite communications terminals, which reduced operating margin by 0.6 percentage points.

Training, Simulation & Government Services

Sales within our Training, Simulation & Government Services segment increased by $160.8 million, or 21.4%, to $911.4 million for the 2004 Nine Month Period from $750.6 million for the 2003 Nine Month Period. Organic sales growth was $154.1 million, or 20.5%, driven by increased sales of training and government services. The increase in sales from acquired businesses was $6.7 million. The acquired businesses include Beamhit and the GEDD business, which were both acquired during the second quarter of 2004.

Operating income increased by $15.3 million to $100.9 million for the 2004 Nine Month Period from $85.6 million for the 2003 Nine Month Period because of higher sales volume for training and operations

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services. Operating margin decreased by 0.3 percentage points to 11.1% for the 2004 Nine Month Period from 11.4% for the 2003 Nine Month Period. The decrease was primarily due to higher sales from cost-reimbursable, time-and-material and unit-price type contracts, for which the ability to earn higher profit margins is lower than those for fixed-priced type contracts.

Aircraft Modernization, O&M and Products

Sales within our Aircraft Modernization, O&M and Products segment increased by $984.9 million, or 148.7%, to $1,647.4 million for the 2004 Nine Month Period from $662.5 million for the 2003 Nine Month Period. The increase in sales from acquired businesses was $788.9 million. The acquired businesses include Vertex, MAS, Avionics Systems and Flight Systems Engineering, which were acquired during 2003, and AVISYS, which was acquired during the second quarter of 2004. Organic sales growth was $196.0 million, or 29.6%, driven by sales of $109.9 million from the AMCOM contract, $38.6 million for aircraft modernization, operations and maintenance and $47.5 million primarily for commercial and military aviation products.

Operating income increased by $91.2 million to $183.9 million for the 2004 Nine Month Period from $92.7 million for the 2003 Nine Month Period because of higher sales volume partially offset by lower operating margin. Operating margin declined by 2.8 percentage points to 11.2% for the 2004 Nine Month Period from 14.0% for the 2003 Nine Month Period. Margins from acquired businesses, primarily Vertex, decreased operating margin by 2.1 percentage points, margins on the AMCOM contract, a new competitively awarded contract for which performance commenced in December of 2003, decreased operating margin by 0.2 percentage points, and the remaining decrease is primarily due to increased certification costs for new commercial aviation products.

Specialized Products

Sales within our Specialized Products segment increased by $75.2 million, or 6.8%, to $1,186.7 million for the 2004 Nine Month Period from $1,111.5 million for the 2003 Nine Month Period. Organic sales growth was $48.0 million, or 4.3%. The increase was driven by increased sales of $87.7 million primarily for training devices, imaging products, naval power equipment and services, maintenance of security systems and fuzing products. These increases were partially offset by volume declines of $17.1 million for ruggedized computers and displays and lower volume of $22.6 million for undersea warfare products. The increase in sales from acquired businesses was $27.2 million. The acquired businesses include Klein, which was acquired in September 2003, and Bay Metals and Brashear, which were both acquired during the second quarter of 2004.

Operating income decreased by $4.0 million to $87.7 million for the 2004 Nine Month Period from $91.7 million for the 2003 Nine Month Period primarily because of additional acceptance testing for certain fuzing products, changes in product sales mix for security products, including fewer than expected sales of higher margin EDS, and production delays for undersea dipping sonar products caused by efforts to improve the reliability of certain products. These decreases were partially offset by cost reductions for microwave components and higher volume for imaging products and naval power equipment and services. Operating margin decreased by 0.9 percentage points to 7.4% for the 2004 Nine Month Period from 8.3% for the 2003 Nine Month Period. Operating margin decreased by 1.4 percentage points due to additional costs for fuzing and undersea dipping sonar products, 0.9 percentage points due to lower margins for security products and 0.4 percentage points due to a gain of $4.5 million recorded in the 2003 Third quarter related to the settlement of a claim. These decreases were partially offset by an increase of 1.8 percentage points primarily for cost reductions for microwave components and higher volume for imaging products and naval power equipment and services.

LIQUIDITY AND CAPITAL RESOURCES

Balance Sheet

Contracts in process increased by $242.4 million to $1,857.7 million at September 30, 2004 from $1,615.3 million at December 31, 2003. See Note 5 to the unaudited condensed consolidated financial statements. The increase included $26.3 million related to acquired business and $216.1 million principally from:

41

•

increases of $133.9 million in unbilled contract receivables due to sales exceeding deliveries and billings for secure network communications, ISR systems, communications products, training and government services, and incentive fees earned but not yet billed in the AMCOM contract. These increases were partially offset by a decrease in unbilled contract receivables for aircraft modernization due to milestone billings, and lower EDS sales;

•	increases of $43.8 million in billed receivables because of higher sales volume of secure network communications systems, training devices and aircraft modernization. These increases were partially offset by a reduction in billed receivables for EDS due to lower sales volumes and improved collections for communication software support services;

•	increases of $17.3 million in inventoried contract costs, primarily for ruggedized computers and displays, aircraft modernization and secure network communications. These increases were partially offset by a decrease for communications products due to deliveries during the period; and

•	increases of $21.1 million in inventories at lower of cost or market due to increases for security products, primarily EDS, partially offset by decreases for satellite communications due to higher sales volume.

L-3's days receivable outstanding (DRO) was 72.3 at September 30, 2004, compared to 70.3 at December 31, 2003. We calculate our DRO by dividing (i) our aggregate end of period billed receivables and net unbilled contract receivables, by (ii) our sales for the last twelve-month period adjusted on a pro forma basis to include sales from acquisitions that we completed as of the end of the period (which amounted to $6,661.4 million for the twelve-month period ended September 30, 2004), multiplied by 365.

L-3's days inventory held (DIH) was 34.2 at September 30, 2004, compared with 36.3 at December 31, 2003. We calculate DIH by dividing (i) our aggregate end of period net inventoried contract costs and inventories at lower of cost or market, by (ii) our cost of sales for the last twelve-month period adjusted on a pro forma basis to include cost of sales from acquisitions that we completed as of the end of the period (which amounted to $5,739.4 million for the twelve month period ended September 30, 2004), multiplied by 365.

Included in contracts in process at September 30, 2004 are net billed receivables of $4.3 million and net inventories of $9.6 million related to our PrimeWave Communications business. At December 31, 2003, we had $6.7 million of net billed receivables and $11.4 million of net inventories related to our PrimeWave Communications business.

The increase in other current assets during the 2004 Nine Month Period was principally due to deposits paid to vendors for the procurement of subsystems used in our airport security products.

The decrease in property, plant and equipment (PP&E) during the 2004 Nine Month Period was principally related to depreciation expense and disposals, partially offset by capital expenditures. The percentage of depreciation expense to average gross PP&E increased to 9.5% for the 2004 Nine Month Period from 9.0% for the 2003 Nine Month Period. The increase was attributable to the impact of business acquisitions completed during 2003. We did not change any of the depreciation methods or assets estimated useful lives that L-3 uses to calculate its depreciation expense.

Goodwill increased by $110.5 million to $3,762.9 million at September 30, 2004 from $3,652.4 million at December 31, 2003. The increase was comprised of (i) $74.3 million for acquisitions completed during the 2004 Nine Month Period, (ii) $33.3 million for increases to purchase price payments for certain acquisitions completed prior to January 1, 2004, related to final closing date net assets of the acquired businesses and contingent purchase price adjustments or earnouts, which were resolved during the period, and (iii) $2.9 million primarily related to final estimates of fair value for assets acquired and liabilities assumed in connection with business acquisitions completed prior to January 1, 2004.

The increase in accounts payable was due to increased purchases from third-party vendors and subcontractors to support higher volumes for sales and related contracts-in-process, and the timing of payments for such purchases. The increase in accrued employment costs was due to the timing of payments of salaries and wages to employees. The decrease in other current liabilities was primarily due

42

to the payment of the remaining purchase price for the acquisition of certain aerospace and defense assets of IPICOM, Inc. The increase in pension and postretirement benefit liabilities was primarily due to pension expenses exceeding related cash contributions of $48.0 million.

Statement of Cash Flows

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

Cash increased to $367.3 million at September 30, 2004 from $134.9 million at December 31, 2003. The table below provides a summary of our cash flows for the periods indicated.

				Nine Months Ended September 30,
				2004				2003
				(in millions)
Net cash from operating activities				$	408.0			$	327.1
Net cash used in investing activities					(183.9	)			(316.8	)
Net cash from financing activities					8.4				232.1
Net increase in cash				$	232.5			$	242.4

Operating Activities

We generated $408.0 million of cash from operating activities during the 2004 Nine Month Period, an increase of $80.9 million from the $327.1 million generated during the 2003 Nine Month Period. Net income adjusted for non-cash expenses and deferred income taxes increased by $122.0 million to $481.9 million for the 2004 Nine Month Period from $359.9 million for the 2003 Nine-Month Period. Deferred income taxes increased primarily because of larger estimated tax deductions arising from our recent acquisitions. Non-cash expenses consist primarily of contributions of L-3 Holdings' common stock to employee savings plans of $37.6 million and depreciation and amortization of $89.5 million. During the 2004 Nine Month Period, the use of cash related to the change in operating assets and liabilities was $73.9 million, compared to $32.8 million for the 2003 Nine Month Period. The use of cash for contracts in process was primarily driven by increases in unbilled contract receivables and billed receivables arising from the organic sales growth for our businesses, as discussed above under "Liquidity and Capital Resources—Balance Sheet" and "Results of Operations". The use of cash for other current assets was primarily due to deposits paid to vendors during the 2004 Nine Month Period. The source of cash for accounts payable was due to increased purchases of materials, components and services and the timing of payments for such purchases. The timing of payment dates of employee salaries and wages was a source of cash. The source of cash for other current liabilities was primarily due to cash received from billings in excess of costs incurred for certain training and satellite communications contracts and the timing of interest payments, which was partially offset by the payment upon settlement of a foreign currency hedging forward contract, and cash payments for costs incurred in excess of estimated contract values for certain contracts in a loss position. The source of cash from the change in pension and postretirement benefit liabilities was due to expenses exceeding related cash contributions.

We expect to generate net cash from operating activities of approximately $545 million for the full year 2004, including a use of cash of approximately $130 million for changes in operating assets and liabilities, including working capital. During the 2004 fourth quarter, primarily due to the timing of billings, collections and payments, we expect contracts in process to decline by approximately $20 million, and accrued employment costs to decline by approximately $15 million, and we also expect reductions to accounts payable and billings in excess of costs incurred.

Our cash interest payments, which are based on the fixed rate coupons and the interest payment dates of our debt, were approximately $29 million for the first quarter of 2004, $30 million for the second quarter of 2004, and $41 million for the 2004 Third Quarter. These cash interest payments, before any potential savings from our interest rate swap agreements, are expected to be approximately $30 million for the fourth quarter of 2004. The interest payments for the third quarter of 2004 exceed those for each of the other three quarters of 2004 because of the timing of the interest coupon payments on the $400.0 million of 6 1/8% Senior Subordinated Notes we sold in December 2003, which are paid in January and July, commencing July 2004.

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We expect to generate a deferred income tax provision in excess of $110 million for the full year 2004. This estimate of deferred income taxes for 2004 will probably increase, if we acquire additional businesses during 2004. L-3 receives substantial income tax deductions from its acquisitions of businesses that are structured as asset purchases for income tax purposes. The effect of these income tax deductions is that our cash payments for income taxes are less than our provision for income taxes reported on the statement of operations. This difference is presented in the deferred income tax provision on our statement of cash flows. The deferred income tax provision primarily results from deducting amortization of tax intangibles, including goodwill, from the acquisitions structured as asset purchases on L-3's income tax returns over 15 years, in accordance with income tax rules and regulations, while no goodwill amortization is recorded for financial reporting purposes, in accordance with SFAS No. 142. We expect our business acquisitions that have been structured as asset purchases for income tax purposes to continue to generate substantial annual deferred tax benefits through 2017. While these income tax deductions are reported as changes to deferred income tax liabilities and assets, they are not differences that are scheduled to reverse in future periods from normal operations. Rather, they will only reverse if L-3 sells its acquired businesses or incurs a goodwill impairment loss for them, because in either case, L-3's financial reporting amounts for goodwill would be greater than the income tax basis for goodwill.

Investing Activities

During the 2004 Nine Month Period, we used $134.6 million of cash for acquisitions of businesses. We paid $89.7 million to acquire Beamhit, Brashear, GEDD, AVISYS and Bay Metals. We paid $11.5 million for the final contractual purchase price adjustment for the Vertex acquired business. We also paid $33.4 million primarily for the remaining contractual purchase price for certain aerospace and defense assets of IPICOM, Inc., and for earnouts, most of which were accrued as other current liabilities at December 31, 2003. During the 2003 Nine Month Period, we used $261.4 million of cash to acquire businesses, including Avionics Systems, Aeromet and Klein Associates.

On October 8, 2004, we acquired the stock of D.P. Associates Inc. In addition, we have entered into agreements to acquire certain businesses for an approximate aggregate purchase price of $511 million, payable in cash. These businesses include Cincinnati Electronics, Northrop Grumman's Canadian Navigation Systems and Space Sensors System business and the Marine Controls Division of CAE. We have not entered into any other agreements with respect to any material transactions at this time. Certain of these business acquisitions are subject to regulatory approval. We expect to complete the acquisitions by December 31, 2004, and will finance them using cash on hand and/or a portion of the proceeds from the expected notes offering discussed below in Financing Activities.

We make capital expenditures for the improvement of manufacturing facilities and equipment. We expect to use approximately $85 million of cash for capital expenditures, net of cash proceeds from dispositions of property, plant and equipment, for the full year of 2004.

Financing Activities

Debt

Senior Credit Facilities.    At September 30, 2004, available borrowings under our senior credit facilities were $671.5 million, after reductions for outstanding letters of credit of $78.5 million. There were no outstanding borrowings under our senior credit facilities at September 30, 2004.

Redemptions and Related Conversion of Convertible Debt into Common Stock.    On December 22, 2003, L-3 Holdings announced a full redemption of $300.0 million of its 5.25% Convertible Senior Subordinated Notes due 2009 (Convertible Notes), which expired on January 9, 2004. At December 31, 2003, holders of approximately $1.6 million of the Convertible Notes had exercised their conversion rights and converted such notes into 40,000 shares of L-3 Holdings common stock. On January 9, 2004, holders of $298.2 million of the Convertible Notes exercised their conversion rights and converted such notes into 7,317,327 shares of L-3 Holdings common stock. The remaining $0.2 million of Convertible Notes were redeemed for cash on January 12, 2004. On October 5, 2004, L-3 Holdings announced a full redemption of all the $420.0 million of its 4.00% Senior Subordinated Convertible Contingent Debt Securities

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(CODES) due 2011 which expired on Thursday, October 21, 2004. On October 21, 2004, holders of $419.8 million of the principal amount of CODES exercised their conversion rights and converted such CODES into 7,800,797 shares of L-3 Holdings common stock. The remaining $0.2 million of the CODES were redeemed for cash on October 25, 2004, at a redemption price of 102.0% of the principal amount, plus accrued and unpaid interest (including contingent interest) to October 25, 2004.

Senior Subordinated Notes Offering.    On November 1, 2004, L-3 Communications agreed to sell $650 million aggregate principal amount of 5 7/8% Senior Subordinated Notes due 2015 through a private placement. The notes will mature on January 15, 2015, with interest payable semi-annually at a rate of 5 7/8% per annum. We expect to complete the offering, subject to certain conditions, on or about November 12, 2004. The notes are being offered within the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, and, outside the United States, only to non-U.S. investors. The securities to be offered have not been registered under the Securities Act, or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. We intend to use the net proceeds to redeem our outstanding $200.0 million of 8% Senior Subordinated Notes due 2008 and for general corporate purposes, including payments for business acquisitions.

In connection with the early redemption of the $200 million of 8% Senior Subordinated Notes, we expect to record a pre-tax debt retirement charge of approximately $5.0 million, or $0.03 per diluted share, net of taxes.

Interest Rate Swap Agreements.    Depending on interest rate levels, we may enter into interest rate swap agreements to convert certain of our fixed interest rate debt obligations to variable interest rates, or terminate any existing interest rate swap agreements. The variable interest rate that we pay under the swap agreements is equal to (i) the variable rate basis, plus (ii) the variable rate spread. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for a detailed table of our interest rate swap agreement that is currently outstanding, and a table that presents the activity for our terminated interest rate swap agreements through September 30, 2004.

Outstanding interest rate swap agreements reduced interest expense by $2.0 million during the 2004 Third Quarter, compared to $2.7 million during the 2003 Third Quarter and by $4.1 million during the 2004 Nine Month Period, compared to $5.5 million during the 2003 Nine Month Period. Interest expense was reduced by $1.1 million for the 2004 Third Quarter, compared to $0.9 million for the 2003 Third Quarter and by $3.2 million for the 2004 Nine Month Period compared to $2.1 million for the 2003 Nine Month Period for amortization of deferred gains on terminated interest rate swap agreements.

Debt Covenants.    The senior credit facilities and senior subordinated notes agreements contain financial covenants and other restrictive covenants, which remain in effect so long as we owe any amount or any commitment to lend exists thereunder. We are in compliance with those covenants in all material respects. The borrowings under the senior credit facilities are guaranteed by L-3 Holdings and by substantially all of the material domestic subsidiaries of L-3 Communications on a senior basis. 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 substantially all of L-3 Communications' restricted subsidiaries other than its foreign subsidiaries. The guarantees of the senior subordinated notes are junior to the guarantees of the senior credit facilities and rank pari passu with each other. See Note 8 to our consolidated financial statements for the fiscal year ended December 31, 2003, included in our Annual Report on Form 10-K filed on March 4, 2004, for a description of our debt and related financial covenants at December 31, 2003.

Equity

In January of 2004, we announced that our Board of Directors declared our first quarterly cash dividend of $0.10 per share. On March 15, 2004, we paid cash dividends of $10.5 million in aggregate to shareholders of record at the close of business on February 17, 2004.

In April of 2004, we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share. On June 15, 2004, we paid cash dividends of $10.6 million in aggregate to shareholders of record at the close of business on May 17, 2004.

45

In July of 2004, we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share. On September 15, 2004, we paid cash dividends of $10.7 million in aggregate to shareholders of record at the close of business on August 17, 2004.

On October 12, 2004 we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share payable on December 15, 2004, to shareholders of record at the close of business on November 17, 2004.

As discussed above under "Statement of Cash Flows—Financing," holders of $419.8 million principal amount of our CODES exercised their conversion rights and converted such CODES into 7,800,797 shares of L-3 Holdings common stock.

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, commitments, research and development expenditures, contingent purchase prices, program and other discretionary investments, dividends and interest payments for the foreseeable future. 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, refrain from declaring quarterly dividends, 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, 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, or make necessary capital expenditures and to make discretionary investments.

Contingencies

A substantial majority of our revenues are generated from providing products and services under legally binding agreements, or contracts with U.S. Government customers. The U.S. Government 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. In addition, all of our U.S. Government contracts are subject to audit and various pricing and cost controls, and include standard provisions for termination for the convenience of the U.S. Government. U.S. Government contracts and related orders are subject to cancellation if funds for contracts become unavailable or for termination for the convenience of the U.S. Government. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government.

Additionally, we have been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to our businesses. For a detailed discussion of items of litigation, see Note 12 to the Unaudited Condensed Consolidated Financial Statements. Litigation is inherently uncertain and it is possible that an adverse decision could be rendered against us, which could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We also 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 by us 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. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

46

Recently Issued and Proposed Accounting Standards

In December of 2003, the Financial Accounting Standards Board (FASB) revised its FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R). FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46R requires that a business enterprise review all of its legal structures used to conduct its business activities, including those to hold assets, and its majority-owned subsidiaries, to determine whether those legal structures are variable interest entities (VIEs) required to be consolidated for financial reporting purposes by the business enterprise. Generally a VIE is a legal structure for which the holders of a majority voting equity (ownership) interest may not have a controlling financial interest in the legal structure. Variable interests in a VIE are the contractual, ownership, creditor or other pecuniary interests in the VIE that change with changes in the fair value of the net assets exclusive of variable interests.. FIN 46R provides guidance for identifying legal structures which are VIEs and the variable interests in a VIE, and also provides guidance for determining whether a business enterprise shall consolidate a VIE. FIN 46R requires that a business enterprise that holds a significant variable interest in a VIE make new disclosures in its financial statements. We adopted the provisions of FIN 46R during the interim period ended March 31, 2004. We do not hold any significant interests in VIEs that require consolidation or additional disclosures.

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). This Act introduces a federal subsidy to employees who sponsor retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May of 2004, the FASB issued FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2). FSP 106-2 provides guidance on the accounting for the effects of the Act and requires certain disclosures regarding the effect of the federal subsidy provided by the Act. The guidance in FSP 106-2 applies only if (i) the prescription drug benefits under our defined benefit postretirement health care plan are considered actuarially equivalent to Medicare Part D and therefore qualify for the subsidy under the Act, and (ii) the expected subsidy will reduce our share of the cost of the underlying postretirement prescription drug coverage. FSP 106-2 is effective for the first interim period beginning after June 15, 2004. We have determined that the benefits provided by certain of our postretirement benefit plans are actuarially equivalent to Medicare Part D, but have concluded that the effects of the Act do not constitute a significant event. Therefore, the amount of the accumulated postretirement benefit obligation or net periodic benefit cost recorded in the unaudited condensed consolidated financial statements and disclosed in the accompanying notes do not include the effects of the Act. The effects of the Act will be incorporated in the measurement of our postretirement benefits liability and periodic benefit cost for the year ending December 31, 2005.

On September 30, 2004 the EITF reached a consensus on issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share. See "Results of Operations" above for a description of EITF No. 04-8 and a discussion of its impact on our results of operations.

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. Such statements will also be influenced by factors such as:

•	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;

47

•	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;

•	our ability to obtain future government contracts on a timely basis;

•	the availability of government funding and changes in customer requirements for our products and services;

•	our significant amount of debt and the restrictions contained in our debt agreements;

•	our ability to continue to retain and train our existing employees and to recruit and hire new qualified and skilled employees;

•	our collective bargaining agreements and our ability to favorably resolve labor disputes should they arise;

•	the business and economic conditions in the markets in which we operate, including those for the commercial aviation and communications markets;

•	economic conditions, competitive environment, international business and political conditions and timing of international awards and contracts;

•	our extensive use of fixed-price type contracts as compared to cost-reimbursable type and time-and-material type contracts;

•	our ability to identify future acquisition candidates or to integrate acquired operations;

•	the rapid change of technology and high level of competition in the communication equipment industry;

•	our introduction of new products into commercial markets or our investments in commercial products or companies;

•	pension, environmental or legal matters or proceedings and various other market, competition and industry factors, many of which are beyond our control; and

•	the fair values of our assets including identifiable intangible assets and the estimated fair value of the goodwill balances for our reporting units which can be impaired or reduced by the other factors discussed above.

Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and our 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 and such differences could be material. 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.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition — Liquidity and Capital Resources — Derivative Financial Instruments," of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for a discussion of the Company's exposure to market risks. The only substantial change in those risks during the nine months ended September 30, 2004 is discussed below.

Derivative Financial Instruments

Interest Rate Risk. Our financial instruments that are sensitive to changes in interest rates include borrowings under the senior credit facilities and interest rate swap agreements, all of which are denominated in U.S. dollars. The interest rates on the senior subordinated notes are fixed-rate and are not affected by changes in interest rates.

In March and April of 2004, we entered into new interest rate swap agreements on $300.0 million aggregate principal amount of our $400.0 million of 6 1/8% senior subordinated notes due 2014, to convert their fixed interest rates to variable rates. During the nine-month period ended September 30, 2004, we terminated $200.0 million aggregate notional amounts of these interest rate swap agreements. At September 30, 2004, $100.0 million notional amount interest rate swap agreement was outstanding. These transactions are discussed above under "Management's Discussion and Analysis of Results of Operations and Financial Condition — Statement of Cash Flows — Financing Activities," of this report.

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ITEM 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chairman and Chief Executive Officer and our President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2004. Based upon that evaluation and subject to the foregoing, our Chairman and Chief Executive Officer and our President and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

In addition, there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe that we are adequately reserved for these liabilities and that there is no litigation that will have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, as discussed below, we are a party to a number of material litigations, for which an adverse determination could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

L-3 Integrated Systems and its predecessors have been involved in a litigation with Kalitta Air arising from a contract to convert Boeing 747 aircraft from passenger configuration to cargo freighters. The lawsuit was brought in the northern district of California on January 31, 1997. The aircraft were modified using Supplemental Type Certificates (STCs) issued in 1988 by the Federal Aviation Administration (FAA) to Hayes International, Inc. (Hayes/Pemco) as a subcontractor to GATX/Airlog Company (GATX). Between 1988 and 1990, Hayes/Pemco modified five aircraft as a subcontractor to GATX using the STCs. Between 1990 and 1994, Chrysler Technologies Airborne Systems, Inc. (CTAS), a predecessor to L-3 Integrated Systems, performed as a subcontractor to GATX and modified an additional five aircraft using the STCs. Two of the aircraft modified by CTAS were owned by American International Airways, the predecessor to Kalitta Air. In 1996, the FAA determined that the engineering data provided by Hayes/Pemco supporting the STCs was inadequate and issued an Airworthiness Directive that effectively grounded the ten modified aircraft. The Kalitta Air aircraft have not been in revenue service since that date. The matter was tried in January 2001 against GATX and CTAS with the jury finding fault on the part of GATX but rendering a unanimous defense verdict in favor of CTAS. Certain co-defendants had settled prior to trial. The U.S. Ninth Circuit Court of Appeals has reversed and remanded the trial court's summary judgment rulings in favor of CTAS regarding a negligence claim by Kalitta Air, which asserts that CTAS as an expert in aircraft modification should have known that the STCs were deficient, and excluding certain evidence at trial. Based on this ruling, a retrial has been scheduled for September 2004. In preparation for retrial, Kalitta Air has submitted to us an expert report on damages that calculated Kalitta Air's damages at either $232 million or $602 million, depending on different factual assumptions. We have retained experts whose reports indicate that, even in the event of an adverse jury finding on the liability issues at trial, Kalitta Air has already recovered amounts from the other parties to the initial suit that more than fully compensated Kalitta Air for any damages it incurred. CTAS' insurance carrier has accepted defense of the matter with a reservation of its right to dispute its obligations under the applicable insurance policy in the event of an adverse jury finding. The trial relating to this matter is scheduled for January 2005. We have meritorious defenses and intend to continue to vigorously defend this matter. However, litigation is inherently uncertain and it is possible that an adverse decision could be rendered, which could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On November 18, 2002, we initiated a proceeding against OSI Systems, Inc. (OSI) in the United States District Court sitting in the Southern District of New York seeking, among other things, a declaratory judgment that we had fulfilled all of our obligations under a letter of intent with OSI (the "OSI Letter of Intent"). Under the OSI Letter of Intent, we were to negotiate definitive agreements with OSI for the sale of certain businesses we acquired from PerkinElmer, Inc. on June 14, 2002. On February 7, 2003, OSI filed an answer and counterclaims alleging, among other things, that we defrauded OSI, breached obligations of fiduciary duty to OSI and breached our obligations under the OSI Letter of Intent. OSI seeks damages in excess of $100 million, not including punitive damages. Under the OSI Letter of Intent, we proposed selling to OSI the conventional detection business and the ARGUS business that we acquired from PerkinElmer, Inc. Negotiations with OSI lasted for almost one year and ultimately broke down over issues regarding, among other things, intellectual property, product-line definitions, allocation of employees and due diligence. Discovery on the matter is essentially complete. We believe that the claims asserted by OSI in its suit are without merit and intend to vigorously defend against the OSI claims.

51

L-3 Communications Vertex Aerospace LLC (formerly known as Vertex Aerospace LLC and acquired by L-3 Communications Corporation on December 1, 2003) (L-3 Vertex) is named as a defendant in two wrongful death lawsuits in the United States District Court, Western District of North Carolina arising from the crash of Air Midwest Flight 5481 at Charlotte-Douglas International Airport in Charlotte, North Carolina on January 8, 2003. The crash resulted in the deaths of nineteen passengers and two crewmembers. Each of the lawsuits alleges contributing factors, including that the accident was caused by the improper maintenance of the aircraft by L-3 Vertex, and seeks to recover compensatory and punitive damages. No discovery has taken place in the lawsuits at this time. Nineteen claims resulting from this incident have previously settled. The National Transportation Safety Board (NTSB) investigated the cause of the crash and has concluded that the crash was caused by the incorrect rigging of the elevator control system compounded by the airplane's center of gravity, which was substantially aft of the certified limit, with several other contributing factors. L-3 Vertex believes that it has meritorious defenses to the pending lawsuits, and intends to defend the cases vigorously. The actions have been tendered to L-3 Vertex's insurance carrier, who has accepted the defense of each action served upon L-3 Vertex to date. L-3 Vertex was also indemnified by Air Midwest for losses L-3 Vertex incurred arising out of its provision of maintenance services to Air Midwest. Based on the availability of insurance and the indemnification from Air Midwest, we do not believe we will have a material liability in this matter.

52

ITEM 6.

EXHIBITS

(a) Exhibits

Exhibit Number				Description of Exhibit
3.1				Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants' Quarterly Report on Form 10-Q for the period ended June 30, 2002).
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 (File No. 333-46975)).
3.3				Certificate of Incorporation of L-3 Communications Corporation (incorporated by reference to Exhibit 3.1 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
3.4				Bylaws of L-3 Communications Corporation (incorporated by reference to Exhibit 3.2 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
**10.56				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 11, 1998 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.94				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of June 28, 2002 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.95				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of May 21, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.96				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 22, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.97				Form of L-3 Communications Holdings, Inc. 1999 Long Term Incentive Plan Nonqualified Stock Option Agreement.
*11				L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share.
**12.1				Ratio of Earnings to Fixed Charges.
**31.1				Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d -14(a) of the Securities Exchange Act, as amended.
**31.2				Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d- 14(a) of the Securities Exchange Act, as amended.
**32				Section 1350 Certifications.

*	The information required in this exhibit is presented in Note 10 to the Unaudited Condensed Consolidated Financial Statements as of September 30, 2004 in accordance with the provisions of SFAS No. 128, Earnings Per Share.

**	Filed herewith

53

Pursuant to the requirements 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.

L-3 Communications Holdings, Inc. and
L-3 Communications Corporation
    Registrants

Date: November 9, 2004

/s/ Robert V. LaPenta                     

Name: Robert V. LaPenta
Title: President and Chief Financial Officer
(Principal Financial Officer)

54

EXHIBIT INDEX

Exhibit Number				Description of Exhibit
3.1				Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants' Quarterly Report on Form 10-Q for the period ended June 30, 2002).
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 (File No. 333-46975)).
3.3				Certificate of Incorporation of L-3 Communications Corporation (incorporated by reference to Exhibit 3.1 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
3.4				Bylaws of L-3 Communications Corporation (incorporated by reference to Exhibit 3.2 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
**10.56				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 11, 1998 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.94				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of June 28, 2002 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.95				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of May 21, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.96				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 22, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.97				Form of L-3 Communications Holdings, Inc. 1999 Long Term Incentive Plan Nonqualified Stock Option Agreement.
*11				L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share.
**12.1				Ratio of Earnings to Fixed Charges.
**31.1				Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
**31.2				Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule15d-14(a) of the Securities Exchange Act, as amended.
**32				Section 1350 Certifications.

*	The information required in this exhibit is presented in Note 10 to the Unaudited Condensed Consolidated Financial Statements as of September 30, 2004 in accordance with the provisions of SFAS No. 128, Earnings Per Share.

**	Filed herewith

EX-10.56

                                                                   EXHIBIT 10.56

                     SUPPLEMENTAL INDENTURE TO BE DELIVERED
                          BY GUARANTEEING SUBSIDIARIES

     Supplemental Indenture (this "Supplemental Indenture"), dated as of August
5, 2004, among L-3 Communications Corporation (or its permitted successor), a
Delaware corporation (the "Company"), each subsidiary of the Company signatory
hereto (each, a "Guaranteeing Subsidiary", and collectively, the "Guaranteeing
Subsidiaries"), and The Bank of New York, as trustee under the indenture
referred to below (the "Trustee").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (as amended, the "Indenture"), dated as of December 11,
1998 providing for the issuance of an aggregate principal amount of up to
$300,000,000 of 8% Senior Subordinated Notes due 2008 (the "Notes");

         WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall
unconditionally guarantee all of the Company's Obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and

         WHEREAS, pursuant to Sections 4.13 and 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:


         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

         2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees
as follows:

            (a)   Each Guaranteeing Subsidiary, jointly and severally with all
                  other current and future guarantors of the Notes
                  (collectively, the "Guarantors" and each, a "Guarantor"),
                  unconditionally guarantees to each Holder of a Note
                  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 Notes or the Obligations
                  of the Company under the Indenture or the Notes, that:

                  (i)   the principal of, premium and interest on the Notes will
                        be promptly paid in full when due, whether at maturity,
                        by


                                       1


                        acceleration, redemption or otherwise, and interest on
                        the overdue principal of, premium and interest on the
                        Notes, 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

                  (ii)  in case of any extension of time for payment or renewal
                        of any Notes 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.

            (b)   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 each Guaranteeing
                  Subsidiary under this Supplemental Indenture and its
                  Subsidiary Guarantee shall be reduced to the maximum amount
                  permissible under such fraudulent conveyance or similar law.

         3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

            (a)   To evidence its Subsidiary Guarantee set forth in this
                  Supplemental Indenture, each Guaranteeing Subsidiary hereby
                  agrees that a notation of such Subsidiary Guarantee
                  substantially in the form of Exhibit F to the Indenture shall
                  be endorsed by an officer of such Guaranteeing Subsidiary on
                  each Note authenticated and delivered by the Trustee after the
                  date hereof.

            (b)   Notwithstanding the foregoing, each Guaranteeing Subsidiary
                  hereby agrees that its Subsidiary Guarantee set forth herein
                  shall remain in full force and effect notwithstanding any
                  failure to endorse on each Note a notation of such Subsidiary
                  Guarantee.

            (c)   If an Officer whose signature is on this Supplemental
                  Indenture or on the Subsidiary Guarantee no longer holds that
                  office at the time the Trustee authenticates the Note on which
                  a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
                  shall be valid nevertheless.

            (d)   The delivery of any Note by the Trustee, after the
                  authentication thereof under the Indenture, shall constitute
                  due delivery of the Subsidiary Guarantee set forth in this
                  Supplemental Indenture on behalf of each Guaranteeing
                  Subsidiary.

            (e)   Each Guaranteeing Subsidiary hereby agrees that its
                  obligations hereunder shall be unconditional, regardless of
                  the validity,


                                       2


                  regularity or enforceability of the Notes or the Indenture,
                  the absence of any action to enforce the same, any waiver or
                  consent by any Holder of the Notes with respect to any
                  provisions of the Notes 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.

            (f)   Each Guaranteeing Subsidiary hereby waives 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
                  its Subsidiary Guarantee made pursuant to this Supplemental
                  Indenture will not be discharged except by complete
                  performance of the obligations contained in the Notes and the
                  Indenture.

            (g)   If any Holder or the Trustee is required by any court or
                  otherwise to return to the Company or any Guaranteeing
                  Subsidiary, or any Custodian, Trustee, liquidator or other
                  similar official acting in relation to either the Company or
                  such Guaranteeing Subsidiary, any amount paid by either to the
                  Trustee or such Holder, the Subsidiary Guarantee made pursuant
                  to this Supplemental Indenture, to the extent theretofore
                  discharged, shall be reinstated in full force and effect.

            (h)   Each Guaranteeing Subsidiary agrees that it 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. Each
                  Guaranteeing Subsidiary further agrees that, as between such
                  Guaranteeing Subsidiary, on the one hand, and the Holders and
                  the Trustee, on the other hand:

                  (i)   the maturity of the obligations guaranteed hereby may be
                        accelerated as provided in Article 6 of the Indenture
                        for the purposes of the Subsidiary Guarantee made
                        pursuant to this Supplemental Indenture, notwithstanding
                        any stay, injunction or other prohibition preventing
                        such acceleration in respect of the obligations
                        guaranteed hereby; and

                  (ii)  in the event of any declaration of acceleration of such
                        obligations as provided in Article 6 of the Indenture,
                        such obligations (whether or not due and payable) shall
                        forthwith become due and payable by such Guaranteeing
                        Subsidiary for the purpose of the Subsidiary Guarantee
                        made pursuant to this Supplemental Indenture.

                                       3


            (i)   Each Guaranteeing Subsidiary shall have the right to seek
                  contribution from any other non-paying Guaranteeing Subsidiary
                  so long as the exercise of such right does not impair the
                  rights of the Holders or the Trustee under the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture.

         4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

            (a)   Except as set forth in Articles 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into the Company
                  or any other Guarantor or shall prevent any transfer, sale or
                  conveyance of the property of any Guaranteeing Subsidiary as
                  an entirety or substantially as an entirety, to the Company or
                  any other Guarantor.

            (b)   Except as set forth in Article 4 of the Indenture, nothing
                  contained in the Indenture, this Supplemental Indenture or in
                  the Notes shall prevent any consolidation or merger of any
                  Guaranteeing Subsidiary with or into a corporation or
                  corporations other than the Company or any other Guarantor (in
                  each case, whether or not affiliated with such Guaranteeing
                  Subsidiary), or successive consolidations or mergers in which
                  a Guaranteeing Subsidiary or its successor or successors shall
                  be a party or parties, or shall prevent any sale or conveyance
                  of the property of any Guaranteeing Subsidiary 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 such Guaranteeing Subsidiary) authorized
                  to acquire and operate the same; provided, however, that each
                  Guaranteeing Subsidiary hereby covenants and agrees 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 the
                  Indenture and this Supplemental Indenture to be performed by
                  such Guaranteeing Subsidiary, shall be expressly assumed (in
                  the event that such Guaranteeing Subsidiary is 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 such Guaranteeing Subsidiary
                  shall have been merged, or by the corporation which shall have
                  acquired such property and (ii) immediately after giving
                  effect to such consolidation, merger, sale or conveyance no
                  Default or Event of Default exists.


                                       4


            (c)   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 Supplemental Indenture and the
                  due and punctual performance of all of the covenants and
                  conditions of the Indenture and this Supplemental Indenture to
                  be performed by each Guaranteeing Subsidiary, such successor
                  corporation shall succeed to and be substituted for such
                  Guaranteeing Subsidiary with the same effect as if it had been
                  named herein as the Guaranteeing Subsidiary. Such successor
                  corporation thereupon may cause to be signed any or all of the
                  Subsidiary Guarantees to be endorsed upon the Notes 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 Supplemental Indenture as though all
                  of such Subsidiary Guarantees had been issued at the date of
                  the execution hereof.

         5. RELEASES.

            (a)   Concurrently with any sale of assets (including, if
                  applicable, all of the Capital Stock of a Guaranteeing
                  Subsidiary), all Liens, if any, in favor of the Trustee in the
                  assets sold thereby shall be released; provided that in the
                  event of an Asset Sale, the Net Proceeds from such sale or
                  other disposition are treated in accordance with the
                  provisions of Section 4.10 of the Indenture. If the assets
                  sold in such sale or other disposition include all or
                  substantially all of the assets of a Guaranteeing Subsidiary
                  or all of the Capital Stock of a Guaranteeing Subsidiary, then
                  the Guaranteeing Subsidiary (in the event of a sale or other
                  disposition of all of the Capital Stock of such Guaranteeing
                  Subsidiary) or the Person acquiring the property (in the event
                  of a sale or other disposition of all or substantially all of
                  the assets of such Guaranteeing Subsidiary) shall be released
                  from and relieved of its obligations under this Supplemental
                  Indenture and its Subsidiary Guarantee made pursuant hereto;
                  provided that in the event of an Asset Sale, the Net Proceeds
                  from such sale or other disposition are treated in accordance
                  with the provisions of Section 4.10 of the Indenture. 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 Guaranteeing Subsidiary, as the
                  case may be, in accordance with the provisions of the
                  Indenture and this Supplemental Indenture, including without
                  limitation, Section 4.10 of the

                                       5


                  Indenture, the Trustee shall execute any documents reasonably
                  required in order to evidence the release of the Guaranteeing
                  Subsidiary from its obligations under this Supplemental
                  Indenture and its Subsidiary Guarantee made pursuant hereto.
                  If the Guaranteeing Subsidiary is not released from its
                  obligations under its Subsidiary Guarantee, it shall remain
                  liable for the full amount of principal of and interest on the
                  Notes and for the other obligations of such Guaranteeing
                  Subsidiary under the Indenture as provided in this
                  Supplemental Indenture.

            (b)   Upon the designation of a Guaranteeing Subsidiary as an
                  Unrestricted Subsidiary in accordance with the terms of the
                  Indenture, such Guaranteeing Subsidiary shall be released and
                  relieved of its obligations under its Subsidiary Guarantee and
                  this Supplemental 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
                  Guaranteeing Subsidiary as an Unrestricted Subsidiary was made
                  by the Company in accordance with the provisions of the
                  Indenture, including without limitation Section 4.07 of the
                  Indenture, the Trustee shall execute any documents reasonably
                  required in order to evidence the release of such Guaranteeing
                  Subsidiary from its obligations under its Subsidiary
                  Guarantee. Any Guaranteeing Subsidiary not released from its
                  obligations under its Subsidiary Guarantee shall remain liable
                  for the full amount of principal of and interest on the Notes
                  and for the other obligations of any Guaranteeing Subsidiary
                  under the Indenture as provided herein.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.

         7. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No
Guaranteeing Subsidiary 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 Guaranteeing Subsidiary and senior in
any respect in right of payment to any of the Subsidiary Guarantees.
Notwithstanding the foregoing sentence, the Subsidiary Guarantee of each
Guaranteeing Subsidiary shall be subordinated to the prior payment in full of
all Senior Debt of that Guaranteeing Subsidiary (in the same manner and to the
same extent that the Notes are subordinated to Senior Debt), which shall include
all guarantees of Senior Debt.

                                       6


         8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         9. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         10. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         11. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.


                                        7


         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.



Dated: August 5, 2004               L-3 COMMUNICATIONS CORPORATION


                                    By: /s/ Christopher C. Cambria
                                        ----------------------------------------
                                        Name:  Christopher C. Cambria
                                        Title: Senior Vice President, Secretary
                                               and General Counsel





Dated: August 5, 2004         APCOM, INC., a Maryland corporation
                              BROADCAST SPORTS INC., a Delaware corporation
                              L-3 COMMUNICATIONS CSI, INC., a California
                                corporation
                              ELECTRODYNAMICS, INC., an Arizona corporation
                              HENSCHEL INC., a Delaware corporation
                              HYGIENETICS ENVIRONMENTAL SERVICES, INC., a
                                Delaware corporation
                              INTERSTATE ELECTRONICS CORPORATION, a California
                                corporation
                              KDI PRECISION PRODUCTS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS AEROMET, INC., an Oregon
                                corporation
                              L-3 COMMUNICATIONS VERTEX AEROSPACE LLC, a
                                Delaware limited liability company
                              L-3 COMMUNICATIONS AIS GP CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS AVYSIS CORPORATION, a Texas
                                corporation
                              L-3 COMMUNICATIONS AYDIN CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS ESSCO, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS FLIGHT INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS FLIGHT CAPITAL LLC, a Delaware
                                limited liability company
                              L-3 COMMUNICATIONS GOVERNMENT SERVICES, INC., a
                                Virginia corporation
                              L-3 COMMUNICATIONS ILEX SYSTEMS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., a
                                Delaware limited partnership
                              L-3 COMMUNICATIONS INVESTMENTS INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS KLEIN ASSOCIATES, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS MAS (US) CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS SECURITY AND DETECTION SYSTEMS,
                                INC., a Delaware corporation
                              L-3 COMMUNICATIONS SECURITY SYSTEMS CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., a
                                California corporation



                              L-3 COMMUNICATIONS VECTOR INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS WESTWOOD CORPORATION, a Nevada
                                corporation
                              MCTI ACQUISITION CORPORATION, a Maryland
                                corporation
                              MICRODYNE COMMUNICATIONS TECHNOLOGIES
                                INCORPORATED, a Maryland corporation
                              MICRODYNE CORPORATION, a Maryland corporation
                              MICRODYNE OUTSOURCING INCORPORATED, a Maryland
                                corporation
                              MPRI, INC., a Delaware corporation
                              PAC ORD INC., a Delaware corporation
                              POWER PARAGON, INC., a Delaware corporation
                              SHIP ANALYTICS, INC., a Connecticut corporation
                              SHIP ANALYTICS INTERNATIONAL, INC., a Delaware
                                corporation
                              SHIP ANALYTICS USA, INC., a Connecticut
                                corporation
                              SPD ELECTRICAL SYSTEMS, INC., a Delaware
                                corporation
                              SPD SWITCHGEAR INC., a Delaware corporation
                              SYCOLEMAN CORPORATION, a Florida corporation
                              TROLL TECHNOLOGY CORPORATION, a California
                                corporation
                              WESCAM AIR OPS INC., a Delaware corporation
                              WESCAM AIR OPS LLC, a Delaware limited liability
                                company
                              WESCAM HOLDINGS (US) INC., a Delaware corporation
                              WESCAM INCORPORATED, a Florida corporation
                              WESCAM LLC, a Delaware limited liability company
                              WESCAM SONOMA INC., a California corporation
                              WOLF COACH, INC., a Massachusetts corporation As
                                Guaranteeing Subsidiaries

                                       By: /s/ Christopher C. Cambria
                                           --------------------------
                                           Name:  Christopher C. Cambria
                                           Title: Vice President, Secretary





Dated: August 5, 2004                    THE BANK OF NEW YORK,
                                         as Trustee


                                         By: /s/ Robert A. Massimillo
                                             ------------------------
                                             Name:  Robert A. Massimillo
                                             Title: Vice President

EX-10.94

                                                                   EXHIBIT 10.94

                     SUPPLEMENTAL INDENTURE TO BE DELIVERED
                          BY GUARANTEEING SUBSIDIARIES

     Supplemental Indenture (this "Supplemental Indenture"), dated as of August
5, 2004, among L-3 Communications Corporation (or its permitted successor), a
Delaware corporation (the "Company"), each subsidiary of the Company signatory
hereto (each, a "Guaranteeing Subsidiary", and collectively, the "Guaranteeing
Subsidiaries"), and The Bank of New York, as trustee under the indenture
referred to below (the "Trustee").

                               W I T N E S S E T H

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of June 28, 2002 providing for
the issuance of an aggregate principal amount of up to $750,000,000 of 7 5/8%
Senior Subordinated Notes due 2012 (the "Notes");

         WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and

         WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

         2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees
as follows:

            (a)   Such Guaranteeing Subsidiary, jointly and severally with all
                  other current and future guarantors of the Notes
                  (collectively, the "Guarantors" and each, a "Guarantor"),
                  unconditionally guarantees to each Holder of a Note
                  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 Notes or the Obligations
                  of the Company under the Indenture or the Notes, that:



                  (i)   the principal of, premium, interest and Additional
                        Amounts, if any, on the Notes will be promptly paid in
                        full when due, whether at maturity, by acceleration,
                        redemption or otherwise, and interest on the overdue
                        principal of, premium, interest and Additional Amounts,
                        if any, on the Notes, 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

                  (ii)  in case of any extension of time for payment or renewal
                        of any Notes 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.

            (b)   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 such Guaranteeing
                  Subsidiary under this Supplemental Indenture and its
                  Subsidiary Guarantee shall be reduced to the maximum amount
                  permissible under such fraudulent conveyance or similar law.

         3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

            (a)   To evidence its Subsidiary Guarantee set forth in this
                  Supplemental Indenture, such Guaranteeing Subsidiary hereby
                  agrees that a notation of such Subsidiary Guarantee
                  substantially in the form of Exhibit F to the Indenture shall
                  be endorsed by an officer of such Guaranteeing Subsidiary on
                  each Note authenticated and delivered by the Trustee after the
                  date hereof.

            (b)   Notwithstanding the foregoing, such Guaranteeing Subsidiary
                  hereby agrees that its Subsidiary Guarantee set forth herein
                  shall remain in full force and effect notwithstanding any
                  failure to endorse on each Note a notation of such Subsidiary
                  Guarantee.

            (c)   If an Officer whose signature is on this Supplemental
                  Indenture or on the Subsidiary Guarantee no longer holds that
                  office at the time the Trustee authenticates the Note on which
                  a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
                  shall be valid nevertheless.

            (d)   The delivery of any Note by the Trustee, after the
                  authentication thereof under the Indenture, shall constitute
                  due delivery of the

                                       2


                  Subsidiary Guarantee set forth in this Supplemental Indenture
                  on behalf of each Guaranteeing Subsidiary.

            (e)   Each Guaranteeing Subsidiary hereby agrees that its
                  obligations hereunder shall be unconditional, regardless of
                  the validity, regularity or enforceability of the Notes or the
                  Indenture, the absence of any action to enforce the same, any
                  waiver or consent by any Holder of the Notes with respect to
                  any provisions hereof or thereof, 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.

            (f)   Each Guaranteeing Subsidiary hereby waives 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
                  its Subsidiary Guarantee made pursuant to this Supplemental
                  Indenture will not be discharged except by complete
                  performance of the Obligations contained in the Notes and the
                  Indenture.

            (g)   If any Holder or the Trustee is required by any court or
                  otherwise to return to the Company or any Guaranteeing
                  Subsidiary, or any custodian, Trustee, liquidator or other
                  similar official acting in relation to either the Company or
                  such Guaranteeing Subsidiary, any amount paid by either to the
                  Trustee or such Holder, the Subsidiary Guarantee made pursuant
                  to this Supplemental Indenture, to the extent theretofore
                  discharged, shall be reinstated in full force and effect.

            (h)   Each Guaranteeing Subsidiary agrees that it 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. Each
                  Guaranteeing Subsidiary further agrees that, as between such
                  Guaranteeing Subsidiary, on the one hand, and the Holders and
                  the Trustee, on the other hand:

                  (i)   the maturity of the Obligations guaranteed hereby may be
                        accelerated as provided in Article 6 of the Indenture
                        for the purposes of the Subsidiary Guarantee made
                        pursuant to this Supplemental Indenture, notwithstanding
                        any stay, injunction or other prohibition preventing
                        such acceleration in respect of the obligations
                        guaranteed hereby; and

                  (ii)  in the event of any declaration of acceleration of such
                        obligations as provided in Article 6 of the Indenture,
                        such

                                       3


                        obligations (whether or not due and payable) shall
                        forthwith become due and payable by such Guaranteeing
                        Subsidiary for the purpose of the Subsidiary Guarantee
                        made pursuant to this Supplemental Indenture.

            (i)   Each Guaranteeing Subsidiary shall have the right to seek
                  contribution from any other non-paying Guaranteeing Subsidiary
                  so long as the exercise of such right does not impair the
                  rights of the Holders or the Trustee under the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture.

         4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

            (a)   Except as set forth in Articles 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into the Company
                  or any other Guarantor or shall prevent any transfer, sale or
                  conveyance of the property of any Guaranteeing Subsidiary as
                  an entirety or substantially as an entirety, to the Company or
                  any other Guarantor.

            (b)   Except as set forth in Article 4 of the Indenture, nothing
                  contained in the Indenture, this Supplemental Indenture or in
                  the Notes shall prevent any consolidation or merger of any
                  Guaranteeing Subsidiary with or into a corporation or
                  corporations other than the Company or any other Guarantor (in
                  each case, whether or not affiliated with the Guaranteeing
                  Subsidiary), or successive consolidations or mergers in which
                  a Guaranteeing Subsidiary or its successor or successors shall
                  be a party or parties, or shall prevent any sale or conveyance
                  of the property of any Guaranteeing Subsidiary 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 Guaranteeing Subsidiary) authorized to
                  acquire and operate the same; provided, however, that each
                  Guaranteeing Subsidiary hereby covenants and agrees 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 the
                  Indenture and this Supplemental Indenture to be performed by
                  such Guaranteeing Subsidiaries, shall be expressly assumed (in
                  the event that such Guaranteeing Subsidiary is 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

                                       4


                  which such Guaranteeing Subsidiary shall have been merged, or
                  by the corporation which shall have acquired such property and
                  (ii) immediately after giving effect to such consolidation,
                  merger, sale or conveyance no Default or Event of Default
                  exists.

            (c)   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 Supplemental Indenture and the
                  due and punctual performance of all of the covenants and
                  conditions of the Indenture and this Supplemental Indenture to
                  be performed by such Guaranteeing Subsidiary, such successor
                  corporation shall succeed to and be substituted for such
                  Guaranteeing Subsidiary with the same effect as if it had been
                  named herein as the Guaranteeing Subsidiary. Such successor
                  corporation thereupon may cause to be signed any or all of the
                  Subsidiary Guarantees to be endorsed upon the Notes 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 Supplemental Indenture as though all
                  of such Subsidiary Guarantees had been issued at the date of
                  the execution hereof.

         5. RELEASES.

            (a)   Concurrently with any sale of assets (including, if
                  applicable, all of the Capital Stock of a Guaranteeing
                  Subsidiary), all Liens, if any, in favor of the Trustee in the
                  assets sold thereby shall be released; provided that in the
                  event of an Asset Sale, the Net Proceeds from such sale or
                  other disposition are treated in accordance with the
                  provisions of Section 4.10 of the Indenture. If the assets
                  sold in such sale or other disposition include all or
                  substantially all of the assets of a Guaranteeing Subsidiary
                  or all of the Capital Stock of a Guaranteeing Subsidiary, then
                  the Guaranteeing Subsidiary (in the event of a sale or other
                  disposition of all of the Capital Stock of such Guaranteeing
                  Subsidiary) or the Person acquiring the property (in the event
                  of a sale or other disposition of all or substantially all of
                  the assets of such Guaranteeing Subsidiary) shall be released
                  from and relieved of its Obligations under this Supplemental
                  Indenture and its Subsidiary Guarantee made pursuant hereto;
                  provided that in the event of an Asset Sale, the Net Proceeds
                  from such sale or other disposition are treated in accordance
                  with the

                                       5


                  provisions of Section 4.10 of the Indenture. 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 Guaranteeing Subsidiary, as the case may be, in
                  accordance with the provisions of the Indenture and this
                  Supplemental Indenture, including without limitation, Section
                  4.10 of the Indenture, the Trustee shall execute any documents
                  reasonably required in order to evidence the release of the
                  Guaranteeing Subsidiary from its Obligations under this
                  Supplemental Indenture and its Subsidiary Guarantee made
                  pursuant hereto. If the Guaranteeing Subsidiary is not
                  released from its obligations under its Subsidiary Guarantee,
                  it shall remain liable for the full amount of principal of and
                  interest on the Notes and for the other obligations of such
                  Guaranteeing Subsidiary under the Indenture as provided in
                  this Supplemental Indenture.

            (b)   Upon the designation of a Guaranteeing Subsidiary as an
                  Unrestricted Subsidiary in accordance with the terms of the
                  Indenture, such Guaranteeing Subsidiary shall be released and
                  relieved of its obligations under its Subsidiary Guarantee and
                  this Supplemental 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
                  Guaranteeing Subsidiary as an Unrestricted Subsidiary was made
                  by the Company in accordance with the provisions of the
                  Indenture, including without limitation Section 4.07 of the
                  Indenture, the Trustee shall execute any documents reasonably
                  required in order to evidence the release of such Guaranteeing
                  Subsidiary from its obligations under its Subsidiary
                  Guarantee. Any Guaranteeing Subsidiary not released from its
                  Obligations under its Subsidiary Guarantee shall remain liable
                  for the full amount of principal of and interest on the Notes
                  and for the other Obligations of any Guaranteeing Subsidiary
                  under the Indenture as provided herein.

            (c)   Each Guaranteeing Subsidiary shall be released and relieved of
                  its obligations under this Supplemental Indenture in
                  accordance with, and subject to, Section 4.18 of the
                  Indenture.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not

                                       6


be effective to waive liabilities under the federal securities laws and it is
the view of the SEC that such a waiver is against public policy.

         7. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No
Guaranteeing Subsidiary 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 Guaranteeing Subsidiary and senior in
any respect in right of payment to any of the Subsidiary Guarantees.
Notwithstanding the foregoing sentence, the Subsidiary Guarantee of each
Guaranteeing Subsidiary shall be subordinated to the prior payment in full of
all Senior Debt of that Guaranteeing Subsidiary (in the same manner and to the
same extent that the Notes are subordinated to Senior Debt), which shall include
all guarantees of Senior Debt.

         8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         9. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         10. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         11. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.



                                       7


         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.


Dated: August 5, 2004               L-3 COMMUNICATIONS CORPORATION


                                    By: /s/ Christopher C. Cambria
                                        ----------------------------------------
                                        Name:  Christopher C. Cambria
                                        Title: Senior Vice President, Secretary
                                               and General Counsel




Dated: August 5, 2004         APCOM, INC., a Maryland corporation
                              BROADCAST SPORTS INC., a Delaware corporation
                              ELECTRODYNAMICS, INC., an Arizona corporation
                              HENSCHEL INC., a Delaware corporation
                              HYGIENETICS ENVIRONMENTAL SERVICES, INC., a
                                Delaware corporation
                              INTERSTATE ELECTRONICS CORPORATION, a California
                                corporation
                              KDI PRECISION PRODUCTS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS AEROMET, INC., an Oregon
                                corporation
                              L-3 COMMUNICATIONS VERTEX AEROSPACE LLC, a
                                Delaware limited liability company
                              L-3 COMMUNICATIONS AIS GP CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS AVISYS CORPORATION, a Texas
                                corporation
                              L-3 COMMUNICATIONS CSI, INC., a California
                                corporation
                              L-3 COMMUNICATIONS AYDIN CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS ESSCO, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS FLIGHT INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS FLIGHT CAPITAL LLC, a Delaware
                                limited liability company
                              L-3 COMMUNICATIONS GOVERNMENT SERVICES, INC., a
                                Virginia corporation
                              L-3 COMMUNICATIONS ILEX SYSTEMS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., a
                                Delaware limited partnership
                              L-3 COMMUNICATIONS INVESTMENTS INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS KLEIN ASSOCIATES, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS MAS (US) CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS SECURITY AND DETECTION SYSTEMS,
                                INC., a Delaware corporation
                              L-3 COMMUNICATIONS SECURITY SYSTEMS CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., a
                                California corporation

                                       9


                              L-3 COMMUNICATIONS VECTOR INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS WESTWOOD CORPORATION, a Nevada
                                corporation
                              MCTI ACQUISITION CORPORATION, a Maryland
                                corporation
                              MICRODYNE COMMUNICATIONS TECHNOLOGIES
                                INCORPORATED, a Maryland corporation
                              MICRODYNE CORPORATION, a Maryland corporation
                              MICRODYNE OUTSOURCING INCORPORATED, a Maryland
                                corporation
                              MPRI, INC., a Delaware corporation
                              PAC ORD INC., a Delaware corporation
                              POWER PARAGON, INC., a Delaware corporation
                              SHIP ANALYTICS, INC., a Connecticut corporation
                              SHIP ANALYTICS INTERNATIONAL, INC., a Delaware
                                corporation
                              SHIP ANALYTICS USA, INC., a Connecticut
                                corporation
                              SPD ELECTRICAL SYSTEMS, INC., a Delaware
                                corporation
                              SPD SWITCHGEAR INC., a Delaware corporation
                              SYCOLEMAN CORPORATION, a Florida corporation
                              TROLL TECHNOLOGY CORPORATION, a California
                                corporation
                              WESCAM AIR OPS INC., a Delaware corporation
                              WESCAM AIR OPS LLC, a Delaware limited liability
                                company
                              WESCAM HOLDINGS (US) INC., a Delaware corporation
                              WESCAM INCORPORATED, a Florida corporation
                              WESCAM LLC, a Delaware limited liability company
                              WESCAM SONOMA INC., a California corporation
                              WOLF COACH, INC., a Massachusetts corporation As
                                Guaranteeing Subsidiaries

                                   By: /s/ Christopher C. Cambria
                                       --------------------------
                                       Name:  Christopher C. Cambria
                                       Title: Vice President, Secretary




Dated: August 5, 2004                THE BANK OF NEW YORK,
                                     as Trustee


                                     By: /s/ Robert A. Massimillo
                                         ------------------------
                                         Name:  Robert A. Massimillo
                                         Title: Vice President

EX-10.95

                                                                   EXHIBIT 10.95

                     SUPPLEMENTAL INDENTURE TO BE DELIVERED
                          BY GUARANTEEING SUBSIDIARIES

     Supplemental Indenture (this "Supplemental Indenture"), dated as of August
5, 2004, among L-3 Communications Corporation (or its permitted successor), a
Delaware corporation (the "Company"), each a direct or indirect subsidiary of
the Company signatory hereto (each, a "Guaranteeing Subsidiary", and
collectively, the "Guaranteeing Subsidiaries"), and The Bank of New York, as
trustee under the indenture referred to below (the "Trustee").

                               W I T N E S S E T H
                               - - - - - - - - - -

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 21, 2003 providing for
the issuance of an unlimited amount of 6 1/8% Senior Subordinated Notes due 2013
(the "Notes");

         WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall
unconditionally guarantee all of the Company's Obligations (as defined in the
Indenture) under the Notes and the Indenture on the terms and conditions set
forth herein (the "Subsidiary Guarantee"); and

         WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

         2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees
as follows:

            (a)   Such Guaranteeing Subsidiary, jointly and severally with all
                  other current and future guarantors of the Notes
                  (collectively, the "Guarantors" and each, a "Guarantor"),
                  unconditionally guarantees to each Holder of a Note
                  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 Notes or the Obligations
                  of the Company under the Indenture or the Notes, that:

                  (i)   the principal of, premium, interest and Additional
                        Amounts, if any, on the Notes will be promptly paid in
                        full when due, whether at maturity, by acceleration,
                        redemption or otherwise, and interest on the overdue
                        principal of,

                                       1


                        premium, interest and Additional Amounts, if any, on the
                        Notes, 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

                  (ii)  in case of any extension of time for payment or renewal
                        of any Notes 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.

            (b)   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 such Guaranteeing
                  Subsidiary under this Supplemental Indenture and its
                  Subsidiary Guarantee shall be reduced to the maximum amount
                  permissible under such fraudulent conveyance or similar law.

         3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

            (a)   To evidence its Subsidiary Guarantee set forth in this
                  Supplemental Indenture, such Guaranteeing Subsidiary hereby
                  agrees that a notation of such Subsidiary Guarantee
                  substantially in the form of Exhibit F to the Indenture shall
                  be endorsed by an officer of such Guaranteeing Subsidiary on
                  each Note authenticated and delivered by the Trustee after the
                  date hereof.

            (b)   Notwithstanding the foregoing, such Guaranteeing Subsidiary
                  hereby agrees that its Subsidiary Guarantee set forth herein
                  shall remain in full force and effect notwithstanding any
                  failure to endorse on each Note a notation of such Subsidiary
                  Guarantee.

            (c)   If an Officer whose signature is on this Supplemental
                  Indenture or on the Subsidiary Guarantee no longer holds that
                  office at the time the Trustee authenticates the Note on which
                  a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
                  shall be valid nevertheless.

            (d)   The delivery of any Note by the Trustee, after the
                  authentication thereof under the Indenture, shall constitute
                  due delivery of the Subsidiary Guarantee set forth in this
                  Supplemental Indenture on behalf of each Guaranteeing
                  Subsidiary.

            (e)   Each Guaranteeing Subsidiary hereby agrees that its
                  Obligations hereunder shall be unconditional, regardless of
                  the validity, regularity or enforceability of the Notes or the
                  Indenture, the

                                       2


                  absence of any action to enforce the same, any waiver or
                  consent by any Holder of the Notes with respect to any
                  provisions hereof or thereof, 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.

            (f)   Each Guaranteeing Subsidiary hereby waives 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
                  its Subsidiary Guarantee made pursuant to this Supplemental
                  Indenture will not be discharged except by complete
                  performance of the Obligations contained in the Notes and the
                  Indenture.

            (g)   If any Holder or the Trustee is required by any court or
                  otherwise to return to the Company or any Guaranteeing
                  Subsidiary, or any custodian, Trustee, liquidator or other
                  similar official acting in relation to either the Company or
                  such Guaranteeing Subsidiary, any amount paid by either to the
                  Trustee or such Holder, the Subsidiary Guarantee made pursuant
                  to this Supplemental Indenture, to the extent theretofore
                  discharged, shall be reinstated in full force and effect.

            (h)   Each Guaranteeing Subsidiary agrees that it 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. Each
                  Guaranteeing Subsidiary further agrees that, as between such
                  Guaranteeing Subsidiary, on the one hand, and the Holders and
                  the Trustee, on the other hand:

                  (i)   the maturity of the Obligations guaranteed hereby may be
                        accelerated as provided in Article 6 of the Indenture
                        for the purposes of the Subsidiary Guarantee made
                        pursuant to this Supplemental Indenture, notwithstanding
                        any stay, injunction or other prohibition preventing
                        such acceleration in respect of the Obligations
                        guaranteed hereby; and

                  (ii)  in the event of any declaration of acceleration of such
                        Obligations as provided in Article 6 of the Indenture,
                        such Obligations (whether or not due and payable) shall
                        forthwith become due and payable by such Guaranteeing
                        Subsidiary for the purpose of the Subsidiary Guarantee
                        made pursuant to this Supplemental Indenture.

            (i)   Each Guaranteeing Subsidiary shall have the right to seek
                  contribution from any other non-paying Guaranteeing Subsidiary

                                       3


                  so long as the exercise of such right does not impair the
                  rights of the Holders or the Trustee under the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture.

         4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

            (a)   Except as set forth in Articles 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into the Company
                  or any other Guarantor or shall prevent any transfer, sale or
                  conveyance of the property of any Guaranteeing Subsidiary as
                  an entirety or substantially as an entirety, to the Company or
                  any other Guarantor.

            (b)   Except as set forth in Article 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into a
                  corporation or corporations other than the Company or any
                  other Guarantor (in each case, whether or not affiliated with
                  the Guaranteeing Subsidiary), or successive consolidations or
                  mergers in which a Guaranteeing Subsidiary or its successor or
                  successors shall be a party or parties, or shall prevent any
                  sale or conveyance of the property of any Guaranteeing
                  Subsidiary 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 Guaranteeing
                  Subsidiary) authorized to acquire and operate the same;
                  provided, however, that each Guaranteeing Subsidiary hereby
                  covenants and agrees 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 the Indenture and this
                  Supplemental Indenture to be performed by such Guaranteeing
                  Subsidiaries, shall be expressly assumed (in the event that
                  such Guaranteeing Subsidiary is 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 such
                  Guaranteeing Subsidiary shall have been merged, or by the
                  corporation which shall have acquired such property and (ii)
                  immediately after giving effect to such consolidation, merger,
                  sale or conveyance no Default or Event of Default exists.

            (c)   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

                                       4


                  satisfactory in form to the Trustee, of the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture and the
                  due and punctual performance of all of the covenants and
                  conditions of the Indenture and this Supplemental Indenture to
                  be performed by such Guaranteeing Subsidiary, such successor
                  corporation shall succeed to and be substituted for such
                  Guaranteeing Subsidiary with the same effect as if it had been
                  named herein as the Guaranteeing Subsidiary. Such successor
                  corporation thereupon may cause to be signed any or all of the
                  Subsidiary Guarantees to be endorsed upon the Notes 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 Supplemental Indenture as though all
                  of such Subsidiary Guarantees had been issued at the date of
                  the execution hereof.

         5. RELEASES.

            (a)   Concurrently with any sale of assets (including, if
                  applicable, all of the Capital Stock of a Guaranteeing
                  Subsidiary), all Liens, if any, in favor of the Trustee in the
                  assets sold thereby shall be released; provided that in the
                  event of an Asset Sale, the Net Proceeds from such sale or
                  other disposition are treated in accordance with the
                  provisions of Section 4.10 of the Indenture. If the assets
                  sold in such sale or other disposition include all or
                  substantially all of the assets of a Guaranteeing Subsidiary
                  or all of the Capital Stock of a Guaranteeing Subsidiary, then
                  the Guaranteeing Subsidiary (in the event of a sale or other
                  disposition of all of the Capital Stock of such Guaranteeing
                  Subsidiary) or the Person acquiring the property (in the event
                  of a sale or other disposition of all or substantially all of
                  the assets of such Guaranteeing Subsidiary) shall be released
                  from and relieved of its Obligations under this Supplemental
                  Indenture and its Subsidiary Guarantee made pursuant hereto;
                  provided that in the event of an Asset Sale, the Net Proceeds
                  from such sale or other disposition are treated in accordance
                  with the provisions of Section 4.10 of the Indenture. 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 Guaranteeing Subsidiary, as the
                  case may be, in accordance with the provisions of the
                  Indenture and this Supplemental Indenture, including without
                  limitation, Section 4.10 of the Indenture, the Trustee shall
                  execute any documents reasonably required in order to evidence
                  the release of the Guaranteeing Subsidiary from its
                  Obligations under this Supplemental Indenture

                                       5


                  and its Subsidiary Guarantee made pursuant hereto. If the
                  Guaranteeing Subsidiary is not released from its obligations
                  under its Subsidiary Guarantee, it shall remain liable for the
                  full amount of principal of and interest on the Notes and for
                  the other obligations of such Guaranteeing Subsidiary under
                  the Indenture as provided in this Supplemental Indenture.

            (b)   Upon the designation of a Guaranteeing Subsidiary as an
                  Unrestricted Subsidiary in accordance with the terms of the
                  Indenture, such Guaranteeing Subsidiary shall be released and
                  relieved of its Obligations under its Subsidiary Guarantee and
                  this Supplemental 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
                  Guaranteeing Subsidiary as an Unrestricted Subsidiary was made
                  by the Company in accordance with the provisions of the
                  Indenture, including without limitation Section 4.07 of the
                  Indenture, the Trustee shall execute any documents reasonably
                  required in order to evidence the release of such Guaranteeing
                  Subsidiary from its Obligations under its Subsidiary
                  Guarantee. Any Guaranteeing Subsidiary not released from its
                  Obligations under its Subsidiary Guarantee shall remain liable
                  for the full amount of principal of and interest on the Notes
                  and for the other Obligations of any Guaranteeing Subsidiary
                  under the Indenture as provided herein.

            (c)   Each Guaranteeing Subsidiary shall be released and relieved of
                  its obligations under this Supplemental Indenture in
                  accordance with, and subject to, Section 4.18 of the
                  Indenture.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any Obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such Obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.

         7. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No
Guaranteeing Subsidiary 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 Guaranteeing Subsidiary and senior in
any respect in right of payment to any of the Subsidiary Guarantees.
Notwithstanding the foregoing sentence, the Subsidiary Guarantee of each
Guaranteeing Subsidiary shall be subordinated to the prior payment in full of
all Senior Debt of that Guaranteeing Subsidiary (in the same manner and to the
same extent that the Notes are subordinated to Senior Debt), which shall include
all guarantees of Senior Debt.

                                       6


         8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         9. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         10. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         11. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.






                                       7


         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.


Dated: August 5, 2004               L-3 COMMUNICATIONS CORPORATION


                                    By: /s/ Christopher C. Cambria
                                        ----------------------------------------
                                        Name:  Christopher C. Cambria
                                        Title: Senior Vice President, Secretary
                                               and General Counsel




Dated: August 5, 2004         APCOM, INC., a Maryland corporation
                              BROADCAST SPORTS INC., a Delaware corporation
                              ELECTRODYNAMICS, INC., an Arizona corporation
                              HENSCHEL INC., a Delaware corporation
                              HYGIENETICS ENVIRONMENTAL SERVICES, INC., a
                                Delaware corporation
                              INTERSTATE ELECTRONICS CORPORATION, a California
                                corporation
                              KDI PRECISION PRODUCTS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS AEROMET, INC., an Oregon
                                corporation
                              L-3 COMMUNICATIONS VERTEX AEROSPACE LLC, a
                                Delaware limited liability company
                              L-3 COMMUNICATIONS AIS GP CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS AVYSIS CORPORATION, a Texas
                                corporation
                              L-3 COMMUNICATIONS AYDIN CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS CSI, INC., a California
                                corporation
                              L-3 COMMUNICATIONS ESSCO, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS FLIGHT INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS FLIGHT CAPITAL LLC, a Delaware
                                limited liability company
                              L-3 COMMUNICATIONS GOVERNMENT SERVICES, INC., a
                                Virginia corporation
                              L-3 COMMUNICATIONS ILEX SYSTEMS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., a
                                Delaware limited partnership
                              L-3 COMMUNICATIONS INVESTMENTS INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS KLEIN ASSOCIATES, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS MAS (US) CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS SECURITY AND DETECTION SYSTEMS,
                                INC., a Delaware corporation
                              L-3 COMMUNICATIONS SECURITY SYSTEMS CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., a
                                California corporation



                              L-3 COMMUNICATIONS VECTOR INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS WESTWOOD CORPORATION, a Nevada
                                corporation
                              MCTI ACQUISITION CORPORATION, a Maryland
                                corporation
                              MICRODYNE COMMUNICATIONS TECHNOLOGIES
                                INCORPORATED, a Maryland corporation
                              MICRODYNE CORPORATION, a Maryland corporation
                              MICRODYNE OUTSOURCING INCORPORATED, a Maryland
                                corporation
                              MPRI, INC., a Delaware corporation
                              PAC ORD INC., a Delaware corporation
                              POWER PARAGON, INC., a Delaware corporation
                              SHIP ANALYTICS, INC., a Connecticut corporation
                              SHIP ANALYTICS INTERNATIONAL, INC., a Delaware
                                corporation
                              SHIP ANALYTICS USA, INC., a Connecticut
                                corporation
                              SPD ELECTRICAL SYSTEMS, INC., a Delaware
                                corporation
                              SPD SWITCHGEAR INC., a Delaware corporation
                              SYCOLEMAN CORPORATION, a Florida corporation
                              TROLL TECHNOLOGY CORPORATION, a California
                                corporation
                              WESCAM AIR OPS INC., a Delaware corporation
                              WESCAM AIR OPS LLC, a Delaware limited liability
                                company
                              WESCAM HOLDINGS (US) INC., a Delaware corporation
                              WESCAM INCORPORATED, a Florida corporation
                              WESCAM LLC, a Delaware limited liability company
                              WESCAM SONOMA INC., a California corporation
                              WOLF COACH, INC., a Massachusetts corporation As
                                Guaranteeing Subsidiaries

                                   By: /s/ Christopher C. Cambria
                                       --------------------------
                                       Name:  Christopher C. Cambria
                                       Title: Vice President, Secretary




Dated: August 5, 2004                     THE BANK OF NEW YORK,
                                          as Trustee


                                          By: /s/ Robert A. Massimillo
                                              ------------------------
                                              Name:  Robert A. Massimillo
                                              Title: Vice President

EX-10.96

                                                                   EXHIBIT 10.96

                     SUPPLEMENTAL INDENTURE TO BE DELIVERED
                          BY GUARANTEEING SUBSIDIARIES

     Supplemental Indenture (this "Supplemental Indenture"), dated as of August
5, 2004, among L-3 Communications Corporation (or its permitted successor), a
Delaware corporation (the "Company"), each a direct or indirect subsidiary of
the Company signatory hereto (each, a "Guaranteeing Subsidiary", and
collectively, the "Guaranteeing Subsidiaries"), and The Bank of New York, as
trustee under the indenture referred to below (the "Trustee").

                               W I T N E S S E T H
                               - - - - - - - - - -

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of December 22, 2003 providing
for the issuance of an unlimited amount of 6 1/8% Senior Subordinated Notes due
2014 (the "Notes");

         WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall
unconditionally guarantee all of the Company's Obligations (as defined in the
Indenture) under the Notes and the Indenture on the terms and conditions set
forth herein (the "Subsidiary Guarantee"); and

         WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

         2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees
as follows:

            (a)   Such Guaranteeing Subsidiary, jointly and severally with all
                  other current and future guarantors of the Notes
                  (collectively, the "Guarantors" and each, a "Guarantor"),
                  unconditionally guarantees to each Holder of a Note
                  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 Notes or the Obligations
                  of the Company under the Indenture or the Notes, that:

                  (i)   the principal of, premium, interest and Additional
                        Interest, if any, on the Notes will be promptly paid in
                        full when due, whether at maturity, by acceleration,
                        redemption or otherwise, and interest on the overdue
                        principal of,

                                       1


                        premium, interest and Additional Amounts, if any, on the
                        Notes, 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

                  (ii)  in case of any extension of time for payment or renewal
                        of any Notes 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.

            (b)   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 such Guaranteeing
                  Subsidiary under this Supplemental Indenture and its
                  Subsidiary Guarantee shall be reduced to the maximum amount
                  permissible under such fraudulent conveyance or similar law.

         3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

            (a)   To evidence its Subsidiary Guarantee set forth in this
                  Supplemental Indenture, such Guaranteeing Subsidiary hereby
                  agrees that a notation of such Subsidiary Guarantee
                  substantially in the form of Exhibit F to the Indenture shall
                  be endorsed by an officer of such Guaranteeing Subsidiary on
                  each Note authenticated and delivered by the Trustee after the
                  date hereof.

            (b)   Notwithstanding the foregoing, such Guaranteeing Subsidiary
                  hereby agrees that its Subsidiary Guarantee set forth herein
                  shall remain in full force and effect notwithstanding any
                  failure to endorse on each Note a notation of such Subsidiary
                  Guarantee.

            (c)   If an Officer whose signature is on this Supplemental
                  Indenture or on the Subsidiary Guarantee no longer holds that
                  office at the time the Trustee authenticates the Note on which
                  a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
                  shall be valid nevertheless.

            (d)   The delivery of any Note by the Trustee, after the
                  authentication thereof under the Indenture, shall constitute
                  due delivery of the Subsidiary Guarantee set forth in this
                  Supplemental Indenture on behalf of each Guaranteeing
                  Subsidiary.

            (e)   Each Guaranteeing Subsidiary hereby agrees that its
                  Obligations hereunder shall be unconditional, regardless of
                  the validity, regularity or enforceability of the Notes or the
                  Indenture, the

                                       2


                  absence of any action to enforce the same, any waiver or
                  consent by any Holder of the Notes with respect to any
                  provisions hereof or thereof, 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.

            (f)   Each Guaranteeing Subsidiary hereby waives 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
                  its Subsidiary Guarantee made pursuant to this Supplemental
                  Indenture will not be discharged except by complete
                  performance of the Obligations contained in the Notes and the
                  Indenture.

            (g)   If any Holder or the Trustee is required by any court or
                  otherwise to return to the Company or any Guaranteeing
                  Subsidiary, or any custodian, Trustee, liquidator or other
                  similar official acting in relation to either the Company or
                  such Guaranteeing Subsidiary, any amount paid by either to the
                  Trustee or such Holder, the Subsidiary Guarantee made pursuant
                  to this Supplemental Indenture, to the extent theretofore
                  discharged, shall be reinstated in full force and effect.

            (h)   Each Guaranteeing Subsidiary agrees that it 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. Each
                  Guaranteeing Subsidiary further agrees that, as between such
                  Guaranteeing Subsidiary, on the one hand, and the Holders and
                  the Trustee, on the other hand:

                  (i)   the maturity of the Obligations guaranteed hereby may be
                        accelerated as provided in Article 6 of the Indenture
                        for the purposes of the Subsidiary Guarantee made
                        pursuant to this Supplemental Indenture, notwithstanding
                        any stay, injunction or other prohibition preventing
                        such acceleration in respect of the Obligations
                        guaranteed hereby; and

                  (ii)  in the event of any declaration of acceleration of such
                        Obligations as provided in Article 6 of the Indenture,
                        such Obligations (whether or not due and payable) shall
                        forthwith become due and payable by such Guaranteeing
                        Subsidiary for the purpose of the Subsidiary Guarantee
                        made pursuant to this Supplemental Indenture.

            (i)   Each Guaranteeing Subsidiary shall have the right to seek
                  contribution from any other non-paying Guaranteeing Subsidiary

                                       3


                  so long as the exercise of such right does not impair the
                  rights of the Holders or the Trustee under the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture.

         4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

            (a)   Except as set forth in Articles 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into the Company
                  or any other Guarantor or shall prevent any transfer, sale or
                  conveyance of the property of any Guaranteeing Subsidiary as
                  an entirety or substantially as an entirety, to the Company or
                  any other Guarantor.

            (b)   Except as set forth in Article 4 and 5 of the Indenture,
                  nothing contained in the Indenture, this Supplemental
                  Indenture or in the Notes shall prevent any consolidation or
                  merger of any Guaranteeing Subsidiary with or into a
                  corporation or corporations other than the Company or any
                  other Guarantor (in each case, whether or not affiliated with
                  the Guaranteeing Subsidiary), or successive consolidations or
                  mergers in which a Guaranteeing Subsidiary or its successor or
                  successors shall be a party or parties, or shall prevent any
                  sale or conveyance of the property of any Guaranteeing
                  Subsidiary 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 Guaranteeing
                  Subsidiary) authorized to acquire and operate the same;
                  provided, however, that each Guaranteeing Subsidiary hereby
                  covenants and agrees 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 the Indenture and this
                  Supplemental Indenture to be performed by such Guaranteeing
                  Subsidiaries, shall be expressly assumed (in the event that
                  such Guaranteeing Subsidiary is 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 such
                  Guaranteeing Subsidiary shall have been merged, or by the
                  corporation which shall have acquired such property and (ii)
                  immediately after giving effect to such consolidation, merger,
                  sale or conveyance no Default or Event of Default exists.

            (c)   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

                                       4


                  satisfactory in form to the Trustee, of the Subsidiary
                  Guarantee made pursuant to this Supplemental Indenture and the
                  due and punctual performance of all of the covenants and
                  conditions of the Indenture and this Supplemental Indenture to
                  be performed by such Guaranteeing Subsidiary, such successor
                  corporation shall succeed to and be substituted for such
                  Guaranteeing Subsidiary with the same effect as if it had been
                  named herein as the Guaranteeing Subsidiary. Such successor
                  corporation thereupon may cause to be signed any or all of the
                  Subsidiary Guarantees to be endorsed upon the Notes 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 Supplemental Indenture as though all
                  of such Subsidiary Guarantees had been issued at the date of
                  the execution hereof.

         5. RELEASES.

            (a)   Concurrently with any sale of assets (including, if
                  applicable, all of the Capital Stock of a Guaranteeing
                  Subsidiary), all Liens, if any, in favor of the Trustee in the
                  assets sold thereby shall be released; provided that in the
                  event of an Asset Sale, the Net Proceeds from such sale or
                  other disposition are treated in accordance with the
                  provisions of Section 4.10 of the Indenture. If the assets
                  sold in such sale or other disposition include all or
                  substantially all of the assets of a Guaranteeing Subsidiary
                  or all of the Capital Stock of a Guaranteeing Subsidiary, then
                  the Guaranteeing Subsidiary (in the event of a sale or other
                  disposition of all of the Capital Stock of such Guaranteeing
                  Subsidiary) or the Person acquiring the property (in the event
                  of a sale or other disposition of all or substantially all of
                  the assets of such Guaranteeing Subsidiary) shall be released
                  from and relieved of its Obligations under this Supplemental
                  Indenture and its Subsidiary Guarantee made pursuant hereto;
                  provided that in the event of an Asset Sale, the Net Proceeds
                  from such sale or other disposition are treated in accordance
                  with the provisions of Section 4.10 of the Indenture. 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 Guaranteeing Subsidiary, as the
                  case may be, in accordance with the provisions of the
                  Indenture and this Supplemental Indenture, including without
                  limitation, Section 4.10 of the Indenture, the Trustee shall
                  execute any documents reasonably required in order to evidence
                  the release of the Guaranteeing Subsidiary from its
                  Obligations under this Supplemental Indenture

                                       5


                  and its Subsidiary Guarantee made pursuant hereto. If the
                  Guaranteeing Subsidiary is not released from its obligations
                  under its Subsidiary Guarantee, it shall remain liable for the
                  full amount of principal of and interest on the Notes and for
                  the other obligations of such Guaranteeing Subsidiary under
                  the Indenture as provided in this Supplemental Indenture.

            (b)   Upon the designation of a Guaranteeing Subsidiary as an
                  Unrestricted Subsidiary in accordance with the terms of the
                  Indenture, such Guaranteeing Subsidiary shall be released and
                  relieved of its Obligations under its Subsidiary Guarantee and
                  this Supplemental 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
                  Guaranteeing Subsidiary as an Unrestricted Subsidiary was made
                  by the Company in accordance with the provisions of the
                  Indenture, including without limitation Section 4.07 of the
                  Indenture, the Trustee shall execute any documents reasonably
                  required in order to evidence the release of such Guaranteeing
                  Subsidiary from its Obligations under its Subsidiary
                  Guarantee. Any Guaranteeing Subsidiary not released from its
                  Obligations under its Subsidiary Guarantee shall remain liable
                  for the full amount of principal of and interest on the Notes
                  and for the other Obligations of any Guaranteeing Subsidiary
                  under the Indenture as provided herein.

            (c)   Each Guaranteeing Subsidiary shall be released and relieved of
                  its obligations under this Supplemental Indenture in
                  accordance with, and subject to, Section 4.18 of the
                  Indenture.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any Obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such Obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.

         7. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No
Guaranteeing Subsidiary 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 Guaranteeing Subsidiary and senior in
any respect in right of payment to any of the Subsidiary Guarantees.
Notwithstanding the foregoing sentence, the Subsidiary Guarantee of each
Guaranteeing Subsidiary shall be subordinated to the prior payment in full of
all Senior Debt of that Guaranteeing Subsidiary (in the same manner and to the
same extent that the Notes are subordinated to Senior Debt), which shall include
all guarantees of Senior Debt.

                                       6


         8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         9. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         10. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         11. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.



                                       7


         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.


Dated: August 5, 2004               L-3 COMMUNICATIONS CORPORATION


                                    By: /s/ Christopher C. Cambria
                                        ----------------------------------------
                                        Name:  Christopher C. Cambria
                                        Title: Senior Vice President, Secretary
                                               and General Counsel





Dated: August 5, 2004         APCOM, INC., a Maryland corporation
                              BROADCAST SPORTS INC., a Delaware corporation
                              ELECTRODYNAMICS, INC., an Arizona corporation
                              HENSCHEL INC., a Delaware corporation
                              HYGIENETICS ENVIRONMENTAL SERVICES, INC., a
                                Delaware corporation
                              INTERSTATE ELECTRONICS CORPORATION, a California
                                corporation
                              KDI PRECISION PRODUCTS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS AEROMET, INC., an Oregon
                                corporation
                              L-3 COMMUNICATIONS VERTEX AEROSPACE LLC, a
                                Delaware limited liability company
                              L-3 COMMUNICATIONS AIS GP CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS AVYSIS CORPORATION, a Texas
                                corporation
                              L-3 COMMUNICATIONS AYDIN CORPORATION, a Delaware
                                corporation
                              L-3 COMMUNICATIONS CSI, INC., a California
                                corporation
                              L-3 COMMUNICATIONS ESSCO, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS FLIGHT INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS FLIGHT CAPITAL LLC, a Delaware
                                limited liability company
                              L-3 COMMUNICATIONS GOVERNMENT SERVICES, INC., a
                                Virginia corporation
                              L-3 COMMUNICATIONS ILEX SYSTEMS, INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., a
                                Delaware limited partnership
                              L-3 COMMUNICATIONS INVESTMENTS INC., a Delaware
                                corporation
                              L-3 COMMUNICATIONS KLEIN ASSOCIATES, INC., a
                                Delaware corporation
                              L-3 COMMUNICATIONS MAS (US) CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS SECURITY AND DETECTION SYSTEMS
                                CORPORATION, INC., a Delaware corporation
                              L-3 COMMUNICATIONS SECURITY SYSTEMS CORPORATION, a
                                Delaware corporation
                              L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC., a
                                California corporation



                              L-3 COMMUNICATIONS VECTOR INTERNATIONAL AVIATION
                                LLC, a Delaware limited liability company
                              L-3 COMMUNICATIONS WESTWOOD CORPORATION, a Nevada
                                corporation
                              MCTI ACQUISITION CORPORATION, a Maryland
                                corporation
                              MICRODYNE COMMUNICATIONS TECHNOLOGIES
                                INCORPORATED, a Maryland corporation
                              MICRODYNE CORPORATION, a Maryland corporation
                              MICRODYNE OUTSOURCING INCORPORATED, a Maryland
                                corporation
                              MPRI, INC., a Delaware corporation
                              PAC ORD INC., a Delaware corporation
                              POWER PARAGON, INC., a Delaware corporation
                              SHIP ANALYTICS, INC., a Connecticut corporation
                              SHIP ANALYTICS INTERNATIONAL, INC., a Delaware
                                corporation
                              SHIP ANALYTICS USA, INC., a Connecticut
                                corporation
                              SPD ELECTRICAL SYSTEMS, INC., a Delaware
                                corporation
                              SPD SWITCHGEAR INC., a Delaware corporation
                              SYCOLEMAN CORPORATION, a Florida corporation
                              TROLL TECHNOLOGY CORPORATION, a California
                                corporation
                              WESCAM AIR OPS INC., a Delaware corporation
                              WESCAM AIR OPS LLC, a Delaware limited liability
                                company
                              WESCAM HOLDINGS (US) INC., a Delaware corporation
                              WESCAM INCORPORATED, a Florida corporation
                              WESCAM LLC, a Delaware limited liability company
                              WESCAM SONOMA INC., a California corporation
                              WOLF COACH, INC., a Massachusetts corporation As
                                Guaranteeing Subsidiaries

                                        By: /s/ Christopher C. Cambria
                                            --------------------------
                                            Name:  Christopher C. Cambria
                                            Title: Vice President, Secretary



Dated: August 5, 2004                     THE BANK OF NEW YORK,
                                          as Trustee


                                          By: /s/ Robert A. Massimillo
                                              ------------------------
                                              Name:  Robert A. Massimillo
                                              Title: Vice President

EX-10.97

                    FORM OF L-3 COMMUNICATIONS HOLDINGS, INC.
                          1999 LONG TERM INCENTIVE PLAN
                       NONQUALIFIED STOCK OPTION AGREEMENT




                  THIS AGREEMENT, effective as of the ___ day of _____ _____
(the "Grant Date"), between L-3 Communications Holdings, Inc., a Delaware
corporation (the "Company"), and _________________ (the "Optionee").

                  WHEREAS, the Company has adopted the 1999 Long Term Incentive
Plan of L-3 Communications Holdings, Inc. (the "Plan") in order to provide
additional incentive to selected officers and employees of the Company and its
subsidiaries; and

                  WHEREAS, the Committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided herein and
the Company and the Optionee hereby wish to memorialize the terms and conditions
applicable to the Option (as defined below);

                  NOW, THEREFORE, the parties hereto agree as follows:

1.       Grant of Option.
         ---------------

                  1.1 Effective as of the Grant Date, for good and valuable
consideration, the Company hereby irrevocably grants to the Optionee the right
and option (the "Option") to purchase all or any part of an aggregate of
___________ (the "Shares") of the Company's Common Stock, par value $0.01 per
share, subject to, and in accordance with, the terms and conditions set forth in
this Option Agreement.

                  1.2 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.

                  1.3 This Option Agreement shall be construed in accordance and
consistent with, and subject to, the terms of the Plan (the provisions of which
are incorporated hereby by reference); and, except as otherwise expressly set
forth herein, the capitalized terms used in this Option Agreement shall have the
same definitions as set forth in the Plan.

2.       Exercise Price.
         --------------

                  The price at which the Optionee shall be entitled to purchase
the Shares upon the exercise of the Option shall be $____ per Share subject to
adjustment as provided in Section 9, without commission or other charge.

3.       Duration of Option.
         ------------------

                  The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the Grant Date (the
"Exercise Term"); provided, however, that the Option may be earlier terminated
as provided in Section 6 hereof.





                             <<FirstName>> <<LastName>>

4.       Exercisability of Option.
         ------------------------

                  Unless otherwise provided in this Option Agreement or the
Plan, the Option shall entitle the Optionee to purchase, in whole at any time or
in part from time to time, one-third (1/3rd) of the total number of shares
covered by the Option on the first anniversary of the later of the Grant Date or
the Hire Date (as herein defined), an additional one-third (1/3rd) of the total
number of Shares covered by the Option on the second anniversary of the later of
the Grant Date or the Hire Date and the final one-third (1/3rd) of the total
number of Shares covered by the Option on the expiration of the later of the
third anniversary of the Grant Date or the Hire Date. Each such right of
purchase shall be cumulative and shall continue, unless sooner exercised or
terminated as herein provided, during the remaining period of the Exercise Term.
Any fractional number of shares resulting from the application of the foregoing
percentages shall be rounded to the next higher whole number of Shares (not to
exceed the total number of Shares granted as provided in Section 1.1). As used
herein, "Hire Date" means the date that Optionee commenced employment with the
Company or a subsidiary of the Company.

5.       Manner of Exercise and Payment.
         ------------------------------

                  5.1 Subject to the terms and conditions of this Option
Agreement and the Plan, the Option may be exercised by delivery of written
notice to the Secretary of the Company, at its principal executive office. Such
notice shall state that the Optionee or other authorized person is electing to
exercise the Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons exercising the
Option. Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part, provided that partial
exercise shall be for whole shares of Common Stock only. If requested by the
Committee, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the right of such person or persons to
exercise the Option.

                  5.2 The notice of exercise described in Section 5.1 shall be
accompanied by (x) either (i) payment of the full purchase price for the Shares
in respect of which the Option is being exercised, in cash, by check or a
combination thereof or (ii) subject to the consent of the Committee,
instructions from the Optionee to the Company directing the Company to deliver a
specified number of Shares directly to a designated broker or dealer pursuant to
a cashless exercise election which is made in accordance with such requirements
and procedures as are acceptable to the Committee in its sole discretion and (y)
full payment of all applicable Withholding Taxes (as defined in Section 11)
pursuant to Section 11 hereof.

                  5.3 Upon receipt of the notice of exercise and any payment or
other documentation as may be necessary pursuant to Section 5.2 relating to the
Shares in respect of which the Option is being exercised, the Company shall,
subject to the Plan and this Option Agreement, take such action as may be
necessary to effect the transfer to the Optionee of the number of Shares as to
which such exercise was effective.

                  5.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights and privileges of a stockholder of the Company in
respect of, Shares purchased upon exercise of the Option until (i) the Option
shall have been exercised pursuant to the terms of this Option Agreement and the
Optionee shall have paid the full purchase price for the number of Shares in
respect of which the Option was exercised and any applicable Withholding Taxes
and (ii) the Company shall have issued certificates representing such Shares to
the Optionee.

                                      -2-



                             <<FirstName>> <<LastName>>

6.       Termination of Employment.
         -------------------------

                  6.1 If, prior to the date of the initial vesting of the Option
pursuant to Section 4 hereof (the "Initial Vesting Date"), the Optionee's
employment with the Company shall be terminated for any reason, other than death
or permanent disability (as herein defined), the Optionee's right to exercise
the Option shall terminate as of the effective date of termination (the
"Termination Date") and all rights hereunder shall cease. For purposes hereof,
"permanent disability" means incapacity due to physical or mental illness as a
result of which the Optionee became eligible for benefits under the applicable
long-term disability plan or policy of the Company or the applicable subsidiary
of the Company which is in effect at the time Optionee becomes incapacitated
and, Optionee's employment with the Company or the applicable subsidiary of the
Company terminates with Optionee receiving benefits under the applicable
long-term disability plan or policy.

                  6.2 If the Optionee's employment with the Company shall be
terminated by reason of death or permanent disability, the Option shall become
immediately fully exercisable as to 100% of the Shares subject to the Option,
and the Optionee or the executor or administrator of the estate of the Optionee
or the person or persons to whom the Option shall have been validly transferred
by the executor or the administrator pursuant to will or the laws of descent or
distribution shall have the right, within one year from the date of the
Optionee's death or permanent disability, to exercise the Option, subject to any
other limitation contained herein on the exercise of the Option in effect at the
date of exercise.

                  6.3 If, on or after the Initial Vesting Date, the Optionee's
employment with the Company shall be terminated for any reason other than for
Cause or death or permanent disability, the Optionee shall have the right within
three months after the Termination Date to exercise the Option to the extent
that installments thereof shall have accrued at the Termination Date and shall
not have been exercised, subject to any other limitation contained herein on the
exercise of the Option in effect at the date of exercise. If the Optionee's
employment is terminated for Cause, the Option shall terminate as of the
Termination Date, whether or not exercisable. For purposes hereof, "Cause" means
the Optionee's (i) intentional failure to perform reasonably assigned duties,
(ii) dishonesty or willful misconduct in the performance of duties, (iii)
engaging in a transaction in connection with the performance of duties to the
Company which transaction is adverse to the interests of the Company and is
engaged in for personal profit or (iv) willful violation of any law, rule or
regulation in connection with the performance of duties (other than traffic
violations or similar offenses).

                  6.4 If the Optionee shall die within the three-month period
referred to in 6.3 above, the Optionee or the executor or administrator of the
estate of the Optionee or the person or persons to whom the Option shall have
been validly transferred by the executor or administrator pursuant to will or
the laws of descent and distribution shall have the right, within one year from
the date of the Optionee's death, to exercise the Option to the extent that the
Option was exercisable at the date of death, subject to any other limitation
contained herein on the exercise of the Option in effect at the date of
exercise.

                  6.5 Whether employment has been terminated and the
determination of the Termination Date for the purposes of this Agreement shall
be determined by the Committee whose good faith determination shall be final,
binding and conclusive. For the purposes hereof, permanent disability shall mean
Optionee's absence from full time performance of his duties with the Company
that has qualified Optionee for long-term disability benefits under the
Company's disability plans.

                                      -3-


                             <<FirstName>> <<LastName>>

7.       Nontransferability.
         ------------------

                  The Option shall not be transferable other than by will or by
the laws of descent and distribution or by such other means explicitly permitted
pursuant to Rule 16b-3 under the Exchange Act. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Section 6.4, be exercised by the
Optionee's personal representative or by any person empowered to do so under the
Optionee's will or under the then applicable laws of descent and distribution.

8.       No Right to Continued Employment.
         --------------------------------

                  Nothing in this Option Agreement or the Plan shall be
interpreted or construed to confer upon the Optionee any right to continue
employment by the Company or any of its subsidiaries, nor shall this Agreement
or the Plan interfere in any way with the right of the Company or any of its
subsidiaries to terminate the Optionee's employment at any time for any reason
whatsoever, whether or not with Cause.

9.       Adjustments.
         -----------

                  In the event that the outstanding shares of the Common Stock
are, from time to time, changed into or exchanged for a different number or kind
of shares of the capital stock of the Company or other securities of the Company
by reason of a merger, consolidation, recapitalization, reclassification, stock
split, stock dividend, combination of capital stock, or other similar increase
or decrease in the number of shares outstanding without receiving compensation
therefor, the Committee shall make an appropriate and equitable adjustment in
the number and kind of Shares or other consideration as to which such Option, or
portions thereof then unexercised, shall be exercisable and the exercise price
therefor. Any such adjustment made by the Committee shall be final, binding and
conclusive upon the Optionee, the Company and all other interested persons. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to the Option.

10.      Effect of a Change in Control.
         -----------------------------

                  10.1 Notwithstanding anything contained in the Plan or this
Agreement to the contrary, in the event of a Change in Control, (a) the Option
becomes immediately fully exercisable as to 100% of the Shares subject to the
Option, and (b) upon termination of an Optionee's employment with the Company,
following a Change in Control, the Option shall remain exercisable until one
year after termination, but in no event beyond the Exercise Term. In the case of
a Change in Control which is intended to be treated as a "pooling of interests"
under generally accepted accounting principals (a "Pooling Transaction"), the
Board of Directors may take such actions which it determines after consultation
with its advisors that are reasonably necessary in order to assure that the
Pooling Transaction will qualify as such. The Company reserves the right to
change or modify in any way the definition of Change of Control set forth in
this Option Agreement and any such change or modification shall be binding on
the Optionee.

                  10.2 For the purposes of this Option Agreement, "Change in
Control shall mean the first to occur of the following:

                  a.  The acquisition by any person or group (including a group
                      within the meaning of Section 13(d)(3) or 14(d)(2) of the
                      Exchange Act), other than the Company or any of its
                      subsidiaries, of beneficial ownership (within the meaning
                      of Rule 13d-3 promulgated under the Exchange Act) of 51%
                      or more of the combined voting power of the Company's then
                      outstanding voting securities, other than (i) pursuant to
                      a


                                      -4-




                             <<FirstName>> <<LastName>>

                      transfer by Lehman Brothers Capital Partners III, L.P.
                      to any of its affiliates or (ii) by any employee benefit
                      plan maintained by the Company;

                  b.  The sale of all or substantially all the assets of the
                      Company or its subsidiaries; or

                  c.  The election, including the filling of vacancies, during
                      any period of 24 months or less, of 50% or more, of the
                      members of the Board of Directors, without the approval of
                      Continuing Directors, as constituted at the beginning of
                      such period. "Continuing Directors" shall mean any
                      director of the Company who either (i) is a member of the
                      Board of Directors on November 14, 2003, or (ii) is
                      nominated for election to the Board of Directors by a
                      majority of the Board which is comprised of directors who
                      were, at the time of such nomination, Continuing
                      Directors.

11.      Withholding of Taxes.
         --------------------

                  The Company shall have the right to deduct from any
distribution of cash to the Optionee an amount equal to the federal, state and
local income taxes and other amounts as may be required by law to be withheld
(the "Withholding Taxes") with respect to the Option. The Optionee shall pay the
Withholding Taxes to the Company in cash prior to the issuance of the Shares. In
satisfaction of the Withholding Taxes, the Optionee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares issuable to him or her upon
exercise of the Option. For withholding tax purposes, the Shares should be
valued on the date the withholding obligation is incurred, provided that to the
extent applicable, such election is made in accordance with Rule 16b-3(e) of the
Act.

12.      Optionee bound by the Plan.
         --------------------------

                  The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.

13.      Modification of Agreement.
         -------------------------

                  This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but, subject to
paragraphs 6.5 and 10.1, only by a written instrument executed by the parties
hereto.

14.      Severability.
         ------------

                  Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.

15.      Governing Law.
         -------------

                  The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the conflicts of laws principles thereof.

16.      Successors in Interest.
         ----------------------

                  This Agreement shall inure to the benefit of and be binding
upon any such successor to the Company. This Agreement shall inure to the
benefit of the Optionee or the Optionee's legal representatives. All obligations
imposed upon the Optionee and all rights granted to the Company under


                                      -5-




                             <<FirstName>> <<LastName>>


this Agreement shall be final, binding and conclusive upon the Optionee's heirs,
executors, administrators and successors.

17.      Administration.
         --------------

                  The Committee shall have the power to interpret the Plan and
this Option Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action determination or
interpretation made in good faith with respect to the Plan or the Options. In
its absolute discretion, the Board of Directors may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Option Agreement.

18.      Resolution of Disputes.
         ----------------------

                  Any dispute or disagreement which may arise under, or as a
result of, or in any way related to, the interpretation, construction or
application of this Agreement shall be determined by the Committee. Any
determination made hereunder shall be final, binding and conclusive on the
Optionee and Company for all purposes.

                                            By:
                                                     ---------------------------
                                                     Name:
                                                     Title:


         Attests: ___________________________
         Name:
         Title:


                         ----------------------------------
                         Employee Signature

                         ----------------------------------
                         Employee Social Security Number


                         Current Employee Address:

                         ----------------------------------

                         ----------------------------------


                                      -6-

EX-12.1

Exhibit 12.1

L-3 COMMUNICATIONS HOLDINGS, INC. AND
L-3 COMMUNICATIONS CORPORATION

RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in thousands)

				Nine Months Ended September 30, 2004
Earnings:
Income before income taxes				$	413,495
Add:
Interest expense					101,325
Amortization of debt expense					5,454
Interest component of rent expense					19,509
Earnings				$	539,783
Fixed Charges:
Interest expense					101,325
Amortization of debt expense					5,454
Interest component of rent expense					19,509
Fixed Charges				$	126,288
Ratio of earnings to fixed charges					4.3x

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Frank C. Lanza, certify that:

1.	I have reviewed this report on Form 10-Q of L-3 Communications Holdings, Inc. and L-3 Communications Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4.	The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)	Disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and

5.	The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent function):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.

Date: November 9, 2004

/s/ Frank C. Lanza
Frank C. Lanza
Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert V. LaPenta, certify that:

1.	I have reviewed this report on Form 10-Q of L-3 Communications Holdings, Inc. and L-3 Communications Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4.	The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)	Disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and

5.	The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent function):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.

Date: November 9, 2004

/s/ Robert V. LaPenta
Robert V. LaPenta
President and Chief Financial Officer

EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of L-3 Communications Holdings, Inc. ("L-3 Holdings") and L-3 Communications Corporation ("L-3 Corporation" together with L-3 Holdings referred to as "L-3") on Form 10-Q for the period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of Frank C. Lanza, Chairman and Chief Executive Officer of L-3 Holdings and L-3 Corporation, and Robert V. LaPenta, President and Chief Financial Officer of L-3 Holdings and L-3 Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L-3.

/s/ Frank C. Lanza				/s/ Robert V. LaPenta
Frank C. Lanza				Robert V. LaPenta
Chairman and Chief Executive Officer				President and Chief Financial Officer
November 9, 2004				November 9, 2004