-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhszGQPCQpsIwAy5Iqf7FkWSYRmWHKJAIjl1T1WI1/y1+tt/kXEiMQkQ5nm9iFdb PLuvW3/+fAX7xU0afJLnvw== 0000027116-01-500008.txt : 20010628 0000027116-01-500008.hdr.sgml : 20010628 ACCESSION NUMBER: 0000027116-01-500008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010626 ITEM INFORMATION: FILED AS OF DATE: 20010627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATRON SYSTEMS INC/DE CENTRAL INDEX KEY: 0000027116 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 952582922 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-07445 FILM NUMBER: 1668266 BUSINESS ADDRESS: STREET 1: 3030 ENTERPRISE CT CITY: VISTA STATE: CA ZIP: 92083 BUSINESS PHONE: 7607345454 MAIL ADDRESS: STREET 1: 3030 ENTERPRISE CT. CITY: VISTA STATE: CA ZIP: 93083 8-K 1 file.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) June 26, 2001 DATRON SYSTEMS INCORPORATED - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-7445 95-2582922 ___________________________________________________________________________ (State or other (Commission File No.) (I.R.S. Employer jurisdiction of Identification No.) incorporation) 3030 Enterprise Court Vista, California 92083 - ----------------------------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (760) 734-5454 Item 5. Other Events. Merger Agreement with The Titan Corporation - ------------------------------------------- On June 25, 2001, Datron Systems Incorporated (the "Registrant") announced that it had entered into an agreement and plan of merger and reorganization (the "Merger Agreement") with The Titan Corporation ("Titan") and GEM Acquisition Corp. ("Merger Sub"). Attached hereto as Exhibit 99.10 is the text of the press release issued by the Registrant on June 25, 2001 announcing the transactions contemplated by the Merger Agreement. On June 26, 2001, Victor A. Hebert, legal counsel to Datron Systems Incorporated, responded to the June 25, 2001 letter from Frank C. Lanza, chairman and chief executive officer of L-3 Communications, to George M. Ball of Philpott Ball & Werner. A copy of Mr. Hebert's letter and other correspondence relevant to this matter are attached hereto as Exhibits 99.11, 99.12, 99.13, 99.14 and 99.15. Item 7. Exhibits. 99.10 Press release issued by Registrant on June 25, 2001 99.11 Letter from Victor A. Hebert to Frank Lanza dated June 26, 2001. 99.12 Letter from Frank C. Lanza to George M. Ball dated June 25, 2001. 99.13 Letter from George M. Ball to Frank C. Lanza dated June 13, 2001. 99.14 Letter from Frank C. Lanza to David A. Derby dated June 11, 2001. 99.15 Letter from Duncan Soukup to Datron Systems Board of Directors dated May 31, 2001, including an attached letter from Frank C. Lanza to C. Duncan Soukup dated May 30, 2001. [REST OF PAGE INTENTIONALLY LEFT BLANK] SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. DATRON SYSTEMS INCORPORATED By: WILLIAM L. STEPHAN Name: WILLIAM L. STEPHAN Title: Vice President and Chief Financial Officer Date: June 26, 2001 EX-99.10 2 press.txt EXHIBIT 99.10 FOR: DATRON SYSTEMS INCORPORATED CONTACT: William L. Stephan Chief Financial Officer (760) 734-5454 www.dtsi.com Tripp Sullivan CORPORATE COMMUNICATIONS, INC. (615) 254-3376 tripp.sullivan@cci-ir.com DATRON SYSTEMS AGREES TO BE ACQUIRED BY THE TITAN CORPORATION VISTA, CA - June 25, 2001 - Datron Systems Incorporated (Nasdaq: DTSI) today announced it has entered into a definitive agreement to be acquired by The Titan Corporation (NYSE: TTN), a leading-edge technology company that creates, builds and launches technology-based businesses, for approximately $51 million, or $16.00 per fully-diluted share, in Titan common stock. Datron common stock closed at $14.00 on Friday, June 22, 2001. Consummation of the transaction, which will be accounted for as a purchase, is subject to customary closing conditions, will include a tender for exchange of at least a majority of Datron's outstanding shares, and is expected to close by the end of Datron's second quarter, September 30, 2001. Commenting on the announcement, David A. Derby, Datron Systems' chairman, president and chief executive officer, stated, "We are firmly committed to maximizing the tremendous growth potential of Datron's mobile broadband communications and public safety wireless network markets, the continued growth of our radio communications products and the resurgence of our satellite antenna systems business. We believe Titan's e-tenna subsidiary, which is developing unique radio frequency technologies, its radio communications business, familiarity with long-term government contracting as well as its size and distribution capabilities are a strategic fit for Datron that will enable the combined companies to better pursue the growth opportunities in these markets. "With its patented antenna technology, Datron has established a strong leadership position in the emerging market of providing broadband satellite data to airliners worldwide. We were first to fly on a commercial airliner nearly five years ago and have maintained our technological and market lead through the protracted maturation of this market. The added strength provided by Titan sharply improves the probability that Datron's substantial investments in this arena will lead to additional growth opportunities in the airborne broadband market." Under terms of the definitive agreement, Titan will first commence an exchange offer for all of the outstanding shares of Datron common stock. The exchange offer will be followed by a merger in which Titan will acquire, at the same exchange ratio, the remaining shares of Datron not previously acquired in the exchange offer. All outstanding options to acquire Datron common stock will be assumed by Titan and converted into the right to purchase shares of Titan common stock. Also under terms of the definitive agreement, which has been approved by the Board of Directors of both companies, Datron stockholders and option holders are expected to receive a total equity value of approximately $51 million if Titan's ten-day average closing share price is equal to or greater than $19.00 and less than or equal to $26.00 per share at the price determination date, which is five (5) trading days prior to the expiration of the initial offering period. If Titan's average closing share price is equal to or greater than $17.50 and less than $19.00, the equity value will decrease ratably from approximately $51 million to approximately $47 million. At a Titan average closing share price of less than $17.50, Datron has the right to terminate the definitive agreement subject to a Titan option to assure a minimum equity value of approximately $46 million. If Datron does not elect to terminate if the average closing share price is less than $17.50, the equity value would be less than $46 million. If Titan's average closing share price is greater than $26.00 and equal to or less than $27.50, the equity value will increase ratably from approximately $51 million to approximately $54 million. At a Titan average closing share price of more than $27.50, Titan has the right to terminate the definitive agreement subject to a Datron option to agree to receive a maximum equity value of approximately $56 million. Philpott Ball & Werner is acting as financial advisor to Datron on the transaction. The foregoing summary is a general description of certain pricing and related terms contained in the definitive agreement for the transaction, and is qualified in its entirety by reference to the definitive agreement, a copy of which will be filed with the Securities and Exchange Commission. Titan will file a registration statement on Form S-4 and other documents regarding the proposed offer and merger described in this press release with the Securities and Exchange Commission. Datron will also be required to file documentation with respect to the offer and, if a vote of Datron's stockholders is required to approve the merger, a proxy statement. Investors are urged to read the prospectus, offer documents and the proxy statement when it becomes available because it will contain important information about Titan and Datron and the proposed transaction. Investors may obtain a free copy of the prospectus and the offer documents (when available) and other documents filed by Titan and Datron with the SEC at the SEC's web site at www.sec.gov. Free copies of these documents may also be obtained from Datron (when available) by directing a request to the Investor Relations section of Datron's web site at www.dtsi.com. The Titan Corporation Headquartered in San Diego, The Titan Corporation creates, builds and launches technology-based businesses, offering innovative technical solutions. Three of Titan's four core businesses develop and deploy communications and information technology solutions and services. In addition, Titan's SureBeam (Nasdaq: SURE) subsidiary markets the leading technology for the electronic pasteurization of food products and Titan is continually identifying promising technologies suitable for commercialization. The company has 7,800 employees and annualized sales of approximately $1.1 billion. Datron Systems Incorporated Datron Systems provides products and services addressing the needs of emerging satellite and radio communication markets. From facilities in Simi Valley and Vista, California, the Company supplies satellite tracking antenna systems, earth stations, and voice and data communication radios to worldwide markets. Datron was the first company to bring live satellite TV to passengers on a commercial airline and is now uniquely positioned as a provider of broadband satellite tracking antennas for mobile customers in the land, sea and air markets. Datron is playing a vital leadership role in the broadband revolution that will see a seamless convergence of voice, video and data services. This release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. A variety of factors could cause the Company's actual results to differ from the anticipated results expressed in such forward- looking statements. These include, among others, uncertainties stemming from the dependence of the Company on foreign sales and on large orders from a relatively small number of customers, risks relating to the decline in the Company's traditional defense business and the Company's efforts to develop and market consumer products, lack of timely development or customer acceptance of new products, changes in or unavailability of products and services offered by satellite service providers and their related suppliers, worldwide economic downturns and currency devaluations, restrictions that may be imposed by the U.S. government on the export of Company products, and the impact of competition. For more information, please review the Company's periodic reports under the Securities Exchange Act of 1934, including without limitation the Investment Considerations set forth in the Company's Annual Report on Form 10-K. # # # # # EX-99.11 3 hewm.txt EXHIBIT 99.11 [Heller Ehrman White & McAuliffe LLP Letterhead] June 26, 2001 Victor A. Hebert vhebert@hewm.com (415) 772-6136 Main (415) 772-6000 Fax (415) 772-6268 11410-0029 Mr. Frank Lanza Chairman and Chief Executive Officer L-3 Communications Corporation 600 Third Avenue New York, New York 10016 Dear Mr. Lanza: We are attorneys for Datron Systems Incorporated ("Datron") which has requested that we respond to your letter dated June 25, 2001 addressed to George M. Ball (the "June 25 Letter") with copies to David A. Derby and C. Duncan Soukup. The June 25 Letter repeatedly mischaracterizes your correspondence and telephone conversations with Mr. Ball as "offers" by L-3 Communications Corporation ("L-3") to acquire Datron. Instead, they were mere expressions of interest in a potential transaction. Initially, L-3 communicated its interest to a minority stockholder of Datron, not to Datron directly, and on terms apparently suggested to L-3 by the minority stockholder without any input from or involvement by Datron. Even so, Datron instructed Philpott Ball & Werner to contact L-3 and request that its interest be communicated to Datron directly. When L-3 communicated its interest to Datron, Philpott Ball & Werner, on Datron's behalf, objected to various terms in writing. Your oral response to Mr. Ball indicated some flexibility by L-3 on the objectionable terms, but L-3 continued to insist upon a 60 day exclusivity period. During this period The Titan Corporation ("Titan") made a firm offer to acquire Datron. Datron and its board of directors was highly confident that definitive agreements could be negotiated with Titan rapidly; and the Titan transaction was documented expeditiously. Datron has recent experience with L-3's prior expressions of interest in acquiring part or all of Datron. Based upon these prior discussions and dealings with L-3 and with you during the past year and problems perceived with L-3's expressions of interest, Datron and its board had little confidence in the likelihood that a potential transaction with L-3 could be accomplished on appropriate terms. It also was not possible to proceed with L-3's request for exclusivity without simultaneously jeopardizing a firm and favorable transaction with Titan. [Heller Ehrman Logo] Mr. Frank Lanza June 26, 2001 Page 2 The Datron board of directors objects strongly to and disagrees vehemently with your statement in the June 25 Letter that the board acted "without regard to its fiduciary duty". The Datron board at all times acted responsibly and in what it believed in the circumstances to be in the best interests of all of the stockholders of Datron. Very truly yours, VICTOR A. HEBERT Victor A. Hebert cc: David A. Derby George M. Ball C. Duncan Soukup EX-99.12 4 jun25.txt EXHIBIT 99.12 [L3 Letterhead] [L3 LOGO] communications ---------------- L-3 Communications Corporation 600 Third Avenue New York, NY 10016 212-697-1111 Fax: 212-949-9879 Frank C. Lanza Chairman and Chief Executive Officer June 25, 2001 George M. Ball Philpott Ball & Werner 212 South Tryon Street Suite 1050 Charlotte, North Carolina 28281 Dear Mr. Ball: I am writing to express my shock and dismay upon learning this morning that Datron Systems has entered into a definitive agreement to be sold to the Titan Corporation for $51.2 million in Titan common stock. As you know, on May 30 we made an offer to acquire substantially all of Datron's assets at an all-cash price of $52 million, subject to a $3 million break-up fee and a 60-day exclusivity period to perform confirmatory due diligence. In response to Datron's concerns regarding our proposal, we promptly informed you of our revised offer for an all-cash acquisition of Datron's common stock that would not be subject to a break-up fee, based upon your representation that Datron was willing to pursue a sale on this basis and that you would contact us on or about June 15 to discuss arrangements for our exclusive period of confirmatory due diligence. Until this morning's announcement of Datron's agreement with Titan, we heard nothing. We are outraged that Datron's board agreed to a sale to Titan in the face of our higher, all-cash offer and without regard to its fiduciary duty to maximize the value to be received by Datron's stockholders. In light of these circumstances, we question whether you shared our revised offer with Datron's board at all. We do not understand how the Datron board could accept a stock-based offer that could result in shareholders receiving as little as $46 million in Titan common stock, based only upon a slightly greater than 10% decline in Titan's common stock price from the current market price, when compared to our fully-funded, firm, all-cash offer. We are currently reviewing this matter and will take any and all legal actions we deem appropriate under the circumstances. Sincerely, F C LANZA Frank C. Lanza cc: David A. Derby, Datron Systems, President, CEO and Chairman C. Duncan Soukup, Lionheart Group, Principal L:\Letters-LOI,101,MOU,MOA.Offers\Datron 6.25.01.doc EX-99.13 5 ball.txt EXHIBIT 99.13 [Letterhead of Philpott Ball & Werner] PHILPOTT BALL & WERNER INVESTMENT BANKERS Charlotte Boston 212 South Tryon Street, Suite 1050 50 Congress Street,6th Floor Charlotte, North Carolina 28281 Boston Massachusetts 02109 Telephone: (704) 358-8094 Telephone: (617) 720-8429 Facsimile: (704) 358-0021 Facsimile: (617) 720-8437 June 13, 2001 Mr. Frank C. Lanza Chairman and Chief Executive Officer L-3 Communications Corporation 600 Third Avenue New York, New York 10016 Dear Mr. Lanza: Our client, Datron Systems Incorporated ("Datron"), has requested that we respond to your letter dated June 11, 2001 (the "Letter"), addressed to David A. Derby, the Chairman and Chief Executive Officer of Datron. Datron appreciates the expression of interest in Datron contained in the Letter. We note that the transaction described in the Letter is the acquisition of assets of Datron subject to certain liabilities. This would result in substantial tax liability to Datron, which would not benefit Datron stockholders. Preliminarily, we estimate this tax liability to be approximately $6.0 million. Accordingly, the value of the transaction from the point of view of a Datron stockholder is reduced by that amount. Your comments to us last week, to the effect that Datron would not be liquidated, suggest that the Datron stockholders would not benefit directly from the transaction proposed in any event. The comments also suggest an agenda of the Lionheart Group not disclosed to Datron or its stockholders. Datron and we believe that the above expressed concerns would be alleviated by a conventional cash merger proposal which would avoid tax to Datron and which would benefit the Datron stockholders directly. We would advise Datron not to enter into a 60-day no-shop arrangement. We would also advise that any break-up fee only be provided in a definitive agreement. We have advised Datron that the suggested size of the proposed break- up fee is larger than normal for a transaction of the size described in the Letter. Datron also requested that you be advised that the Lionheart Group, Acquisitor Plc and Duncan Soukup are not representatives of Datron and are not authorized to speak or act on Datron's behalf. Datron and its board of directors would be pleased to consider a proposal from L-3 Communications Corporation which addresses the concerns expressed in this letter. Sincerely, GEORGE M. BALL George M. Ball Chairman cc: David A. Derby EX-99.14 6 jun11.txt EXHIBIT 99.14 [L3 Letterhead] [L3 LOGO] communications ------------------------ L-3 Communications Corporation 600 Third Avenue New York, NY 10015 212-697-1111 Fax: 212-949-9879 Frank C. Lanza Chairman and Chief Executive Officer June 11, 2001 Mr. David A. Derby Datron Systems, Inc. 3030 Enterprise Court Vista, California 92083 Dear Mr. Derby: As you are aware, the Lionheart Group contacted L-3 Communications Corporation ("L-3") last month to inquire about L- 3's interest in acquiring Datron Systems, Inc. (the "Company"). We understand that you and the other members of the Company's Board of Directors (the "Board") have been given a copy of the letter dated May 30, 2001 from L-3 to the Lionheart Group (the "May 30 Letter") expressing L-3's interest in acquiring substantially all of the assets of the Company, and assuming the liabilities of the Company, for a purchase price of U.S. $52 million (the "Acquisition") in a transaction supported by the Board. For purposes of the May 30 Letter, we assumed that, at the closing, the Company would have $11 million of cash on hand, debt of $3 million and continue to own the Simi Valley facility, all of which would be included in the assets we purchase and liabilities we assume. We now submit this letter to you and the other members of the Board to communicate directly to the Board our continuing interest in the Acquisition and to request the Board's consideration and approval of the Acquisition. If the Board approves of the Acquisition and the Company agrees to execute a 60-day no shop agreement containing a U.S. $3 million break-up fee provision, we would be prepared to move quickly into an exclusive due diligence period. This letter is subject to, among other things, L-3's satisfactory completion of due diligence and further in-depth evaluation of the operations and prospects of the Company's business. Timing And Process - ------------------ The Acquisition would be consummated pursuant to a purchase agreement containing customary terms and conditions for an asset purchase transaction (the "Agreement"). L-3 is prepared to move quickly to complete its due diligence and, if satisfactory, negotiate the final terms of the Agreement. Our proposal to enter into exclusive negotiations will remain open through the close of business on June 29, 2001. Sources of Funds - ----------------- L-3 has funds of its, own, or has binding commitments from responsible banks or other institutions under its existing revolving credit agreements, which will be sufficient and available to pay the purchase price. Necessary Approvals and Consents - -------------------------------- We foresee the transaction as being subject to customary U.S. regulatory approvals and do not anticipate any issues in gaining such approvals. In particular, we do not foresee any issues with regard to U.S. Mr. David A. Derby June 11, 2001 Page 2 of 2 antitrust/competition laws. Final approval of the specific terms and conditions of the Acquisition will be required by L-3's Board of Directors. Employees and Management - ------------------------- L-3 is focused on growing the Company and intends to retain the Company's current employees. Further, L-3 will agree to maintain comparable levels of employee benefits for a period of at least 12 months after closing of the transaction. We are prepared to meet with senior management as soon as possible to discuss their desires and intentions. Confidentiality - --------------- This letter is hereby submitted on a confidential basis with the full understanding and expectation that you and the rest of the Board will not share any part of this letter with any other party without our prior written approval. Should there be a breach of this confidentiality, L-3 reserves the right to withdraw this expression of interest immediately. This letter should not be construed as binding upon any party. Only such agreements as are contained in the executed Agreement shall be binding upon the Company and L-3. Summary - ---------- We believe that our expression of interest represents an attractive opportunity for the sale of the Company's assets. We are prepared to commence immediate negotiations and look forward to a rapid reply to this letter. If you have any questions regarding this letter or any other aspect of our expression of interest, please call me directly at (212) 697-1111 or Christopher Cambria at (212) 805-5634. Sincerely F C LANZA Frank C. Lanza cc: C. Duncan Soukup EX-99.15 7 acq.txt EXHIBIT 99.15 Acquisitor p1c190 The Strand London WC2R IN May 31, 2001 Datron Systems Incorporated 3030 Enterprise Court Vista, California 92083-8347 Attention: The Board of Directors of Datron Systems Inc. As per attached list Re. Acquisition Proposal from L3 Communications Gentlemen, As we have not had a response to our letter to the Board of Directors of Datron Systems Incorporated ("Datron" or the "Company") dated May 18, 2001, be advised that we hereby withdraw our offer to negotiate with the current Board to reduce our slate to two Directors. Acquisitor intends to run its slate of four Directors at Datron's 2001 Annual Meeting. As we have stated in our Schedule 13-D filings and during our discussions with MR.Derby and Mr. Preston, our goal has and continues to be the enhancement of shareholder value for all Datron shareholders. In this connection, I have had discussions with a number of parties interested in potentially purchasing Datron or its assets. Enclosed is a letter that I received today from Mr. Frank Lanza, Chairman of L3 Communications, offering to acquire, in an all cash transaction not subject to financing, substantially all of E:\ACQUISITOR\DTSI\Corespondence re. L3 acquisition proposal \Draft Letter to Datron re L3 acquisition proposal v.l4.sw.md.ds.doc the assets and assume certain liabilities of the Company for $52 million. I believe it is self-explanatory. I would request the Board's immediate response to Mr. Lanza's letter and an explanation as to why the discussions that Mr. Derby had with Mr. Lanza and L3 last year did not result in a negotiated transaction. It should be obvious that the proposed transaction is in the best interest of all of Datron's shareholders. I would also like to advise you that we totally support Mr. Lanza's proposal, which we believe fairly represents Datron's current value. We also believe that the proposed asset purchase by L3 optimizes shareholder value for Datron's shareholders while fully protecting the Company's employees. We are prepared to assist the Board in fulfilling its fiduciary duties in pursuing this transaction. I look forward to hearing from you forthwith. I can be reached at (212) 614-0323 or by e-mail at dsoukup@acquisitor.com Sincerely, DUNCAN SOUKUP Duncan Soukup Managing Director, Acquisitor p1c. Encl. E:\ACQUISITOR\DTSI\Correspondence re L3 acquisition proposal\Draft Letter to Datron re L3 acquisition proposal v.l4sw.md.ds.doc [Letterhead of L3 Communications] [L3 LOGO] communications ------------------- L-3 Communications Corporation 600 Third Avenue New York, NY 10016 212-697-1111 Fax: 212-949-9B79 Frank C. Lanza Chairman and Chief Executive Officer May 30,2001 C. Duncan Soukup Principal Lionheart Group, Inc. 118 East 25th Street 8th Floor New York, New York 10010 Dear Mr. Soukup: You have approached L-3 Communications Corporation ("L-3") to inquire about L-3's interest in acquiring Datron Systems, Inc. (the "Company). We appreciate your inquiry and wish to express our interest in acquiring substantially all of the assets of the Company, and assuming the liabilities of the Company, for a purchase price of U.S. $52 million (the "Acquisition") in a transaction supported by the Company's Board of Directors. We submit this letter for your consideration and the approval of the Company's Board of Directors. We have assumed, for this purpose, that, at the closing, the Company will have $11 million of cash on hand, debt of $3 million and continue to own the Simi Valley facility, all of which will be included in the assets we purchase and liabilities we assume. We have also assumed that your company would agree to support the L-3 acquisition. After executing a 60-day no shop agreement containing a U.S. $3 million break-up fee provision, we would be prepared to move quickly into an exclusive due diligence period. This letter is subject to, among other things, L-3's satisfactory completion of due diligence and further in-depth evaluation of the operations and prospects of the Company's business. Timing, and Process - ------------------- The Acquisition would be consummated pursuant to a purchase agreement containing customary terms and conditions for an asset purchase transaction (the "Agreement"). L-3 is prepared to move quickly to complete its due diligence and, if satisfactory, negotiate the final terms of the Agreement. Our proposal to enter into exclusive negotiations will remain open through the close of business on June 8, 2001. Sources of Funds - ---------------- L-3 has funds of its own, or has binding commitments from responsible banks or other institutions under its existing revolving credit agreements, which will be sufficient and available to pay the purchase price. Necessary Approvals and Consents - -------------------------------- We foresee the transaction as being subject to customary U.S. regulatory approvals and do not anticipate any issues in gaining such approvals. In particular, we do not foresee any issues with regard to U.S. C. Duncan Soukup May 30,2001 Page 2 of 2 antitrust/competition laws. Final approval of the specific terms and conditions of the Acquisition will be required by L-3's Board of Directors. Employees and Management - ------------------------ L-3 is focused on growing the Company and intends to retain the Company's current employees. Further, L-3 will agree to maintain comparable levels of employee benefits for a period of at least 12 months after closing of the transaction. We are prepared to meet with senior management as soon as possible to discuss their desires and intentions. Confidentiality - --------------- This letter is hereby submitted on a confidential basis with the full understanding and expectation that you and your representatives will not share any part of this letter with any other party other than the Company's Board of Directors without our prior written approval. Should there be a breach of this confidentiality, L-3 reserves the right to withdraw this expression of interest immediately. This letter should not be construed as binding upon any party. Only such agreements as are contained in the executed Agreement shall be binding upon the Company and L-3. We believe that our expression of interest represents an attractive opportunity for the sale of the Company's assets. We are prepared to commence immediate negotiations and look forward to a rapid reply to this letter. If you have any questions regarding this letter or any other aspect of our expression of interest, please call me directly at (212) 697- 1111 or Christopher Cambria at (212) 905-5634. Sincerely, F C LANZA Frank C. Lanza -----END PRIVACY-ENHANCED MESSAGE-----