-----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, Q/LjOamoKy8lUna6YFrLgS9G9HKXjmzWafmbPqX4vfUM8pEcYUjbqMcMCtR02CBf Sh7KOynb6XWgitnhoottsQ== 0000950123-02-009990.txt : 20021028 0000950123-02-009990.hdr.sgml : 20021028 20021028123801 ACCESSION NUMBER: 0000950123-02-009990 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20021028 GROUP MEMBERS: PRINCE MERGER CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PARAVANT INC CENTRAL INDEX KEY: 0000944405 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 592209179 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-50101 FILM NUMBER: 02799523 BUSINESS ADDRESS: STREET 1: 89 HEADQUARTERS PLZ N STREET 2: SUITE 1421 CITY: MORRISTOWN STATE: NJ ZIP: 07960 BUSINESS PHONE: 3217273672 MAIL ADDRESS: STREET 1: 89 HEADQUARTERS PLZ N CITY: MORRISTOWN STATE: NJ ZIP: 07960 FORMER COMPANY: FORMER CONFORMED NAME: PARAVANT COMPUTER SYSTEMS INC /FL/ DATE OF NAME CHANGE: 19950424 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DRS TECHNOLOGIES INC CENTRAL INDEX KEY: 0000028630 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 132632319 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 3RD FLOOR STREET 2: 5 SYLVAN WAY CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 9738981500 MAIL ADDRESS: STREET 1: 16 THORNTON RD CITY: OAKLAND STATE: NJ ZIP: 07436 FORMER COMPANY: FORMER CONFORMED NAME: DIAGNOSTIC RETRIEVAL SYSTEMS INC DATE OF NAME CHANGE: 19920703 SC TO-T 1 y64755tsctovt.txt TENDER OFFER STATEMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- PARAVANT INC. (NAME OF SUBJECT COMPANY (ISSUER)) PRINCE MERGER CORPORATION DRS TECHNOLOGIES, INC. (NAME OF FILING PERSON (OFFERORS)) COMMON STOCK, PAR VALUE $0.015 PER SHARE (TITLES OF CLASSES OF SECURITIES) 69937610 9 (CUSIP NUMBERS OF CLASSES OF SECURITIES) NINA L. DUNN DRS TECHNOLOGIES, INC. 5 SYLVAN WAY PARSIPPANY, NJ 07054 (973) 898-1500 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE FILING PERSON) COPY TO: JEFFREY W. TINDELL, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK, NEW YORK 10036 (212) 735-3000 CALCULATION OF FILING FEE
- ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ TRANSACTION VALUATION* AMOUNT OF FILING FEE** - ------------------------------------------------------------------------------------------------------ $92,589,017 $8,518.19 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
* Estimated for purposes of calculating the filing fee only. This calculation assumes the purchase of 17,378,290 shares of common stock of Paravant Inc. (based on the number of shares outstanding as of October 23, 2002, which was 17,354,040, plus the number of shares of common stock to be issued under the Paravant Employee Stock Purchase Plan, which is 24,250) at the tender offer price of $4.75 per share of common stock. The transaction value also includes the offer price of $4.75 less $2.20 which is the weighted-average exercise price of outstanding options as of October 23, 2002, multiplied by 3,808,682 the estimated number of options outstanding on such date. The transaction value further includes the offer price of $4.75 less $2.75 which is the exercise price of warrants as of October 23, 2002, multiplied by 165,000, the number of warrants outstanding on such date. ** The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities and Exchange Act of 1934, as amended, and Fee Advisory #6 for Fiscal Year 2003 issued by the Securities and Exchange Commission on October 18, 2002, equals 0.0092% of the transaction valuation. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Filing Party: Form or Registration No.: Date Filed:
[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. This Tender Offer Statement on Schedule TO (this "Schedule TO") relates to the offer by Prince Merger Corporation, a Florida corporation ("Purchaser") and wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation ("Parent"), to purchase all of the outstanding shares of common stock, par value $0.015, of Paravant Inc., a Florida corporation (the "Company"), at a purchase price of $4.75 per share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 28, 2002 (the "Offer to Purchase"), and in the related Letter of Transmittal, copies of which are filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively. This Schedule TO is being filed on behalf of Purchaser and Parent. The information set forth in the Offer to Purchase, including Schedule I thereto, is hereby incorporated by reference in answer to items 1 through 11 of this Schedule TO, and is supplemented by the information specifically provided herein. ITEM 1. SUMMARY TERM SHEET. The information set forth in the "Summary Term Sheet" of the Offer to Purchase is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the subject company is Paravant Inc., a Florida corporation. The Company's principal executive offices are located at 89 Headquarters Plaza North, Suite 1421, Morristown, NJ 07960. The Company's telephone number is (973) 631-6190. (b) This Schedule TO relates to the Company's common stock, par value $0.015 per share, of which there were 17,354,040 shares issued and outstanding as of October 23, 2002. The information set forth in the "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 of the Offer to Purchase entitled "Price Range of the Shares; Dividends on the Shares" is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) This Schedule TO is filed by Purchaser and Parent. The information set forth in Section 9 of the Offer to Purchase entitled "Certain Information Concerning Parent and Purchaser" is incorporated herein by reference. (b) The information set forth in Section 9 of the Offer to Purchase entitled "Certain Information Concerning Parent and Purchaser" is incorporated herein by reference. (c) The information set forth in Section 9 of the Offer to Purchase entitled "Certain Information Concerning Parent and Purchaser" is incorporated herein by reference. Except as set forth below, during the last five years, none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) resulting in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or finding of any violation of such laws. ITEM 4. TERMS OF THE TRANSACTION. (a)(1)(i)-(viii), (x)-(xii) The information set forth in the "Introduction" and in Sections 1, 2, 3, 4, 5 and 7 of the Offer to Purchase entitled "Terms of the Offer," "Acceptance for Payment and Payment for Shares," "Procedure for Tendering Shares," "Withdrawal Rights," "Certain U.S. Federal Income Tax Consequences" and "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulation," respectively, is incorporated herein by reference. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. The information set forth in Sections 9 and 11 of the Offer to Purchase entitled "Certain Information Concerning Parent and Purchaser" and "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements," respectively, is incorporated herein by reference. Except as set forth therein, there have been no material contacts, negotiations or transactions during the past two years which would be required to be disclosed under this Item 5 between any of Purchaser or Parent or any of their respective subsidiaries or, to the best knowledge of Purchaser or Parent, any of those persons listed on Schedule I to the Offer to Purchase, on the one hand, and the Company or its affiliates, on the other, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or sale or transfer of a material amount of assets. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (a),(c)(1)-(7) The information set forth in the "Introduction" and Sections 7, 11 and 12 of the Offer to Purchase entitled "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations," "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements" and "Plans for the Company," respectively, is incorporated herein by reference. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The information set forth in Section 10 of the Offer to Purchase entitled "Source and Amount of Funds" is incorporated herein by reference. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. The information set forth in the "Introduction" and Sections 9 and 11 of the Offer to Purchase entitled "Certain Information Concerning Parent and Purchaser", "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements," respectively, is incorporated herein by reference. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. The information set forth in the "Introduction" and Section 15 of the Offer to Purchase entitled "Fees and Expenses" is incorporated herein by reference. ITEM 10. FINANCIAL STATEMENTS. Not applicable. ITEM 11. ADDITIONAL INFORMATION. The information set forth in Sections 11, 14 and 15 of the Offer to Purchase entitled "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements," "Certain Legal Matters" and "Fees and Expenses," respectively, is incorporated herein by reference. ITEM 12. EXHIBITS. (a)(1)(A) Offer to Purchase, dated October 28, 2002. (a)(1)(B) Form of Letter of Transmittal. (a)(1)(C) Form of Notice of Guaranteed Delivery. (a)(1)(D) Form of Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(1)(E) Form of Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
2 (a)(1)(G) Press Release issued by Parent on October 24, 2002 (incorporated herein by reference to the pre-commencement Schedule TO filed by Parent and Purchaser on October 24, 2002). (a)(1)(H) Joint Press Release issued by Parent and the Company on October 28, 2002. (a)(1)(I) Summary Advertisement published in The Wall Street Journal on October 28, 2002. (a)(1)(J) Letter to Shareholders, dated October 28, 2002, from the President and Chief Executive Officer of the Company. (b)(1) Credit Agreement, dated as of September 28, 2001, by and among Parent as borrower, the lenders referred to therein, Wachovia Bank, N.A. (formerly known as First Union National) as administrative agent, TD Securities (USA) Inc. as syndication agent and Mellon Investor Services LLC, N.A. as documentation agent, as amended by the First Amendment on March 26, 2002, the Second Amendment on May 23, 2002 and the Third Amendment on July 15, 2002. (b)(2) Commitment Letter, dated October 27, 2002 among Parent, Wachovia Securities, Inc. and Wachovia Bank, N.A. (d)(1) Agreement and Plan of Merger, dated as of October 23, 2002, among Parent, Purchaser and the Company. (d)(2) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and Krishan K. Joshi, Vicky M. Joshi and UES Inc. (d)(3) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and William R. Craven. (d)(4) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and Richard P. McNeight. (d)(5) Tender and Voting Agreement, dated as of October 2002, by and among Parent, Purchaser and James E. Clifford. (d)(6) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and C. Hyland Schooley. (d)(7) Confidentiality Agreement, dated April 24, 2002, by and between Parent and the Company. (g) Not applicable. (h) Not applicable.
3 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. PRINCE MERGER CORPORATION By: /s/ MARK S. NEWMAN ------------------------------------ Name: Mark S. Newman Title: President DRS TECHNOLOGIES, INC. By: /s/ MARK S. NEWMAN ------------------------------------ Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer Date: October 28, 2002 4 INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT ------- -------- (a)(1)(A) Offer to Purchase, dated October 28, 2002. (a)(1)(B) Form of Letter of Transmittal. (a)(1)(C) Form of Notice of Guaranteed Delivery. (a)(1)(D) Form of Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(1)(E) Form of Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press Release issued by Parent on October 24, 2002 (incorporated herein by reference to the pre-commencement Schedule TO filed by Parent and Purchaser on October 24, 2002). (a)(1)(H) Joint Press Release issued by Parent and the Company on October 28, 2002. (a)(1)(I) Summary Advertisement published in The Wall Street Journal on October 28, 2002. (a)(1)(J) Letter to Shareholders, dated October 28, 2002, from the President and Chief Executive Officer of the Company. (b)(1) Credit Agreement, dated as of September 28, 2001, by and among Parent as borrower, the lenders referred to therein, Wachovia Bank, N.A. (formerly known as First Union National) as administrative agent, TD Securities (USA) Inc. as syndication agent and Mellon Investor Services LLC, N.A. as documentation agent, as amended by the First Amendment on March 26, 2002, the Second Amendment on May 23, 2002 and the Third Amendment on July 15, 2002. (b)(2) Commitment Letter, dated October 27, 2002 among Parent, Wachovia Securities, Inc. and Wachovia Bank, N.A. (d)(1) Agreement and Plan of Merger, dated as of October 23, 2002, among Parent, Purchaser and the Company. (d)(2) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and Krishan K. Joshi, Vicky M. Joshi and UES Inc. (d)(3) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and William R. Craven. (d)(4) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and Richard P. McNeight. (d)(5) Tender and Voting Agreement, dated as of October 2002, by and among Parent, Purchaser and James E. Clifford. (d)(6) Tender and Voting Agreement, dated as of October 23, 2002, by and among Parent, Purchaser and C. Hyland Schooley. (d)(7) Confidentiality Agreement, dated April 24, 2002, by and between Parent and the Company. (g) Not applicable. (h) Not applicable.
EX-99.A.1.A 3 y64755texv99waw1wa.txt OFFER TO PURCHASE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF PARAVANT INC. BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. AT $4.75 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 22, 2002, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 23, 2002 (THE "MERGER AGREEMENT"), BY AND AMONG DRS TECHNOLOGIES, INC. ("PARENT"), PRINCE MERGER CORPORATION (THE "PURCHASER") AND PARAVANT INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (I) HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AGREEMENT AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, (II) HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (III) RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 13 -- "CERTAIN CONDITIONS OF THE OFFER". ------------------------ IMPORTANT Any shareholder who desires to tender all or any portion of such shareholder's shares should either (i) complete and sign the Letter of Transmittal (or facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such shares to the Depositary or tender such shares pursuant to the procedures for book-entry transfer set forth in Section 3 -- "Procedure for Tendering Shares" or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person to tender their shares. Any shareholder who desires to tender shares and whose certificates representing such shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such shares by following the procedures for guaranteed delivery set forth in Section 3 -- "Procedure for Tendering Shares." Questions and requests for assistance may be directed to D.F. King & Co., Inc. (the "Information Agent") or Bear, Stearns & Co. Inc. (the "Dealer Manager") at their respective locations and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager, or to brokers, dealers, commercial banks or trust companies. A shareholder also may contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. ------------------------ The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. ------------------------ October 28, 2002 TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE OFFER................................................... 7 1. Terms of the Offer................................ 7 2. Acceptance for Payment and Payment for Shares..... 9 3. Procedure for Tendering Shares.................... 10 4. Withdrawal Rights................................. 12 5. Certain U.S. Federal Income Tax Consequences...... 13 6. Price Range of the Shares; Dividends on the Shares................................................ 14 7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations....................................... 14 8. Certain Information Concerning the Company........ 15 9. Certain Information Concerning Parent and Purchaser............................................. 18 10. Source and Amount of Funds........................ 19 11. Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements........................................ 20 12. Plans For the Company............................. 34 13. Certain Conditions of the Offer................... 35 14. Certain Legal Matters............................. 37 15. Fees and Expenses................................. 40 16. Miscellaneous..................................... 40 SCHEDULE I -- Directors and Executive Officers of Parent and Purchaser................................................. 41
i SUMMARY TERM SHEET Prince Merger Corporation is offering to purchase all of the outstanding common stock of Paravant Inc. for $4.75 per share in cash. The following are some of the questions you, as a shareholder of Paravant Inc. may have and answers to those questions. We urge you to carefully read the remainder of this Offer to Purchase because the information in this summary is not complete and additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal. WHO IS OFFERING TO BUY MY SHARES? Our name is Prince Merger Corporation. We are a Florida corporation formed for the purpose of making a tender offer for all of the common stock of Paravant Inc. We are a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation. See "Introduction" to this Offer to Purchase and Section 9 -- "Certain Information Concerning Parent and Purchaser." WHAT SHARES ARE BEING SOUGHT IN THE OFFER? We are seeking to purchase all of the outstanding common stock of Paravant Inc. See "Introduction" to this Offer to Purchase and Section 1 -- "Terms of the Offer." HOW MUCH ARE YOU OFFERING TO PAY? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $4.75 per share, net to you, in cash. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See "Introduction" to this Offer to Purchase. DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? DRS Technologies, Inc., our parent company, will provide us with sufficient funds to purchase all shares validly tendered and not withdrawn in the offer and to provide funding for the merger which is expected to follow the successful completion of the offer (as discussed below). All of these funds are expected to be obtained from DRS's generally available corporate funds and an existing credit facility of DRS. The existing credit facility does not permit the consummation of the Offer and the Merger, however, DRS has entered into a commitment letter with the administrative agent of the existing credit facility which provides for a waiver of the provisions in the existing credit facility that prohibit the Offer and the Merger or, alternatively DRS entering into a replacement credit facility that will permit the consummation of the Offer and the Merger. The offer is not conditioned upon any financing arrangement. See Section 10 -- "Source and Amount of Funds." IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think that our financial condition is relevant to your decision to tender in the offer because: - the form of payment consists solely of cash and the Offer is to purchase all outstanding Shares; - we, through our parent company DRS Technologies, Inc., are arranging for our funding from generally available corporate funds and an existing credit facility as discussed above; - the offer is not subject to any financing condition; and - if we consummate the offer, we will acquire all remaining shares for the same cash price in the merger as in the offer. See Section 10 -- "Source and Amount of Funds." 1 HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:00 midnight, New York City time, on Friday, November 22, 2002, to decide whether to tender your shares in the offer. Further, if you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which is described later in this Offer to Purchase. See Section 1 -- "Terms of the Offer" and Section 3 -- "Procedure for Tendering Shares." CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? Yes. The offer can be extended for varying lengths of time depending on the circumstances. We have agreed in the merger agreement that: - We may, at our discretion, extend the expiration date of the offer if any of the conditions to our obligation to accept for payment and pay for shares tendered into the offer have not been satisfied or waived by us. - We may, at our discretion, extend the expiration date of the offer for up to ten (10) business days if less than 80% of the outstanding shares are tendered; - We may, at our discretion, elect to provide a subsequent offering period of three (3) to twenty (20) business days, beginning after we have purchased shares during the offer, during which shareholders may tender, but not withdraw, their shares and receive the offer consideration. - We may extend the expiration date of the offer upon an increase in the offer price for the shares as provided under federal securities laws. See Section 1 -- "Terms of the Offer." HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform Mellon Investor Services LLC (which is the depositary for the offer) of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the business day after the day on which the offer was scheduled to expire. See Section 1 -- "Terms of the Offer." WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? - We are not obligated to purchase any shares which are validly tendered unless that number of shares represents at least a majority of the shares of Paravant Inc. outstanding on a fully diluted basis. - We are not obligated to purchase shares which are validly tendered if, among other things, Paravant Inc. shall have not satisfied the conditions set forth in the Merger Agreement (See Section 13 to this Offer to Purchase -- "Certain Conditions of the Offer"), including if the Board of Directors of Paravant Inc. shall have withdrawn its recommendation of the offer and merger. - We are not obligated to purchase shares unless and until the expiration or termination of applicable waiting periods or comparable provisions under any applicable pre-merger notification laws or regulations under United States antitrust law. HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing your shares, together with a completed letter of transmittal, to Mellon Investor Services LLC, the depositary for the offer, not later than the time the tender offer expires. If your shares are held in street name, the shares can be tendered by your nominee through Mellon Investor Services LLC. If you cannot get something that is required to the depositary by the expiration of the tender offer, you may get a little extra time to do so by having a broker, a bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution guarantee that the missing items will be received by the depositary within three Nasdaq Stock Market trading 2 days. However, the depositary must receive the missing items within that three trading day period or else your shares will not be validly tendered. See Section 3 -- "Procedure for Tendering Shares." UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? You can withdraw shares at any time until the offer has expired. If we have not agreed to accept your shares for payment by December 26, 2002, you can withdraw them at any time after such time until we accept them for payment. This right to withdraw will not apply to any subsequent offering period discussed in Section 1. See Section 1 -- "Terms of the Offer" and Section 4 -- "Withdrawal Rights." HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to the depositary while you still have the right to withdraw the shares. See Section 4 -- "Withdrawal Rights." WHAT DOES THE BOARD OF DIRECTORS OF PARAVANT INC. THINK OF THE OFFER? We are making the offer pursuant to the Agreement and Plan of Merger with Paravant Inc., which has been approved by the board of directors of Paravant Inc. The board of directors of Paravant Inc. has unanimously approved the Merger Agreement, our tender offer and the proposed merger of us with and into Paravant Inc. The board of directors of Paravant Inc. also has unanimously determined that the Merger Agreement, the tender offer and the proposed merger are fair to and in the best interests of shareholders and has recommended that shareholders tender their shares. See "Introduction" to this Offer to Purchase and Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements." HAVE ANY PARAVANT INC. SHAREHOLDERS AGREED TO TENDER THEIR SHARES? Yes. Certain shareholders owning approximately 22% of the Company's outstanding shares who are all directors or executive officers of the Company or its subsidiaries (or relatives of, or entities controlled by, such persons) have agreed to tender their shares in the Offer pursuant to certain Shareholder Tender and Voting Agreements which have been approved by the board of directors of Paravant Inc. See "Introduction" to this Offer to Purchase and Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements." IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL PARAVANT INC. CONTINUE AS A PUBLIC COMPANY? No. If a majority of the outstanding shares of Paravant Inc. on a fully diluted basis are tendered and accepted for payment, subject to the Merger Agreement we will be merged with and into Paravant Inc. If the merger takes place, Paravant Inc. no longer will be publicly owned. Even if the merger does not take place, if we purchase all the tendered shares, there may be so few remaining shareholders and publicly held shares that Paravant Inc. common stock will no longer be eligible to be traded through a Nasdaq market or on a securities exchange, there may not be a public trading market for Paravant Inc., and Paravant Inc. may cease making filings with the Securities and Exchange Commission or otherwise being required to comply with the SEC rules relating to publicly held companies. See Section 7 -- "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations." WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE PARAVANT INC. SHARES ARE NOT TENDERED IN THE OFFER? If we accept for payment and pay for at least a majority of the outstanding shares of Paravant Inc. on a fully diluted basis, subject to the Merger Agreement we will be merged with and into Paravant Inc. If that merger takes place, DRS Technologies, Inc. will own all of the shares of Paravant Inc. and all remaining shareholders of Paravant Inc. (other than us and DRS Technologies, Inc.) will receive $4.75 per share in cash. See "Introduction" to this Offer to Purchase. 3 IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the merger described above takes place, shareholders not tendering in the offer will receive the same amount of cash per share which they would have received had they tendered their shares in the offer. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares. If you decide not to tender your shares in the offer and we purchase the shares tendered by other shareholders, but the merger does not occur, the number of shareholders and of shares of Paravant Inc. which are still in the hands of the public may be so small that there no longer may be an active public trading market (or, possibly, any public trading market) for the Paravant Inc. common stock. Also, as described above, Paravant Inc. may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. You do not have the right to assert dissenters' rights as a result of the offer or merger described above. See "Introduction" to this Offer to Purchase and Section 7 -- "Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations." WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On October 23, 2002, the last trading day before we announced the tender offer and the possible subsequent merger, the last sale price of Paravant Inc. common stock reported on the Nasdaq National Market was $3.60 per share. On October 25, 2002, the last full day prior to commencement of the offer, the last reported sales price of the shares on the Nasdaq National Market was $4.69 per share of common stock. We advise you to obtain a recent quotation for shares of Paravant Inc. common stock in deciding whether to tender your shares. See Section 6 -- "Price Range of the Shares; Dividends on the Shares." WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES AND OF THE MERGER? The sale or exchange of shares pursuant to the offer and the merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign tax purposes as well. In general, a shareholder who sells shares for cash pursuant to the offer or receives cash in exchange for shares pursuant to the merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the shareholder's adjusted tax basis in the shares sold or exchanged. See Section 5 -- "Certain U.S. Federal Income Tax Consequences." WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You can call D.F. King & Co., Inc. at (800) 628-8532 (toll free). D.F. King & Co., Inc. is acting as the information agent for our tender offer. 4 To the Holders of Common Stock of Paravant Inc.: INTRODUCTION Prince Merger Corporation, a Florida corporation (the "Purchaser") and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation ("Parent"), hereby offers to purchase all issued and outstanding shares of common stock ("Common Stock"), par value $0.015 per share (the "Shares"), of Paravant Inc., a Florida corporation (the "Company"), at a price of $4.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. Purchaser will pay all fees and expenses incurred in connection with the Offer of Bear, Stearns & Co. Inc., which is acting as the Dealer Manager, D.F. King & Co., Inc., which is acting as the Information Agent (the "Information Agent"), and Mellon Investor Securities LLC which is acting as the Depositary (the "Depositary"). See Section 15 -- "Fees and Expenses." THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"). SEE SECTION 13 -- "CERTAIN CONDITIONS OF THE OFFER." The Offer is being made pursuant to an Agreement and Plan of Merger, dated October 23, 2002 (the "Merger Agreement"), by and among Parent, Purchaser and the Company pursuant to which, no later than the second business day after the satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), Purchaser will be merged with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent, and the separate corporate existence of Purchaser will thereupon cease. The merger of Purchaser with and into the Company as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger," and the Company as the Surviving Corporation of the Merger is sometimes herein referred to as the "Surviving Corporation." At the effective time of the Merger (the "Effective Time"), each Share (other than Shares held by Parent, Purchaser or any other wholly owned subsidiary of Parent) will be cancelled and retired and converted into the right to receive $4.75 per Share, net to the seller in cash (such price, being referred to herein as the "Offer Price"), payable to the holder thereof without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements." The Company has informed Purchaser that, as of October 23, 2002, there were (i) 17,354,040 Shares issued and outstanding; (ii) outstanding options (including shares to be issued pursuant to the Company's Employee Stock Purchase Plan) to purchase an aggregate of 3,832,932 Shares under the Company's stock plans; and (iii) outstanding warrants to purchase an aggregate of 165,000 Shares. The Merger Agreement provides, among other things, that the Company will not, without the prior written consent of Parent, issue any additional Shares (except on the exercise of outstanding options and other rights and securities). Based on the foregoing, and after giving effect to the exercise of all outstanding options and warrants, Purchaser believes that the Minimum Condition would be satisfied if 10,697,338 Shares are validly tendered and not withdrawn prior to the expiration of the Offer. If the Minimum Condition is satisfied and Purchaser accepts for payment the Shares tendered pursuant to the offer, Purchaser will be able to elect a majority of the members of the Company's Board of Directors and to effect the Merger without the affirmative vote of any other shareholder of the Company. See Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements" and Section 12 -- "Plans For the Company." As used in this Offer to Purchase, "fully diluted basis" takes into account the conversion or exercise of all outstanding options and other rights and securities exercisable or convertible into Shares. 5 As a condition and inducement to Parent and Purchaser entering into the Merger Agreement and incurring the liabilities therein, certain shareholders of the Company (each, a "Tendering Shareholder"), who hold voting and dispositive power with respect to 3,780,835 Shares (representing approximately 22% of the outstanding Shares), concurrently with the execution and delivery of the Merger Agreement entered into Shareholder Tender and Voting Agreements (the "Shareholder Tender and Voting Agreements"), dated October 23, 2002, with Parent and Purchaser. Pursuant to the Shareholder Tender and Voting Agreements, the Tendering Shareholders have agreed, among other things, to tender the Shares held by them in the Offer, and to grant Parent a proxy with respect to the voting of such Shares in favor of the Merger with respect to such Shares upon the terms and subject to the conditions set forth therein. The Board of Directors of the Company has approved the Shareholder Tender and Voting Agreements. See Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements". THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (I) HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AGREEMENT AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, (II) HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (III) RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Wachovia Securities, Inc. (previously First Union Securities, Inc.), the Company's financial advisor ("Wachovia"), has delivered to the Company's Board of Directors its written opinion (the "Fairness Opinion"), dated October 21, 2002, to the effect that, as of such date, the consideration to be received by the holders of Shares pursuant to the Offer and under the terms of the Merger Agreement, is fair from a financial point of view to such holders. Such opinion is set forth in full as an exhibit to the Company's Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), which is being mailed to shareholders of the Company with this Offer to Purchase. Shareholders are urged to read the Schedule 14D-9 and such opinion carefully in their entirety. Consummation of the Merger is conditioned upon, among other things, the approval and adoption by the requisite vote of shareholders of the Company of the Merger Agreement, if required by applicable law in order to consummate the Merger. If Purchaser obtains eighty percent (80%) or more of the outstanding Shares in the Offer, Purchaser will effect the Merger pursuant to the short-form merger provisions of the Florida Business Corporation Act ("FBCA") without obtaining the approval of any other shareholder of the Company. See Section 14 -- "Certain Legal Matters." If the Minimum Condition is satisfied, Purchaser would have sufficient voting power to approve the Merger without the affirmative vote of any other shareholder of the Company. The Company has agreed, if required, to cause a meeting of its shareholders to be held following consummation of the Offer for the purposes of considering and taking action upon the approval and adoption of the Merger Agreement. Parent and Purchaser have agreed to vote the Shares purchased in the Offer in favor of the approval and adoption of the Merger Agreement. Under the FBCA, holders of the Shares do not have the right to assert dissenters' rights as a result of the Offer or Merger. See Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements." THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 6 THE OFFER 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 -- "Withdrawal Rights." The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, November 22, 2002, unless and until Purchaser, in accordance with the terms of the Merger Agreement, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition, and the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") and the other conditions set forth in Section 13 -- "Certain Conditions of the Offer." If such conditions are not satisfied prior to the Expiration Date, Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Shares tendered and terminate the Offer, subject to the terms of the Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent permitted by applicable law and the provisions of the Merger Agreement, and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "SEC"), purchase all Shares validly tendered, (iii) subject to the terms of the Merger Agreement, extend the Offer or (iv) amend the Offer. Subject to the terms of the Merger Agreement, Purchaser may, (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer by giving oral or written notice of such amendment to the Depositary. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(d) under the Securities Exchange Act. Without limiting the obligation of Purchaser under such Rule or the manner in which Purchaser may choose to make any public announcement, Purchaser currently intends to make announcements by issuing a press release to the Dow Jones News Service. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The Merger Agreement provides that, except as described below, Purchaser will not, without the prior written consent of the Company (i) decrease the price per Share payable in the Offer, (ii) change the form of consideration payable in the Offer, (iii) reduce the maximum number of Shares sought to be purchased in the Offer, (iv) impose conditions to the Offer in addition to those described in Section 13, (v) waive or change the Minimum Condition or make other changes in the terms and conditions of the Offer that are in any manner adverse to the holders of the Shares, or (vi) except as provided below, extend the Offer beyond the date that is twenty (20) business days after the commencement of the Offer (the "Initial Expiration Date"). Notwithstanding the foregoing, Purchaser may, without the consent of the Company (a) extend the Offer beyond the scheduled Expiration Date, which initially shall be the Initial Expiration Date if, as of such expiration, any of the Offer Conditions (as defined in the Merger Agreement) shall not be satisfied or waived, (b) extend the Offer for any period required by any rule, regulation or interpretation of the SEC, the staff thereof or the Nasdaq National Market applicable to the Offer, (c) extend the Offer for up to ten (10) business days if, as of the scheduled Expiration Date, there shall not have been tendered at least eighty percent (80%) of the outstanding Shares on a fully diluted basis and (d) provide a "Subsequent Offering Period" in accordance with Rule 14d-11 under the Exchange Act. A Subsequent Offering Period would be an additional period of time from three (3) to twenty (20) business days in length, following the expiration of the Offer, during which shareholders may tender Shares for the Offer Price. Rule 14d-11 provides that Purchaser may include a Subsequent Offering Period so long as, among other things, (i) the Offer remained open for a minimum of twenty (20) business days and has 7 expired, (ii) Purchaser offers the same form and amount of consideration to shareholders in both the initial and subsequent offering period, (iii) Purchaser accepts and promptly pays for all Shares tendered during the Offer prior to the Expiration Date, (iv) Purchaser announces the results of the Offer, including the approximate number and percentage of Shares deposited in the Offer, no later than 9:00 a.m. New York City time on the next business day after the Expiration Date and immediately begins the Subsequent Offering Period, and (v) Purchaser immediately accepts and promptly pays for Shares as they are tendered during the Subsequent Offering Period. In a public release, the SEC has expressed the view that the inclusion of a Subsequent Offering Period would constitute a material change to the terms of the Offer requiring Purchaser to disseminate new information to shareholders in a manner reasonably calculated to inform them of such change sufficiently in advance of the Expiration Date (generally five (5) business days). The SEC, however, has recently stated that such advance notice may not be required under certain circumstances. In the event Purchaser elects to include a Subsequent Offering Period, it will notify shareholders of the Company consistent with the requirements of the SEC. Purchaser does not currently intend to include a Subsequent Offering Period in the Offer, although it reserves the right to do so in its sole discretion. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered during a Subsequent Offering Period, and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. During a Subsequent Offering Period, Purchaser will promptly purchase and pay for all Shares tendered at the same price paid in the Offer. In addition, Purchaser may increase the Offer Price and extend the Offer to the extent required by law in connection with such increase, in each case in its sole discretion and without Company's consent. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. If Purchaser extends the Offer, or if Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4 -- "Withdrawal Rights." However, the ability of Purchaser to delay the payment for Shares which Purchaser has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In the SEC's view, an offer should remain open for a minimum of five (5) business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten (10) business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. PURSUANT TO RULE 14D-7 UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS APPLY DURING THE SUBSEQUENT OFFERING PERIOD. FURTHERMORE, THE SAME CONSIDERATION, THE OFFER PRICE, WILL BE PAID TO SHAREHOLDERS TENDERING SHARES IN THE OFFER OR IN A SUBSEQUENT OFFERING PERIOD, IF ONE IS INCLUDED. 8 The Company has provided Purchaser with the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed by Purchaser to record holders of Shares and will be furnished by Purchaser to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will pay, promptly after the Expiration Date, for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4 -- "Withdrawal Rights". All determinations concerning the satisfaction of such terms and conditions will be within Purchaser's discretion, which determinations will be final and binding. See Sections 1 -- "Terms of the Offer" and 13 -- "Certain Conditions of the Offer." Subject to the Merger Agreement and compliance with Rule 14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer), Purchaser expressly reserves the right to delay acceptance for payment for Shares in order to comply with any applicable law, including, without limitation, the HSR Act. See Section 14 -- "Certain Legal Matters." In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined below), and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any holder of Common Stock pursuant to the Offer will be the highest per Share consideration paid to any other holder of such Shares pursuant to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to Purchaser and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering shareholders. If Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer (including such rights as are set forth in Sections 1 -- "Terms of the Offer" and 13 -- "Certain Conditions of the Offer") (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4 -- "Withdrawal Rights." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined below) pursuant to the procedures set forth in Section 3 -- "Procedures for Tendering Shares" such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. 9 Purchaser reserves the right to transfer or assign, in whole or in part, to Parent or to any affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES Valid Tender. For a shareholder to validly tender Shares pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined below), and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, except with respect to any Subsequent Offering Period, and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined below) received by the Depositary), in each case, prior to the Expiration Date or (ii) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two (2) business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below), and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date (except with respect to any Subsequent Offering Period, if one is provided), or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against the participant. For Shares to be validly tendered during any Subsequent Offering Period, the tendering shareholder must comply with the foregoing procedures except that the required documents and certificates must be received during the Subsequent Offering Period. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 10 Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section 3, includes any participant in the Book Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates for Shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such shareholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the National Association of Security Dealers Automated Quotation System, Inc. (the "Nasdaq") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery made available by Purchaser. Other Requirements. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Appointment. By executing the Letter of Transmittal as set forth above, the tendering shareholder will irrevocably appoint designees of Purchaser, and each of them, as such shareholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser and with respect to any and all other Shares or other securities or rights issued or 11 issuable in respect of such Shares. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts for payment Shares tendered by such shareholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such shareholder (and, if given, will not be deemed effective). The designees of Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, including, without limitation, in respect of any annual, special or adjourned meeting of the Company's shareholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other related securities or rights, including voting at any meeting of shareholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by Purchaser, in its sole discretion, which determination will be final and binding. Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of, or payment for, which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right, in its sole discretion, subject to the provisions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Subject to the terms of the Merger Agreement, Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. To prevent backup withholding with respect to payment of the purchase price of Shares purchased pursuant to the Offer, a tendering registered holder, or his assignee (in either case, the "Payee"), must provide the Depository with such shareholder's correct taxpayer identification number ("TIN") and certify that such shareholder is not subject to backup withholding by completing and signing the Substitute Form W-9 provided in the Letter of Transmittal. If backup withholding applies with respect to a shareholder, the Depository is required to withhold and deposit with the Internal Revenue Service 30%, or other applicable withholding percentage, of any payments made to such shareholder. Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. In order for a foreign shareholder to qualify as an exempt recipient, the shareholder must submit a Form W-8BEN, signed under penalties of perjury, attesting to the shareholder's exempt status. See Instruction 9 of the Letter of Transmittal 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares pursuant to the Offer are irrevocable. Except as provided in this Offer to Purchase with respect to a Subsequent Offering Period, Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time after December 26, 2002. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on 12 such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3 -- "Procedure for Tendering Shares", any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 -- "Procedure for Tendering Shares" any time prior to the Expiration Date or during any Subsequent Offering Period. No withdrawal rights will apply to Shares tendered in a Subsequent Offering Period under Rule 14d-11 of the Exchange Act, and no withdrawal rights apply during a Subsequent Offering Period under Rule 14d-11 with respect to Shares tendered in the Offer and accepted for payment. See Section 1 -- "Terms of the Offer." All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding. None of Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES The following is a general summary of certain United States federal income tax consequences of the Offer and the Merger relevant to a beneficial holder of Shares whose Shares are sold for cash pursuant to the Offer or converted into the right to receive cash in the Merger (a "Holder"). This discussion is for general informational purposes only and does not address all aspects of United States federal income taxation that may be relevant to particular Holders of Shares in light of their specific investment or tax circumstances. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion applies only to Holders who hold Shares as "capital assets" within the meaning of Section 1221 of the Code and may not apply to Holders who acquired their Shares pursuant to the exercise of employee stock options or otherwise as compensation. In addition, this discussion does not apply to certain types of Holders subject to special tax rules including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, broker dealers and persons who hold their Shares as a part of "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment. The tax consequences of the Offer and the Merger to Holders who hold their Shares through a partnership or other pass-through entity generally will depend upon such Holder's status for United States federal income tax purposes. This discussion does not address the United States federal income tax consequences to a Holder that, for United States federal income tax purposes, is: (i) an individual who is not a U.S. resident or citizen, (ii) a foreign corporation, (iii) a foreign partnership, or (iv) a foreign estate or trust, nor does it consider the effect of any state, local or foreign income tax or other tax laws. EACH HOLDER IS URGED TO CONSULT SUCH HOLDER'S TAX ADVISOR REGARDING THE SPECIFIC UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE OFFER AND THE MERGER IN LIGHT OF SUCH HOLDER'S SPECIFIC TAX SITUATION. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under state, local, or foreign tax laws. In general, a Holder who receives cash in exchange for Shares pursuant to the Offer or the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received by the Holders and the Holder's adjusted tax basis in the Shares sold pursuant to the Offer or surrendered for cash pursuant to the Merger. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold for cash pursuant to the Offer or surrendered for cash pursuant to the Merger. Such gain or loss will generally be capital gain or loss 13 and will generally be long-term capital gain or loss if such Shares have been held for more than one year at the time of the consummation of the Offer or the Merger, as the case may be. Certain limitations may apply to the use of capital losses. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares are traded through the Nasdaq National Market under the symbol "PVAT". The following table sets forth, for each of the calendar quarters indicated, the high and low reported sales price per Share on the Nasdaq National Market based on published financial sources.
HIGH LOW ----- ----- 2000 Fourth Quarter............................................ $2.94 $1.50 2001 First Quarter............................................. $2.06 $1.58 Second Quarter............................................ $1.95 $1.51 Third Quarter............................................. $2.37 $1.12 Fourth Quarter............................................ $3.15 $1.84 2002 First Quarter............................................. $3.55 $2.28 Second Quarter............................................ $4.36 $2.92 Third Quarter............................................. $3.75 $2.20 Fourth Quarter (through October 23)....................... $3.62 $3.06
On October 23, 2002, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the last reported sales price of the Shares on the Nasdaq National Market was $3.60 per Share. On October 25, 2002, the last full trading day prior to the commencement of the Offer, the last reported sales price of the Shares on the Nasdaq National Market was $4.69 per Share. Shareholders are urged to obtain a current market quotation for the Shares. Dividends on the Shares. The Company did not declare or pay any cash dividends during the past two years. In addition, under the terms of the Merger Agreement, the Company is not permitted to declare or pay dividends with respect to the Shares without the prior written consent of Parent. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS Market for the Shares. The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. The purchase of Shares pursuant to the Offer can also be expected to reduce the number of holders of Shares. Stock Listing. The Shares are traded through the Nasdaq National Market. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq National Market, which requires that an issuer either (i) have at least 750,000 publicly held shares, held by at least 400 round-lot shareholders, with a market value of at least $5,000,000, stockholders equity of $10,000,000 calculated pursuant to SEC Regulation S-X (which excludes from the calculation any preferred stock with a redemption feature), have two market makers for the shares, and have a minimum bid price of $1 or (ii) have at least 1,100,000 publicly held shares, held by at least 400 round-lot shareholders, with a market value of at least $15,000,000, have four market makers for the shares, and have a minimum bid price of $3 and have either (A) a market capitalization of at least $50,000,000 or (B) total assets and revenues each of at least $50,000,000. 14 If the Nasdaq National Market and the Nasdaq Smallcap Market were to cease to publish quotations for the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such Shares and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or lesser than the Offer Price. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the SEC if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act, assuming there are no other securities of the Company subject to registration, would substantially reduce the information required to be furnished by the Company to its shareholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. Purchaser may seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If the Nasdaq National Market listing and the Exchange Act registration of the Shares are not terminated prior to the Merger, then the Shares will be delisted from the Nasdaq National Market and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Regulations. The Shares currently are "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which status has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY The information concerning the Company contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the SEC and other public sources. Neither Parent nor Purchaser assumes responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or Purchaser. The Company is a Florida corporation with its principal executive offices at 89 Headquarters Plaza North, Suite 1421, Morristown, New Jersey 07960. The telephone number of the Company at such offices is (973) 631-6190. The Company serves the defense and national security industry with a range of electronic commercial off-the-shelf products engineered to meet applications within aircraft support, command and control, communications, radar and signal intelligence. The Company also offers software design, integration 15 services and customization services to modify its standard products to the specific needs of end users. The Company operates its business through its five wholly owned subsidiaries, Paravant Computer Systems, Inc., Engineering Development Laboratories, Incorporated, STL of Ohio, Inc., Tri-Plex Systems Corporation and Catalina Systems Research, Inc. Selected Financial Information. Set forth below is certain selected consolidated financial information with respect to the Company, excerpted or derived from the Company's Annual Reports on Form 10-K for the fiscal years ended September 30, 2001 and September 30, 2000, and the Company's Quarterly Report on Form 10-Q for the nine-months ended June 30, 2002. More comprehensive financial information is included in such reports and in other documents filed by the Company with the SEC. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents may be inspected and copies may be obtained from the SEC in the manner set forth below. PARAVANT INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION
NINE MONTHS ENDED JUNE 30, FISCAL YEAR ENDED SEPTEMBER 30, ----------------- --------------------------------- 2002 2001 2000 1999 ----------------- --------- --------- --------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) OPERATING DATA: Revenues..................................... $40,063 $51,839 $40,410 $42,279 Operating income............................. 4,350 3,374 3,387 10,237 Net earnings................................. 2,139 445 1,584 5,886 Basic net earnings per share................. .12 .03 .09 .42 BALANCE SHEET DATA (AT END OF PERIOD): Total assets................................. $59,740 $61,875 $67,520 $42,973 Total liabilities............................ 24,784 29,387 35,196 10,771 Shareholders' equity......................... 34,956 32,488 32,324 32,202
Based on the Company's preliminary results, the Company's revenues for the fiscal year ended September 30, 2002 were approximately $62.1 million, its income from operations was approximately $8.3 million, its net earnings was approximately $4.4 million and its basic and fully diluted earnings per Share were approximately $0.26 and $0.25, respectively. These preliminary results have been prepared by the Company's management and are subject to audit. Certain Company Projections. Prior to entering into the Merger Agreement, representatives of Parent conducted a due diligence review of the Company, and in connection with such review received certain projections of the Company's future operating performance. Parent analyzed the information in the projections, certain publicly available information and additional information obtained in Parent's due diligence review of the Company, along with Parent's own estimates of potential cost savings and benefits and its own estimates with respect to certain of the Company's programs. The projections provided to Parent by the Company in connection with a possible acquisition of the Company in May 2002 included, among other things, the following forecasts of the Company's revenues and earnings before interest and taxes (adjusted for cost savings expected to be realized from the elimination of corporate headquarters expenses) (in millions): $58.7 and $8.8 in fiscal 2002; $72.1 and $11.3 in fiscal 2003; $95.5 and $15.9 in fiscal 2004; and $122.7 and $21.4 in fiscal 2005. The financial projections in the Company's recently prepared fiscal 2003 strategic plans, provided to Parent by the Company in September 2002 in connection with the discussions concerning the Offer and the Merger, included, among other things, the following forecasts of the Company's revenues and unadjusted earnings before interest and taxes (in millions): $70.0 and $8.0 in fiscal 2003; $79.9 and $9.6 in fiscal 2004; and $94.4 and $12.0 in fiscal 2005. Both sets of financial projections are based on numerous 16 assumptions including assumptions concerning anticipated expansion of existing contracts, new product introductions, new contracts and other growth opportunities. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED PURCHASER AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. THE PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED TO PARENT), ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. Available Information. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at 233 Broadway, New York, New York 10279 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such information should be obtainable by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to the Company that have been filed via 17 the EDGAR System. Such material should also be available for inspection at the offices of the Nasdaq National Market, located at 20 Broad Street, New York, New York 10005. 9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER Parent and Purchaser. Parent is a Delaware corporation with its principal executive offices at 5 Sylvan Way, Parsippany, New Jersey 07054. The telephone number of Parent at such offices is (973) 898-1500. Parent is a leading supplier of defense electronics products and systems. Parent provides high-technology services to all branches of the U.S. military, major aerospace and defense prime contractors, government intelligence agencies, international military forces and industrial markets. Parent is a leading provider of thermal imaging devices, combat display workstations, electronic sensor systems, ruggedized computers, mission recorders and deployable flight incident recorders. Purchaser is a Florida corporation newly formed at the discretion of Parent for the purpose of effecting the Offer and the Merger. Parent owns, directly, all of the outstanding capital stock of Purchaser. It is not anticipated that, prior to the consummation of the Offer, Purchaser will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger and the financing thereof. The offices of Purchaser are located at 5 Sylvan Way, Parsippany, New Jersey 07054. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Purchaser and Parent are set forth in Schedule I hereto. Except as set forth in this Offer to Purchase or Schedule I to this Offer to Purchase, (a) none of Purchaser, Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I, or any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company; and (b) none of Purchaser, Parent, or, to the best knowledge of Purchaser or Parent, any of the persons or entities referred to above, nor any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transaction in Shares or any other equity securities of the Company during the past 60 days. Except as provided by the Merger Agreement or as set forth in this Offer to Purchase, none of Purchaser, Parent or, to the best knowledge of Purchaser and Parent, any of the persons listed on Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies). Except as set forth in this Offer to Purchase, none of Purchaser, Parent or any of their respective affiliates, or, to the best knowledge of Purchaser and Parent, any of the persons listed on Schedule I, has had, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, during the past two years there have been no contacts, negotiations or transactions between Purchaser or Parent, any of their respective affiliates or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I, and the Company or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. None of the persons listed on Schedule I has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Available Information. Pursuant to Rule 14d-3 under the Exchange Act, Parent and Purchaser filed with the SEC a Tender Offer Statement on Schedule TO (together with any amendments, supplements, 18 schedules, annexes and exhibits thereto, the "Schedule TO"), of which this Offer to Purchase forms a part. Additionally, Parent is subject to the information and reporting requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning Parent's business, principal physical properties, capital structure, material pending legal proceedings, operating results, financial condition, directors and officers (including their remuneration and stock options granted to them), the principal holders of Parent's securities, any material interests of such persons in transactions with Parent and certain other matters is required to be disclosed in proxy statements and annual reports distributed to Parent's shareholders and filed with the SEC. The Schedule TO and the exhibits thereto, as well as these other reports, proxy statements and other information, may be inspected and copied at the SEC's public reference facilities in the same manner as set forth above with respect to the Company in Section 8 -- "Certain Information Concerning the Company." 10. SOURCE AND AMOUNT OF FUNDS The Offer is not conditioned upon any financing arrangements. The total amount of funds required by Purchaser to consummate the Offer and the Merger, and expected to be incurred by Parent, is estimated to be approximately $92 million plus any related transaction fees and expenses. Purchaser will acquire all such funds from Parent, which intends to obtain funds from generally available corporate funds, as well as in accordance with the terms of a Credit Agreement, dated as of September 28, 2001 (the "Credit Agreement"), by and among Parent as borrower, the lenders referred to therein, Wachovia Bank, N.A. (formerly known as First Union National Bank) as administrative agent (the "Administrative Agent"), TD Securities (USA) Inc. as syndication agent and Mellon Bank, N.A. as documentation agent, as amended. Pursuant to the Credit Agreement, the lenders therein have made available to Parent a $240,000,000 credit facility, consisting of a $100,000,000 revolving credit commitment and a $140,000,000 term loan commitment. Under the terms of the Credit Agreement, the consummation by Purchaser of the Offer and the Merger would not be permitted unless, among other things, the approval of a majority of the lenders thereunder is first obtained. On October 27, 2002, Parent entered into a Commitment Letter (the "Commitment Letter") with the Administrative Agent and certain of its affiliates, including Wachovia Securities, Inc., pursuant to which such parties have agreed (i) to seek a waiver of, or an amendment to, the provisions in the Credit Agreement that prohibit the consummation of the Offer and the Merger by Purchaser or (ii) alternatively, to enter into a replacement credit facility (the "Replacement Facility") which would permit the consummation of the Offer and the Merger by Purchaser. The Credit Agreement contains representations and warranties, conditions precedent, covenants, events of default and other provisions generally found in similar agreements. In particular, the revolving loan component of the credit facility has a termination date of the earliest of (a) September 30, 2006, (b) such date chosen by Parent in accordance with the provisions of the Credit Agreement concerning permanent reduction of the revolving credit commitment or (c) such date chosen by the Administrative Agent in accordance with its remedies under the Credit Agreement. The term loan component of the credit facility has a maturity date of the first to occur of (a) September 30, 2008 or (b) the date of termination set by the Administrative Agent in accordance with its remedies under the Credit Agreement. Parent has the ability to choose between (i) a base rate consisting of Wachovia, N.A.'s prime rate or the Federal Funds Rate (as defined in the Credit Agreement) plus 1/2 of 1%, or (ii) a standard LIBOR Rate (as defined in the Credit Agreement), plus the respective applicable margin provided for (i) and (ii) within the Credit Agreement. This credit facility is secured by all of the personal property, books and records and proceeds of Parent and certain of its subsidiaries. The Replacement Facility, as contemplated by the Commitment Letter, contains material terms substantially similar to the existing Credit Agreement; provided, however, the Replacement Facility would permit the consummation of the Offer and the Merger and would increase the term loan commitment up to $213,600,000. Parent intends to repay any amounts borrowed under the Credit Agreement or the Replacement Facility through internally generated free cash flows or through a refinancing. 19 In the event that Parent is unable to borrow sufficient funds to allow Purchaser to consummate the Offer and the Merger pursuant to the Commitment Letter, Parent intends to seek to refinance its indebtedness through an alternative replacement credit facility. Wachovia, the Company's financial advisor in connection with the Offer and Merger, is the Lead Arranger and Book Manager under the Commitment Letter. This summary is not a complete description of the terms and conditions of the Credit Agreement and the Commitment Letter, and is qualified in its entirety by reference to the full text of the Credit Agreement and the Commitment Letter, respectively, which is incorporated herein by reference and a copy of which has been filed with the SEC as an exhibit to the Schedule TO. Because (i) the only consideration in the Offer and Merger is cash, (ii) the Offer is to purchase all outstanding Shares, (iii) there is an absence of a financing condition and (iv) the amount of consideration payable in relation to the financial capacity of Parent and its affiliates is not considered excessive, Purchaser believes the financial condition of Purchaser is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. 11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER AGREEMENT AND CERTAIN OTHER AGREEMENTS BACKGROUND OF THE OFFER The following information was prepared by Parent and the Company. Information about the Company was provided by the Company, and neither Purchaser nor Parent takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which Parent or its representatives did not participate. Parent continually explores and conducts discussions with regard to acquisitions and other strategic corporate transactions that are consistent with its corporate strategies. Mr. Mark S. Newman, Parent's Chairman of the Board, President and Chief Executive Officer, and Mr. William R. Craven, the Company's President and Chief Executive Officer, are acquainted and have had periodic informal discussions over several years about their respective businesses and operations and the potential for strategic alliances. On an ongoing basis, the Company's Board of Directors evaluates the Company's financial performance against the Company's business plan and strategic alternatives. In October 1999, the Company announced that it had engaged Wachovia as its financial advisor to explore strategic alternatives to enhance shareholder value. In late 1999, following an indication of interest from a third party, the Company's Board of Directors authorized management to initiate discussions with the third party regarding a possible strategic transaction with the Company. These discussions were terminated in early 2000 after the Company and the third party were unable to negotiate a mutually acceptable transaction. In the early 2001, a third party contacted the Company about the possibility of a strategic transaction, but after preliminary discussions, the Company determined that the valuation range did not meet the expectations of the Company's Board of Directors and discussions were terminated in May 2001. In January 2002, another third party contacted the Company about a possible transaction, and after a preliminary meeting in February 2002 the Company's management proposed to the Company's Board of Directors that it consider launching a process for a strategic transaction. On March 21, 2002, the Company's Board of Directors approved a process for seeking and considering proposals for transactions involving the merger or sale of the entire Company, which process was to be managed by Wachovia. In connection with the sale process, Wachovia prepared a Confidential Information Memorandum in April 2002 and contacted 15 companies which Wachovia and the Company believed, based on a variety of factors, might be interested in acquiring the Company. Wachovia delivered copies of the 20 Confidential Information Memorandum to eight of these companies, including Parent, that expressed an interest in receiving it. On April 17, 2002, Parent was contacted by Wachovia in connection with this process and on April 24, 2002, Parent and the Company executed a confidentiality agreement in order to facilitate the disclosure of confidential business information for the purpose of evaluating the acquisition of the Company. For a summary of certain provisions of the confidentiality agreement, see below in this Section 11. Of the parties contacted by Wachovia in connection with the process, three companies, including Parent, expressed interest in submitting bids to acquire the Company in May 2002. Prior to conducting due diligence, on May 20, 2002, Parent submitted a non-binding, preliminary indication of interest to the Company at a range between $4.00 and $5.00 per Share, subject to satisfactory due diligence, Parent Board approval and other customary conditions. The three prospective bidders were provided with access to the Company's senior management during May and June 2002 for a detailed presentation regarding the Company's business and operations. In late May 2002 the Company established a data room containing certain business, operational and financial information in order to make those materials available to any party interested in the Company. On May 28, 2002 representatives of Parent attended a presentation by the Company's management with respect to its business and operations. In June 2002, based on the expressed interest of several potential bidders during the process, the Company's management requested that Wachovia explore the possible separate sale of certain of the Company's business units. On June 27, 2002, the Company's Board of Directors authorized Wachovia to contact an additional five potential strategic buyers regarding a sale of the entire Company and to contact three potential buyers regarding a separate sale of certain of the Company's business units. Wachovia contacted these potential buyers, distributing one additional Confidential Information Memorandum regarding the sale of the entire Company. None of the potential buyers of any of the Company's business units expressed interest in a separate purchase of a business unit. The Company also responded to a previously unidentified potential buyer of a business unit in July 2002. Parent did not ultimately submit a final bid to acquire the Company as it was primarily engaged in exploring the possibility of another acquisition. In August 2002, due to the lack of formal offers to acquire the entire Company, the Company's Board of Directors decided to terminate the process of exploring a sale for the Company. Throughout the summer of 2002, Parent continued to explore the possibility of another acquisition. On September 19, 2002, a representative of Bear Stearns contacted Mr. Craven to inquire whether the Company was still interested in exploring a negotiated transaction and expressed its view that Parent might be interested in a possible acquisition of the Company. Mr. Craven offered to provide certain additional financial information, including updated forecasts with respect to certain programs, to Parent and its representatives. On September 20, 2002, Mr. Newman and Mr. Craven discussed, by telephone, the possibility of an acquisition of the Company by Parent. Mr. Craven noted his expectation that Parent's valuation should be at the high end of the range indicated in Parent's May 20, 2002 preliminary indication of interest. Mr. Newman indicated that Parent might be willing to affirm its valuation of the Company if it were able to confirm certain assumptions during due diligence. Beginning on or about September 30, 2002, Parent conducted two weeks of due diligence. On September 24, 2002, Mr. Craven and Mr. James E. Clifford, Vice President of Mergers and Acquisitions of the Company, met at Parent's facilities and discussed Parent's valuation of the Company with Mr. Newman and other representatives of Parent's management team. The parties discussed an acquisition of the Company utilizing cash and stock alternatives within a range of $4.00-$5.00 per Share. More specifically, Mr. Newman indicated that he would be prepared to recommend an acquisition price of either $4.50 per Share in cash or $5.00 per Share in Parent common stock subject to a so-called "collar" arrangement with respect to the trading range of Parent's common stock. Over the next two weeks, representatives of Parent and the Company's management teams held several meetings to discuss the proposed acquisition and certain operational issues. 21 On September 26, 2002, the Company's Board of Directors met with the Company's management, Wachovia and a representative of its outside legal counsel, Holland & Knight LLP ("Holland & Knight"), to discuss these proposals from Parent. Wachovia reviewed with the Board the terms of the proposals and the valuation methodologies it expected to use in evaluating the consideration to be received under the proposals. Holland & Knight discussed with the Board its fiduciary responsibilities in connection with the proposals. The Board engaged in a detailed discussion regarding the proposals and authorized management and its advisors to continue to negotiate with Parent with respect to the proposals, and shortly thereafter, Mr. Craven indicated to Parent that a proposal involving the use of Parent common stock would be preferable. On October 2, 2002, Parent's counsel delivered drafts of the Merger Agreement and Shareholder Tender and Voting Agreements to the Company's counsel. Over the next several weeks, counsel engaged in discussions regarding the terms of the Merger Agreement. On October 3, 2002 and October 9, 2002, the Company's Board of Directors met to discuss the status of the negotiations with Parent. At each meeting the Board discussed with its legal advisors and Wachovia the terms and structure of the proposed transaction and the importance of a price protection floor with respect to Parent's common stock below which either the consideration received by the Company's shareholders would be converted to cash or the Company would have a right to terminate the Merger Agreement. After lengthy discussion at each meeting, the Board authorized continued negotiations with Parent. During October 2002, coincident with a decrease in the stock prices of defense companies generally, Parent common stock began trading at a range that was below the collar proposed to the Company. Accordingly, Mr. Newman and Mr. Craven concluded that it would be preferable for both parties to proceed on the basis of an all-cash deal. They concluded that each would recommend to their respective Board of Directors the acquisition of the Company for cash at a price of $4.75 per Share. In connection with agreeing to recommend the cash alternative, Mr. Newman required that Mr. Craven use his best efforts to provide for the rescission of certain severance payments which would otherwise have been payable to Messrs. Craven, Richard P. McNeight, President of Paravant Computer Systems, Inc., a subsidiary of the Company, and Krishan K. Joshi, the Company's Chairman. On October 17, 2002, the Board of Directors of Parent held a meeting at which they discussed a number of factors concerning the potential acquisition of the Company and considered certain business, operational and financial information concerning the Company. At the meeting, representatives of Bear Stearns made a detailed presentation to the Board of Directors concerning the preliminary financial analysis of the Company and certain synergies that could result from an acquisition. Bear Stearns responded to inquiries from the Board of Directors as to specific aspects of their review and the remaining analysis that Bear Stearns was still undertaking. On October 17, 2002, the Company's Board of Directors held a special meeting at which representatives of Wachovia gave a detailed preliminary presentation regarding valuation, valuation methodology, comparable transactions, and the factors considered in connection with its rendering of a fairness opinion. In addition, a representative of Holland & Knight, the Company's legal counsel, reviewed with the Board in detail the main legal principles, including the Board's fiduciary duties, applicable to the proposed Merger Agreement, the Merger, and the Board's recommendation that the shareholders of the Company accept the Offer. The Board authorized management to negotiate a definitive agreement with Parent and present the same to the Board as soon as it was available. On October 22, 2002, the Company's Board of Directors held a special meeting at which representatives of Wachovia and Holland & Knight reviewed in detail the principal terms of the proposed Merger Agreement and related agreements. Representatives of Wachovia then delivered its oral opinion to the Board of Directors, confirmed in writing as of October 21, 2002, that, based upon and subject to various considerations, as of October 21, 2002, the Offer Price proposed to be paid in the Offer and the Merger is fair, from a financial point of view, to the holders of Shares. After further deliberation, the Company's Board of Directors unanimously determined that each of the Offer, the Merger Agreement and the Merger are advisable and fair to, and in the best interests of the 22 Company and its shareholders; approved the Offer, the Merger Agreement, the transactions contemplated thereby, including the Merger and the Shareholder Tender and Voting Agreements; and resolved to recommend that shareholders of the Company accept the Offer and tender their Shares pursuant to the Offer, and vote in favor of adoption and approval of the Merger Agreement and approval of the Merger (if such approval would be required by applicable law). On October 22, 2002, the Board of Directors of Parent held a special meeting at which representatives of Bear Stearns delivered an oral opinion to the Board of Directors, confirmed in writing as of October 22, 2002, that, based upon and subject to the various considerations, assumptions and conditions contained in its opinion, the purchase price paid in the Offer and Merger is fair, from a financial point of view, to Parent. After further discussion and deliberation, the Parent's Board of Directors unanimously determined that each of the Offer, the Merger Agreement, the Shareholder Tender and Voting Agreements and the Merger are advisable and fair to, and in the best interests of Parent; and approved the Offer, the Merger Agreement, and the transactions contemplated thereby, including the Merger. Following final negotiations over the terms of the Merger Agreement, the Merger Agreement was executed on October 23, 2002 and on October 24, 2002 the execution of the Merger Agreement was announced in separate press releases by the Company and Parent. PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer, the Merger and the Merger Agreement is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The transaction is structured as a merger in order to ensure the acquisition by Parent of all the outstanding Shares. If the Merger is consummated, Parent will have acquired 100% of the common equity interest in the Company and Parent would be entitled to all benefits resulting from that interest. These benefits include complete management with regard to the future conduct of the Company's business and any increase in its value. Similarly, Parent will also bear the risk of any losses incurred in the operation of the Company and any decrease in the value of the Company. Shareholders of the Company who sell their Shares in the Offer will cease to have any equity interest in the Company and to participate in its earnings and any future growth. If the Merger is consummated, the shareholders will no longer have an equity interest in the Company and instead will have only the right to receive cash consideration pursuant to the Merger Agreement. See Section 12 -- "Plans for the Company." Similarly, the shareholders of the Company will not bear the risk of any decrease in the value of the Company after selling their Shares in the Offer or the subsequent Merger. The primary benefits of the Offer and the Merger to the shareholders of the Company are that such shareholders are being afforded an opportunity to sell all of their Shares for cash at a price which represents a premium of approximately 31.9% over the closing market price of the Common Stock on the last full trading day prior to the public announcement that the Company, Parent and Purchaser executed the Merger Agreement, and a more substantial premium over recent historical trading prices. Under the FBCA, holders of the Shares do not have the right to assert dissenters' rights as a result of the Offer or the Merger. MERGER AGREEMENT The following is a summary of certain provisions of the Merger Agreement. The summary is qualified in its entirety by reference to the Merger Agreement, which is incorporated herein by reference. A copy of the Merger Agreement has been filed by Parent and Purchaser, pursuant to Rule 14d-3 under the Exchange Act, as exhibit (d)(1) to the Schedule TO. The Merger Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 -- "Certain Information Concerning the Company." 23 Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement. The Offer. The Merger Agreement provides that Purchaser will commence the Offer and as promptly as reasonably practicable after the date of the Merger Agreement and that, upon the terms and subject to the prior satisfaction or waiver of the conditions to the Offer described in Section 13 -- "Certain Conditions of the Offer," Purchaser will purchase all Shares validly tendered and not withdrawn pursuant to the Offer. The Merger Agreement provides that, without the written consent of the Company, Purchaser will not (i) decrease the price per Share payable in the Offer, (ii) reduce the maximum number of Shares sought to be purchased in the Offer, (iii) change the form of consideration payable in the Offer, (iv) impose conditions to the Offer in addition to those described in Section 13, or (v) waive or change the Minimum Condition or make other changes in the terms and conditions of the Offer that are in any manner adverse to the holders of the Shares. Purchaser may, without the consent of the Company (a) extend the Offer beyond the Initial Expiration Date if, as of such expiration, any of the Offer Conditions shall not be satisfied or, to the extent permitted, waived, (b) extend the Offer for any period required by any rule, regulation or interpretation of the SEC, the staff thereof or Nasdaq National Market applicable to the Offer, (c) extend the Offer for a period not to exceed ten (10) business days if, as of the scheduled Expiration Date, there shall not have been tendered at least eighty percent (80%) of the outstanding Shares, and (d) provide a Subsequent Offering Period in accordance with Rule 14d-11 under the Exchange Act. The Merger. The Merger Agreement provides that, following the consummation of the Offer, subject to the terms and conditions thereof (i) Purchaser shall be merged with and into the Company and, as a result of the Merger, the separate corporate existence of Purchaser shall cease, (ii) the Company shall be the successor or surviving corporation (sometimes referred to as the "Surviving Corporation") in the Merger, and (iii) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger. The respective obligations of each party to the Merger Agreement to effect the Merger are subject to the satisfaction on or prior to the Closing Date of each of the following conditions: (i) the Company shareholders' approval shall have been obtained; provided that Parent may not assert this condition if it fails to vote all Shares held by it or Purchaser in favor of the Merger and the Company may not assert this condition if it fails to comply with its obligation under the Merger Agreement to, among other things, call and hold a meeting of its shareholders and distribute proxy materials, if such actions are required under applicable laws to consummate the Merger, (ii) no governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which (a) is in effect and (b) has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger (which illegality or prohibition would have a material impact on Parent and its subsidiaries, on a combined basis with the Company and its subsidiaries, if the Merger were consummated notwithstanding such statute, rule, regulation, executive order, decree, injunction or other order), (iii) Parent or Purchaser shall have purchased Shares pursuant to the Offer, except that this condition shall not be a condition to Parent's and Purchaser's obligation to effect the Merger if Parent or Purchaser shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under the Merger Agreement, and (iv) the applicable waiting period under the HSR Act shall have expired or been terminated. At the Effective Time of the Merger (i) each issued and outstanding Share will be converted into the right to receive the Offer Price, without interest, paid pursuant to the Offer, (ii) each Share that is owned by the Company as treasury stock and each Share owned by Parent, Purchaser or any wholly owned subsidiary of Parent, Purchaser or the Company will be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor, and (iii) each issued and outstanding share of common stock of Purchaser will be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. The Company's Board of Directors. The Merger Agreement provides that promptly upon the purchase of and payment for any Shares by Parent or Purchaser which satisfies the Minimum Condition pursuant to the 24 Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as is equal to the product of the total number of directors on the Company's Board of Directors (after giving effect to the directors to be designated by Parent) multiplied by the percentage that the aggregate number of Shares so purchased and paid for bears to the total number of Shares then outstanding. The Company shall, upon Parent's request, promptly increase the size of the Company's Board of Directors or use its reasonable best efforts to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable Parent's designees to be so designated to the Company's Board of Directors. If Parent's designees are appointed or elected to the Company's Board of Directors as set forth above, until the Effective Time the Company and Parent shall use reasonable efforts to have at least two (2) members of the Company's Board of Directors who are directors on the date of the Merger Agreement and who are neither officers of the Company nor designees of Parent. Following the election or appointment of Parent's designees and until the Effective Time, the approval of a majority of the directors then in office who were neither designated by Parent nor employed by the Company shall be required to authorize any amendment of the Merger Agreement or the Company's articles of incorporation and bylaws, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Purchaser or Parent, any waiver of any of the Company's rights under the Merger Agreement or any action as to which consent or agreement of the Company is required under the Merger Agreement. The Company's obligations with respect to this section of the Merger Agreement are subject to Section 14(f) of the Exchange Act and Rule 14f-1 General Rules and Regulations under the Exchange Act. Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger (i) duly call, give notice of, convene and hold a special meeting of its shareholders and submit the Merger Agreement to a vote of its shareholders, (ii) prepare and file with the SEC a preliminary proxy or information statement (the "Proxy Statement") relating to the Merger and the Merger Agreement which shall comply as to form with all applicable legal requirements and which shall include all information concerning the Company, Parent and Purchaser required to be set forth therein pursuant to the Exchange Act, (iii) file a definitive form of the Proxy Statement, which shall reflect compliance with or resolution of the comments and requests in accordance with the Exchange Act from the SEC as the Company and Parent shall deem appropriate and shall distribute the definitive Proxy Statement to the Company's shareholders in accordance with applicable legal requirements, and (iv) take all such other reasonable action necessary or appropriate to obtain the lawful approval of the Merger Agreement by the Company's shareholders, including soliciting from holders of Shares proxies in favor of the adoption and approval of the Merger and the transactions contemplated hereby. The Merger Agreement provides that Parent will vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other subsidiaries in favor of the approval of the Merger and the Merger Agreement. The Merger Agreement further provides that in the event that Parent, Purchaser and any other subsidiaries of Parent shall acquire in the aggregate at least 80% of the outstanding Shares pursuant to the Offer or otherwise, the parties hereto shall, subject to the terms and conditions of the Merger Agreement, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders, in accordance with the FBCA. Company Option Plans. The Merger Agreement provides that as of the Effective Time, each employee stock option, stock equivalent right or right to acquire Shares granted under the Company's Incentive Stock Option Plan, as amended June 4, 1999, the Company's Stock Incentive Plan or the Non-employee Directors' Stock Plan, as amended August 30, 2001, that is outstanding immediately prior to the Effective Time, whether or not then vested or exercisable, shall, effective as of the Effective Time, be cancelled in exchange for a single lump sum cash payment, to be paid by the Surviving Corporation as soon as practicable following the Effective Time upon its receipt of a release or other documentation by the holder of such Company option reasonably satisfactory to the Parent and the Surviving Corporation, equal to the product of (i) the number of Shares subject to such Company option and (ii) the excess, if any, of the Offer Price per Share at the Effective Time over the exercise price per share of such Company option. 25 Warrants. All warrants to purchase shares of Company common stock outstanding as of the Effective Time shall be cancelled in exchange for a single lump sum cash payment to be paid by the Surviving Company as soon as practicable following the Closing to the holder of such warrant upon receipt by Parent of a release or other documentation by the holder of such warrant reasonably satisfactory to Parent relinquishing any right or benefit under the terms of the warrant or any obligation on the part of Parent, Purchaser or Company after the Effective Time equal to the product of (i) the number of Shares subject to such warrant and (ii) the excess, if any, of the Merger Consideration for a Share at the Effective Time over the exercise price per Share of such warrant. Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company has agreed that, except (i) as expressly contemplated by the Merger Agreement or (ii) as agreed to in writing by Parent, after the date of execution of the Merger Agreement, and prior to the earlier of (x) the termination of the Merger Agreement in accordance with its terms and (y) the time the designees of Parent have been elected to and shall constitute a majority of the Company's Board of Directors the Company shall, and shall cause each of its subsidiaries to, carry on its business in the usual, regular and ordinary course, in substantially the same manner as heretofore conducted, and use all reasonable efforts consistent with past practices and policies to (x) preserve intact its present business organization, (y) keep available the services of the Company's key employees, and (z) preserve its relationships with customers, suppliers, licensors, licensees, and others with which it has business dealings. In addition, without limiting the generality of the foregoing, during the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement pursuant to its terms or the Effective Time, except as set forth on the Company's budget delivered to Parent prior to the execution of the Merger Agreement, the Company shall not do, and shall not permit its subsidiaries to do, any of the following: (a) enter into any new line of business material to it and its subsidiaries taken as a whole; (b) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock (other than dividends or distributions paid by wholly owned subsidiaries of the Company to the Company or to other wholly owned subsidiaries of the Company); (c) purchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or the capital stock of its subsidiaries, except repurchases of unvested shares at cost in connection with the termination of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on the date hereof; (d) issue, deliver, sell, authorize, pledge or otherwise encumber any shares of capital stock, Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or subscriptions, rights, warrants or options to acquire any shares of capital stock or Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or enter into other agreements or commitments of any character obligating it to issue any such securities or rights, other than issuances of Company common stock upon the exercise of Company Options existing on the date hereof in accordance with their present terms (including cashless exercises); (e) cause, permit or propose any amendments to its Charter Documents or any of the Subsidiary Charter Documents of its Subsidiaries; (f) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any person or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to its business, other than acquisitions of inventory and other assets in the ordinary course of business consistent with past practices; (g) enter into any joint ventures, strategic partnerships or alliances that are material to any of its divisions or business units if such entry would (A) present a material risk of delaying the Merger or make 26 it more difficult to obtain any Necessary Consent required under the terms of the Merger Agreement or (B) require a consent of the other party thereto to consummate the Merger; (h) sell, pledge, dispose of, transfer, lease, license, or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, or encumbrance of, any material property or assets of the Company or any of its Subsidiaries, except (A) sales, pledges, dispositions, transfers, leases, licenses or encumbrances pursuant to existing Contracts which have been made available to Parent prior to the date hereof, or (B) sales or dispositions of inventory and other tangible current assets in the ordinary course of business consistent with past practices; (i) make any loans, advances or capital contributions to, or investments in, any other person, other than loans or investments by the Company or one of its subsidiaries to or in the Company or one of its wholly owned subsidiaries; (j) except as required by GAAP or the SEC as concurred in by its independent auditors, make any material change in its methods or principles of accounting; (k) make or change any material Tax election; (l) settle any material claim (including any Tax claim), action or proceeding involving money damages, except (A) in the ordinary course of business consistent with past practice or (B) to the extent subject to reserves existing as of the date hereof in accordance with GAAP; (m) except as required by Legal Requirements or Contracts currently binding on the Company or its subsidiaries, (1) increase in any manner the amount of compensation or fringe benefits of, pay any bonus to or grant severance or termination pay to, any executive officer or director of the Company or any of the Company's Key Employees or materially increase the foregoing with respect to employees of the Company and its subsidiaries generally, (2) make any increase in, or commitment to increase, any Company benefit plan (including any severance plan), adopt or amend, or make any commitment to adopt or amend, any Company benefit plan or make any contribution, other than regularly scheduled contributions, to any Company benefit plan, (3) waive any stock repurchase rights, accelerate, amend or change the period of exercisability of Company Options or restricted stock, or reprice any Company Options or authorize cash payments in exchange for any Company Options, (4) enter into any employment, severance, termination or indemnification agreement with any Company employee, (5) make any material oral or written representation or commitment with respect to any material aspect of any Company benefit plan that is not materially in accordance with the existing written terms and provision of such Company benefit plan, (6) grant any stock appreciation right, phantom stock award, stock-related award or performance award (whether payable in cash, shares or otherwise) to any person (including any Company employee), or (7) enter into any agreement with any Company employee the benefits of which are (in whole or in part) contingent or the terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby; (n) subject Parent or the Surviving Corporation or any of their respective subsidiaries to any non-compete or other material restriction on any of their respective businesses following the Closing; (o) enter into any agreement or commitment the effect of which would be to grant to a third party following the Merger any actual or potential right of license to any material Intellectual Property owned by Parent or any of its subsidiaries; (p) enter into, modify or amend in a manner adverse in any material respect to such party, or terminate any Company Material Contract or waive, release or assign any material rights or claims thereunder, in each case, in a manner adverse in any material respect to such party, other than any modification, amendment or termination of any such Company material contract in the ordinary course of business consistent with past practice; (q) (i) incur any Indebtedness, except for Indebtedness for borrowed money under the Company's existing credit facilities or replacement credit facilities in an aggregate amount not materially larger than 27 the Company's existing credit facilities, or (ii) make or authorize any capital expenditure materially in excess of the Company's budget as disclosed to Parent prior to the date of the Merger Agreement; (r) write up, write down or write off the book value of any assets other than in the ordinary course of business or otherwise not in excess of two million dollars ($2,000,000); (s) take any action to render inapplicable, or to exempt any third party from any state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, except to the extent that the Company would be permitted to change the recommendation of the Company's Board of Directors that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirement, approve and adopt the Merger Agreement and the Merger; or (t) agree in writing or otherwise to take any of the actions described above. No Solicitation. Pursuant to the Merger Agreement, the Company has agreed to immediately terminate, and cause each of its subsidiaries and its and their representatives to immediately terminate, all activities, discussions or negotiations, if any, with any third party with respect to, or any that could reasonably be expected to lead to or contemplate the possibility of, an Acquisition Proposal. For purposes of the Merger Agreement an "Acquisition Proposal", with respect to the Company, shall mean any offer or proposal, relating to any transaction or series of related transactions involving: (A) any purchase from the Company or acquisition by any person or "group" (as defined under Section 13(d)(3) of the Exchange Act) of more than a ten percent (10%) interest in the total outstanding voting securities of the Company or any of its subsidiaries or any tender or exchange offer that if consummated would result in any person or group beneficially owning ten percent (10%) or more of the total outstanding voting securities of the Company or any of its subsidiaries or any merger, consolidation, business combination or similar transaction involving the Company or any of its subsidiaries, (B) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of more than ten percent (10%) of the assets of the Company (including its subsidiaries taken as a whole), or (C) any liquidation or dissolution of the Company. Except as provided below, from the date of the Merger Agreement until the earlier of termination of the Merger Agreement or the Effective Time, the Company is not permitted, and will not authorize or permit its officers, directors, employees, investment bankers, attorneys, accountants or other agents, to directly or indirectly: (i) solicit, initiate, encourage, knowingly facilitate or induce any inquiry with respect to, or the making, submission or announcement of, any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any person with respect to any Acquisition Proposal, except as to the existence of the restrictions upon the Company's activities in the Merger Agreement, (iv) approve, endorse or recommend any Acquisition Proposal, or (v) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal or any transaction contemplated thereby. Notwithstanding the foregoing, prior to the acceptance of a majority of the then outstanding Shares pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any person pursuant to a confidentiality agreement with terms no less favorable to the Company than those contained in the Confidentiality Agreement, dated as of April 24, 2002 entered into between Parent and the Company (the "Confidentiality Agreement"), and may negotiate and participate in discussions and negotiations with such person concerning an Acquisition Proposal if (x) the Company receives an unsolicited, bona fide written Acquisition Proposal from a third party that its Board of Directors has in good faith concluded (following consultation with its outside legal counsel and its financial advisor), is, or is reasonably likely to result in, a Superior Offer (as defined below), (y) the Company's Board of Directors concludes in good faith, following consultation with its outside legal counsel, that there is a reasonable possibility that the failure to take such actions would result in a breach of its fiduciary obligations under applicable legal requirements, and (z) the Company has given a written notice to Parent with respect to the Superior Offer as required pursuant to the Merger Agreement. The Merger Agreement further provides that for a period of not less than three (3) business days after Parent's receipt from the Company 28 of each such notice with respect to a Superior Offer, the Company shall, if requested by Parent, negotiate in good faith with Parent to revise the Merger Agreement so that the Acquisition Proposal that constituted a Superior Offer no longer constitutes a Superior Offer. For purposes of the Merger Agreement, a "Superior Offer" shall mean an unsolicited, bona fide written offer made by a third party to acquire, directly or indirectly, pursuant to a tender or exchange offer, merger, consolidation or other business combination, all or substantially all of the assets of the Company or a majority of the total outstanding voting securities of the Company and as a result of which the shareholders of the Company immediately preceding such transaction would hold less than fifty percent (50%) of the equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent or subsidiary thereof, on terms that the Board of Directors of the Company has in good faith concluded (following consultation with its outside legal counsel and its financial advisor), taking into account, among other things, all legal, financial, regulatory and other aspects of the offer and the person making the offer, to be more favorable, from a financial point of view, to the Company's shareholders (in their capacities as shareholders) than the terms of the Offer and the Merger and is reasonably capable of being consummated Neither the Company's Board of Directors nor any committee thereof shall withdraw, modify or change, or propose publicly to withdraw, modify or change, in a manner adverse to Parent, the Company's Board of Director's recommendation that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirements, approve and adopt the Merger Agreement and the Merger. Notwithstanding the foregoing, the Company's Board of Directors may (A) withhold or withdraw its recommendation that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirements, approve and adopt the Merger Agreement and the Merger in response to the receipt of a Superior Offer, and (B) recommend that its shareholders accept a tender or exchange offer in the case of a Superior Offer that is a tender or exchange offer made directly to its shareholders, if in the case of (A) or (B) all of the following conditions are met: (i) Purchaser shall not yet have accepted a majority of the then outstanding Shares in the Offer; (ii) the Company shall have (A) provided to Parent written notice which shall state expressly (1) that it has received a Superior Offer, (2) the material terms and conditions of the Superior Offer and the identity of the Person or group making the Superior Offer, and (3) that it intends to change the recommendation of the Company's Board of Directors that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirement, approve and adopt the Merger Agreement and the Merger; and the manner in which it intends to do so, and (B) provided to Parent a copy of all written materials delivered to the Person or group making the Superior Offer; (iii) the Company's Board of Directors has concluded in good faith, after consultation with its outside legal counsel, that, in light of such Superior Offer, there is a reasonable possibility that failure to change the recommendation of the Company's Board of Directors that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirement, approve and adopt the Merger Agreement and the Merger would result in a breach of fiduciary obligations of the Company's Board of Directors to its shareholders under applicable Legal Requirements; and (iv) the Company shall not have breached in any material respect certain provisions as set forth in the Merger Agreement with respect to Acquisition Proposals. Indemnification and Insurance. The Merger Agreement provides that for a period of six (6) years after the Effective Time, Parent shall indemnify and hold harmless the Company's directors and officers immediately prior to the Effective Time to the fullest extent permitted under applicable Legal Requirements, with respect to all actions or omissions by them prior to the Effective Time in their capacities as officers or directors of the Company or any of its subsidiaries (including with respect to all acts or omissions by them in their capacities as officers or directors of the Company or any of its subsidiaries in connection with the adoption and approval of the Merger Agreement and the transactions contemplated thereby). 29 The Merger Agreement also provides that from and after the Effective Time, Parent will, and will cause the Surviving Corporation to, fulfill and honor in all respects the obligations of the Company pursuant to any indemnification agreements between the Company and its directors and officers immediately prior to the Effective Time, subject to applicable Legal Requirements. The articles of incorporation and bylaws of the Surviving Corporation are required to contain provisions with respect to exculpation and indemnification that are at least as favorable to such indemnified parties as those contained in the articles of incorporation and bylaws of the Company as in effect on the date of the Merger Agreement, which provisions will not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, immediately prior to the Effective Time, were directors, officers, employees or agents of the Company, unless such modification is required by applicable Legal Requirements. Parent or the Surviving Corporation will maintain in effect for the benefit of the Company's current directors and officers liability insurance covering those persons who are covered by the Company's directors' and officers' liability insurance policy as of the date of the Merger Agreement on terms no less favorable to those applicable to the current directors and officers of the Company for a period of six (6) years; provided, however, that in no event will the Surviving Corporation be required to expend in excess of two hundred percent (200%) of the annual premium paid by the Company as of the date of the Merger Agreement for such coverage (and to the extent the annual premium would exceed two hundred percent (200%) of the annual premium currently paid by the Company for such coverage, the Surviving Corporation shall use all reasonable efforts to cause to be maintained the maximum amount of coverage as is available for such two hundred percent (200%) of such annual premium). Representations and Warranties. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, its organization, subsidiaries, capital structure, authority to enter into the Merger Agreement and consummate the transactions contemplated by the Merger Agreement (the "Transactions"), the vote of its shareholders required to approve the Transactions, consents and approvals necessary to consummate the Transactions, public filings, financial statements, conduct of the Company's business, taxes, intellectual property, compliance with applicable laws, permits, litigation involving the Company, brokers that may be entitled to any fees from the Company, potential conflicts of interest among the Company, the Company subsidiaries, and any of their affiliates, employee benefit plans, environmental matters, the Company's contracts, the information to be made in the Company's public disclosure with respect to the Transactions, approvals by its Board of Directors, the opinion of the Company's financial advisor, and actions taken with respect to takeover statutes. Pursuant to the Merger Agreement, each of Parent and Purchaser has made customary representations and warranties to the Company with respect to, among other things, its organization, authority to enter into the Merger Agreement and consummate the Transactions, consents and approvals necessary to consummate the Transactions, brokers that may be entitled to any fees from Parent or Purchaser, the information in Parent's and Purchaser's public disclosure to be made with respect to the Transactions, and funding for the Offer. Company and Parent representations are generally qualified as to "Material Adverse Effect." For purposes of the Merger Agreement, the term "Material Adverse Effect" means any fact, change, event, violation, inaccuracy, circumstance or effect (any such item, an "Effect"), individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, that is or could be reasonably expected to (i) be materially adverse to the business, assets (including intangible assets), capitalization, financial condition or results of operations of such entity taken as a whole with its subsidiaries or (ii) materially impede the consummation of the transactions contemplated by the Merger Agreement, including the Offer, in accordance with the terms thereof and applicable Legal Requirements excluding with respect to clauses (i) and (ii) Effects (A) generally affecting the industry in which such entity and its subsidiaries operate or arising from changes in general business or economics conditions, or (B) affecting the securities markets generally. 30 Termination Fees. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the shareholders of the Company: a. by mutual written consent of Parent and the Company; or b. by either the Company or Parent, if as a result of any of the Offer Conditions being incapable of being satisfied the Offer shall have expired without any Shares being purchased pursuant thereto; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement or the Offer has been the cause of, or resulted in, the failure of the Shares to have been purchased pursuant to the Offer; or c. by either the Company or Parent, if the Offer has not been consummated on or before April 30, 2003; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement or the Offer has been the cause of, or resulted in, the failure of the Offer to have been consummated by such date; or d. by either the Company or Parent, if a Governmental Entity shall have issued an order, decree or ruling or taken any other action (including the failure to have taken an action), in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger, which order, decree, ruling or other action is final and nonappealable; or e. by Parent, if a Company Triggering Event shall have occurred. For the purposes of the Merger Agreement, a "Company Triggering Event" shall be deemed to have occurred if: (i) the Company's Board of Directors shall have for any reason changed its recommendation that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirements, approve and adopt the Merger Agreement and the Merger, (ii) the Company shall have failed to include in the Proxy Statement or the Schedule 14D-9 the Company's Board of Directors' recommendation that the shareholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and, if required by Legal Requirement, approve and adopt the Merger Agreement and the Merger, (iii) the Company's Board of Directors fails to reaffirm (publicly, if so requested) its recommendation within three (3) calendar days after Parent requests in writing that such recommendation be reaffirmed, (iv) the Company's Board of Directors or any committee thereof shall have approved or recommended any Acquisition Proposal, (v) a tender or exchange offer relating to the Company's securities shall have been commenced by a Person unaffiliated with Parent, and (A) the Company shall not have sent to its securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act, within ten (10) business days after such tender or exchange offer is first published, sent or given, a statement disclosing that the Company's Board of Directors recommends rejection of such tender or exchange offer or (B) such tender or exchange offer shall result in such Person beneficially owning fifty percent (50%) or greater of the Company's outstanding equity securities, or (vi) any person unaffiliated with Parent shall beneficially own twenty-five percent (25%) or more of the Company's outstanding equity securities; or f. by the Company, (i) if Purchaser or Parent shall have materially breached any of their respective covenants, obligations or other agreements under the Merger Agreement, or (ii) if the representations and warranties of Parent and Purchaser set forth in the Merger Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of the Merger Agreement and as of the expiration of the date of termination of the Merger Agreement (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure to be so true and correct, individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on Parent; provided, further that the breach of the covenant, obligation, agreement, representation or warranty is incapable of being or has not been cured by Parent or Purchaser prior to or on the date which is thirty (30) calendar days immediately following written notice by the Company to Parent of such breach or failure to perform; or g. by Parent, (i) if the Company shall have materially breached any of its respective covenants, obligations or other agreements under the Merger Agreement, or (ii) if the representations and 31 warranties of the Company set forth in Merger Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of Merger Agreement and as of the expiration of the date of termination of Merger Agreement (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure to be so true and correct, individually or in the aggregate would not reasonably be expected to have, a Material Adverse Effect on the Company; provided, further that the breach of the covenant, obligation, agreement, representation or warranty is incapable of being or has not been cured by the Company prior to or on the date which is thirty (30) calendar days immediately following written notice by Parent to the Company of such breach or failure to perform. If Parent shall have terminated the Merger Agreement pursuant to clause b. above or clause c. above, the Company shall pay Parent a fee equal to four million dollars ($4,000,000) in immediately available funds (the "Company Termination Fee"); provided, that (A) such payment shall be made only if following the date of the Merger Agreement and prior to the termination of the Merger Agreement, there has been public disclosure of an Acquisition Proposal with respect to the Company and (1) within nine (9) months following the termination of the Merger Agreement an Acquisition is consummated or (2) within nine (9) months following the termination of the Merger Agreement the Company enters into an agreement providing for an Acquisition of the Company and an Acquisition is consummated within eighteen (18) months of the termination of the Merger Agreement and (B) such payment shall be made promptly, but in no event later than two (2) business days after the consummation of such Acquisition. For purposes of the Merger Agreement, "Acquisition" means any of the following transactions (other than the transactions contemplated by the Merger Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company pursuant to which the shareholders of the Company immediately preceding such transaction hold less than sixty percent (60%) of the aggregate equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent thereof, (ii) a sale or other disposition by the Company of assets representing in excess of forty percent (40%) of the aggregate fair market value of the Company's business immediately prior to such sale, or (iii) the acquisition by any person or group (including by way of a tender offer or an exchange offer or issuance by the Company or such person or group), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of forty percent (40%) of the voting power of then outstanding shares of capital stock of the Company. If Parent shall have terminated the Merger Agreement pursuant to clause e. above, the Company shall promptly, but in no event later than two (2) business days after the date of such termination, pay Parent the Company Termination Fee. If (A) the Merger Agreement is terminated by Parent or the Company, as applicable, pursuant to clause b. above or clause c. above and following the date hereof and prior to the termination of the Merger Agreement there has been public disclosure of an Acquisition Proposal with respect to the Company, or (B) the Merger Agreement is terminated by Parent pursuant to clause e. above, then the Company shall pay Parent promptly and from time to time (as applicable), an amount equal to Parent's documented or documentable out-of-pocket expenses (including attorneys', accountants' and financial advisors' fees and any fees incurred by Parent in connection with the filing of the Schedule TO or the proxy statement with the SEC and the filing of the Notification and Report Forms with the FTC and DOJ under the HSR Act and any premerger notification and reports forms under similar applicable legal requirements of other jurisdictions, in each case pursuant to the Merger Agreement), but which amount shall in no event exceed one million dollars ($1,000,000). SHAREHOLDER TENDER AND VOTING AGREEMENTS The following is a summary of certain provisions of the Shareholder Tender and Voting Agreements dated as of October 23, 2002 by and among Parent, Purchaser and each of Krishan K. Joshi, Vicky M. Joshi and UES Inc., William K. Craven, Richard P. McNeight, James E. Clifford and C. Hyland Schooley (each referred to as a "Tendering Shareholder" and collectively as the "Tendering Shareholders"). The Tendering 32 Shareholders include directors and executive officers of the Company or its subsidiaries (or relatives of, or entities controlled by, such persons) and have voting and dispositive power with respect to an aggregate of 3,780,835 Shares (the "Subject Shares") representing approximately 22% of the Shares outstanding on the date of the Merger Agreement. The summary is qualified in its entirety by reference to the Shareholder Tender and Voting Agreements, which are incorporated herein by reference and copies of which have been filed with the SEC as exhibits to the Schedule TO. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Shareholder Tender and Voting Agreements. As a condition to the willingness of Parent to enter into the Merger Agreement, and as inducement and in consideration therefor, each Tendering Shareholder has entered into a Shareholder Tender and Voting Agreement. The Tendering Shareholders include certain directors and officers of the Company. Each Tendering Shareholder has also agreed that unless the Shareholder Tender and Voting Agreement is terminated as stated below, (i) each Tendering Shareholder shall tender the Subject Shares to Purchaser in the Offer no later than the tenth Business Day following the commencement of the Offer, and (ii) each Tendering Shareholder shall not withdraw any Subject Shares tendered unless the Offer is terminated or has expired without Parent purchasing all Shares tendered in the Offer. Each Tendering Shareholder has agreed that, prior to the termination of the Shareholder Tender and Voting Agreement pursuant to its terms, they will not (i) transfer, assign, sell, tender, gift-over, pledge, encumber or otherwise dispose of ("Transfer"), any or all of the Subject Shares or any right or interest therein, (ii) enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer, (iii) grant any proxy, power-of-attorney or other authorization or consent with respect to any of the Subject Shares, (iv) deposit any of the Subject Shares into a voting trust, or enter into a voting agreement or arrangement with respect to any of the Subject Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Tendering Shareholder's obligations under the Shareholder Tender and Voting Agreements. (a) Each Tendering Shareholder has agreed that it shall not, nor shall it permit any of its affiliates to, nor shall such Tendering Shareholder act in concert with or permit any of its affiliates to act in concert with any person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any person with respect to the voting of, any Shares in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company accept the Offer, tender their Shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by the Shareholder Tender and Voting Agreements. Each Tendering Shareholder has agreed that it shall not, nor shall it permit any of its affiliates to, nor shall such Tendering Shareholder act in concert with or permit any of its affiliates to act in concert with any person to, deposit any Shares in a voting trust or subject any Shares to any arrangement or agreement with any person with respect to the voting of such Shares. Each Shareholder has also agreed that it shall not, and shall direct its representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any person, other than Parent, relating to any Acquisition Proposal. Each Tendering Shareholder has granted Parent an irrevocable proxy with respect to the voting of such Subject Shares in favor of the Merger and other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof). Each Tendering Shareholder has made certain representations and warranties in the Shareholder Tender and Voting Agreements, including with respect to (i) being the lawful owner of the Subject Shares, (ii) the authority to enter into and perform the obligations under the Shareholder Tender and Voting Agreements and the absence of required consents (except for filings under the HSR Act and the Exchange Act) and statutory or contractual conflicts or violations, and (iii) the absence of liens or any other encumbrances with regard to the Subject Shares. The Shareholder Tender and Voting Agreements, and all rights and obligations of the parties thereto, shall terminate upon the earliest to occur of (i) the mutual consent of Parent and each individual Tendering 33 Shareholder, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms. Termination of the Shareholder Tender and Voting Agreements shall not prevent any party thereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of the Shareholder Tender and Voting Agreements. Each Tendering Shareholder has entered into a Shareholder Tender and Voting Agreement solely in his, her or its capacity as a record and beneficial owner of the Subject Shares, and, if applicable, nothing therein shall limit or affect any actions taken in his, her or its capacity as an officer or director of the Company. CONFIDENTIALITY AGREEMENT The following is a summary of certain provisions of the Confidentiality Agreement, dated as of April 24, 2002 (the "Confidentiality Agreement"), between the Company and Parent. The following summary of the Confidentiality Agreement does not purport to be complete and is qualified by reference to the text of the Confidentiality Agreement, a copy of which is filed as an exhibit hereto and incorporated herein by reference. Under the Confidentiality Agreement, the Company agreed to furnish certain confidential information (the "Confidential Evaluation Material") concerning its business, operational and financial condition to Parent and its representatives in connection with Parent's evaluation of a possible transaction with the Company. Parent agreed that it would use the Confidential Evaluation Material solely for the purpose of evaluating a possible transaction between itself and the Company, and that Parent, its representatives, and anyone to whom Parent disclosed the Confidential Evaluation Material as permitted under the Confidentiality Agreement would keep such information confidential, unless such information was publicly available, already known to Parent or becomes available to Parent on a non-confidential basis from another source. Parent agrees to be held responsible for any breach of the Confidentiality Agreement by its officers, directors, advisors, employees, and/or affiliates or any of its representatives. If Parent becomes legally compelled by deposition, subpoena, or other governmental action to disclose any of the confidential information covered by the Confidentiality Agreement, Parent will give Company prompt prior written notice and will cooperate with the Company if it seeks to obtain a protective order concerning such confidential information. The Company and Parent agreed that for a period of two (2) years from the date of the Confidentiality Agreement, neither Parent nor any of its affiliates would, without obtaining the Company's prior written consent, solicit for employment any officer or management employee of the Company. Until the expiration of two (2) years from the date of the Confidentiality Agreement, Parent agreed not to, without the prior written approval of the Company's Board of Directors, (i) acquire or agree to acquire or make any proposal to acquire directly or indirectly any of the Company's securities or property; (ii) make, or in any way participate in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the SEC) to vote or to influence any other person's voting of the Company's securities; (iii) form, join or participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with regard to the Company's voting securities; or (iv) otherwise act alone or in concert with others, directly or indirectly, to control, advise, or influence the management, Board of Directors, or policies of the Company. Parent agreed to take all precautions with regard to protecting any Confidential Evaluation Material. Upon the Company's request, Parent agreed to return all written information provided by the Company and to destroy all materials prepared by Parent based on the Confidential Evaluation Material. 12. PLANS FOR THE COMPANY Plans for the Company. Parent intends to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel and will consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances which exist upon completion of the Offer. Such changes could include changes in the Company's business, corporate structure, articles of incorporation, by-laws, capitalization, Board of Directors, management or dividend policy, although, except as disclosed in this Offer to Purchase, Parent has no current plans with respect to any of such matters. The Merger Agreement provides that promptly upon the purchase of 34 and payment for any Shares by Parent or Purchaser which satisfies the Minimum Condition pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as is equal to the product of the total number of directors on the Company's Board of Directors (after giving effect to the directors to be designated by Parent) multiplied by the percentage that the aggregate number of Shares so purchased and paid for bears to the total number of Shares then outstanding. The Company shall, upon Parent's request, promptly increase the size of the Company's Board of Directors or use its best efforts to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable Parent's designees to be so designated to the Company's Board of Directors. If Parent's designees are appointed or elected to the Company's Board of Directors as set forth above, until the Effective Time the Company and Parent shall use reasonable efforts to have at least two (2) members of the Company's Board of Directors who were directors on the date of the execution of the Merger Agreement and who are neither officers of the Company nor designees of Parent. Following the election or appointment of Parent's designees and until the Effective Time, the approval of a majority of the directors then in office who were neither designated by Parent nor employed by the Company shall be required to authorize any amendment of the Merger Agreement or the Company's articles of incorporation and bylaws, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Purchaser or Parent, any waiver of any of the Company's rights under the Merger Agreement or any action as to which consent or agreement of the Company is required under the Merger Agreement. See Section 11 -- "Background of the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain Other Agreements." The Merger Agreement provides that the directors of Purchaser and the officers of the Company at the Effective Time of the Merger will, from and after the Effective Time, be the initial directors and officers, respectively, of the Surviving Corporation. Except as disclosed in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure, business or composition of its management or personnel. 13. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any validly tendered Shares unless the Minimum Condition shall have been satisfied. Furthermore, notwithstanding any other provisions of the Offer, Purchaser shall not be required to accept for payment or pay for any validly tendered Shares if, at the scheduled Expiration Date (i) any applicable waiting periods under the HSR Act and any comparable provisions under any applicable pre-merger notification laws or regulations of foreign jurisdictions have not expired or terminated prior to termination of the Offer, or (ii) immediately prior to the expiration of the Offer, any of the following conditions shall exist (capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement): (a) there shall have been instituted or be pending, by any Governmental Entity or any other Person or threatened by a Governmental Entity, any suit, action or proceeding against Parent, Purchaser or the Company challenging or seeking (i) to make illegal, restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent or Purchaser, or the consummation of the Merger, (ii) to prohibit or limit materially the ownership or operation by the Company, Parent, Purchaser or any of their affiliates of all or any material portion of the business or assets of the Company, Parent or any of their affiliates, or compel the Company, Parent or any of their affiliates to effect an Action of Divestiture, (iii) to impose or confirm limitations on the ability of Parent, Purchaser or any other affiliate of Parent to exercise full rights of ownership of any Shares, 35 including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, (iv) to require divestiture by Parent or Purchaser of any Shares; or (v) which otherwise seeks damages or relief which could reasonably be expected to have a Material Adverse Effect on Parent or the Company; (b) there shall have been entered, enforced, enacted or deemed applicable to (A) Parent, Purchaser or the Company or (B) the Merger Agreement, the Offer or the Merger, in any case, any statute, rule, regulation, legislation, judgment, order, injunction or decree by any Governmental Entity or any other Person that is reasonably likely to, directly or indirectly, result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) a Company Triggering Event shall have occurred; (d) the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of the Merger Agreement and the expiration of the Offer (except to the extent that such representations and warranties speak as of a specific date, in which case as of such specific date), except where the failure to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company; (e) the Company shall have materially breached any covenant, obligation or other agreement to be performed or complied by it under the Merger Agreement; (f) the Merger Agreement shall have been terminated in accordance with its terms; (g) any of the following shall have occurred: (1) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, the American Stock Exchange or the Nasdaq for a period in excess of 24 hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (3) a commencement or material worsening of a war, armed hostilities or other national or international calamity directly or indirectly involving the United States or any terrorist activities which materially and adversely affects Parent, Purchaser or the Company or the ability of financial institutions in the United States to extend credit or syndicate loans, (4) any limitation (whether or not mandatory) by any Governmental Entity on the extension of credit generally by banks or other financial institutions, or (5) a change in general financial, bank or capital market conditions which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans; (h) Purchaser and the Company shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; or (i) any party to the Shareholder Tender and Voting Agreements other than Purchaser and Parent shall have breached or failed to perform any of its covenants or agreements under such agreements or breached any of its representations and warranties in any of such agreements, or any of such agreements shall not be valid, binding and enforceable, except for such breaches or failures to be valid, binding and enforceable that do not materially and adversely affect the benefits expected to be received by Parent and Purchaser under the Merger Agreement or the Shareholder Tender and Voting Agreements. The foregoing conditions are for the benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Parent in whole or in part at any time and from time to time in their sole and absolute discretion. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances 36 shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 14. CERTAIN LEGAL MATTERS Except as described in this Section 14, based on information provided by the Company, none of the Company, Purchaser or Parent is aware of any license or regulatory permit that appears to be material to the business of the Company that might be adversely affected by Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required for the acquisition and ownership of the Shares by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser and Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 13 -- "Certain Conditions of the Offer" for certain conditions to the Offer, including conditions with respect to governmental actions. Affiliated Transaction Statute. Because the Company is incorporated under the laws of the State of Florida, it is subject to Section 607.0901 (the "Affiliated Transactions Statute") of the FBCA. The Affiliated Transactions Statute generally prohibits a Florida corporation from engaging in an "affiliated transaction" with an "interested shareholder," unless (i) the affiliated transaction is approved by a majority of the disinterested directors or by the affirmative vote of the holders of two-thirds of the voting shares other than the shares beneficially owned by the interested shareholder, (ii) the corporation has not had more than 300 shareholders of record at any time for three years prior to the public announcement relating to the affiliated transaction, or (iii) the corporation complies with certain statutory fair price provisions. Subject to certain exceptions, under the FBCA an "interested shareholder" is a person who beneficially owns more than 10% of the corporation's outstanding voting shares. In general terms, an "affiliated transaction" includes: (i) any merger or consolidation with an interested shareholder; (ii) the transfer to any interested shareholder of corporate assets with a fair market value equal to 5% or more of the corporation's consolidated assets or outstanding shares or representing 5% or more of the corporation's earning power or net income; (iii) the issuance to any interested shareholder of shares with a fair market value equal to 5% or more of the aggregate fair market value of all outstanding shares of the corporation; (iv) any reclassification of securities or corporate reorganization that will have the effect of increasing by more than 5% the percentage of the corporation's outstanding voting shares beneficially owned by any interested shareholder; (v) the liquidation or dissolution of the corporation if proposed by any interested shareholder; and (vi) any receipt by the interested shareholder of the benefit of any loans, advances, guaranties, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the corporation. At the October 22, 2002 meeting of the Company's Board of Directors, by unanimous vote of all directors, including a majority of disinterested directors, the Company's Board of Directors have approved the Merger Agreement and the Shareholder Tender and Voting Agreements and the transactions contemplated by those agreements. As a result, the provisions of the Affiliated Transactions Statute are not applicable to the Offer and the Merger and the transactions contemplated by such agreements. Control Share Acquisition Statute. The Company also may be subject to Section 607.0902 of the FBCA (the "Control Share Acquisition Statute"). The Control Share Acquisition Statute provides that shares of publicly held Florida corporations that are acquired in a "control share acquisition" generally will have no 37 voting rights unless such rights are conferred on those shares by the vote of the holders of a majority of all the outstanding shares other than interested shares. A control share acquisition is defined, with certain exceptions, as the acquisition of the ownership of voting shares which would cause the acquirer to have voting power within the following ranges or to move upward from one range into another: (i) 20%, but less than 33 1/3%; (ii) 33 1/3%, but less than 50%; or (iii) 50% or more of such votes. The Control Share Acquisition Statute does not apply to an acquisition of shares of a publicly held Florida corporation (i) pursuant to a merger or share exchange effected in compliance with the FBCA if the publicly held Florida corporation is a party to the merger or share exchange agreement, or (ii) if such acquisition has been approved by the board of directors of that corporation before the acquisition. Because the Control Share Acquisition Statute specifically exempts (i) an acquisition of shares of a publicly held Florida corporation which has been approved by the board of directors of the such corporation before the acquisition, and (ii) a merger effected in compliance with the FBCA if the publicly held Florida corporation is a party to the merger agreement, the provisions of the Control Share Acquisition Statute are not applicable to the Offer or to the Merger. At the October 22, 2002 meeting of the Company's Board of Directors, by unanimous vote of all directors, the Company's Board of Directors approved the acquisition of the Subject Shares (as defined in the Shareholder Tender and Voting Agreements) pursuant to the Shareholder Tender and Voting Agreements, the acquisition of Shares pursuant to the Offer, and the Merger Agreement. Short-Form Merger. Section 607.1104 of the FBCA provides that, if a parent corporation owns at least 80% of the outstanding shares of each class of a subsidiary corporation, the merger of the subsidiary corporation into another 80% owned subsidiary of the parent corporation may be effected by a plan of merger adopted by the board of directors of the parent corporation and the appropriate filings with the Florida Department of State, without the approval of the shareholders of the subsidiary corporation (a "short-form merger"). In accordance with the FBCA, if Purchaser acquires at least 80% of the outstanding Shares, Purchaser will be able to effect the Merger without a vote of the other shareholders of the Company. In such event, the Company has agreed in the Merger Agreement to take, at the request of Purchaser, all necessary and appropriate action to cause the Merger to become effective after such acquisition without a meeting of the Company's shareholders. State Takeover Statutes. A number of states have adopted laws which purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or which have substantial assets, shareholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. Except as described herein, we do not know whether any of these laws will, by their terms, apply to the Offer or the Merger and have not complied with any such laws. To the extent that certain provisions of these laws purport to apply to the Offer or the Merger we believe that there are reasonable bases for contesting such laws. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated, and has a substantial number of stockholders, in the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a Federal District Court in Florida held in Grand Metropolitan PLC v. Butterworth, that the 38 provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Based on information supplied by the Company and the approval by the Board of Directors of the Company of the Merger Agreement, the Shareholder Tender and Voting Agreements, the Merger and the Offer, Purchaser does not believe that any state takeover statutes or similar laws purport to apply to the Offer or the Merger. Neither Purchaser nor Parent has currently complied with any state takeover statute or regulation other than as set forth in this Offer to Purchase. If any government official or third party should seek to apply any state takeover law to the Offer or the Merger or other business combination between Purchaser or any of its affiliates and the Company, Purchaser will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. In the event that it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of Shares, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment or pay for any tendered Shares pursuant to the Offer. Antitrust. Under the HSR Act, and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. A Notification and Report Form with respect to the Offer is expected to be filed under the HSR Act on or about October 28, 2002, and the waiting period with respect to the Offer under the HSR Act will expire at 11:59 P.M., New York City time, on the fifteenth day after such Notification and Report Form is filed. Before such time, however, either the FTC or the Antitrust Division may extend the waiting period by requesting additional information or material from Purchaser. If such request is made, the waiting period will expire at 11:59 P.M., New York City time, on the tenth calendar day after Purchaser has substantially complied with such request. Thereafter, the waiting period may be extended only by court order or with Purchaser's consent. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by Purchaser or divestiture of substantial assets of Parent or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Parent and the Company are engaged, Parent and Purchaser believe that the acquisition of Shares by Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 13 -- "Certain Conditions of the Offer," including conditions with respect to litigation and certain governmental actions. In addition to the United States, the antitrust and competition laws of other countries may apply to the Offer and the Merger and additional filings and notifications may be required. Parent and the Company are reviewing whether any such filings are required and intend to make such filings promptly to the extent required. Federal Reserve Board Regulations. Regulations G, U and X (the "Margin Regulations") of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct 39 and indirect collateral securing the credit, including margin stock and other collateral. All financing for the Offer will be structured so as to be in full compliance with the Margin Regulations. 15. FEES AND EXPENSES Except as set forth below, neither Purchaser nor Parent will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Parent and Purchaser have retained D.F. King & Co., Inc. to act as the Information Agent, Mellon Investor Services LLC to act as Depositary and Bear, Stearns & Co. Inc. to act as the Dealer Manager in connection with the Offer. Such firms will each receive reasonable and customary compensation for their services. Parent and Purchaser have also agreed to reimburse such firms for certain reasonable out-of-pocket expenses and to indemnify each such firm against certain liabilities in connection with their services, including certain liabilities under federal securities laws. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent, Depository and the Dealer Manager) for making solicitations or recommendations in connection with the Offer. Brokers, dealers, banks and trust companies will be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. 16. MISCELLANEOUS The Offer is being made to all holders of Shares other than the Company. Purchaser is not aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. We have filed with the SEC the Schedule TO pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional information with respect to the Offer. The Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC and the Nasdaq National Market in the manner set forth in Section 8 -- "Certain Information Concerning the Company" of this Offer to Purchase (except that they will not be available at the regional offices of the SEC). Prince Merger Corporation October 28, 2002 40 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PRINCE MERGER CORPORATION AND DRS TECHNOLOGIES, INC. 1. PRINCE MERGER CORPORATION Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of the Prince Merger Corporation. Unless otherwise indicated, (a) each such person is a citizen of the U.S., and (b) the business address of each such person is c/o DRS Technologies, Inc. 5 Sylvan Way, Parsippany, NJ 07054.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- Mark S. Newman................... Mr. Newman has been a Director and the President of Prince Merger Corporation since its formation on October 17, 2002. Mr. Newman has been Chairman of the Board since August 1995 and President and Chief Executive Officer of DRS Technologies, Inc. since May 1994. Mr. Newman joined DRS Technologies, Inc. in 1973 and has been a director since 1988. Mr. Newman serves as Vice Chairman on the board of directors of the American Electronics Association, and is a director on the boards of the New Jersey Technology Council, SSG Precision Optronics, Inc., Opticare Health Systems, Inc. and Congoleum Corporation, where he chairs the Audit Committee. Mr. Newman also serves on the Board of Governors of the Aerospace Industries Association of America. Richard A. Schneider............. Mr. Schneider has been the Vice President and Treasurer of Prince Merger Corporation since its formation on October 17, 2002. Mr. Schneider has been Executive Vice President, Chief Financial Officer and Treasurer of DRS Technologies, Inc. since 1999. He held similar positions at NAI Technologies, Inc. (NAI) from November 1988 until February 1999 and was a member of its board of directors from 1996 until February 1999, when it was acquired by DRS Technologies. Mr. Schneider has over 25 years of experience in corporate financial management, including ten years with NAI. Nina Laserson Dunn............... Ms. Dunn has been a Director, and the Vice President and Secretary of Prince Merger Corporation since its formation on October 17, 2002. Ms. Dunn has been Executive Vice President, General Counsel and Secretary of DRS Technologies, Inc. since July 1997. From July 1993 until June 1997, Ms. Dunn was a Director in the corporate law department of Hannoch Weisman, a Professional Corporation, where she served as DRS Technologies, Inc.'s outside legal counsel. Ms. Dunn is admitted to practice law in New York and New Jersey and is a member of the American, New York State and New Jersey State Bar Associations.
41 2. DRS TECHNOLOGIES, INC. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of the directors and executive officers of DRS Technologies, Inc. Unless otherwise indicated, (a) each such person is a citizen of the U.S., and (b) the business address of each such person is c/o DRS Technologies, Inc. 5 Sylvan Way, Parsippany, NJ 07054.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- EXECUTIVE OFFICERS Mark S. Newman................... See Part 1 of this Schedule I Richard A. Schneider............. See Part 1 of this Schedule I Paul G. Casner, Jr. ............. Mr. Casner has been Executive Vice President and Chief Operating Officer of DRS Technologies, Inc. since May 2000. Mr. Casner joined DRS Technologies, Inc. in 1993 as President of Technology Applications and Service Company, now DRS Electronic Systems, Inc. From 1994 until 1998, Mr. Casner was one of DRS Technologies, Inc.'s Vice Presidents and President of the DRS Electronic Systems Group. Thereafter, Mr. Casner was Executive Vice President, Operations from 1998 until 2000. Mr. Casner has over 30 years of experience in the defense electronics industry and has held positions in engineering, marketing and general management. Mr. Casner is a director of ACE-COMM Corporation and Mikros Systems Corporation. Nina Laserson Dunn............... See Part 1 of this Schedule I Robert F. Mehmel................. Mr. Mehmel has been Executive Vice President, Business Operations and Strategy since January 2001. Before joining DRS Technologies, Inc., he was Director, Corporate Development, at Jabil Circuit, Inc. from July 2000 until December 2000. Prior to that, he was Vice President, Planning, at L-3 Communications Corporation from its inception in April 1997 until June 2000. Earlier, Mr. Mehmel held various positions in divisional and corporate financial management with Lockheed Martin Corporation from April 1996 until April 1997, with Loral Corporation from September 1984 until March 1996 and with Lear Siegler, Inc. from June 1982 until August 1994. DIRECTORS Mark S. Newman................... See Part 1 of this Schedule I Ira Albom........................ Mr. Albom has been a director of DRS Technologies, Inc. 630 W. Germantown Pike, Ste. 450 since February 1997. Additionally, Mr. Albom has been Plymouth Meeting, PA 19462 employed since 1977 by Teleflex, Inc., a defense and aerospace company, and has been Senior Vice President at Teleflex since 1987. Mr. Albom has over forty years of operations and management experience in the defense and aerospace industry. Since 1987, he has been actively involved in leading diligence teams and negotiating terms of mergers and acquisitions, as well as negotiating major contracts for Teleflex's Defense/Aerospace Group. Mr. Albom also serves as a director of Klune Industries, Inc.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- Donald C. Fraser................. Mr. Fraser has been a director of DRS Technologies, Inc. 8 St Mary's Street since 1993. He currently serves as Director of the Boston Boston, MA 02215 University Photonics Center since November 1993 and as Professor of Engineering and Physics at that university since November 1993. From 1991 until 1993, Mr. Fraser was the Principal Deputy Under Secretary of Defense, Acquisition, with primary responsibility for managing the Department of Defense acquisition process, including setting policy and executing programs. He also served as Deputy Director of Operational Test and Evaluation for Command, Control, Communication and Intelligence from 1990 to 1991, a position which included top level management and oversight of the operational test and evaluation of all major Department of Defense communication, command and control, intelligence, electronic warfare, space and information management system programs. From 1981 to 1988, Dr. Fraser was employed as Vice President, Technical Operations at Charles Stark Draper Laboratory and, from 1988 to 1990, as its Executive Vice President. William F. Heitmann.............. Mr. Heitmann has been a director of DRS Technologies, 1095 Avenue of the Americas Inc. since February 1997. Mr. Heitmann is currently New York, NY 10036 Senior Vice President and Treasurer of Verizon Communications, Inc. since July 2000. He has been employed by Verizon Communications, Inc. since its formation in June 2000 through the merger of Bell Atlantic Corp. and GTE Corp. He was employed by Bell Atlantic Corp. and its predecessors since 1971, serving as a Vice President from 1996 until July 2000 and as Treasurer from June 1999 until July 2000. Previously, he was Chief Investment Officer of NYNEX Asset Management Company from March 1991 until September 1995 and of Bell Atlantic Asset Management Company from June 1996 until July 2000. Mr. Heitmann has also served as Chairman of Bell Atlantic Credit Company (BACC) from September 1997 until December 1998 and as Chairman and Chief Executive Officer from December 1998 until July 2000. Mr. Heitmann currently serves as Chairman of Verizon Capital Corp. since July 2000. He also serves as Director of Exchange Indemnity Corp since October 1996 and of GTE Reinsurance since November 2000. Mr. Heitmann is a member of the Real Estate Advisory Board of the New York Common Fund and The Financial Executives Institute and a Director of its New York City chapter.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- Steven S. Honigman............... Mr. Honigman has been a director of DRS Technologies, 40 West 57th Street Inc. since 1998. Mr. Honigman has been a partner of the New York, NY 10019 law firm of Thelen Reid & Priest LLP since August 1998. Previously, he served as General Counsel to the Department of the Navy from 1993 until 1998. As chief legal officer of the Department of the Navy and the principal legal advisor to the Secretary of the Navy, Mr. Honigman was recognized as a leader in acquisition reform, procurement related litigation and the accomplishment of national security objectives in the context of environmental compliance. He also exercised Secretariat oversight of the Naval Criminal Investigative Service and served as the Department's Designated Agency Ethics Officer and Contractor Suspension and Department Official from 1993 until 1998. For his service, Mr. Honigman received the Department of the Navy Distinguished Public Service Award. Prior to that, he was a partner of the law firm of Miller, Singer, Raives & Brandes from 1982 until 1993. Mr. Honigman also serves as a director of The Wornick Company, a producer of combat rations for the Department of Defense. C. Shelton James................. Mr. James has been a director of DRS Technologies, Inc 310 East Royal Palm Rd. since February 1999. Mr. James is currently President of Boca Raton, FL 33432 C.S. James Associates, business advisors, and has served in that position since May 2000. From December 2001 until July 2002 Mr. James was Chief Executive Officer of Technisource, Inc., a provider of information technology staffing, outsourced solutions and computer systems. Until June 1999, he served as President of Fundamental Management Corporation, an investment management company. Additionally, from May 1992 until February 2000, Mr. James was Chairman of the Board of Elcotel, Inc., a public communications company. He serves as a director of Concurrent Computer Systems, Inc., SK Technologies, CSPI, Inc. and Technisource, Inc. Mark N. Kaplan................... Mr. Kaplan has been a director of DRS Technologies, Inc. Four Times Square since 1986. Mr. Kaplan was a member of the law firm of New York, NY 10036 Skadden, Arps, Slate, Meagher & Flom LLP from 1979 to 1998 and is now of counsel to the firm. Mr. Kaplan also serves as a director of American Biltrite Inc., Autobytel Inc., Grey Advertising Inc., REFAC Technology Inc., Congoleum Corporation and Volt Information Sciences, Inc. Stuart F. Platt.................. Mr. Platt has been a director of DRS Technologies, Inc 14679 Henderson Road NE since 1991. From May 1994 until 1999, he served as a Vice Bainbridge Island, WA 98110 President and also as the President of our Data Systems Group. Admiral Platt also served as President of our wholly owned subsidiary, DRS Precision Echo, Inc. from July 1992 to August 1998. Mr. Platt has been Chairman of The Wornick Company, a producer of combat rations for the Department of Defense, since 2000 and Chairman of CDCOM, a Washington State based data storage company, since 1999. Admiral Platt held various high level positions as a military officer in the Department of the Navy, retiring as Competition Advocate General of the Navy in 1987. He has also served as Chairman of The Historic Battleship Society since 1996 and Chairman of Hydro Wing Hawaii since 2000.
44
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- Dennis J. Reimer................. Mr. Reimer has been a director of DRS Technologies, Inc. P.O. Box 889 since 2000. He has served as Director of the National 204 North Robinson, Suite 1404 Memorial Institute for the Prevention of Terrorism, Oklahoma City, OK 73101 located in Oklahoma City, OK, since April 2000. General Reimer served as the 33rd Chief of Staff, U.S. Army, from June 20, 1995 until June 21, 1999. Prior to that, he was Commanding General of United States Army Forces Command, Fort McPherson, Georgia, from August 1, 1999 until March 31, 2000. Additionally, General Reimer has served as Distinguished Fellow of the Association of the U.S. Army since 1999. He is a member of the Editorial Board of the Armed Forces Journal and the Advisory Committee for Media and Security of the Fund for Peace Project. General Reimer also serves as a director of Microvision, Inc., Mutual of America and Plato Learning, Inc. Eric J. Rosen.................... Mr. Rosen has been a director of DRS Technologies, Inc. 712 5th Ave FL 40 since August 1998. He is a Managing Director of Onex New York, NY 10019-4108 Investment Corp. since 1992 and has been with Onex Investment Corp. since 1989. Previously, he worked at Kidder, Peabody & Co. in both the Mergers and Acquisitions group from 1983 until 1985 and the Merchant Banking group from 1987 until 1989. Mr. Rosen also serves as a director of Dura Automotive Systems. Mr. Rosen and Mark S. Newman, our Chairman of the Board, President and Chief Executive Officer, are first cousins.
45 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below: Depositary for the Offer is: MELLON INVESTOR SERVICES LLC BY MAIL BY HAND BY OVERNIGHT DELIVERY Mellon Investor Services Mellon Investor Services LLC Mellon Investor Services LLC LLC 120 Broadway, 13th Floor 85 Challenger Road P.O. Box 3301 New York, NY 10271 Mail Stop-Reorg South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 Attn: Reorganization Department
BY FACSIMILE TRANSMISSION: CONFIRM RECEIPT OF FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY) BY TELEPHONE: (201) 296-4293 (201) 296-4860
Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. Shareholders may also contact Bear, Stearns & Co. Inc., Dealer Manager for the Offer, or their broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, NY 10005 Banks and Brokers (Call Collect): (212) 269-5550 All Others Call Toll-Free: (800) 628-8532 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, NY 10179 Call Toll-Free (866) 413-0658 EX-99.A.1.B 4 y64755texv99waw1wb.txt FORM OF LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF PARAVANT INC. PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 28, 2002 BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 22, 2002, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: MELLON INVESTOR SERVICES LLC. By First Class Mail: By Hand: By Overnight, Certified or Express Mail: Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC P.O. BOX 3301 120 Broadway, 13th Floor 85 Challenger Road South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg Ridgefield Park, NJ 07660 Attn: Reorganization Department
By Facsimile Transmission: (For Eligible Institutions Only) (201) 296-4293 Conform Receipt by Telephone: (201) 296-4860 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATES AND SHARES TENDERED ON SHARE CERTIFICATES) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER SHARE EVIDENCED OF SHARES CERTIFICATE BY SHARE TENDERED** NUMBER(S)* CERTIFICATE(S)* ------------------- ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by Book-Entry Transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. Shareholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders" and other shareholders are referred to herein as "Certificate Shareholders." Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE SYSTEM OF THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: Account Number: Transaction Code Number: [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): Window Ticket No. (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: Account Number (if delivered by Book-Entry Transfer): Transaction Code Number: [ ] CHECK HERE IF ANY OF YOUR SHARE CERTIFICATES HAVE BEEN LOST, DESTROYED OR STOLEN AND CALL CONTINENTAL STOCK TRANSFER AND TRUST CO. AT (212) 509-4000 TO OBTAIN AN AFFIDAVIT OF LOSS. SEE INSTRUCTION 10. Number of Shares represented by lost, destroyed or stolen Share Certificates: BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 2 Ladies and Gentlemen: The undersigned hereby tenders to Prince Merger Corporation, a Florida corporation (the "Purchaser"), and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation ("Parent"), the above-described shares of Common Stock, par value $0.015 per share (the "Shares"), pursuant to Purchaser's offer to purchase all outstanding Shares at a price of $4.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 28, 2002 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements hereto or thereto, constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or in part from time to time, to Parent or any affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of Purchaser, all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof (collectively, "Distributions")), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Distributions for cancellation and transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and all Distributions and that, when the same are accepted for payment by the Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser, in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Mark S. Newman and Nina Laserson Dunn, and each of them, acting unanimously if more than one be present, and any other designees of Purchaser, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's shareholders or otherwise act in such manner as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper and to otherwise act with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be 3 deemed effective). Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting and other rights with respect to such Shares, including voting at any shareholders' meeting then scheduled. The undersigned understands that the valid tender of Shares to Purchaser pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the tendered Shares. Purchaser's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate), to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book- entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. The undersigned recognizes that Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered. 4 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name: -------------------------------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail check and/or certificate(s) to: Name: -------------------------------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9) 5 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by shareholders either if Share Certificates are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents, must be received by the Depositary at one of the Depositary's addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer (and a Book-Entry Confirmation received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedure set forth below. Shareholders whose Share Certificates are not immediately available or who cannot complete the procedures for book-entry transfer on a timely basis, or if time will not permit all required documents to reach the Depositary prior to the Expiration Date, may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser (or facsimile thereof), must be received by the Depositary prior to the Expiration Date and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with this properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading day" is any day on which the National Association of Securities Dealers Automated Quotation System, Inc. is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARE CERTIFICATES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 6 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule attached hereto. 4. Partial Tenders. If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new Share Certificate(s) for the remainder of the Shares that were evidenced by the Share Certificate(s) delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on page 5, as soon as practicable after the expiration or termination of the Offer. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificate(s) evidencing such Shares without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal or any Share Certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and tendered hereby, no endorsements of Share Certificates or separate stock powers are required unless payment or Share Certificates evidencing Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificates. Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, Purchaser will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price for any Shares is to be made to, or if Share Certificates evidencing Shares not tendered or accepted for payment are to be issued in the name of, a person other than the registered holder(s), or if tendered Share Certificates are registered in the name of a person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such person or otherwise) payable on the account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of and/or Share Certificates not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Share Certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of Shares Tendered" on page 1, the appropriate boxes on page 5 of this Letter of Transmittal should be completed. Any shareholder tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such shareholder at the Book-Entry Transfer Facility from which such transfer was made. 7 8. Waiver of Conditions. Except as otherwise provided in the Offer to Purchase, Purchaser reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. 9. Taxpayer Identification Number and Backup Withholding. U.S. federal income tax law generally requires that a shareholder tendering Shares pursuant to the Offer must provide the Depositary (the "Payor") with his correct Taxpayer Identification Number ("TIN"), which, in the case of a shareholder who is an individual, is his social security number. If the Payor is not provided with the correct TIN or an adequate basis for an exemption, such shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding at the rate of 30% (or other applicable percentage) may be imposed upon the gross proceeds of any payment received hereunder. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each tendering shareholder must provide his correct TIN by completing the "Substitute Form W-9" set forth herein, which requires such shareholder to certify that the TIN provided is correct (or that such shareholder is awaiting a TIN) and that (i) the shareholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the shareholder that he is no longer subject to backup withholding. Exempt shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt shareholder must enter its correct TIN in Part 1 of Substitute Form W-9, write "Exempt" in Part 2 of such form, and sign and date the form. See the enclosed Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8BEN signed under penalties of perjury attesting to such exempt status. Such forms may be obtained from the Payor. If Shares are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. If you do not have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If you do not provide your TIN to the Payor within 60 days, backup withholding will begin and continue until you furnish your TIN to the Payor. NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE. 10. Lost or Destroyed Certificates. If any Share Certificate has been lost or destroyed, the shareholder should check the appropriate box on page 2 of this Letter of Transmittal. The Company's stock transfer agent will then instruct such shareholder as to the procedure to be followed in order to replace the Share Certificate. The shareholder will have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed Share Certificates have been followed. 11. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OR A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). 8 IMPORTANT SHAREHOLDER(S): SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) Dated: ------------------------------ , 2002 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing or by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity: ---------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PROVIDE FULL TITLE) Address: ----------------------------------------------------------------------- (INCLUDE ZIP CODE) Telephone No.: ---------------------------------------------------------------------- (INCLUDE AREA CODE) Taxpayer Identification or Social Security Number: - ---------------------------------------------------------------- (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ---------------------------------------- Name: ------------------------------------------------------------------------ Name of Firm: ------------------------------------------------------------------------ Address: ----------------------------------------------------------------------- (INCLUDE ZIP CODE) Title: ------------------------------------------------------------------------ Telephone No.: ------------------------------------------------------------ (INCLUDE AREA CODE) Dated: ------------------------------ , 2002 9 - ------------------------------------------------------------------------------------------------------------------------ PAYOR'S NAME: MELLON INVESTOR SERVICES LLC, AS DEPOSITARY - ------------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART I -- Taxpayer Identification Num- -------------------------------------- FORM W-9 ber -- For All Accounts Social Security Number DEPARTMENT OF THE TREASURY Enter your TIN in the box at right. (For OR--------------------------------- INTERNAL REVENUE SERVICE most individuals, this is your social Employer Identification security number. If you do not have a TIN, Number see Obtaining a Number in the enclosed Guidelines). Certify by signing and dating (If awaiting TIN, write below. "Applied For") Note: If the account is in more than one name, see the chart in the enclosed Guide- lines to determine which number to give the payor. ------------------------------------------------------------------------------------ PAYOR'S REQUEST FOR TAXPAYER PART II -- For Payees Exempt from Backup Withholding, see the enclosed Guidelines IDENTIFICATION NUMBER (TIN) and complete as instructed therein. - ------------------------------------------------------------------------------------------------------------------------ PART III -- CERTIFICATION -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) - ------------------------------------------------------------------------------------------------------------------------ Signature -------------------------------------------------- Date -------------------------------------------- , 2002 - ------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 30% (OR OTHER APPLICABLE PERCENTAGE) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under the penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 30% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature ---------------------------------------------------- Date ------------------------------------------------ , 2002
10 Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Dealer Manager and the Information Agent at the locations and telephone numbers set forth below: The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers (Call Collect): (212) 269-5550 All Others Call Toll-Free: (800) 628-8532 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, NY 10179 Call Toll-Free (866) 413-0658 EX-99.A.1.C 5 y64755texv99waw1wc.txt FORM OF NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF PARAVANT INC. PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 28, 2002 TO PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if certificates evidencing shares (the "Shares") of common stock, par value $0.015 per share, of Paravant Inc., a Florida corporation (the "Company"), are not immediately available or time will not permit all required documents to reach Mellon Investor Services LLC, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: MELLON INVESTOR SERVICES LLC By First Class Mail: By Hand: By Overnight, Certified or Mellon Investor Services LLC Mellon Investor Services LLC Express Mail: P.O. Box 3301 120 Broadway, 13th Floor Mellon Investor Services LLC South Hackensack, NJ 07606 New York, NY 10271 85 Challenger Road Mail Stop-Reorg Ridgefield Park, NJ 07660 Attn: Reorganization Department By Facsimile Transmission: (For Eligible Institutions only) (201) 296-4293 Confirm Receipt by Telephone: (201) 296-4860
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. SHARES MAY NOT BE TENDERED PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES. Ladies and Gentlemen: The undersigned hereby tenders to Prince Merger Corporation, a Florida corporation and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 28, 2002 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Series and Certificate Nos. of Shares (if available): Name(s) of Record Holder(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PLEASE TYPE OR PRINT Address(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ZIP CODE Area Code and Tel. No.: - -------------------------------------------------------------------------------- Common Stock, par value $0.015 per share Certificate Nos. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Number of Shares Tendered - -------------------------------------------------------------------------------- If Share(s) will be delivered by book-entry transfer, check this box [ ] Account number: - -------------------------------------------------------------------------------- Signature(s): - -------------------------------------------------------------------------------- Dated: - -------------------------------------------------------------------------------- 2 GUARANTEE (NOT TO BE USED FOR THE SIGNATURE GUARANTEE) The undersigned, an Eligible Institution (as defined in the Offer to Purchase), hereby guarantees delivery to the Depositary, at one of its addresses set forth above, certificates ("Share Certificates") evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three days on which the National Association of Securities Dealers Automated Quotation System, Inc. is open for business after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and Share Certificates to the Depositary within the time period set forth above. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: - ---------------------------------------- Address: - ----------------------------------------------- - --------------------------------------------------------- (CITY, STATE, ZIP CODE) Area Code and Telephone Number: - ----------------------------------- - --------------------------------------------------------- (AUTHORIZED SIGNATURE) Name: - ------------------------------------------------- Title: - -------------------------------------------------- Dated: - ------------------------------------------, 2002 DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A.1.D 6 y64755texv99waw1wd.txt FORM OF LETTER TO BROKERS, DEALERS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF PARAVANT INC. AT $4.75 NET PER SHARE BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 22, 2002 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. October 28, 2002 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Prince Merger Corporation, a Florida corporation (the "Purchaser") and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's offer to purchase all outstanding shares (the "Shares") of common stock, par value $0.015 per share (the "Common Stock") of Paravant Inc., a Florida corporation (the "Company"), at a price of $4.75 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated October 28, 2002 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of October 23, 2002, by and among Parent, Purchaser and the Company. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing copies of the following documents: 1. Offer to Purchase; 2. Letter of Transmittal to tender Shares for your use and for the information of your clients; 3. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A letter to the shareholders of the Company from William R. Craven, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to Mellon Investor Services LLC (the "Depositary"). WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, FRIDAY, NOVEMBER 22, 2002 UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to the Agreement and Plan of Merger, dated October 23, 2002 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant to the Merger Agreement, no later than the second business day after the satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), Purchaser will be merged with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent (the "Merger") and the separate corporate existence of Purchaser will thereupon cease. At the effective time of the Merger, each outstanding Share (other than Shares held by Parent, Purchaser, the Company or any wholly owned subsidiary of Parent or the Company) will be converted into the right to receive the Offer Price, without interest thereon, as set forth in the Merger Agreement and described in the Offer to Purchase. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will pay, promptly after the Expiration Date, for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4 of the Offer to Purchase. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery, and (iii) any other documents required by the Letter of Transmittal. If holders of Shares wish to tender Shares, but cannot deliver such holders' certificates or other required documents, or cannot comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Neither Purchaser nor Parent will pay any fees or commissions to any broker, dealer or other person (other than Bear, Stearns & Co. Inc. (the "Dealer Manager") and D.F. King & Co., Inc. (the "Information Agent")) for soliciting tenders of Shares pursuant to the Offer. However, upon request, Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to the Information Agent or to the Dealer Manager, at the respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, BEAR, STEARNS & CO. INC. as Dealer Manager 383 Madison Avenue New York, NY 10179 Call Toll-Free: (866) 413-0658 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PARENT, THE PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.A.1.E 7 y64755texv99waw1we.txt FORM OF LETTER TO CLIENTS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF PARAVANT INC. AT $4.75 NET PER SHARE BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 22, 2002 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. October 28, 2002 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated October 28, 2002 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") relating to the offer by Prince Merger Corporation, a Florida corporation (the "Purchaser") and wholly owned subsidiary of DRS Technologies Inc., a Delaware corporation ("Parent"), to purchase all outstanding shares (the "Shares") of common stock, par value $0.015 per Share, of Paravant Inc., a Florida corporation (the "Company"), at a price of $4.75 per Share, net to the seller in cash (the "Offer Price"), without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated October 23, 2002, by and among Parent, Purchaser and the Company (the "Merger Agreement"). Also enclosed is the Letter to Shareholders of the Company from William R. Craven, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company. WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us (or our nominee) for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $4.75 per Share, net to the seller in cash, without interest. 2. The Offer is being made for all outstanding Shares. 3. The Offer is being made pursuant to an Agreement and Plan of Merger, dated October 23, 2002 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that Purchaser will be merged with and into the Company (the "Merger") following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. 4. The Board of Directors of the Company has determined that each of the Offer, the Merger Agreement and the Merger is fair to and in the best interests of the shareholders of the Company and recommends that the shareholders of the Company accept the Offer and tender their Shares to Purchaser pursuant to the Offer. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Friday, November 22, 2002, unless the Offer is extended. 6. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. However, U.S. federal income tax backup withholding at a rate of 30% (or other applicable percentage) may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 9 of the Letter of Transmittal. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and any supplements or amendments thereto, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Bear, Stearns & Co. Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF PARAVANT INC. BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated October 28, 2002, and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") in connection with the offer by Prince Merger Corporation, a Florida corporation and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation, to purchase all outstanding shares (the "Shares") of common stock, par value $0.015 per share (the "Common Stock") of Paravant Inc., a Florida corporation (the "Company"). This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. DATE: - -----------------------------------------, 2002 NUMBER OF SHARES TO BE TENDERED: COMMON STOCK* SIGN HERE - ------------------------------------------------------ - ------------------------------------------------------ SIGNATURE(S) OF HOLDER(S) ------------------------------------------------------ NAME(S) OF HOLDER(S) SHARES OF - ------------------------------------------------------ PLEASE TYPE OR PRINT ADDRESS - --------------------------------------------- ZIP CODE - ------------------------------------------- - ------------------------------------------------------ AREA CODE AND TELEPHONE NUMBER - ------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.A.1.F 8 y64755texv99waw1wf.txt GUIDLINES FOR CERTIFICATION OF TAX ID # GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------------ GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------ 1. An individual The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor- trust (grantor is also trustee) trustee(1) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship The owner(3) 6. Account in the name of guardian or The ward, minor or committee for a designated ward, incompetent person minor or incompetent person(4) - ------------------------------------------------------------
- ------------------------------------------------------------ GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------ 7. A valid trust, estate or pension Legal entity(5) trust 8. Corporate The corporation 9. Association, club, religious, The organization charitable, educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employer identification number. (4) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (5) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the identifying number of the person, representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, at the local office of the Social Security Administration or Form SS-4. Applications for Employer Identification Number at the Internal Revenue Service (the "IRS") and apply for a number. If you do not have a number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the substitute Form W-9 and return it to the payor. You must provide a payor with a taxpayer identification number within 60 days. During this 60-day period, a payor has two options for withholding on reportable interest or dividend payments: (1) a payor must backup withhold on any withdrawals you make from the account after 7 business days after a payor receives the substitute Form W-9: or (2) a payor must backup withhold on any reportable interest or dividend payments made to your account, regardless of whether you make any withdrawals. Under this option, backup withholding must begin no later than 7 business days after a payor receives the Substitute Form W-9. Under this option, a payor must refund the amounts withheld if a payor receives your certified taxpayer identification number within the 60-day period and you are not otherwise subject to backup withholding during the period. With respect to other reportable payments, if a payor does not receive your taxpayer identification number within the 60 days, a payor must backup withhold until you furnish your taxpayor identification number. CERTIFICATION For interest, dividends and broker transactions, you must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct taxpayer identification number to a payor, you must cross out item 2 in Part III before signing the form. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - An organization exempt from tax under section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement account or a custodial account under section 403(b)(7) of the Code if the account satisfies the requirements of section 401(1)(2) of the Code. - The United States or any of its agencies or instrumentalities. - A State, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. - A foreign government or any of its political subdivisions, agencies or instrumentalities. - An international organization or any of its agencies or instrumentalities. Other payees that may be exempt from backup withholding include the following: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a) of the Code. - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payor's trade or business and you have not provided your current taxpayer identification number to the payor. - Payments of tax-exempt interest (including exempt interest dividends under section 852 of the Code). - Payments described in section 6049(b)(5) of the Code to non-resident aliens. - Payments on tax-free covenant funds under section 1451 of the Code. - Payments made by certain foreign organizations. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYOR. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER. ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N of the Code and their regulations. PRIVACY ACT NOTICE. -- Section 6109 of the Code requires recipients of dividend, interest, or other payments to give taxpayer identification numbers to payors who must report the payments to IRS. The IRS uses the numbers for identification purposes. The Payor must be given the numbers whether or not recipients are required to the tax returns. Payors must generally withhold 30% (or other applicable percentage) of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payor. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payor, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX ADVISOR OR THE IRS. EX-99.A.1.H 9 y64755texv99waw1wh.txt JOINT PRESS RELEASE Exhibit (a)(1)(H) [DRS TECHNOLOGIES LETTERHEAD] NEWS RELEASE For information contact: PATRICIA M. WILLIAMSON #51 FY03 DRS Technologies, Inc. (973) 898-1500 or JOHN ZISKO Paravant Inc. (973) 631-6190 FOR IMMEDIATE RELEASE Monday, October 28, 2002 DRS TECHNOLOGIES BEGINS TENDER OFFER FOR ALL OF THE OUTSTANDING SHARES OF PARAVANT PARSIPPANY AND MORRISTOWN, N.J., OCTOBER 28 -- DRS Technologies, Inc. (NYSE: DRS) and Paravant Inc. (Nasdaq: PVAT) announced today that Prince Merger Corporation, a wholly-owned subsidiary of DRS, commenced a cash tender offer for all of the outstanding shares of common stock of Paravant at a price of $4.75 per share in cash. The tender offer is being made pursuant to an Offer to Purchase, dated October 28, 2002, and in connection with an Agreement and Plan of Merger, dated October 23, 2002, between DRS, Prince Merger Corporation and Paravant. The tender offer is scheduled to expire at 12:00 midnight, New York City time, on Friday, November 22, 2002, unless the offer is extended. Following the completion of the tender offer, Prince Merger Corporation will be merged with and into Paravant. Holders of any remaining outstanding common stock of Paravant will receive in the merger the $4.75 price per share in cash. Paravant's board of directors has unanimously recommended that its shareholders tender their shares, pursuant to the tender offer. Certain shareholders owning approximately 22 percent of the outstanding common stock of Paravant have agreed to tender their shares in the offer. The tender offer is subject to customary regulatory approvals and other closing conditions, including a majority of the fully diluted shares being deposited for tender and not withdrawn. The depositary for the tender offer is Mellon Investor Services, LLC, 85 Challenger Road, Ridgefield Park, New Jersey 07660. The dealer manager for the tender offer is Bear, Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179. - more - The information agent for the tender offer is D.F. King & Co., Inc., 77 Water Street, New York, New York 10005. The tender offer statement and related materials may be obtained free of charge by directing such requests to the information agent, D.F. King & Co., Inc., 77 Water Street, Floor 20, New York, New York 10005, toll free phone (800) 628-8532 or (212) 269-5550. The tender offer statement was filed by DRS with the Securities and Exchange Commission (SEC) on Schedule TO, and the solicitation/ recommendation statement was filed by Paravant with the SEC on Schedule 14D-9. Investors and security holders are advised to carefully read these materials, as they will contain important information on deciding whether to tender their shares, as well as on the process for tendering shares. Investors and security holders may obtain these and other documents filed by DRS and Paravant free of charge from either company or from the SEC's web site at http://www.sec.gov. Bear, Stearns & Co. Inc. is serving as financial advisor to DRS on the acquisition. DRS Technologies provides leading edge products and services to government and commercial customers worldwide. Focused on defense electronics, the company develops and manufactures a broad range of mission critical systems and components in the areas of communications, combat systems, rugged computers, electro-optics, power conversion, data storage, digital imaging, flight safety and space. For more information about DRS Technologies, please visit the company's web site at www.drs.com. Paravant is a leading designer and manufacturer of highly engineered, technically advanced, defense electronics for U.S. and allied international military and intelligence agency applications. Headquartered in Morristown, New Jersey, it manufactures rugged computer systems and communications interfaces serving military Command, Control, Communications, Computer, Intelligence and Surveillance (C4ISR) initiatives. Paravant also produces high-speed processing equipment for the intelligence community and offers modernization design and installation services for select rotary- and fixed-wing military aircraft. For more information about Paravant, please visit the company's web site at www.paravant.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Except for historical information contained herein, the matters set forth in this news release are forward-looking statements The forward-looking statements set forth above involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, and include, without limitation, demand and competition for the Company's products and other risks or uncertainties detailed in the Company's Securities and Exchange Commission filings. # # # EX-99.A.1.I 10 y64755texv99waw1wi.txt SUMMARY ADVERTISEMENT Exhibit (a)(1)(I) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase, dated October 28, 2002 (the "Offer to Purchase"), and the related Letter of Transmittal and is being made to all holders of Shares (as defined below). The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction or any administrative or judicial action pursuant thereto. In any jurisdiction where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser (as defined below) by the Dealer Manager (as defined below) or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF PARAVANT INC. AT $4.75 NET PER SHARE BY PRINCE MERGER CORPORATION A WHOLLY OWNED SUBSIDIARY OF DRS TECHNOLOGIES, INC. Prince Merger Corporation, a Florida corporation (the "Purchaser") and a wholly owned subsidiary of DRS Technologies, Inc., a Delaware corporation ("Parent"), is offering to purchase all issued and outstanding shares of common stock, par value $0.015 per share (the "Shares"), of Paravant Inc., a Florida corporation (the "Company"), at a price of $4.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses incurred in connection with the Offer of Bear, Stearns & Co. Inc., which is acting as the Dealer Manager (the "Dealer Manager"), D.F. King & Co., Inc., which is acting as the Information Agent (the "Information Agent"), and Mellon Investor Services LLC, which is acting as the Depositary (the "Depositary"). The Purchaser is offering to acquire all Shares as a first step in acquiring the entire equity interest in the Company. Following consummation of the Offer, the Purchaser intends to effect the merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 22, 2002, UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of October 23, 2002 (the "Merger Agreement"), by and among Parent, the Purchaser and the Company, pursuant to which, after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the merger, the Purchaser will be merged with and into the Company and the separate corporate existence of the Purchaser will thereupon cease. The merger of the Purchaser with and into the Company, as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger." At the effective time of the Merger, each Share then outstanding (other than Shares held by Parent, the Purchaser, the Company or any other direct or indirect wholly owned subsidiary of such person) will be canceled and retired and converted into the right to receive $4.75 per Share, net to the seller in cash, (such price being referred to herein as the "Offer Price"), without interest thereon. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (I) HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AGREEMENT AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, (II) HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (III) RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE OTHER CONDITIONS SET FORTH IN THE OFFER TO PURCHASE. As a condition and inducement to Parent and the Purchaser entering into the Merger Agreement and incurring the liabilities therein, certain shareholders of the Company, who hold voting and dispositive power with respect to 3,780,835 Shares (approximately 22% of the outstanding Shares), concurrently with the execution and delivery of the Merger Agreement entered into Shareholder Tender and Voting Agreements (the "Shareholder Tender and Voting Agreements"), dated as of October 23, 2002, with Parent and the Purchaser. Pursuant to the Shareholder Tender and Voting Agreements, such shareholders have agreed, among other things, to tender the Shares held by them in the Offer and to grant Parent a proxy with respect to the voting of such Shares in favor of the Merger upon the terms and subject to the conditions set forth therein. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on the Offer Price for the Shares, regardless of any extension of the Offer or any delay in making such payment. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or a timely Book-Entry Confirmation) (as defined in the Offer to Purchase) with respect thereto, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any holder pursuant to the Offer will be the highest per Share consideration paid to any other holder pursuant to the Offer. Except as otherwise provided in the Offer to Purchase, tenders of Shares are irrevocable. Except as provided below with respect to a Subsequent Offering Period, Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date (as defined below) and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may, as described in the Offer to Purchase, also be withdrawn at any time after December 26, 2002. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates representing Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in the Offer to Purchase at any time prior to the Expiration Date. Pursuant to Rule 14d-11 under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and subject to the terms of the Merger Agreement, the Purchaser may, subject to certain conditions, provide a "Subsequent Offering Period" following the expiration of the Offer. A Subsequent Offering Period is an additional period of time from three to twenty business days in length, beginning after the Purchaser purchases Shares tendered in the Offer, during which shareholders may tender, but not withdraw, their Shares and receive the Offer Price. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered during a Subsequent Offering Period, and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. During a Subsequent Offering Period, the Purchaser would promptly purchase and pay for all Shares tendered at the same price paid in the Offer. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, November 22, 2002, unless the Offer is extended, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Subject to the terms of the Merger Agreement, Purchaser may, without the consent of the Company, (a) extend the Offer beyond the then scheduled Expiration Date if, as of such expiration, any of the conditions (as set forth in the Offer to Purchase) shall not be satisfied or waived, (b) extend the Offer for any period required by any rule, regulation or interpretation of the Securities and Exchange Commission, the staff thereof or Nasdaq National Market applicable to the Offer, (c) extend the Offer for up to ten (10) business days if, as of the then scheduled Expiration Date, there shall not have been tendered at least eighty percent (80%) of the outstanding Shares on a fully diluted basis, and (d) provide a Subsequent Offering Period. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. Shareholders should consult with their tax advisors as to the particular tax consequences of the Offer and the Merger to them, including the applicability and effect of the alternative minimum tax and any state, local or foreign income and other tax laws and of changes in such tax laws. For a more complete description of certain U.S. federal income tax consequences of the Offer and the Merger, see Section 5 of the Offer to Purchase. The information required to be disclosed by paragraph (d)(1) of Rule 14d-6 of the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant documents will be mailed by the Purchaser to record holders of Shares, and will be furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer documents may be directed to the Information Agent or the Dealer Manager at the respective addresses and telephone numbers set forth below, and copies will be furnished at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street, 20th floor New York, NY 10005 Banks and Brokers Call Collect: (212) 269-5550 ALL OTHERS CALL TOLL-FREE: (800) 628-8532 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, NY 10179 CALL TOLL-FREE: (866) 413-0658 October 28, 2002 EX-99.A.1.J 11 y64755texv99waw1wj.txt LETTER TO STOCKHOLDERS [PARAVANT LOGO] October 28, 2002 Dear Fellow Shareholders: We are pleased to inform you that on October 23, 2002, Paravant Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with DRS Technologies, Inc. ("Parent") and Prince Merger Corporation, a wholly owned subsidiary of Parent ("Merger Sub"), providing for the acquisition of the Company. Under the terms of the Merger Agreement, Merger Sub has today commenced a cash tender offer (the "Offer") to purchase all of the outstanding shares of common stock (the "Shares") of the Company for $4.75 per Share in cash. The Merger Agreement provides that, following the Offer, Merger Sub will merge with and into the Company (the "Merger") and all Shares not purchased in the Offer (other than Shares held by Parent, Merger Sub or the Company) will be converted into the right to receive $4.75 per Share in cash. After careful consideration, your Board of Directors unanimously approved the Merger Agreement, the Offer and the Merger. They determined that the Offer and the Merger are fair to, and in the best interests of, the Company and its shareholders. The Board of Directors recommends that you accept the Offer and tender your Shares pursuant to the Offer. In arriving at its recommendation, your Board of Directors gave careful consideration to a number of factors described in the attached Schedule 14D-9 that is being filed today with the Securities and Exchange Commission. Included as an annex to the Schedule 14D-9 is the written opinion, dated October 21, 2002, of Wachovia Securities, Inc., the Company's financial advisor, to the effect that, as of the date of such opinion and based upon and subject to certain matters stated in such opinion, the $4.75 per Share cash consideration to be received in the Offer and the Merger by the holders of the Shares was fair, from a financial point of view, to such holders. In addition to the attached Schedule 14D-9 relating to the Offer, also enclosed is the Offer to Purchase, dated October 28, 2002, of Merger Sub, together with related materials, including a Letter of Transmittal to be used for tendering your Shares. These documents set forth the terms and conditions of the Offer and the Merger and provide instructions as to how to tender your Shares. We urge you to read these materials carefully. Sincerely, -s- William R. Craven WILLIAM R. CRAVEN President and Chief Executive Officer EX-99.B.1 12 y64755texv99wbw1.txt CREDIT AGREEMENT Exhibit (b)(1) CREDIT AGREEMENT, dated as of the 28th day of September, 2001, by and among DRS TECHNOLOGIES, INC., a Delaware corporation, as Borrower, the lenders who are or may become a party to this Agreement, as Lenders, FIRST UNION NATIONAL BANK, a national banking association, as Administrative Agent for the Lenders, TD SECURITIES (USA) INC., as Syndication Agent and MELLON BANK, N.A., as Documentation Agent. STATEMENT OF PURPOSE The Borrower has requested, and the Lenders have agreed, to extend certain credit facilities to the Borrower on the terms and conditions of this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. The following terms when used in this Agreement shall have the meanings assigned to them below: "Account Debtor" means, with respect to any Account, any Person obligated to make payment thereunder, including, without limitation, any account debtor thereon. "Accounts" means all "accounts" (as now or hereafter defined in the UCC) of the Borrower or any of its Restricted Subsidiaries, including, without limitation, all present or future accounts receivable, all rights to payment of a monetary obligation, whether or not earned by performance, for property sold, leased, licensed, assigned or otherwise disposed of or to be sold, leased, licensed, assigned or otherwise disposed of, for services rendered or to be rendered, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, or arising out of the use of a credit card or charge card or information contained on or for use with the card, all rights in any merchandise or goods which any of the same may represent, all notes receivable, health care insurance receivables (as now or hereafter defined in the UCC), book debts, notes, bills, drafts, acceptances, and all sums of money due or to become due thereon and all proceeds thereof and all rights, title, security interests and guarantees with respect to each of the foregoing. "Acquisition" means the acquisition of the assets and business of Sensors by the Borrower from The Boeing Company pursuant to the terms of the Asset Purchase Agreement. "Additional Term Loan" has the meaning assigned thereto in Section 4.6. "Additional Term Loan Effective Date" means the date, which shall be a Business Day, on or before the Additional Term Loan Termination Date, but no earlier than thirty (30) days after any Increase Notification Date, on which the Term Lenders make Additional Term Loans to the Borrower pursuant to Section 4.6. "Administrative Agent" means First Union in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to Section 13.9. "Administrative Agent's Office" means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 14.1(c). "Affiliate" means, with respect to any Person, any other Person (other than a Subsidiary of such Person) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its Subsidiaries. The term "control" means (a) the power to vote ten percent (10%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Aggregate Commitment" means the aggregate amount of the Lenders' Commitments hereunder, as such amount may be increased, reduced or otherwise modified at any time or from time to time pursuant to the terms hereof. On the Closing Date, the Aggregate Commitment shall be Two Hundred Forty Million Dollars ($240,000,000). "Agreement" means this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Applicable Law" means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators. "Applicable Margin" shall have the meaning assigned thereto in Section 5.1(c). "Application" means an application, in the form specified by the Issuing Lender from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Approved Fund" means any Person (other than a natural Person), including, without limitation, any special purpose entity, that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business; provided, that with respect to any assignment of any Revolving Credit Commitment, such Approved Fund must be administered by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arbitration Rules" shall have the meaning assigned thereto in Section 14.6(a). "Asset Coverage Ratio" means as of any date of determination, the ratio of (a) the sum of (i) Available Cash plus (ii) the gross book value of all Accounts of the Borrower and its Restricted Subsidiaries on such date determined in accordance with GAAP plus (iii) the gross 2 book value of all Inventory of the Borrower and its Restricted Subsidiaries on such date determined in accordance with GAAP to (b) the aggregate outstanding amount of all Extensions of Credit as of such date. "Asset Purchase Agreement" means the Asset Purchase Agreement by and between The Boeing Company and the Borrower dated as of August 3, 2001, together with all exhibits, schedules and all other documents and agreements executed in relation thereto, as amended, modified or otherwise supplemented with the consent of the Administrative Agent, which consent is not to be unreasonably withheld. "Asset Sale Proceeds" shall have the meaning assigned thereto in Section 4.4(b)(iii). "Assignment and Acceptance" shall have the meaning assigned thereto in Section 14.10. "Available Cash" means, as of any date of determination, without duplication, calculated in accordance with GAAP, the aggregate amount of all cash and Cash Equivalents of the Borrower and its Restricted Subsidiaries, which such cash or Cash Equivalents are readily marketable and available without restriction or limitation for the immediate payment or repayment of Debt as of such date of determination. "Base Rate" means, at any time, the higher of (a) the Prime Rate and (b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate. "Base Rate Loan" means any Loan bearing interest at a rate based upon the Base Rate as provided in Section 5.1(a). "Benefited Lender" shall have the meaning assigned thereto in Section 5.6. "Bonding Obligations" means, with respect to the Borrower or any Restricted Subsidiary thereof, without duplication, the face amount (including, without limitation, any contingent obligations arising in connection therewith), of any surety, performance or other bond issued at the request of or delivered by the Borrower or any Restricted Subsidiary thereof in the ordinary course of business to any other Person owed any contractual or other obligation (other than for borrowed money or other Debt) by such Borrower or Restricted Subsidiary thereof to secure the performance of such contractual or other obligations or otherwise benefit such Person to whom such contractual or other obligations are owed. All outstanding Bonding Obligations as of the Closing Date are set forth on Schedule 7.1(t). "Borrower" means DRS Technologies, Inc., a Delaware corporation. "Borrowing Base" means at any date of determination thereof, an amount equal to the sum of (a) ninety percent (90%) of Eligible Accounts Receivable, plus (b) fifty percent (50%) of Eligible Unbilled Receivables, plus (c) fifty percent (50%) of Eligible Inventory. "Borrowing Base Certificate" means each certificate delivered by the Borrower 3 substantially in the form of Exhibit K. "Borrowing Limit" means, at any date of determination thereof, an amount equal to the lesser of (a) the Borrowing Base and (b) the Revolving Credit Commitment of all Lenders. "Business Day" means (a) for all purposes other than as set forth in clause (b) below, any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina and New York, New York, are open for the conduct of their commercial banking business, and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and that is also a day for trading by and between banks in Dollar deposits in the London interbank market. "Calculation Date" shall have the meaning assigned thereto in Section 5.1(c). "Capital Asset" means, with respect to the Borrower and its Restricted Subsidiaries, any asset that should, in accordance with GAAP, be classified and accounted for as a capital asset on a Consolidated balance sheet of the Borrower and its Restricted Subsidiaries. "Capital Expenditures" means with respect to the Borrower and its Restricted Subsidiaries for any period, the aggregate cost of all Capital Assets acquired by the Borrower and its Restricted Subsidiaries during such period, as determined in accordance with GAAP. "Capital Lease" means any lease of any property by the Borrower or any of its Restricted Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of the Borrower and its Restricted Subsidiaries. "Cash Equivalents" shall have the meaning assigned thereto in Section 11.3(b). "Change in Control" shall have the meaning assigned thereto in Section 12.1(i). "Closing Date" means the date of this Agreement or such later Business Day upon which each condition described in Section 6.2 shall be satisfied or waived in all respects in a manner acceptable to the Administrative Agent, in its sole discretion. "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or modified from time to time. "Collateral" shall mean the collateral security for the Obligations pledged or granted pursuant to the Security Documents. "Collateral Agreement" means the collateral agreement of even date herewith executed by the Borrower and its Domestic Subsidiaries that are Restricted Subsidiaries in favor of the Administrative Agent for the ratable benefit of itself and the Lenders, substantially in the form of Exhibit I, as amended, restated, supplemented or otherwise modified from time to time 4 "Commitment" means, as to any Lender, the sum of such Lender's Revolving Credit Commitment and Term Loan Commitment as set forth opposite such Lender's name on Schedule 1 hereto, as such Commitment may be increased, reduced or otherwise modified at any time or from time to time pursuant to the terms hereof. "Commitment Percentage" means, as to any Lender at any time, the ratio of (a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment of all the Lenders. "Consolidated" means, when used with reference to financial statements or financial statement items of the Borrower and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. "Credit Facility" means, collectively, the Revolving Credit Facility, the Term Loan Facility and the L/C Facility. "Debt" means, with respect to the Borrower and its Restricted Subsidiaries at any date and without duplication, the sum of the following calculated in accordance with GAAP: (a) all liabilities, obligations and indebtedness for borrowed money including, but not limited to, obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person, (b) all obligations to pay the deferred purchase price of property or services of any such Person (including, without limitation, all obligations under non-competition agreements), except trade payables arising in the ordinary course of business not more than ninety (90) days past due, (c) all obligations of any such Person as lessee under Capital Leases to the extent such obligations are required to be capitalized in accordance with GAAP, (d) all Debt of any other Person secured by a Lien on any asset of any such Person, (e) all Guaranty Obligations of any such Person, (f) all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation, any Reimbursement Obligation, and banker's acceptances issued for the account of any such Person, (g) all obligations of any such Person to redeem, repurchase, exchange, defease or otherwise make payments in respect of capital stock or other securities or partnership interests of such Person and, (h) all net payment obligations incurred by any such Person pursuant to Hedging Agreements; provided, however, that Bonding Obligations shall not be considered Debt. "Default" means any of the events specified in Section 12.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "Disputes" shall have the meaning set forth in Section 14.6. "Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States. "Dollar Equivalent" means, at any time of determination, (a) with respect to any L/C Obligation denominated in Dollars, the amount thereof and (b) with respect to any L/C Obligation denominated in a currency other than Dollars, the amount of Dollars which is equivalent to the amount of such L/C Obligation at the most favorable spot exchange rate determined by the Administrative Agent to be available to it at such time of determination. 5 "Domestic Subsidiary" means any direct or indirect subsidiary of the Borrower organized under the laws of the United States, the law of any State thereof or the laws of Puerto Rico. "EBITDA" means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Restricted Subsidiaries in accordance with GAAP: (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization and depreciation, (iv) expenses related to the transactions contemplated under this agreement, (v) extraordinary losses, (vi) non-cash losses from the sale of assets, (vii) in connection with the Acquisition, a one-time non-cash write-off relating to "in process" research and development of Sensors and (viii) non-cash minority interest deductions, less (c) interest income and any extraordinary gains, plus (d) Pro Forma EBITDA; provided, that as of the fiscal quarters ending on the dates set forth below, EBITDA for the four (4) consecutive fiscal quarter period ending on such date shall be adjusted to reflect historical EBITDA attributable to Sensors by the below amount corresponding to such fiscal quarter end:
DATE AMOUNT ---- ------ September 30, 2001 $5,200,000 December 31, 2001 $3,900,000 March 31, 2002 $2,600,000 June 30, 2002 $1,300,000
"Eligible Assignee" means, with respect to any assignment of the rights, interest and obligations of a Lender hereunder, a Person that is at the time of such assignment (a) a commercial bank organized under the laws of the United States or any state thereof, having combined capital and surplus in excess of $500,000,000, (b) a commercial bank organized under the laws of any other country that is a member of the Organization of Economic Cooperation and Development, or a political subdivision of any such country, having combined capital and surplus in excess of $500,000,000, (c) a finance company, insurance company or other financial institution which in the ordinary course of business extends credit of the type extended hereunder and that has total assets in excess of $500,000,000, (d) already a Lender hereunder (whether as an original party to this Agreement or as the assignee of another Lender), (e) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Lender, (f) any Affiliate of the assigning Lender, (g) any Approved Fund or (h) any other Person that has been approved in writing as an Eligible Assignee by the Borrower (other than upon the occurrence and during the continuance of any Default or Event of Default) and the Administrative Agent. "Eligible Accounts Receivable" means, at any date of determination thereof, any bona fide Account created or acquired by the Borrower or any Restricted Subsidiary thereof in the ordinary course of their business as presently conducted, for which the Account Debtor has been billed and which Account satisfies and continues to satisfy the following requirements: (i) The Account is a bona fide existing obligation of the named Account Debtor arising from the rendering of services or the sale and delivery of 6 merchandise to such Account Debtor in the ordinary course of business on terms that are normal and customary in the business of the Borrower or its Restricted Subsidiaries and is actually and absolutely owing to the Borrower or a Restricted Subsidiary of the Borrower and is not contingent for any reason and such Borrower or such Restricted Subsidiary has lawful and absolute title to such Account; (ii) The Account does not arise out of transactions with an employee, officer, agent, director, stockholder or other Affiliate of the Borrower or any Restricted Subsidiary thereof; (iii) The Account is evidenced by an invoice and has not remained unpaid for a period exceeding ninety (90) days or more beyond the invoice date of the invoice; (iv) The Account is not due from an Account Debtor whose debt on Accounts that are unpaid ninety (90) days or more after the invoice date of the respective invoices exceeds fifty percent (50%) of such Account Debtor's total debt to the Borrower and its Restricted Subsidiaries; (v) The Account is a valid, legally enforceable obligation of the Account Debtor and no offset (including without limitation discounts, advertising allowances, counterclaims or contra accounts) or other defense on the part of such Account Debtor or any claim on the part of such Account Debtor denying liability thereunder has been asserted; provided, however, that if the Account is subject to any such offset, defense or claim, or any inventory related thereto has been returned, such account shall not be an Eligible Accounts Receivable only to the extent of the maximum amount of such offset, defense, claim or return and the balance of such Account, if it otherwise represents a valid, uncontested and legally enforceable obligation of the Account Debtor and meets all of the other criteria for eligibility set forth herein, shall be considered an Eligible Account Receivable; (vi) The Account Debtor is not the subject of any bankruptcy or insolvency proceeding of any kind; (vii) The services have been performed (unless billing prior to such services having been performed is permitted under the agreement with the Account Debtor) or the subject merchandise has been shipped or delivered on open Account to the named Account Debtor on an absolute sale basis and not on a bill-and-hold, consignment, sale on approval or subject to any other repurchase or return agreement and no material part of the subject goods has been returned; (viii) Other than pursuant to the Security Documents, the Account is not subject to any Lien or security interest whatsoever, including any Account owed pursuant to any contractual or other obligation of the Borrower or any Restricted Subsidiary thereof subject to any Bonding Obligation; 7 (ix) The Account is not evidenced by chattel paper or an instrument of any kind; (x) The Account is not due from an Account Debtor, except for the United States government, its branches and its agencies, whose total debt to the Borrower and its Restricted Subsidiaries, on a Consolidated basis, on Accounts exceeds fifteen percent (15%) of the aggregate amount of the Eligible Accounts Receivable; provided, however, that the Account shall not be an Eligible Account Receivable only to the extent of such excess, if it otherwise represents a valid, uncontested and legally enforceable obligation of the Account Debtor and meets all of the other criteria for eligibility set forth herein; (xi) The Account is not due pursuant to a Governmental Contract with respect to which the aggregate amount of all Accounts due under such Governmental Contract to the Borrower and its Subsidiaries, on a Consolidated basis, exceeds fifteen percent (15%) of the aggregate amount of the Eligible Accounts Receivable; provided, however, that the Account shall not be an Eligible Account Receivable only to the extent of such excess, if it otherwise represents a valid, uncontested and legally enforceable obligation of the Account Debtor and meets all of the other criteria for eligibility set forth herein; (xii) The Account has not been turned over to any Person that is not a Restricted Subsidiary or Affiliate of the Borrower for collection; (xiii) The Administrative Agent has not determined, in good faith in its reasonable discretion in accordance with its internal credit policies and after fifteen (15) days notice to the Borrower that (A) collection of the Account is insecure or (B) the Account may not be paid by reason of the Account Debtor's financial inability to pay; (xiv) The Account is not with a customer located in any state denying creditors access to said state's courts in the absence of a notice of business activities report or other similar filing, unless the Borrower, its Restricted Subsidiaries and Affiliates have either qualified as a foreign corporation authorized to transact business in such state or has filed a notice of business activities report or similar filing with the applicable state agency for the then current year; (xv) With respect to any Account, which is payable to a Foreign Subsidiary (any such Account, a "Foreign Account"), the amount of such Foreign Account is reported in Dollars (irrespective of the currency in which such Account is payable) on the applicable Borrowing Base Certificate; provided that no more than thirty percent (30%) of the aggregate amount of all Eligible Accounts Receivable at any one time shall be Foreign Accounts; and (xvi) In addition to the foregoing, with respect to Accounts arising out of a Governmental Contract, the Administrative Agent is satisfied as to the absence of setoffs, counterclaims and other defenses to payment on the part of the United States or 8 such state governmental authority. "Eligible Inventory" means, at any date of determination, any Inventory of the Borrower or any Restricted Subsidiary thereof that satisfies and continues to satisfy each of the following requirements: (a) Any warranty or representation contained in this Agreement or any of the other Loan Documents applicable either to Inventory in general or to any specific Inventory remains true and correct in all material respects with respect to such Inventory; (b) If the Inventory is located in a public warehouse, the Administrative Agent shall have received a control agreement, in form and substance reasonably satisfactory to the Administrative Agent; (c) The Inventory is not under consignment to or from any Person; (d) The Inventory is free from defects which would materially and adversely affect the market value thereof; (e) The Inventory meets in all material respects all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, and is either currently useable or currently saleable in the normal course of the Borrower's or any Restricted Subsidiary's business; (f) The Inventory was produced in accordance with the Fair Labor Standards Act and is not subject to the "hot goods" provisions contained in 29 U.S.C.Section 215 or any successor statute or section; (g) The Inventory is not obsolete or currently unfit for use or sale in the ordinary course of the business of the Borrower or any Restricted Subsidiary thereof; (h) Other than pursuant to the Security Documents, the Inventory is not subject to any Lien or security interest whatsoever; provided that for purposes hereof, any Inventory subject to a progress payment shall not be considered to be subject to a Lien or security interest. (i) If the Inventory has been purchased with a trade letter of credit, all reimbursement and similar obligations with respect to such trade letter of credit has been paid in full; (j) With respect to any Inventory located outside of the United States (any such Inventory, "Foreign Inventory"), no more than thirty percent (30%) of the aggregate amount of all Eligible Inventory at any one time shall be Foreign Inventory; and (k) The Administrative Agent has not determined, in good faith in its reasonable discretion in accordance with its internal credit policies, that the Inventory is 9 otherwise ineligible. "Eligible Unbilled Receivables" means, at any date of determination thereof, any Account (i) which is an Eligible Accounts Receivable, but for the fact such Account has not been invoiced (a) as a result of normal frequency of billing under the particular contract, or (b) as a result of government delays in the preparation of contract documents and (ii) which will be invoiced within ninety (90) days of the "as of" date of the particular Borrowing Base Certificate setting forth such Account. "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, allegations, notices of noncompliance or violation, investigations (other than internal reports prepared by any Person in the ordinary course of business and not in response to any third party action or request of any kind) or proceedings relating in any way to any actual or alleged violation of or liability under any Environmental Law or any permit issued, or any approval given, under any such Environmental Law, including, without limitation, any and all claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution, indemnification cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to human health or the environment. "Environmental Laws" means any and all federal, foreign, state, provincial and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time. "ERISA Affiliate" means any Person who, together with the Borrower, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. "Eurodollar Reserve Percentage" means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. 10 "Event of Default" means any of the events specified in Section 12.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "Excess Cash Flow" means, for any period of determination, the sum of (a) EBITDA for such period (determined by adding back thereto any amounts deducted in determining Net Income for such period that were paid, incurred or accrued by Borrower or any of its Restricted Subsidiaries in violation of any of the other provisions of this Agreement), minus (b) income and franchise taxes (paid or payable in cash) and (to the extent permitted hereunder) Interest Expense (paid or payable in cash) minus (c) all principal payments made in respect of Debt during such period, to the extent permitted hereunder (excluding Excess Cash Flow Payments pursuant to Section 4.4(b)(vii)) minus (d) all Capital Expenditures made in cash during such period, to the extent permitted hereunder, minus (e) non-scheduled principal payments of Term Loans (excluding Excess Cash Flow Payments pursuant to Section 4.4(b)(v)) and plus or minus (as applicable) (f) changes in working capital. "Excess Proceeds" shall have the meaning assigned thereto in Section 4.4(b)(vii). "Existing Facility" means the credit facility established by the Amended and Restated Revolving Credit Loan and Term Loan Agreement by and among the Borrower, DRS Technologies Canada Company, DRS Technologies Canada, Inc., DRS EO, Inc. and DRS FPA, L.P., as Co-Borrowers, Mellon Bank, N.A., as Agent, Mellon Bank Canada, as Lender and the other Lenders signatory thereto, as Lenders, dated as of October 20, 1998 as amended from time to time. "Existing Foreign Currency Letters of Credit" means (a) letter of credit number 866287 issued by Mellon Bank, N.A. in the face amount of L750,000 and (b) letter of credit number 869397 issued by Mellon Bank, N.A. in the face amount of CDN $1,000,000. "Existing Letters of Credit" means those letters of credit issued by Mellon Bank, N.A. and existing on the Closing Date and identified on Schedule 7.1(t). "Extensions of Credit" means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (ii) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, (iii) such Lender's Revolving Credit Commitment Percentage of the Swingline Loans then outstanding and (iv) the aggregate principal amount of all Term Loans made by such Lender then outstanding, or (b) the making of any Loan or participation in any Letter of Credit by such Lender, as the context requires. "FDIC" means the Federal Deposit Insurance Corporation, or any successor thereto. "Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the Administrative Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Administrative Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" shall mean a daily rate which is determined, 11 in the opinion of the Administrative Agent, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the rate for the most immediately preceding Business Day. "First Union" means First Union National Bank, a national banking association, and its successors. "Fiscal Year" means the fiscal year of the Borrower and its Restricted Subsidiaries ending on March 31. "Fixed Charges" means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Restricted Subsidiaries in accordance with GAAP: (a) Interest Expense (paid in cash), (b) scheduled principal payments with respect to Debt, and (c) cash taxes. "Foreign Accounts" shall have the meaning assigned thereto in clause (vii) of the definition of Eligible Accounts Receivable. "Foreign Subsidiary" means any direct or indirect subsidiary of the Borrower that is not a Domestic Subsidiary. "GAAP" means United States generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries throughout the period indicated. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Governmental Contract" means a contract between the Borrower and an agency, department or instrumentality of the United States or any state Governmental Authority in the United States where such Borrower is the prime contractor. "Guaranty Obligation" means, with respect to the Borrower and its Restricted Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered 12 into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include (i) endorsements for collection or deposit in the ordinary course of business or (ii) guarantees by the Borrower or any Restricted Subsidiary thereof of any non-Debt obligations of the Borrower or any Restricted Subsidiary thereof. "Hazardous Materials" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any Environmental Law or common law, (d) the discharge or emission or release of which requires a permit or license under any Environmental Law or other Governmental Approval, (e) which are deemed to constitute a nuisance or a trespass which pose a health or safety hazard to Persons or neighboring properties, or (f) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas. "Hedging Agreement" means any agreement with respect to any Interest Rate Contract, forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap agreement, cross-currency rate swap agreement, currency option agreement or other agreement or arrangement designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices, all as amended, restated, supplemented or otherwise modified from time to time. "Increase Notification" means the written notice by the Borrower of its desire to increase the Term Loan Commitment pursuant to Section 4.6. "Increase Notification Date" means the date on which the Increase Notification is received by the Administrative Agent. "Insurance and Condemnation Proceeds" shall have the meaning assigned thereto in Section 4.4(b)(iv). "Interest Expense" means, with respect to the Borrower and its Restricted Subsidiaries for any period, the gross interest expense (including, without limitation, interest expense attributable to Capital Leases and all net payment obligations pursuant to Hedging Agreements) of the Borrower and its Restricted Subsidiaries, all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP. "Interest Period" shall have the meaning assigned thereto in Section 5.1(b). "Interest Rate Contract" means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or any 13 other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, restated, supplemented or otherwise modified from time to time. "Inventory" means all "inventory" (as now or hereafter defined in the UCC) of the Borrower or any Restricted Subsidiary, including, without limitation, all raw materials, inventory and other materials and supplies, work-in-process, finished goods, all accessions thereto, documents therefor and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto. "ISP98" means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590. "Issuing Lender" means (a) with respect to Letters of Credit issued hereunder after the Closing Date, First Union, in its capacity as issuer thereof, or any successor thereto and (b) with respect to the Existing Letters of Credit, Mellon Bank, N.A. "L/C Commitment" means the lesser of (a) Thirty-Five Million Dollars ($35,000,000) and (b) the Revolving Credit Commitment. "L/C Facility" means the letter of credit facility established pursuant to Article III. "L/C Obligations" means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5. "L/C Participants" means the collective reference to all the Lenders other than the Issuing Lender. "Lender" means each Person executing this Agreement as a Lender (including, without limitation, the Issuing Lender and the Swingline Lender unless the context otherwise requires) set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to Section 4.6 or Section 14.10. "Lending Office" means, with respect to any Lender, the office of such Lender maintaining such Lender's Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of the Extensions of Credit. "Letters of Credit" means the collective reference to letters of credit issued pursuant to Section 3.1 and the Existing Letters of Credit. "LIBOR" means the rate of interest per annum determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to the applicable Interest Period which appears on the Dow Jones Market Screen 3750 at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest 14 Period (rounded upward, if necessary, to the nearest 1/100th of 1%). If, for any reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR" shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period. Each calculation by the Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error. "LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula: LIBOR Rate = LIBOR ---------------------------------- 1.00-Eurodollar Reserve Percentage "LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 5.1(a). "Lien" means, with respect to any asset, any mortgage, leasehold mortgage, lien, pledge, charge, security interest, hypothecation or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "Loan Documents" means, collectively, this Agreement, the Notes, the Applications, the Security Documents, each joinder agreement executed pursuant to Section 9.11 and each other document, instrument, certificate and agreement executed and delivered by the Borrower or any Subsidiary thereof in connection with this Agreement or otherwise referred to herein or contemplated hereby (excluding any Hedging Agreement), all as may be amended, restated, supplemented or otherwise modified from time to time. "Loans" means the collective reference to the Revolving Credit Loans, the Term Loans, the Swingline Loans, and "Loan" means any of such Loans. "Material Adverse Effect" means, with respect to the Borrower or any of its Restricted Subsidiaries or Sensors, a material adverse effect on (i) the properties, business, prospects, operations or condition (financial or otherwise) of such Persons, taken as a whole, or (ii) the ability of such Persons, taken as a whole, to perform their obligations under the Loan Documents in each case to which they are parties. "Material Contract" means (a) any contract or other agreement, written or oral, of the Borrower or any of its Restricted Subsidiaries involving monetary liability of or to any Person in an amount in excess of $5,000,000 per annum, or (b) any other contract or agreement, written or oral, of the Borrower or any of its Restricted Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect. 15 "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, or has accrued an obligation to make contributions within the preceding six (6) years. "Net Cash Proceeds" means, as applicable, (a) with respect to any sale or other disposition of assets, the gross cash proceeds received by the Borrower or any of its Restricted Subsidiaries from such sale less the sum of (i) all income taxes and other taxes assessed (or reasonably anticipated to be payable) by a Governmental Authority as a result of such sale and any other fees and expenses incurred in connection therewith, (ii) net reserves required in accordance with GAAP in connection with such sale and (iii) the principal amount of, premium, if any, and interest on any Debt secured by a Lien on the asset (or a portion thereof) sold, which Debt is required to be repaid in connection with such sale, (b) with respect to any offering of capital stock or issuance of Debt, the gross cash proceeds received by the Borrower or any of its Restricted Subsidiaries therefrom less all reasonable legal, underwriting and other reasonable fees and expenses incurred in connection therewith and (c) with respect to any payment under an insurance policy or in connection with a condemnation proceeding, the amount of cash proceeds received by the Borrower or its Restricted Subsidiaries from an insurance company or Governmental Authority, as applicable, net of all reasonable expenses of collection. "Net Income" means, with respect to the Borrower and its Restricted Subsidiaries, for any period of determination, the net income (or loss) of the Borrower and its Restricted Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary of such Person or is merged into or consolidated with such Person or any of its Restricted Subsidiaries or that Person's assets are acquired by such Person or any of its Restricted Subsidiaries. "New Lender" shall have the meaning assigned thereto in Section 4.6(b). "Notes" means the collective reference to the Revolving Credit Notes, the Term Notes and Swingline Notes, and "Note" means any of such Notes. "Notice of Account Designation" shall have the meaning assigned thereto in Section 2.3(b). "Notice of Borrowing" shall have the meaning assigned thereto in Section 2.3(a). "Notice of Conversion/Continuation" shall have the meaning assigned thereto in Section 5.2. "Notice of Prepayment" shall have the meaning assigned thereto in Section 2.4(c). "Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C Obligations, (c) all existing or future payment and other obligations owing by the Borrower under any Hedging Agreement (which such Hedging 16 Agreement is permitted hereunder) with any Person that is a Lender hereunder at the time such Hedging Agreement is executed, (all such obligations with respect to any such Hedging Agreement, "Hedging Obligations") and (d) all other fees and commissions (including attorneys' fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower or any of its Restricted Subsidiaries to the Lenders or the Administrative Agent, in each case under or in respect of this Agreement, any Note, any Letter of Credit or any of the other Loan Documents of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note. "Officer's Compliance Certificate" shall have the meaning assigned thereto in Section 8.2. "Other Taxes" shall have the meaning assigned thereto in Section 5.11(b). "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is maintained for the employees of the Borrower or any ERISA Affiliates or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any of its current or former ERISA Affiliates. "Performance Based Letters of Credit" means standby Letters of Credit issued to ensure the performance of services and/or delivery of goods by or on behalf of the Borrower. "Permitted Acquisition" means any acquisition permitted by Section 11.3(d). "Permitted Acquisition Consideration" means the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or capital stock of the Borrower, net of the applicable acquired company's cash (including Cash Equivalents) balance as shown on its most recent financial statements delivered in connection with the applicable Permitted Acquisition) to be paid on a singular basis in connection with any applicable Permitted Acquisition as set forth in the applicable Permitted Acquisition Documents executed by the Borrower or any of its Restricted Subsidiaries in order to consummate the applicable Permitted Acquisition. "Permitted Acquisition Documents" means the merger, stock and/or asset purchase documents entered into in connection with any Permitted Acquisition. "Permitted Lien" means any Lien permitted pursuant to Section 11.2 hereof. "Person" means an individual, corporation, limited liability company, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or any other form of entity or group thereof. 17 "Pledge Agreement" means the collective reference to the pledge agreements executed by the Borrower (or applicable Restricted Subsidiary thereof) in favor of the Administrative Agent for the ratable benefit of itself and the Lenders, substantially in the form of Exhibit L hereto, as amended, restated, supplemented or otherwise modified. "Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by First Union as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs. The parties hereto acknowledge that the rate announced publicly by First Union as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. "Pro Forma EBITDA" means with respect to any Person acquired in connection with a Permitted Acquisition consummated during any calculation period, EBITDA of such acquired Person calculated on a pro forma basis as of the first day of such calculation period. "Purchasing Lender" shall have the meaning assigned thereto in Section 14.10. "Register" shall have the meaning assigned thereto in Section 14.10(d). "Reimbursement Obligation" means the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Required Lenders" means, at any date, any combination of Lenders holding at least fifty-one percent (51%) of each of (a) the Revolving Credit Commitment (or, if the Revolving Credit Facility has been terminated, any combination of Lenders holding at least fifty-one percent (51%) of the aggregate outstanding Extensions of Credit thereunder) and (b) the aggregate outstanding Extensions of Credit under the Term Loan Facility. "Responsible Officer" means any of the following: the chief executive officer, chief financial officer or corporate controller of the Borrower or any other officer of the Borrower reasonably acceptable to the Administrative Agent. "Restricted Subsidiaries" means all Subsidiaries of the Borrower other than the Unrestricted Subsidiaries. "Revolving Credit Commitment" means (a) as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the account of the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1 hereto as such amount may be reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Credit Loans, as such amount may be reduced at any time or from time to time pursuant to the terms hereof. The Revolving Credit Commitment of all Lenders on the Closing Date shall be $100,000,000. "Revolving Credit Commitment Percentage" means, as to any Lender at any time, the 18 ratio of (a) the amount of the Revolving Credit Commitment of such Lender to (b) the Revolving Credit Commitments of all Lenders. "Revolving Credit Facility" means the revolving credit facility established pursuant to Article II. "Revolving Credit Loans" means any revolving loan made to the Borrower pursuant to Section 2.1, and all such revolving loans collectively as the context requires. "Revolving Credit Notes" means the collective reference to the Revolving Credit Notes made by the Borrower payable to the order of each Lender, substantially in the form of Exhibit A-1 hereto, evidencing the Revolving Credit Facility, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part; "Revolving Credit Note" means any of such Revolving Credit Notes. "Revolving Credit Maturity Date" means the earliest of the dates referred to in Section 2.7. "Security Documents" means the collective reference to the Subsidiary Guaranty Agreement, the Collateral Agreement, the Pledge Agreement, and each other agreement or writing pursuant to which the Borrower or any Restricted Subsidiary thereof purports to pledge or grant a security interest in any property or assets securing the Obligations or any such Person purports to guaranty the payment and/or performance of the Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time. "Sensors" means the collective reference to the assets and business which, immediately prior to the Closing Date, comprise the Sensors and Electronic Systems Organization business unit of The Boeing Company. "Solvent" means, as to the Borrower and its Restricted Subsidiaries on a particular date, that any such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) owns property having a value, both at fair valuation and at present fair saleable value, greater than the amount required to pay its probable liabilities (including contingencies), and (c) does not believe that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature. "Subordinated Debt" means the collective reference to any Debt of the Borrower or any Restricted Subsidiary subordinated in right and time of payment to the Obligations and containing such other terms and conditions, in each case as are reasonably satisfactory to the Required Lenders. "Subsidiary" means as to any Person, any corporation, partnership, limited liability company or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of 19 directors or other managers of such corporation, partnership, limited liability company or other entity is at the time owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock or other ownership interests of any other class or classes of such corporation, partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Borrower. "Subsidiary Guaranteed Obligations" means the collective reference to the guaranteed obligations of each of the Restricted Subsidiaries party to the Subsidiary Guaranty Agreement. "Subsidiary Guarantors" means the collective reference to the Domestic Subsidiaries of the Borrower who are Restricted Subsidiaries executing the Subsidiary Guaranty Agreement. "Subsidiary Guaranty Agreement" means the unconditional guaranty agreement of even date herewith executed by each of the Subsidiary Guarantors in favor of the Administrative Agent for the ratable benefit of itself and the Lenders, substantially in the form of Exhibit H, as amended, restated, supplemented or otherwise modified from time to time. "Swingline Commitment" means the lesser of (a) Five Million Dollars ($5,000,000) and (b) the Revolving Credit Commitment. "Swingline Facility" means the swingline facility established pursuant to Section 2.2. "Swingline Lender" means First Union in its capacity as swingline lender hereunder. "Swingline Loan" means any swingline loan made by the Swingline Lender to the Borrower pursuant to Section 2.2, and all such swingline loans collectively as the context requires. "Swingline Note" means the Swingline Note made by the Borrower payable to the order of the Swingline Lender, substantially in the form of Exhibit A-2 hereto, evidencing the Swingline Loans, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extensions thereof, in whole or in part. "Swingline Termination Date" means the first to occur of (a) the resignation of First Union as Administrative Agent in accordance with Section 13.9 and (b) the Revolving Credit Maturity Date. "Taxes" shall have the meaning assigned thereto in Section 5.11(a). "Term Loan Commitment" means (a) as to any Lender, the obligation of such Lender to make the Term Loans to the account of the Borrower hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Lender's name on Schedule 1 hereto, as such amount may be increased, reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate commitment to make Term Loans. The 20 Term Loan Commitment of all Lenders as of the Closing Date shall be $140,000,000. "Term Loan Facility" shall mean the term loan facility established pursuant to Article IV. "Term Loan Increase Termination Date" means the first to occur of (a) September 30, 2003, (b) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 12.2(a), or (c) the date of termination pursuant to Section 4.4. "Term Loan Maturity Date" means the first to occur of (a) September 30, 2008, or (b) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 12.2(a). "Term Loan Percentage" means, as to any Lender, after the Term Loans are made, the ratio of (i) the outstanding principal balance of the Term Loan of such Lender to (ii) the aggregate outstanding principal balance of the Term Loans of all Lenders. "Term Loans" shall mean the term loans to be made to the Borrower by the Lenders pursuant to Section 4.1 and all Additional Term Loans made to the Borrower pursuant to Section 4.6. "Term Notes" means the Term Notes made by the Borrower payable to the order of each of the Lenders, substantially in the form of Exhibit A-3 hereto, evidencing the Debt incurred by the Borrower pursuant to the Term Loan Facility, and any amendments, modifications and supplements thereto, any substitute therefor, and any replacement, restatements, renewals or extensions thereof, in whole or in part. "Termination Event" means except for any such event or condition that could not reasonably be expected to have a Material Adverse Effect: (a) a "Reportable Event" described in Section 4043 of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan if withdrawal liability is asserted by such plan, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (h) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Total Leverage Ratio" shall have the meaning assigned thereto in Section 10.1. 21 "Uniform Customs" means the Uniform Customs and Practice for Documentary Credits (1993 Revision), effective January, 1994 International Chamber of Commerce Publication No. 500. "Unrestricted Subsidiary" means any Subsidiary of the Borrower set forth on Schedule 2 hereto. "UCC" means the Uniform Commercial Code as in effect in the State of New York, as amended or modified from time to time. "United States" means the United States of America. "Wholly-Owned" means, with respect to a Subsidiary, that all of the shares of capital stock or other ownership interests of such Subsidiary are, directly or indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries (except for directors' qualifying shares or other shares required by Applicable Law to be owned by a Person other than the Borrower). SECTION 1.2 General. Unless otherwise specified, a reference in this Agreement to a particular article, section, subsection, Schedule or Exhibit is a reference to that article, section, subsection, Schedule or Exhibit of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. SECTION 1.3 Other Definitions and Provisions. (a) Use of Capitalized Terms. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement, the Notes and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement. (b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. ARTICLE II REVOLVING CREDIT FACILITY SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time from 22 the Closing Date through, but not including, the Revolving Credit Maturity Date as requested by the Borrower in accordance with the terms of Section 2.3; provided, that (a) the sum of the aggregate amount of all outstanding Revolving Credit Loans (after giving effect to the amount requested and the use of the proceeds thereof to repay Extensions of Credit hereunder), Swingline Loans and L/C Obligations from any Lender to the Borrower shall at no time exceed such Lender's Revolving Credit Commitment and (b) no borrowing of Revolving Credit Loans shall be made if, immediately after giving effect thereto and the use of the proceeds thereof to repay Extensions of Credit hereunder, the aggregate principal amount of Revolving Credit Loans then outstanding plus (i) all outstanding Swingline Loans plus (ii) the aggregate principal amount of all outstanding L/C Obligations would exceed the then applicable Borrowing Limit. Each Revolving Credit Loan by a Lender shall be in a principal amount equal to such Lender's Revolving Credit Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Maturity Date. SECTION 2.2 Swingline Loans. (a) Availability. Subject to the terms and conditions of this Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time from the Closing Date through, but not including, the Swingline Termination Date; provided, that the Swingline Lender shall have no obligation to make any Swingline Loan, if, after giving effect to any amount requested and the use of the proceeds thereof to repay Extensions of Credit hereunder, (a) the aggregate principal amount of all Swingline Loans then outstanding would exceed the Swingline Commitment or (b) the aggregate principal amount of all Revolving Credit Loans then outstanding plus the aggregate principal amount of all Swingline Loans then outstanding plus the L/C Obligations then outstanding would exceed the then applicable Borrowing Limit. (b) Refunding. (i) Swingline Loans shall be refunded by the Lenders (which for such purpose shall include the Swingline Lender in its capacity as a Lender having a Revolving Credit Commitment) on demand by the Swingline Lender. Subject to clause (a) of the proviso to the initial sentence of Section 2.1 hereof, such refundings shall be made by the Lenders in accordance with their respective Revolving Credit Commitment Percentages and shall thereafter be reflected as Revolving Credit Loans of the Lenders on the books and records of the Administrative Agent. Each Lender shall fund its respective Revolving Credit Commitment Percentage of Revolving Credit Loans as required to repay Swingline Loans outstanding to the Swingline Lender upon demand to such Lender by telecopier (or by telephone promptly confirmed by telecopier) by the Swingline Lender but in no event later than 2:00 p.m. (Charlotte time) on the next succeeding Business Day after such demand is made. No Lender's obligation to fund its respective Revolving Credit Commitment Percentage of a Swingline Loan shall be affected by any other Lender's failure to fund its Revolving Credit Commitment Percentage of a Swingline Loan, nor shall any Lender's Revolving Credit Commitment Percentage be 23 increased as a result of any such failure of any other Lender to fund its Revolving Credit Commitment Percentage of a Swingline Loan. (ii) The Borrower shall pay to the Swingline Lender on demand the amount of such Swingline Loans to the extent amounts received from the Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded. In addition, the Borrower hereby authorizes the Administrative Agent to charge any account maintained by the Borrower with the Swingline Lender (up to the amount available therein) in order to immediately pay the Swingline Lender the amount of such Swingline Loans to the extent amounts received from the Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded. If any portion of any such amount paid to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be ratably shared among all the Lenders in accordance with their respective Revolving Credit Commitment Percentages (unless the amounts so recovered by or on behalf of the Borrower pertain to a Swingline Loan extended after the occurrence and during the continuance of an Event of Default of which the Administrative Agent has received notice in the manner required pursuant to Section 13.5 and which such Event of Default has not been waived by the Required Lenders or the Lenders, as applicable). (iii) Each Lender acknowledges and agrees that its obligation to refund Swingline Loans in accordance with the terms of this Section 2.2 is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Article VII. Further, each Lender agrees and acknowledges that if prior to the refunding of any outstanding Swingline Loans pursuant to this Section 2.2, one of the events described in Section 12.1(j) or (k) shall have occurred, each Lender will (subject to clause (a) of the proviso to the initial sentence of Section 2.1 hereof), on the date the applicable Revolving Credit Loan would have been made, purchase an undivided participating interest in the Swingline Loan to be refunded in an amount equal to its Revolving Credit Commitment Percentage of the aggregate amount of such Swingline Loan. Each Lender will immediately transfer to the Swingline Lender, in immediately available funds at the office of the Swingline Lender, the amount of its participation and upon receipt thereof the Swingline Lender will deliver to such Lender a certificate evidencing such participation dated the date of receipt of such funds and for such amount. Whenever, at any time after the Swingline Lender has received from any Lender such Lender's participating interest in a Swingline Loan, the Swingline Lender receives any payment on account thereof, the Swingline Lender will promptly distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded). SECTION 2.3 Procedure for Advances of Revolving Credit and Swingline Loans. (a) Requests for Borrowing. The Borrower shall give the Administrative Agent 24 irrevocable prior written notice substantially in the form attached hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan and each Swingline Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be (x) with respect to Base Rate Loans (other than Swingline Loans) in an aggregate principal amount of $2,500,000 or a whole multiple of $100,000 in excess thereof, (y) with respect to LIBOR Rate Loans in an aggregate principal amount of $2,500,000 or a whole multiple of $100,000 in excess thereof and (z) with respect to Swingline Loans in an aggregate principal amount of $50,000 or a whole multiple of $50,000 in excess thereof, (C) whether such Loan is to be a Revolving Credit Loan or Swingline Loan, (D) whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. A Notice of Borrowing received after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of each Notice of Borrowing by telecopier (or by telephone promptly confirmed by telecopier). (b) Disbursement of Revolving Credit and Swingline Loans. Not later than 2:00 p.m. (Charlotte time) on the proposed borrowing date, subject to the terms and conditions of this Agreement, (i) each Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, such Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date and (ii) the Swingline Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, the Swingline Loans to be made on such borrowing date; provided that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.3 in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice substantially in the form of Exhibit C hereto (a "Notice of Account Designation") delivered by the Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the Administrative Agent from time to time. Subject to Section 5.7 hereof, the Administrative Agent shall not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan requested pursuant to this Section 2.3 to the extent that any Lender has not made available to the Administrative Agent its Revolving Credit Commitment Percentage of such Loan. Revolving Credit Loans to be made for the purpose of refunding Swingline Loans shall be made by the Lenders as provided in Section 2.2(b). SECTION 2.4 Repayment of Loans. (a) Repayment on Termination Date. The Borrower hereby agrees to repay the outstanding principal amount of (i) all Revolving Credit Loans in full on the Revolving Credit Maturity Date, and (ii) all Swingline Loans in accordance with Section 2.2(b), together, in each 25 case, with all accrued but unpaid interest thereon. (b) Mandatory Repayment of Revolving Credit Loans. (i) If at any time the Asset Coverage Ratio as set forth on the most recently delivered Borrowing Base Certificate and adjusted on a pro forma basis for all Extensions of Credit made and/or repaid since the date of the financial information used to determine such Asset Coverage Ratio is less than 1.00 to 1.00, the Borrower agrees to immediately repay the principal amount of outstanding Revolving Credit Loans in an amount sufficient to cause the Asset Coverage Ratio (determined on a pro forma basis after giving effect to such payment) to equal or exceed 1.00 to 1.00. (ii) If at any time the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding Swingline Loans and L/C Obligations exceeds the Borrowing Limit, the Borrower agrees to repay immediately upon notice from the Administrative Agent, by payment to the Administrative Agent for the account of the Lenders Extensions of Credit in an amount equal to such excess with each such repayment applied first to the principal amount of outstanding Swingline Loans, second to the principal amount of outstanding Revolving Credit Loans and third, with respect to any Letters of Credit then outstanding, a payment of cash collateral into a cash collateral account opened by the Administrative Agent, for the benefit of the Lenders in an amount equal to the aggregate then undrawn and unexpired Dollar Equivalent amount of such Letters of Credit (such cash collateral to be applied in accordance with Section 12.2(b)). (c) Optional Repayments. The Borrower may at any time and from time to time repay the Loans, in whole or in part, upon at least three (3) Business Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans and one (1) Business Day irrevocable notice with respect to Base Rate Loans and Swingline Loans, substantially in the form attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and amount of repayment and whether the repayment is of LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender by telecopier (or by telephone promptly confirmed by telecopier). If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial repayments shall be in an aggregate amount of $2,500,000 or a whole multiple of $100,000 in excess thereof with respect to Base Rate Loans (other than Swingline Loans), $2,500,000 or a whole multiple of $100,000 in excess thereof with respect to LIBOR Rate Loans and $50,000 or a whole multiple of $50,000 in excess thereof with respect to Swingline Loans. Each such repayment shall be accompanied by an amount required to be paid pursuant to Section 5.9 hereof. (d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 5.9 hereof. 26 (e) Hedging Agreements. No repayment or prepayment pursuant to this Section 2.4 shall affect any of the Borrower's obligations under any Hedging Agreement. SECTION 2.5 Notes. (a) Revolving Credit Notes. Except as otherwise provided in Section 14.10 (a) - (e), each Lender's Revolving Credit Loans and the obligation of the Borrower to repay such Revolving Credit Loans shall be evidenced by a separate Revolving Credit Note executed by the Borrower payable to the order of such Lender. (b) Swingline Notes. The Swingline Loans and the obligation of the Borrower to repay such Swingline Loans shall be evidenced by a Swingline Note executed by the Borrower payable to the order of the Swingline Lender. SECTION 2.6 Permanent Reduction of the Revolving Credit Commitment. (a) Voluntary Reduction. The Borrower shall have the right at any time and from time to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to permanently reduce, without premium or penalty, (i) the entire Revolving Credit Commitment at any time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate principal amount not less than $2,000,000 or any whole multiple of $1,000,000 in excess thereof. Upon receipt of such notice, the Administrative Agent shall promptly notify each of the Lenders thereof by telecopier (or by telephone promptly confirmed by telecopier). The amount of each partial permanent reduction shall permanently reduce the Lenders' Revolving Credit Commitments pro rata in accordance with their respective Revolving Credit Commitment Percentages. (b) Mandatory Reduction. The Revolving Credit Commitment shall be permanently reduced on the date of the required prepayment under Section 4.4(b)(vii) by an amount equal to the amount of such Excess Proceeds, to the extent a corresponding prepayment was made pursuant to 4.4(b)(iii). (c) Corresponding Payment. Each permanent reduction permitted or required pursuant to this Section 2.6 shall be accompanied by a payment of principal sufficient to reduce the aggregate outstanding Revolving Credit Loans, Swingline Loans and L/C Obligations, as applicable, after such reduction to the Revolving Credit Commitment as so reduced and if the Revolving Credit Commitment as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrower shall be required to deposit cash collateral in a cash collateral account opened by the Administrative Agent in an amount equal to the aggregate then undrawn and unexpired Dollar Equivalent amount of such Letters of Credit. Such cash collateral shall be applied in accordance with Section 12.2(b). Any reduction of the Revolving Credit Commitment to zero shall be accompanied by payment of all outstanding Revolving Credit Loans and Swingline Loans (and furnishing of cash collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment and the Swingline Commitment and the Revolving Credit Facility. Such cash collateral shall be applied in accordance with Section 12.2(b). If the reduction of the Revolving Credit 27 Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof. SECTION 2.7 Termination of Revolving Credit Facility. The Revolving Credit Facility shall terminate on the earliest of (a) September 30, 2006, (b) the date of termination by the Borrower pursuant to Section 2.6, or (c) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 12.2(a). ARTICLE III LETTER OF CREDIT FACILITY SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue standby Letters of Credit for the account of the Borrower on any Business Day from the Closing Date through but not including the Revolving Credit Maturity Date in such form as may be approved from time to time by the Issuing Lender; provided, that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the aggregate principal amount of outstanding Revolving Credit Loans, plus the aggregate principal amount of outstanding Swingline Loans, plus the aggregate amount of L/C Obligations would exceed the then applicable Borrowing Limit. Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $100,000 (other than the Existing Foreign Currency Letters of Credit), (ii) be a standby letter of credit issued to support obligations of the Borrower or any of its Restricted Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date satisfactory to the Issuing Lender, which date shall be no later than ninety (90) Business Days prior to the Revolving Credit Maturity Date and (iv) be subject to the Uniform Customs and/or ISP98, as set forth in the Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of North Carolina. The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law. References herein to "issue" and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any existing Letters of Credit, unless the context otherwise requires. SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at the Administrative Agent's Office an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender shall process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article VII hereof, promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the Application therefor and all 28 such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall promptly furnish to the Borrower a copy of such Letter of Credit and promptly notify each Lender of the issuance and upon request by any Lender, furnish to such Lender a copy of such Letter of Credit and the amount of such Lender's L/C Participation therein by telecopier (or by telephone promptly confirmed by telecopier). SECTION 3.3 Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit commission with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by the Applicable Margin with respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis). Such commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter and on the Revolving Credit Maturity Date. The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all commissions received pursuant to this Section 3.3(a) in accordance with their respective Revolving Credit Commitment Percentages. (b) In addition to the foregoing commission, the Borrower shall pay the Issuing Lender an issuance fee with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by 0.125% per annum; provided, that such issuance shall not be payable with respect to the Existing Letter of Credit. Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar quarter and on the Revolving Credit Maturity Date. (c) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. SECTION 3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees (subject to clause (a) of the proviso to the initial sentence of Section 2.1 hereof) to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to the Dollar Equivalent of such L/C Participant's Revolving Credit Commitment Percentage in the Issuing Lender's obligations and rights under and in respect of each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise in accordance with the terms of this Agreement, such L/C Participant shall (subject to clause (a) of 29 the proviso to the initial sentence of Section 2.1 hereof) pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to the Dollar Equivalent of such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) Upon becoming aware of any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit, the Issuing Lender shall notify each L/C Participant by telecopier (or by telephone promptly confirmed by telecopier) of the amount and due date (which shall not be less than one (1) Business Day after the giving of such notice) of such required payment and such L/C Participant shall pay to the Issuing Lender the amount specified on the applicable due date. If any such amount is paid to the Issuing Lender after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of the Issuing Lender with respect to any amounts owing under this Section 3.4(b) shall be conclusive in the absence of manifest error. With respect to payment to the Issuing Lender of the unreimbursed amounts described in this Section 3.4(b), if the L/C Participants receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due that Business Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due on the following Business Day. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment Percentage of such payment in accordance with this Section 3.4, the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, or any payment of interest on account thereof, the Issuing Lender will promptly distribute to such L/C Participant its pro rata share thereof; provided, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. SECTION 3.5 Reimbursement Obligation of the Borrower. In the event of any drawing under any Letter of Credit, the Borrower agrees to reimburse (either with the proceeds of a Revolving Credit Loan or a Swingline Loan as provided for in this Section 3.5 or with funds from other sources), in same day funds, the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft paid under any Letter of Credit for the Dollar Equivalent amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Issuing Lender in connection with such payment. Unless the Borrower shall immediately notify the Issuing Lender that the Borrower intends to reimburse the Issuing Lender for such drawing from other sources or funds, the Borrower shall be deemed to have timely given a Notice of Borrowing to the Administrative Agent requesting that the Lenders make a Revolving Credit Loan or, if less than the minimum amount for such Loan, a Swingline 30 Loan, bearing interest at the Base Rate on such date in the Dollar Equivalent amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Issuing Lender in connection with such payment, and (not later than one (1) Business Day after being given notice thereof by the Administrative Agent by telecopier (or by telephone promptly confirmed by telecopier)) the Lenders shall make a Revolving Credit Loan or, if less than the minimum amount for such Loan, a Swingline Loan, bearing interest at the Base Rate in such amount, the proceeds of which shall be applied to reimburse the Issuing Lender for the amount of the related drawing and costs and expenses. Each Lender acknowledges and agrees that its obligation to fund a Revolving Credit Loan or, if less than the minimum amount for such Loan, a Swingline Loan, in accordance with this Section 3.5 to reimburse the Issuing Lender for any draft paid under a Letter of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Section 2.3(a) or Article VII. If the Borrower has elected to pay the amount of such drawing with funds from other sources and shall fail to reimburse the Issuing Lender as provided above, the unreimbursed amount of such drawing shall bear interest at the rate which would be payable on any outstanding Base Rate Loans which were then overdue from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full. SECTION 3.6 Obligations Absolute. The Borrower's obligations under this Article III (including, without limitation, the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender or any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees that the Issuing Lender and the L/C Participants shall not be responsible for, and the Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. SECTION 3.7 Effect of Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply. 31 SECTION 3.8 Existing Foreign Currency Letters of Credit. For purposes of calculating the amount of L/C Obligations with respect to Existing Foreign Currency Letters of Credit under (a) Section 2.1, Section 2.2(a), Section 2.4(b) and Section 3.1, such L/C Obligations shall be calculated at the Dollar Equivalent amount of such L/C Obligations as of the first Business Day of the current calendar month and (b) for all other purposes based on the Dollar Equivalent amount as of the Business Day immediately preceding such date of determination. ARTICLE IV TERM LOAN FACILITY SECTION 4.1 Term Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Term Loans to the Borrower on the Closing Date. The Term Loans shall be funded by each Lender in a principal amount equal to such Lender's Term Loan Percentage of the aggregate principal amount of the Term Loans made on the Closing Date, which aggregate principal amount shall equal the total Term Loan Commitment as of the Closing Date. SECTION 4.2 Procedure for Advance of Term Loan. The Borrower shall give the Administrative Agent an irrevocable Notice of Borrowing prior to 11:00 a.m. (Charlotte time) on the Closing Date requesting that the Lenders make the Term Loans as Base Rate Loans on such date. Upon receipt of such Notice of Borrowing from the Borrower, the Administrative Agent shall promptly notify each Lender thereof by telecopier (or by telephone promptly confirmed by telecopier). Not later than 2:00 p.m. (Charlotte time) on the Closing Date, each Lender will make available to the Administrative Agent for the account of the Borrower, at the office of the Administrative Agent in immediately available funds, the amount of such Term Loan to be made by such Lender on such borrowing date. The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of the Term Loans in immediately available funds by wire transfer to such Person or Persons as may be designated by the Borrower. SECTION 4.3 Repayment of Term Loan. The Borrower shall repay the aggregate outstanding principal amount of the Term Loans in consecutive quarterly installments on the last Business Day of each of March, June, September and December commencing December 31, 2001 as set forth below, except as the amounts of individual installments may be adjusted pursuant to Section 4.4 hereof: 32
PAYMENT DATE PRINCIPAL TERM LOAN AMOUNT If the Payment Date specified is INSTALLMENT ($) not a Business Day, the ($) Payment Date shall be deemed to be the Business Day immediately preceding the date. - -------------------------------- ----------- ---------------- December 31, 2001 350,000 139,650,000 March 31, 2002 350,000 139,300,000 June 30, 2002 350,000 138,950,000 September 30, 2002 350,000 138,600,000 December 31, 2002 350,000 138,250,000 March 31, 2003 350,000 137,900,000 June 30, 2003 350,000 137,550,000 September 30, 2003 350,000 137,200,000 December 31, 2003 350,000 136,850,000 March 31, 2004 350,000 136,500,000 June 30, 2004 350,000 136,150,000 September 30, 2004 350,000 135,800,000 December 31, 2004 350,000 135,450,000 March 31, 2005 350,000 135,100,000 June 30, 2005 350,000 134,750,000 September 30, 2005 350,000 134,400,000 December 31, 2005 350,000 134,050,000 March 31, 2006 350,000 133,700,000 June 30, 2006 350,000 133,350,000 September 30, 2006 350,000 133,000,000 December 31, 2006 350,000 132,650,000 March 31, 2007 350,000 132,300,000 June 30, 2007 350,000 131,950,000 September 30, 2007 350,000 131,600,000 December 31, 2007 32,900,000 98,700,000 March 31, 2008 32,900,000 65,800,000 June 30, 2008 32,900,000 32,900,000 September 30, 2008 32,900,000 0
If not sooner paid, the Term Loans shall be paid in full, together with accrued interest thereon, on the Term Loan Maturity Date. SECTION 4.4 Prepayments of Term Loan. (a) Optional Prepayment of Term Loans. The Borrower shall have the right at any time and from time to time, upon delivery to the Administrative Agent of a Notice of Prepayment at least three (3) Business Days prior to any repayment, to prepay the Term Loans in whole or in part without premium or penalty except as provided in Section 5.9. The Administrative Agent shall promptly give each of the Lenders notice of any such proposed 33 prepayment by telecopier (or by telephone promptly confirmed by telecopier). Each optional prepayment of the Term Loans hereunder shall be in an aggregate principal amount of at least $2,000,000 or any whole multiple of $1,000,000 in excess thereof and shall be applied to the outstanding principal installments of the Term Loans in inverse order of maturity thereof. Each repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof. (b) Mandatory Prepayment of Term Loan. (i) Debt Proceeds. The Borrower shall make mandatory principal prepayments of the Term Loans in the manner set forth in Section 4.4(b)(vii) below in amounts equal to one hundred percent (100%) of the aggregate Net Cash Proceeds from any incurrence of Debt (excluding Debt permitted pursuant to Section 11.1) by the Borrower or any of its Restricted Subsidiaries. Such prepayment shall be made within three (3) Business Days after the date of receipt of Net Cash Proceeds of any such transaction. (ii) Equity Proceeds. If at any time the Total Leverage Ratio exceeds 2.00 to 1.00, the Borrower shall make mandatory principal prepayments of the Term Loans in the manner set forth in Section 4.4(b)(vii) below in amounts equal to fifty percent (50%) of the aggregate Net Cash Proceeds from any offering of equity securities by the Borrower or any of its Restricted Subsidiaries (excluding (A) offerings of equity securities made in connection with employee stock option or incentive plans or made in connection with compensation or incentive plans for directors and officers, in each case entered into in the ordinary course of business and (B) the exercise of warrants existing on the Closing Date and set forth on Schedule 7.1(b)). Such prepayment shall be made within three (3) Business Days after the date of receipt of Net Cash Proceeds of any such transaction. (iii) Asset Sale Proceeds. No later than one hundred eighty (180) days following the Borrower's or applicable Restricted Subsidiary's receipt thereof, the Borrower shall make mandatory principal prepayments of the Term Loans in the manner set forth in Section 4.4(b)(vii) below in amounts equal to one hundred percent (100%) of the aggregate Net Cash Proceeds from the sale or other disposition or series of related sales or other dispositions of assets, excluding asset sales and dispositions permitted by Section 11.5(a) through and including Section 11.5(d) (the "Asset Sale Proceeds") by the Borrower or any of its Restricted Subsidiaries which have not been reinvested as of such date in similar replacement assets unless such Asset Sale Proceeds have been committed to be reinvested within such one hundred eighty (180) day period and are thereafter actually reinvested within two hundred seventy (270) days after receipt of such Asset Sale Proceeds. If such Asset Sale Proceeds are not actually reinvested in accordance with the terms of this Section 4.4(b)(iii) by the date which is two hundred seventy (270) days after the receipt thereof, the Borrower shall make a mandatory prepayment in an amount equal to such Asset Sale Proceeds as described above on such date. Notwithstanding any of the foregoing to the contrary, upon and during the continuance of an Event of Default and upon notice from the Administrative Agent, all Asset Sale Proceeds, received by the 34 Borrower and its Restricted Subsidiaries shall be applied to make prepayments of the Term Loans pursuant to Section 4.4(b)(vii), such prepayments to be made within three (3) Business Days after the Borrower's receipt of such Asset Sale Proceeds. (iv) Insurance and Condemnation Proceeds. No later than one hundred eighty (180) days following the date of receipt by the Borrower or any of its Restricted Subsidiaries of any Net Cash Proceeds under any of the insurance policies maintained pursuant to Section 9.3 or from any condemnation proceeding (the "Insurance and Condemnation Proceeds") which have not been reinvested as of such date in similar replacement assets, the Borrower shall make mandatory principal prepayments of the Term Loans in the manner set forth in Section 4.4(b)(vii) below in amounts equal to one hundred percent (100%) of the aggregate amount of such Insurance and Condemnation Proceeds received by the Borrower or any of its Restricted Subsidiaries unless such Insurance and Condemnation Proceeds have been committed to be reinvested within such one hundred eighty (180) day period and are thereafter actually reinvested within two hundred seventy (270) days after receipt of such Insurance and Condemnation Proceeds. If such Insurance and Condemnation Proceeds are not actually reinvested in accordance with the terms of this Section 4.4(b)(iv) by the date which is two hundred seventy (270) days after the receipt thereof, the Borrower shall make a mandatory prepayment in an amount equal to such Insurance and Condemnation Proceeds as described above on such date. Notwithstanding any of the foregoing to the contrary, upon and during the continuance of an Event of Default and upon notice from the Administrative Agent, all Insurance and Condemnation Proceeds, received by the Borrower and its Restricted Subsidiaries shall be applied to make prepayments of the Term Loans, such prepayments to be made within three (3) Business Days after the Borrower's receipt of such Insurance and Condemnation Proceeds. (v) Excess Cash Flow. No later than ninety (90) days after the end of any Fiscal Year commencing with the Fiscal Year ending March 31, 2002, during the term of this Agreement for which the Total Leverage Ratio exceeds 2.00 to 1.00, the Borrower shall make a mandatory principal repayment of the Term Loans in an amount equal to fifty percent (50%) of Excess Cash Flow, if any, for such Fiscal Year. (vi) Asset Coverage Ratio. In the event that payments made under Section 2.4(b)(i) are insufficient to cause the pro forma Asset Coverage Ratio to equal or exceed 1.00 to 1.00, then Borrower shall immediately repay remaining principal installments of the Term Loans, in inverse order of maturity, in an amount sufficient to cause the Asset Coverage Ratio (determined on a pro forma basis after giving effect to such payment) to equal or exceed 1.00 to 1.00. Any prepayment pursuant to this Section 4.4(b)(vi) shall be applied to reduce, in inverse order of maturity, the remaining scheduled principal installments of the Term Loans pursuant to Section 4.3. (vii) Notice; Manner of Payment. Upon the occurrence of any event triggering the prepayment requirement under Sections 4.4(b)(i) through and including 4.4(b)(v), the Borrower shall promptly deliver a Notice of Prepayment to the Administrative Agent and upon receipt of such notice, the Administrative Agent shall promptly so notify each of the 35 Lenders by telecopier (or by telephone promptly confirmed by telecopier). Each prepayment under this Section 4.4 shall be applied as follows: (A) first to reduce, in inverse order of maturity, the remaining scheduled principal installments of the Term Loans pursuant to Section 4.3, and (B) second to the extent of any excess (the "Excess Proceeds"), to prepay the aggregate outstanding amounts under the Revolving Credit Facility and, to the extent of any prepayments made pursuant to Section 4.4(b)(iii), to permanently reduce the Revolving Credit Commitment; provided, however, that (a) to the extent that there are any amounts outstanding under the Revolving Credit Facility, or (b) with respect to prepayments resulting from any equity securities offering pursuant to Section 4.4(b)(ii) consummated on or before December 31, 2001 (regardless of whether there are amounts outstanding under the Revolving Credit Facility), any Term Loan Lender shall have the right to refuse its pro rata share (based on Term Loan Percentage) of any such mandatory prepayment at which time the remaining amount shall be applied first, to reduce the Revolving Credit Loans in accordance with the foregoing Section 4.4(b)(vii)(B), and then, to the extent of any remaining funds, to the Borrower. No prepayment or repayment pursuant to this Section 4.4 shall affect any of the Borrower's obligations under any Hedging Agreement. Amounts prepaid under the Term Loans pursuant to this Section 4.4 may not be reborrowed and will constitute a permanent reduction in such Term Loan Commitment. Each prepayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof. SECTION 4.5 Term Notes. Except as otherwise provided in Section 14.10 (a) - - (e), each Lender's Term Loan and the obligation of the Borrower to repay such Term Loan shall be evidenced by a separate Term Note executed by the Borrower payable to the order of such Lender. SECTION 4.6 Optional Increase In Term Loan Commitment. (a) Subject to the conditions set forth below, the Borrower shall have the option, at any time after the Closing Date until the Term Loan Increase Termination Date to incur additional indebtedness under this Agreement in the form of an increase of the Term Loan Commitment of up to Fifty Million ($50,000,000) Dollars. The Borrower, by providing an Increase Notification, may request that additional Term Loans be made on the Additional Term Loan Effective Date pursuant to such increase in the Term Loan Commitment (each such additional Term Loan, an "Additional Term Loan, and collectively, the "Additional Term Loans"). (b) Each Additional Term Loan shall be obtained from existing Lenders, entities that qualify as Eligible Assignees, or from other banks, financial institutions or investment funds, in each case in accordance with this Section 4.6. Participation in any Additional Term Loan shall be offered first to each of the existing Lenders; provided that each such Lender shall have no obligation to provide any portion of such Additional Term Loans. If the amount of the Additional Term Loans requested by the Borrower shall exceed the commitments which the existing Lenders are willing to provide with respect to such Additional Term Loans, then the Borrower may invite other banks, financial institutions and investment funds which meet the 36 requirements of an Eligible Assignee to join this Agreement as Lenders for the portion of such Additional Term Loans not committed to by existing Lenders (each such other bank, financial institution or investment fund, a "New Lender" and collectively with the existing Lenders providing increased Commitments, the "Increase Lenders"). The Administrative Agent is authorized to enter into, on behalf of the Lenders, any amendment to this Agreement or any other Loan Document as may be necessary to incorporate the terms of any Additional Term Loan herein or therein; provided that such amendment shall not modify the Credit Agreement or any other Loan Document in any manner materially adverse to any Lender and shall otherwise be in accordance with Section 14.11 hereof. (c) The following terms and conditions shall apply to each Additional Term Loan: (i) the Additional Term Loans made under this Section 4.6 shall constitute Obligations of the Borrower and shall be secured and guaranteed with the other Extensions of Credit on a pari passu basis; (ii) any New Lender making Additional Term Loans shall be entitled to the same voting rights as the existing Lenders under the Term Loan Facility and the Additional Term Loans shall receive proceeds of prepayments on the same basis as the Term Loans; (iii) the Borrower shall execute such Term Loan Notes as are necessary to reflect the Additional Term Loans under this Section 4.6; (iv) the Administrative Agent and the Lenders shall have received from the Borrower updated financial projections and an Officer's Compliance Certificate, in each case in form and substance satisfactory to the Administrative Agent, demonstrating that, after giving effect to any such Additional Term Loan, the Borrower will be in pro forma compliance with the financial covenants set forth in Article X; (v) no Default or Event of Default shall have occurred and be continuing hereunder as of the Additional Term Loan Effective Date or after giving effect to the making of any such Additional Term Loans; (vi) the representations and warranties made by the Borrower and contained in Article VII shall be true and correct on and as of the Additional Term Loan Effective Date with the same effect as if made on and as of such date (other than those representations and warranties that by their terms speak as of a particular date, which representations and warranties shall be true and correct as of such particular date); (vii) the Borrower shall demonstrate, on a pro forma basis (as of the date of, and after giving effect to, the making of any such Additional Term Loan), an Asset Coverage Ratio equal to or exceeding 1.00 to 1.00; (viii) the amount of such increase in the Term Loan Commitment and any Additional Term Loans obtained thereunder shall not (A) be less than a minimum principal amount of $10,000,000, or any whole multiple of $5,000,000 in excess thereof and (B) shall not cause the Term Loan Commitment to exceed $190,000,000; (ix) the Borrower and each such Lender or lender not theretofore a Lender shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Lender Addition and Acknowledgment Agreement acknowledged by the Administrative Agent and each Subsidiary Guarantor and substantially in the form of Exhibit J attached hereto, and (x) the Administrative Agent shall have received any documents or information, including any joinder agreements, in connection with such increase in the Term Loan Commitment as it may request in its reasonable discretion. (d) Upon the execution, delivery, acceptance and recording of the Lender Addition and Acknowledgement Agreement, from and after the Additional Term Loan Effective Date, each such Increase Lender shall have a Term Loan Commitment as therein set forth and all the rights and obligations of a Lender with such a Term Loan Commitment hereunder. The Increase Lenders shall make Additional Term Loans to the Borrower on the Additional Term Loan 37 Effective Date in an amount equal to each such Lender's Term Loan Commitment. (e) The Administrative Agent shall maintain a copy of each Lender Addition and Acknowledgement Agreement delivered to it in accordance with Section 14.10(d). (f) Within five (5) Business Days after receipt of notice, the Borrower shall execute and deliver to the Administrative Agent, in exchange for any surrendered Term Loan Note or Term Loan Notes of any existing Lender or with respect to any Lender not theretofore a Lender, a new Term Loan Note or Term Loan Notes to the order of the applicable Lenders in amounts equal to the Term Loan Commitment of such Lenders pursuant to the Lender Addition and Acknowledgement Agreement. Such new Term Loan Note or Term Loan Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such Term Loan Commitments, shall be dated as of the Additional Term Loan Effective Date and shall otherwise be in substantially the form of the existing Term Loan Notes. Each surrendered Term Loan Note and/or Term Loan Notes shall be canceled and returned to the Borrower. (g) The Applicable Margin and pricing grid, if applicable, for the Additional Term Loans shall be determined on the Additional Term Loan Effective Date. If the Applicable Margin and pricing grid, if applicable, for such Additional Term Loans at such time exceeds the Applicable Margin or existing pricing grid, as applicable, for Term Loans set forth in Section 5.1(c), then the Applicable Margin and pricing grid, if applicable, for all Term Loans shall be increased to be equal to the Applicable Margin and pricing grid, if applicable, for the Additional Term Loans as determined on the Additional Loan Effective Date. In addition, the amortization schedule set forth in Section 4.3 shall be replaced with a new amortization schedule reflecting a pro rata increase in the remaining installment payments and to provide for the repayment of both the existing Term Loans and the Additional Term Loans. ARTICLE V GENERAL LOAN PROVISIONS SECTION 5.1 Interest. (a) Interest Rate Options. Subject to the provisions of this Section 5.1, at the election of the Borrower, (i) Revolving Credit Loans and Term Loans shall bear interest at (A) the Base Rate plus the Applicable Margin as set forth in Section 5.1(c) or (B) the LIBOR Rate plus the Applicable Margin as set forth in Section 5.1(c) (provided that the LIBOR Rate shall not be available until three (3) Business Days after the Closing Date) and (ii) any Swingline Loan shall bear interest at the Base Rate plus the Applicable Margin as set forth in Section 5.1(c). The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Loan at the time a Notice of Borrowing is given or at the time a Notice of Conversion/Continuation is given pursuant to Section 5.2. Each Loan or portion thereof bearing interest based on the Base Rate shall be a "Base Rate Loan", each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any Loan or any portion thereof as to which the Borrower has not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan. 38 (b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by giving notice at the times described in Section 5.1(a), shall elect an interest period (each, an "Interest Period") to be applicable to such Loan, which Interest Period shall be a period of one (1), two (2), three (3), or six (6) months with respect to each LIBOR Rate Loan; provided that: (i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the immediately preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day; (iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period; (iv) no Interest Period shall extend beyond the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable, and Interest Periods shall be selected by the Borrower so as to permit the Borrower to make mandatory reductions of the Revolving Credit Commitment pursuant to Section 2.6(b) and the quarterly principal installment payments pursuant to Section 4.3 without payment of any amounts pursuant to Section 5.9; and (v) there shall be no more than six (6) Interest Periods in effect at any time. (c) Applicable Margin. (i) The Applicable Margin provided for in Section 5.1(a) with respect to any Revolving Credit Loans and Swingline Loans (the "Applicable Margin") shall be based upon the table set forth below and shall be determined and adjusted quarterly on the date (each a "Calculation Date") ten (10) Business Days after the date by which the Borrower is required to provide an Officer's Compliance Certificate for the most recently ended fiscal quarter of the Borrower; provided, however, that (A) the initial Applicable Margin for the Revolving Credit Loans and Swingline Loans shall be based on Pricing Level IV (as shown below) and shall remain at Pricing Level IV until December 31, 2001, and, thereafter the Pricing Level shall be determined by reference to the Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding the applicable Calculation Date, and (B) if the Borrower fails to provide the Officer's Compliance Certificate as required by Section 8.2 for the most recently ended fiscal 39 quarter of the Borrower preceding the applicable Calculation Date, the Applicable Margin for Revolving Credit Loans and Swingline Loans from such Calculation Date shall be based on Pricing Level IV (as shown below) until such time as an appropriate Officer's Compliance Certificate is provided, at which time the Pricing Level shall be determined by reference to the Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding such Calculation Date. The Applicable Margin for Revolving Credit Loans and Swingline Loans shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all Extensions of Credit then existing or subsequently made or issued.
PRICING LEVEL TOTAL LEVERAGE RATIO LIBOR BASE RATE ------------- -------------------- ----- --------- I <2.00x 2.25% 1.25% II greater than or equal to 2.00x but <2.50x 2.50% 1.50% III greater than or equal to 2.50x but <3.00x 2.75% 1.75% IV greater than or equal to 3.00x 3.00% 2.00%
(ii) Subject to the provisions of Section 4.6(g), the Applicable Margin for Term Loans shall be based on the table set forth below and shall be determined and adjusted on each Calculation Date until such time as any change in the Applicable Margin or pricing grid, as applicable for Term Loans pursuant to Section 4.6; provided, however that (A) the initial Applicable Margin for Term Loans shall be based on Pricing Level II until the Calculation Date of March 31, 2002 and (B) if the Borrower fails to provide the Officer's Compliance Certificate as required by Section 8.2 for the most recently ended fiscal quarter of the Borrower preceding the applicable Calculation Date, the Applicable Margin for Term Loans from such Calculation Date shall be based on Pricing Level II (as shown below) until such time as an appropriate Officer's Compliance Certificate is provided, at which time the Pricing Level shall be determined by reference to the Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding such Calculation Date. The Applicable Margin for Term Loans shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all Term Loans then existing or subsequently made or issued.
Applicable LIBOR Applicable Base Rate Level Total Leverage Ratio Rate Margin (bps) Margin (bps) ----- -------------------- ----------------- -------------------- I < 2.50x 300.0 200.0 II greater than or equal to 2.50x 325.0 225.0
(d) Default Rate. Subject to Section 13.3, at the discretion of the Administrative Agent or as directed by the Required Lenders, upon the occurrence and during the continuance of an Event of Default, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans or Swingline Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum of two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans until the 40 end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans and other Obligations arising hereunder or under any other Loan Document shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document. Interest shall continue to accrue on the Notes after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (e) Interest Payment and Computation. Interest on each Base Rate Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing September 30, 2001; and interest on each LIBOR Rate Loan shall be payable on the last day of each Interest Period applicable thereto, and if such Interest Period extends over three (3) months, at the end of each three (3) month interval during such Interest Period. Interest on LIBOR Rate Loans and all fees payable hereunder shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed and interest on Base Rate Loans shall be computed on the basis of a 365/66-day year and assessed for the actual number of days elapsed. (f) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Notes charged or collected pursuant to the terms of this Agreement or pursuant to any of the Notes exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent's option (i) promptly refund to the Borrower any interest received by the Lenders in excess of the maximum lawful rate or (ii) shall apply such excess to the principal balance of the Obligations on a pro rata basis. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law. SECTION 5.2 Notice and Manner of Conversion or Continuation of Loans. Provided that no Default or Event of Default has occurred and is then continuing, the Borrower shall have the option to (a) convert at any time following the third Business Day after the Closing Date all or any portion of any outstanding Base Rate Loans (other than Swingline Loans) in a principal amount equal to $2,500,000 or any whole multiple of $100,000 in excess thereof into one or more LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $2,500,000 or a whole multiple of $100,000 in excess thereof into Base Rate Loans (other than Swingline Loans) or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert or continue Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written notice substantially in the form attached hereto as Exhibit E (a "Notice of Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a proposed conversion or continuation of such Loan is to be effective specifying (A) the Loans to be converted or continued, and, in the case of 41 any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the Lenders of such Notice of Conversion/Continuation by telecopier (or by telephone promptly confirmed by telecopier). SECTION 5.3 Fees. (a) Commitment Fee. Commencing on the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of the Lenders, a non-refundable commitment fee at a rate per annum equal to 0.50% on the average daily unused portion of the Revolving Credit Commitment; provided, that the amount of outstanding Swingline Loans shall not be considered usage of the Revolving Credit Commitment for the purpose of calculating such commitment fee. The commitment fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement with the first payment due on September 30, 2001, and on the Revolving Credit Maturity Date. Such commitment fee shall be promptly distributed by the Administrative Agent to the Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment Percentages. (b) Administrative Agent's and Other Fees. In order to compensate the Administrative Agent for structuring and syndicating the Loans and for its obligations hereunder, the Borrower agrees to pay to the Administrative Agent, for its account, the fees set forth in the separate fee letter agreement executed by the Borrower and the Administrative Agent dated June 22, 2001. SECTION 5.4 Manner of Payment. Each payment by the Borrower on account of the principal of or interest on the Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lenders under this Agreement or any Note shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office for the account of the Lenders (other than as set forth below) pro rata in accordance with their respective Revolving Credit Commitment Percentages or Term Loan Percentages, as applicable, (except as specified below), in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 12.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall promptly distribute to each Lender at its address for notices set forth herein its pro rata share of such payment in accordance with such Lender's Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, (except as specified below) and shall wire advice of the amount of such credit to each Lender. Each payment to the 42 Administrative Agent of the Issuing Lender's fees or L/C Participants' commissions shall be made in like manner, but for the account of the Issuing Lender or the L/C Participants, as the case may be. Each payment to the Administrative Agent of Administrative Agent's fees or expenses shall be made for the account of the Administrative Agent and any amount payable to any Lender under Sections 5.8, 5.9, 5.10, 5.11 or 14.2 shall be promptly paid to the Administrative Agent for the account of the applicable Lender. Subject to Section 5.1(b)(ii) if any payment under this Agreement or any Note shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment. SECTION 5.5 Crediting of Payments and Proceeds. In the event that the Borrower shall fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to Section 12.2, all payments received by the Lenders upon the Notes and the other Obligations and all net proceeds from the enforcement of the Obligations shall be applied: (a) first, to all expenses then due and payable by the Borrower hereunder and under the other Loan Documents, (b) then to all indemnity obligations then due and payable by the Borrower hereunder and under the other Loan Documents, (c) then to all Administrative Agent's and Issuing Lender's fees then due and payable, (d) then to all commitment and other fees and commissions then due and payable, (e) then to accrued and unpaid interest on the Swingline Note to the Swingline Lender, (f) then to the principal amount outstanding under the Swingline Note to the Swingline Lender, (g) then to accrued and unpaid interest on the other Notes, accrued and unpaid interest on the Reimbursement Obligation and any payments (including any termination payments and any accrued and unpaid interest thereon) due in respect of a Hedging Agreement with any Lender or the Administrative Agent (which such Hedging Agreement is permitted or required hereunder) (pro rata in accordance with all such amounts due), (h) then to the principal amount of the other Notes and Reimbursement Obligation (pro rata in accordance with all such amounts due) and (i) then to the cash collateral account described in Section 12.2(b) hereof to the extent of any L/C Obligations then outstanding, in that order. SECTION 5.6 Adjustments. If any Lender (a "Benefited Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or interest thereon, or if any Lender shall at any time receive any collateral in respect to the Obligations owing to it (whether voluntarily or involuntarily, by set-off or otherwise) (other than as a result of the operation of the proviso to Section 4.4(b)(vii) hereof or pursuant to Sections 5.8, 5.9, 5.10, 5.11 or 14.2 hereof) in a greater proportion than any such payment to and collateral received by any other Lender, if any, in respect of the similar Obligations owing to such other Lender, or interest thereon, such Benefited Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Extensions of Credit, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Extensions of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; 43 Assumption by the Administrative Agent. The obligations of the Lenders under this Agreement to make the Loans and issue or participate in Letters of Credit are several and are not joint or joint and several. Unless the Administrative Agent shall have received written notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender's ratable portion of the amount to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the proposed borrowing date in accordance with Sections 2.3(b) and 4.2, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the amount not made available by such Lender in accordance with the terms hereof, times (b) the daily average Federal Funds Rate during such period as determined by the Administrative Agent, times (c) a fraction the numerator of which is the number of days that elapse from and including such borrowing date to the date on which such amount not made available by such Lender in accordance with the terms hereof shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent with respect to any amounts owing under this Section 5.7 shall be conclusive, absent manifest error. If such Lender's Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of such borrowing is not made available to the Administrative Agent by such Lender within three (3) Business Days after such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the Administrative Agent with interest thereon at the rate per annum applicable to such borrowing hereunder, on demand, from the Borrower. The failure of any Lender to make available its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of any Loan requested by the Borrower shall not relieve it or any other Lender of its obligation, if any, hereunder to make its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of such Loan available on the borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of such Loan available on the borrowing date. Notwithstanding anything set forth herein to the contrary, any Lender that fails to make available its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, shall not (a) have any voting or consent rights under or with respect to any Loan Document or (b) constitute a "Lender" for purposes of the calculation of Required Lenders hereunder for any voting or consent rights under or with respect to any Loan Document; so long as such Lender fails to make available such Revolving Credit Commitment Percentage or Term Loan Percentage. Notwithstanding the foregoing, in no event shall any of the amendments, changes or modifications specifically enumerated in Section 14.11(a) - (d) be effective with respect to any Lender that has not consented thereto. SECTION 5.8 Changed Circumstances. (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest Period the Administrative Agent or any Lender (after consultation with the Administrative Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars, in the applicable amounts are not being 44 quoted via the Dow Jones Market Screen 3750 or offered to the Administrative Agent or such Lender for such Interest Period, then the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders by telecopier (or by telephone promptly confirmed by telecopier). Thereafter, until the Administrative Agent notifies the Borrower and the Lenders by telecopier (or by telephone promptly confirmed by telecopier) that such circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period. (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor their obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Lenders by telecopier (or by telephone promptly confirmed by telecopier). Thereafter, until the Administrative Agent notifies the Borrower and the other Lenders by telecopier (or by telephone promptly confirmed by telecopier) that such circumstances no longer exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period and the Borrower shall pay any amount required to be paid under Section 5.9 hereof. (c) Increased Costs. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of such Governmental Authority, central bank or comparable agency: (i) shall (except as provided in Section 5.11(e)) subject any of the Lenders (or any of their respective Lending Offices) to any tax, duty or other charge with respect to any Note, Letter of Credit or Application or shall change the basis of taxation of payments to any of the Lenders (or any of their respective Lending Offices) of the principal of or interest on any Note, Letter of Credit or Application or any other amounts 45 due under this Agreement in respect thereof (except for changes in the rate of franchise tax or tax on the overall net income of any of the Lenders or any of their respective Lending Offices imposed by the jurisdiction in which such Lender is organized or is or should be qualified to do business or such Lending Office is located); provided that the Borrower shall not be obligated to pay any amounts pursuant to this Section 5.8(c)(i) to the extent that such amounts are duplicative of any amounts paid by the Borrower pursuant to Section 5.11; or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance or capital or similar requirement against assets of, deposits with or for the account of, or credit extended by any of the Lenders (or any of their respective Lending Offices) or shall impose on any of the Lenders (or any of their respective Lending Offices) or the foreign exchange and interbank markets any other condition affecting any Note; and the result of any of the foregoing events described in clause (i) or (ii) above is to increase the costs to any of the Lenders of maintaining any LIBOR Rate Loan or issuing or participating in Letters of Credit or to reduce the yield or amount of any sum received or receivable by any of the Lenders under this Agreement or under the Notes in respect of a LIBOR Rate Loan or Letter of Credit or Application, then such Lender shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Borrower of such fact and demand compensation therefor and, within fifteen (15) days after such notice by the Administrative Agent, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or Lenders for such increased cost or reduction. The Administrative Agent will promptly notify the Borrower of any event of which it has knowledge which will entitle such Lender to compensation pursuant to this Section 5.8(c); provided, that the Administrative Agent shall incur no liability whatsoever to the Lenders or the Borrower in the event it fails to do so. The amount of such compensation shall be determined, in the applicable Lender's sole discretion, based upon the assumption that such Lender funded its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical. A certificate of such Lender setting forth the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 5.9 Indemnity. The Borrower hereby indemnifies each of the Lenders against any loss or expense which may arise or be attributable to each Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow, continue or convert on a date specified therefor in a Notice of Borrowing or Notice of Continuation/Conversion or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount 46 of such loss or expense shall be determined, in the applicable Lender's sole discretion, based upon the assumption that such Lender funded its Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable, of the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical. A certificate of such Lender setting forth the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 5.10 Capital Requirements. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Lender or any corporation controlling such Lender as a consequence of, or with reference to the Commitments and other commitments of this type, below the rate which such Lender or such other corporation could have achieved but for such introduction, change or compliance, then within five (5) Business Days after written demand by any such Lender, the Borrower shall pay to such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender or other corporation for such reduction. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender, shall, in the absence of manifest error, be presumed to be correct and binding for all purposes. SECTION 5.11 Taxes. (a) Payments Free and Clear. Except as otherwise provided in Section 5.11(e), any and all payments by the Borrower hereunder or under the Notes or the Letters of Credit shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Lender and the Administrative Agent, income and franchise taxes imposed by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision thereof and (ii) in the case of each Lender, income and franchise taxes imposed by the jurisdiction of such Lender's Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder or under any Note or in respect of any Letter of Credit to any Lender or the Administrative Agent, (A) except as otherwise provided in Section 5.11(e), the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 5.11) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions or withholdings been made, (B) the Borrower shall make such deductions or withholdings, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with Applicable Law, and (D) the Borrower shall deliver to the Administrative Agent and such Lender evidence of such payment to the 47 relevant taxing authority or other Governmental Authority in the manner provided in Section 5.11(d). (b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Loans, the Letters of Credit or the other Loan Documents, or the perfection of any rights or security interest in respect thereof (hereinafter referred to as "Other Taxes"). (c) Indemnity. Except as otherwise provided in Section 5.11(e), the Borrower shall indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 5.11) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. (d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Administrative Agent and the applicable Lender, at its address referred to in Section 14.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Administrative Agent. (e) Delivery of Tax Forms. To the extent required by Applicable Law to reduce or eliminate withholding or payment of taxes, each Lender and the Administrative Agent shall deliver to the Borrower, with a copy to the Administrative Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms W-9, Forms W-8ECI or Forms W-8BEN, as applicable (or successor forms) properly completed and certifying in each case that such Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each such Lender further agrees to deliver to the Borrower, with a copy to the Administrative Agent, as applicable, two Form W-9, Form W-8BEN or W-8ECI, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form W-9, Form W-8BEN or W-8ECI (or successor forms) that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Lender notifies the Borrower and the 48 Administrative Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-9, Form W-8BEN or W-8ECI, establishing an exemption from United States backup withholding tax. Notwithstanding anything in any Loan Document to the contrary, the Borrower shall not be required to pay additional amounts to any Lender or the Administrative Agent under Section 5.11 or Section 5.8(c), (i) if such Lender or the Administrative Agent fails to comply with the requirements of this Section 5.11(e), other than to the extent (i) that such failure is due to a change in law occurring after the date on which such Lender or the Administrative Agent became a party to this Agreement or (ii) that such additional amounts are the result of such Lender's or the Administrative Agent's gross negligence or willful misconduct, as applicable. (f) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 5.11 shall survive the payment in full of the Obligations and the termination of the Commitments until the expiration of the applicable statute of limitations. SECTION 5.12 Security. The Obligations of the Borrower and the Subsidiary Guaranteed Obligations shall be secured as provided in the Security Documents. SECTION 5.13 Mitigation Obligations/Replacement of Lenders. (a) If any Lender requests compensation under Section 5.8(c), or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, then such Lender shall use its reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.8(c) or 5.11, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 5.8(c), or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, or if any Lender defaults in its obligations to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 14.10), all its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in L/C Obligations and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other 49 amounts (including, without limitation, any amounts then payable to such Lender under Section 5.8(c) or Section 5.11 hereof)) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 5.8(c) or payments required to be made pursuant to Section 5.11, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING SECTION 6.1 Closing. The closing shall take place at the offices of Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on September 28, 2001, or on such other place, date and time as the parties hereto shall mutually agree. SECTION 6.2 Conditions to Closing and Initial Extensions of Credit. The obligation of the Lenders to close this Agreement and to make the initial Loan or issue or participate in the initial Letter of Credit, if any, is subject to the satisfaction of each of the following conditions: (a) Executed Loan Documents. This Agreement, the Revolving Credit Notes, the Term Notes, the Swingline Note, the Security Documents, together with any other applicable Loan Documents, shall have been duly authorized, executed and delivered to the Administrative Agent by the parties thereto, shall be in full force and effect and no Default or Event of Default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Administrative Agent. (b) Closing Certificates; etc. (i) Officer's Certificate of the Borrower. The Administrative Agent shall have received a certificate from a Responsible Officer, in form and substance satisfactory to the Administrative Agent, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that the Borrower has satisfied each of the closing conditions. (ii) Certificate of Secretary of the Borrower and Subsidiary Guarantors. The Administrative Agent shall have received a certificate of the secretary or assistant secretary of each of the Borrower and the Subsidiary Guarantors certifying as to the incumbency and genuineness of the signature of each officer of the Borrower or such Subsidiary Guarantor executing the Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the certificate of limited partnership, articles of incorporation or other organizational document of the Borrower or such Subsidiary Guarantor and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation, (B) the bylaws, partnership agreement, operating agreement or other operative document of the Borrower or 50 such Subsidiary Guarantor as in effect on the date of such certifications, (C) resolutions duly adopted by the Board of Directors, partners or members of the Borrower or such Subsidiary Guarantor authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 6.2(b)(iii). (iii) Certificates of Good Standing. The Administrative Agent shall have received certificates as of a recent date of the good standing of the Borrower and each Subsidiary Guarantor under the laws of its jurisdiction of organization and, to the extent requested by the Administrative Agent in its reasonable judgment, each other jurisdiction where the Borrower and each Subsidiary Guarantor is qualified to do business and a certificate of the relevant taxing authorities of such jurisdictions certifying that such Person has filed required tax returns and owes no delinquent taxes. (iv) Opinions of Counsel. The Administrative Agent shall have received favorable opinions of counsel to the Borrower and Subsidiary Guarantors addressed to the Administrative Agent and the Lenders with respect to the Borrower and Subsidiary Guarantors, the Loan Documents and such other matters as the Administrative Agent shall reasonably request. (v) Tax Forms. The Administrative Agent shall have received copies of the United States Internal Revenue Service forms required by Section 5.11(e) hereof. (vi) Borrowing Base Certificate. The Administrative Agent shall have received from the Borrower a Borrowing Base Certificate dated as of the last day of the month preceding the Closing Date executed by a Responsible Officer of the Borrower which shall be accurate and complete in all material respects. (c) Collateral. (i) Filings and Recordings. All filings and recordations that are necessary to perfect the security interests of the Lenders in the collateral described in the Security Documents shall have been received by the Administrative Agent and the Administrative Agent shall have received evidence satisfactory to the Administrative Agent that upon such filings and recordations such security interests constitute valid and perfected first priority Liens therein. (ii) Pledged Collateral. The Administrative Agent shall have received (A) original stock certificates or other certificates evidencing the capital stock or other ownership interests pledged pursuant to the Collateral Agreement or the Pledge Agreements together with an undated stock power for each such certificate duly executed in blank by the registered owner thereof and (B) each original promissory note pledged 51 pursuant to the Collateral Agreement or any Pledge Agreement. (iii) Lien Search. The Administrative Agent shall have received the results of a Lien search (including a search as to judgments and tax matters) made against the Borrower and its Restricted Subsidiaries under the Uniform Commercial Code as in effect in any state in which any of its assets are located, indicating among other things that its assets are free and clear of any Lien except for Liens permitted hereunder. (iv) Hazard and Liability Insurance. The Administrative Agent shall have received certificates of insurance, evidence of payment of all insurance premiums for the current policy year of each, and, if requested by the Administrative Agent, copies (certified by a Responsible Officer) of insurance policies in the form required under the Security Documents and otherwise in form and substance reasonably satisfactory to the Administrative Agent. (v) Environmental Assessments. The Administrative Agent shall have received the environmental assessments and the other environmental reports set forth on Schedule 6.2(c)(v). (d) Consents; Defaults. (i) Governmental and Third Party Approvals. The Borrower shall have obtained all necessary approvals, authorizations and consents of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents. (ii) No Injunction, Etc. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Administrative Agent's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement and such other Loan Documents. (iii) No Event of Default. No Default or Event of Default shall have occurred and be continuing. (e) Financial Matters. (i) Financial Statements. The Administrative Agent shall have received the March 31, 2001 audited Consolidated financial statements of the Borrower and its Subsidiaries, and unaudited pro forma Consolidated financial statements for the twelve month period ended June 30, 2001, of the Borrower and its Subsidiaries and for Sensors, all in form and substance satisfactory to the Administrative Agent and prepared in accordance with GAAP, except that such financial statements of Sensors shall not be prepared in accordance with GAAP. 52 (ii) Closing Balance Sheet. The Administrative Agent shall have received a closing balance sheet of the Borrower dated as of the last day of the month preceding the Closing Date that, after giving effect to the Acquisition, shall not be materially different from the projections previously delivered to the Administrative Agent and otherwise be in form and substance satisfactory to the Administrative Agent. (iii) Financial Condition Certificate. The Borrower shall have delivered to the Administrative Agent a certificate, in form and substance satisfactory to the Administrative Agent, and certified as accurate by a Responsible Officer, that (A) the Borrower and its Restricted Subsidiaries taken as a whole are Solvent, (B) the Borrower's and its Restricted Subsidiaries' payables are not past due beyond customary trade terms, (C) attached thereto are calculations evidencing compliance basis with the covenants contained in Article X hereof and an Asset Coverage Ratio equal to or exceeding 1.00 to 1.00, in each case, determined on a pro forma basis, as of the Closing Date and after giving effect to the proposed Extensions of Credit to be made on such date, (D) the financial projections previously delivered to the Administrative Agent represent the good faith estimates (utilizing assumptions believed by the Borrower's management to be reasonable) of the financial condition and operations of the Borrower and its Restricted Subsidiaries and (E) attached thereto is a calculation of the Applicable Margin pursuant to Section 5.1(c). (iv) Financial Projections. The Administrative Agent shall have received management approved five (5) year projected financial statements of the Borrower and its Subsidiaries. (v) Debt Ratings. The Administrative Agent shall have received senior secured debt ratings for the Borrower from both Standard & Poor's Corporation and Moody's Investors Service. (vi) Payment at Closing; Fee Letters. The Borrower shall have paid to the Administrative Agent and the Lenders the fees set forth or referenced in Section 5.3 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees and expenses) and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. (f) Acquisition Documents. (i) The Administrative Agent shall have received all documentation (including amendments, modifications, and waivers thereof) relating to the Acquisition (and all closing conditions therein shall be satisfied to the satisfaction of the Administrative Agent and the Acquisition shall be consummated in accordance with the terms of such provided documentation on or before the Closing Date). 53 (ii) The Administrative Agent shall be satisfied that the maximum amount paid for the Acquisition (including the fees and expenses paid in connection with such Acquisition) does not exceed $95,000,000. (iii) The Administrative Agent shall have received evidence satisfactory thereto that all governmental (including approvals required under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended), shareholder and third party consents and approvals necessary or desirable in connection with the Acquisition shall have been obtained and remain in effect. (iv) The Administrative Agent shall have received copies (i) of each employment agreement between the Borrower and its respective key employees and (ii) each non-competition agreement entered into by any seller or any member of management of the Borrower in favor of the Borrower, each of the foregoing in form and substance satisfactory to the Administrative Agent. (v) The Administrative Agent shall have received copies of all such other Acquisition documents and information as it may reasonably request, including, without limitation, copies of (A) the Estimated Closing Net Assets as such term is defined in Section 2.4(b) of the Asset Purchase Agreement, (B) the Closing Statement of Assets and Liabilities as such term is defined in Section 2.5(a) of the Asset Purchase Agreement, (C) copies of any Notice of Disagreement as such term is defined in the Asset Purchase Agreement and (D) copies of the final Tax Allocation pursuant to the terms of Section 2.7 of the Asset Purchase Agreement. (vi) The Administrative Agent shall have received satisfactory evidence that all Debt of the Borrower and its Restricted Subsidiaries other than Debt permitted by Section 11.1, including any Debt incurred in connection with the Acquisition, has been repaid in full and any Liens or other security interests related thereto have been terminated. (g) Miscellaneous. (i) Notice of Borrowing. The Administrative Agent shall have received a Notice of Borrowing, as applicable, from the Borrower in accordance with Section 2.3(a) and Section 4.2, and a Notice of Account Designation specifying the account or accounts to which the proceeds of any Loans made after the Closing Date are to be disbursed. (ii) Existing Facility. The Existing Facility (except for the Existing Letters of Credit) shall be repaid in full and terminated and all collateral security therefor shall be released, and the Administrative Agent shall have received a pay-off letter in form and substance satisfactory to it evidencing such repayment, termination, reconveyance and release. On the Closing Date, the Existing Letters of Credit shall be deemed to be Letters of Credit issued under this Agreement. (iii) Other Documents. All opinions, certificates and other instruments and all 54 proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Administrative Agent. The Administrative Agent shall have received copies of all other documents, certificates and instruments reasonably requested thereby, with respect to the transactions contemplated by this Agreement. SECTION 6.3 Conditions to All Extensions of Credit. The obligations of the Lenders to make any Extensions of Credit (including the initial Extension of Credit), convert or continue any Loan and/or the Issuing Lender to issue or extend any Letter of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing continuation, conversion, issuance or extension date: (a) Continuation of Representations and Warranties. The representations and warranties contained in Article VII shall be true and correct on and as of such borrowing or issuance date or such date of continuation or conversion with the same effect as if made on and as of such date; except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date. (b) Asset Coverage Ratio. After giving effect to any requested Extension of Credit on a pro forma basis, the Asset Coverage Ratio of the Borrower and its Restricted Subsidiaries shall be greater than or equal to 1.00 to 1.00. (c) No Existing Default. No Default or Event of Default shall have occurred and be continuing (i) on the borrowing date with respect to such Loan or after giving effect to the Loans to be made on such date or (ii) on the issue date with respect to such Letter of Credit or after giving effect to the issuance of such Letter of Credit on such date or on such continuation or conversion date after giving effect to such continuation or conversion. (d) Notices. The Administrative Agent shall have received a Notice of Borrowing or Notice of Conversion/Continuation, as applicable, from the Borrower in accordance with Section 2.3(a) and Section 4.2. (e) Additional Documents. The Administrative Agent shall have received each additional document, instrument, legal opinion or other item reasonably requested by it. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWER SECTION 7.1 Representations and Warranties. To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the Borrower hereby represents and warrants to the Administrative Agent and Lenders both before and after giving effect to the transactions contemplated hereunder that: (a) Organization; Power; Qualification. Each of the Borrower and its Restricted 55 Subsidiaries (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and (ii) except to the extent as could not reasonably be expected to have a Material Adverse Effect, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization. The jurisdictions in which the Borrower and its Restricted Subsidiaries are organized and qualified to do business as of the Closing Date are described on Schedule 7.1(a). (b) Ownership. Each Subsidiary of the Borrower as of the Closing Date is listed on Schedule 7.1(b). As of the Closing Date, the capitalization of the Borrower and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.1(b). All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and not subject to any preemptive or similar rights. The shareholders of the Subsidiaries of the Borrower and the number of shares owned by each as of the Closing Date are described on Schedule 7.1(b). As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Borrower or its Restricted Subsidiaries, except as described on Schedule 7.1(b). (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower and its Restricted Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms. This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of the Borrower and each of its Restricted Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the Borrower or its Restricted Subsidiary party thereto, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies. (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the Borrower and its Restricted Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the Extensions of Credit hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower or any of its Restricted Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Borrower or any of its Restricted Subsidiaries or any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now 56 owned or hereafter acquired by such Person other than Liens arising under the Loan Documents or (iv) require any consent or authorization of, filing with, or other act in respect of, an arbitrator or Governmental Authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. (e) Compliance with Law; Governmental Approvals. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, each of the Borrower and its Restricted Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding, (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Laws relating to it or any of its respective properties and (iii) has timely filed all material reports, documents and other materials required to be filed by it under all Applicable Laws with any Governmental Authority and has retained all material records and documents required to be retained by it under Applicable Law. (f) Tax Returns and Payments. Each of the Borrower and its Restricted Subsidiaries has duly filed or caused to be filed all federal, state, local and other tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except (a) any taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Restricted Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Such returns accurately reflect in all material respects all liability for taxes of the Borrower and its Subsidiaries for the periods covered thereby. There is no ongoing audit or examination or, to the knowledge of the Borrower, other investigation by any Governmental Authority of the tax liability of the Borrower and its Restricted Subsidiaries. No Governmental Authority has asserted any Lien or other claim against the Borrower or any Restricted Subsidiary thereof with respect to unpaid taxes which has not been discharged or resolved other than Liens for taxes not yet due and payable. The charges, accruals and reserves on the books of the Borrower and any of its Subsidiaries in respect of federal, state, local and other taxes for all Fiscal Years and portions thereof for all open years of the Borrower and any of its Restricted Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does not anticipate any additional material taxes or assessments for any of such years. (g) Intellectual Property Matters. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, each of the Borrower and its Restricted Subsidiaries owns or possesses rights to use all franchises, licenses, copyright registrations, copyright applications, issued patents, patent applications, trademarks, trademark applications, trademark registrations, trademark rights, service marks, service mark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business. To the knowledge of the Borrower and its Restricted Subsidiaries, no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights (except for the expiration of patents in the ordinary 57 course), and neither the Borrower nor any Restricted Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations except to the extent any such revocation, termination, or infringement could not reasonably be expected to have a Material Adverse Effect. (h) Environmental Matters. Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, (i) The properties presently owned, leased or operated by the Borrower and its Restricted Subsidiaries do not contain, and to their knowledge have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could reasonably be expected to give rise to liability under applicable Environmental Laws; (ii) The Borrower, each Restricted Subsidiary and such properties and all operations conducted in connection therewith are in compliance, and have been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about such properties or such operations which could interfere with the continued operation of such properties; (iii) Neither the Borrower nor any Restricted Subsidiary thereof has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters, Hazardous Materials, or compliance with Environmental Laws, nor does the Borrower or any Restricted Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened; (iv) Hazardous Materials have not been transported or disposed of to or from the properties owned, leased or operated by of the Borrower and its Restricted Subsidiaries in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, Environmental Laws, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Laws; and (v) No judicial proceedings or governmental or administrative action is pending under any Environmental Law to which the Borrower or any Restricted Subsidiary thereof has been named as a potentially responsible party with respect to such properties or operations conducted in connection therewith, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to Borrower or any Restricted Subsidiary. (i) ERISA. (i) As of the Closing Date, neither the Borrower nor any ERISA Affiliate 58 maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than those identified on Schedule 7.1(i); (ii) The Borrower and each ERISA Affiliate is in material compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired and except where a failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code except for such plans that have not yet received determination letters but for which the remedial amendment period for submitting a determination letter has not yet expired. No liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan except for a liability that could not reasonably be expected to have a Material Adverse Effect; (iii) Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, as of the Closing Date, no Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; (iv) Except where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (C) failed to make a required contribution or payment to a Multiemployer Plan, or (D) failed to make a required installment or other required payment under Section 412 of the Code; (v) No Termination Event has occurred or is reasonably expected to occur; and (vi) Except where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse Effect, no proceeding, claim (other than a benefits claim in the ordinary course 59 of business), lawsuit and/or investigation is existing or, to the best knowledge of the Borrower after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan. (j) Margin Stock. Neither the Borrower nor any Restricted Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used, directly or indirectly, in Regulation U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Loans or Letters of Credit will be used for purchasing or carrying margin stock or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors. (k) Government Regulation. Neither the Borrower nor any Restricted Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the Borrower nor any Restricted Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended, or any other Applicable Law which limits its ability to incur or consummate the transactions contemplated hereby. (l) Material Contracts. Schedule 7.1(l) sets forth a complete and accurate list of all Material Contracts of the Borrower and its Restricted Subsidiaries in effect as of the Closing Date not listed on any other Schedule hereto; other than as set forth in Schedule 7.1(l), each such Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof. The Borrower and its Subsidiaries have made available to the Administrative Agent a true and complete copy of each Material Contract required to be listed on Schedule 7.1(l) or any other Schedule hereto. Neither the Borrower nor any Restricted Subsidiary (nor, to the knowledge of the Borrower, any other party thereto) is in breach of or in default under any Material Contract which could reasonably be expected to have a Material Adverse Effect. (m) Employee Relations. Each of the Borrower and its Restricted Subsidiaries is not, as of the Closing Date, party to any collective bargaining agreement nor has any labor union been recognized as the representative of its employees except as set forth on Schedule 7.1(m). The Borrower knows of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Restricted Subsidiaries. (n) Burdensome Provisions. Neither the Borrower nor any Restricted Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Borrower and its Restricted Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as could reasonably be expected to have a Material Adverse Effect. No Restricted Subsidiary is party to any agreement or 60 instrument or otherwise subject to any restriction or encumbrance that restricts or limits its ability to make dividend payments or other distributions in respect of its capital stock to the Borrower or any Restricted Subsidiary or to transfer any of its assets or properties to the Borrower or any other Restricted Subsidiary in each case other than existing under or by reason of the Loan Documents or Applicable Law. (o) Financial Statements. The financial statements required pursuant to Section 6.2(e) and related unaudited interim statements of income and retained earnings, copies of which have been furnished to the Administrative Agent and each Lender, are complete and correct and fairly present on a Consolidated basis the assets, liabilities and financial position of the Borrower and its Restricted Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended (other than customary year-end adjustments for unaudited financial statements). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP. (p) No Material Adverse Change. Since March 31, 2001, there has been no material adverse change in the properties, business, operations, prospects, or condition (financial or otherwise) of the Borrower, its Restricted Subsidiaries or Sensors and no event has occurred or condition arisen that could reasonably be expected to have a Material Adverse Effect. (q) Solvency. As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the Borrower and its Restricted Subsidiaries taken as a whole will be Solvent. (r) Titles to Properties. Each of the Borrower and its Restricted Subsidiaries has such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the Borrower and its Restricted Subsidiaries delivered pursuant to Section 7.1(o), except those which have been disposed of by the Borrower or its Restricted Subsidiaries subsequent to such date which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder. As of the Closing Date, all real property owned or leased by the Borrower or any Restricted Subsidiary is set forth on Schedule 7.1(r). (s) Liens. None of the properties and assets of the Borrower or any Restricted Subsidiary thereof is subject to any Lien, except Permitted Liens. No financing statement under the Uniform Commercial Code of any state which names the Borrower or any Restricted Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither the Borrower nor any Restricted Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Liens permitted by Section 11.2 hereof. (t) Debt and Guaranty Obligations. Schedule 7.1(t) is a complete and correct listing of all Debt, Guaranty Obligations and Bonding Obligations of the Borrower and its Restricted Subsidiaries as of the date set forth on such Schedule 7.1(t) in excess of $1,000,000. The 61 Borrower and its Restricted Subsidiaries have performed and are in compliance with all of the terms of such Debt and Guaranty Obligations and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with notice or lapse of time or both would constitute such a default or event of default on the part of the Borrower or any of its Restricted Subsidiaries exists with respect to any such Debt or Guaranty Obligation. (u) Litigation. Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, and except for matters existing on the Closing Date and set forth on Schedule 7.1(u), there are no actions, suits or proceedings pending nor, to the knowledge of the Borrower, threatened against or in any other way relating adversely to or affecting the Borrower, any Restricted Subsidiary thereof or Sensors or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority. (v) Absence of Defaults. No event has occurred or is continuing which constitutes a Default or an Event of Default, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by the Borrower or any Restricted Subsidiary thereof under any Material Contract (which such default under such Material Contract, either individually, or in the aggregate with all other outstanding defaults under other Material Contracts (including, for purposes hereof, the effect of termination of any other Material Contracts that could reasonably be expected to be terminated as a result of such existing default or defaults), could reasonably be expected to have a Material Adverse Effect) or judgment, decree or order to which the Borrower or any of its Restricted Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their respective properties may be bound or which would require the Borrower or any of its Restricted Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor. (w) Senior Debt Status. The Obligations of the Borrower and each of its Restricted Subsidiaries under this Agreement, the Subsidiary Guaranteed Obligations and each of the other Loan Documents ranks and shall continue to rank at least senior in priority of payment to all Subordinated Debt and the Obligations of the Borrower and each Restricted Subsidiary under this Agreement are hereby designated as "Senior Indebtedness" under all instruments and documents, now or in the future, relating to all Subordinated Debt. (x) Accuracy and Completeness of Information. All written information, reports and other papers and data, when taken as a whole, produced by or on behalf of the Borrower or any Restricted Subsidiary thereof (other than financial projections, which shall be subject to the standard set forth in Section 8.1(c)) and furnished to the Lenders were, at the time the same were so furnished, complete and correct in all material respects to the extent necessary to give the recipient a true and accurate knowledge of the subject matter. No document furnished or written statement made to the Administrative Agent or the Lenders by the Borrower or any Restricted Subsidiary thereof in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains or will contain any untrue statement of a fact material to the creditworthiness of the Borrower or its Restricted Subsidiaries or omits or will omit to state a fact necessary in order to make the statements contained therein not misleading. The Borrower is not aware of any facts which it has not disclosed in writing to the 62 Administrative Agent having a Material Adverse Effect, or insofar as the Borrower can now foresee, which could reasonably be expected to have a Material Adverse Effect. SECTION 7.2 Survival of Representations and Warranties, Etc. All representations and warranties set forth in this Article VII and all representations and warranties contained in any certificate, or any of the Loan Documents (including, but not limited to, any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder. ARTICLE VIII FINANCIAL INFORMATION AND NOTICES Until all the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 14.11, the Borrower will furnish or cause to be furnished to (a) Standard & Poor's Corporation, (b) Moody's Investors Service and (c) the Administrative Agent at the Administrative Agent's Office at the address set forth in Section 14.1 and to the Lenders at their respective addresses as set forth on Schedule 1, or such other office as may be designated by the Administrative Agent and Lenders from time to time: SECTION 8.1 Financial Statements and Projections. (a) Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter of each Fiscal Year, an unaudited Consolidated and consolidating balance sheet of the Borrower and its Restricted Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated and consolidating statements of income, retained earnings and cash flows for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the corresponding period in the preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by the chief financial officer of the Borrower to present fairly in all material respects the financial condition of the Borrower and its Restricted Subsidiaries on a Consolidated and consolidating basis as of their respective dates and the results of operations of the Borrower and its Restricted Subsidiaries for the respective periods then ended, subject to normal year end adjustments. (b) Annual Financial Statements. As soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, an audited Consolidated balance sheet of the 63 Borrower and its Restricted Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, retained earnings and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the preceding Fiscal Year and prepared by an independent certified public accounting firm acceptable to the Administrative Agent in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by the Borrower or any of its Restricted Subsidiaries or with respect to accounting principles followed by the Borrower or any of its Restricted Subsidiaries not in accordance with GAAP. (c) Annual Business Plan and Financial Projections. As soon as practicable and in any event within thirty (30) days prior to the beginning of each Fiscal Year, a business plan of the Borrower and its Restricted Subsidiaries for the ensuing four (4) fiscal quarters, such plan to be prepared in accordance with GAAP and to include, on a quarterly basis, the following: a quarterly operating and capital budget, a projected income statement, statement of cash flows and balance sheet and a report containing management's discussion and analysis of such projections, accompanied by a certificate from the chief financial officer of the Borrower to the effect that, to the best of such officer's knowledge, such projections are good faith estimates (utilizing assumptions believed by Borrower's management to be reasonable) of the financial condition and operations of the Borrower and its Restricted Subsidiaries for such four (4) quarter period. SECTION 8.2 Officer's Compliance Certificate. At each time financial statements are delivered pursuant to Sections 8.1 (a) or (b) and at such other times as the Administrative Agent shall reasonably request (including, without limitation, in connection with any Permitted Acquisition), a certificate of the chief financial officer or the treasurer of the Borrower in the form of Exhibit F attached hereto (an "Officer's Compliance Certificate"). SECTION 8.3 Accountants' Certificate. At each time financial statements are delivered pursuant to Section 8.1(b), a certificate of the independent public accountants certifying such financial statements addressed to the Administrative Agent for the benefit of the Lenders: (a) stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature and period of existence; and (b) including the calculations prepared by such accountants required to establish whether or not the Borrower and its Restricted Subsidiaries are in compliance with the financial covenants set forth in Article X hereof as at the end of each respective period. 64 SECTION 8.4 Other Reports. (a) Auditor's Management Letters. Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower or its Board of Directors by its independent public accountants in connection with their auditing function, including, without limitation, any management report and any management responses thereto; and (b) Borrowing Base Certificate. As soon as available, but in any event within twenty-five (25) days after the end of each calendar month (and, upon the occurrence and during the continuation of an Event of Default, on a more frequent basis if requested by the Administrative Agent or at such other times as required pursuant to the terms of this Agreement), a Borrowing Base Certificate which shall include a calculation of the Asset Coverage Ratio as of such date. (c) Accounts Receivable Aging Report. As soon as available, but in any event within twenty-five (25) days after the end of each calendar month (and, upon the occurrence and during the continuation of an Event of Default, on a more frequent basis if requested by the Administrative Agent), a summary accounts receivable aging report as of the last Business Day of such month which report shall include such information as the Administrative Agent may require, all in form and substance satisfactory to the Administrative Agent. Upon the Administrative Agent's reasonable request, the Borrowers shall deliver annually on the first day of the second quarter of each Fiscal Year and upon the occurrence and during the continuation of a Default or Event of Default, within thirty (30) days upon the request of the Administrative Agent, the name and mailing address of each Account Debtor. (d) Accounts Payable Aging Report. As soon as available, but in any event within twenty-five (25) days after the end of each calendar month (and, upon the occurrence and during the continuation of an Event of Default, on a more frequent basis if requested by the Administrative Agent), a summary accounts payable aging report which report shall include such information as the Administrative Agent may require, all in form and substance satisfactory to the Administrative Agent. (e) Government Contract Report. Upon the request of the Administrative Agent, which such requests shall be limited to one per fiscal quarter (and, upon the occurrence and during the continuance of an Event of Default, as often as requested by the Administrative Agent), a status report with respect to all Governmental Contracts in excess of $1,000,000 of the Borrowers and their Restricted Subsidiaries, in form and substance satisfactory to the Administrative Agent. (f) Acquisition Related Reports. As soon as available, a copy of any report issued by an Accounting Arbitrator pursuant to the terms of the Asset Purchase Agreement, including, without limitation, reports issued pursuant to Section 2.5(d) of the Asset Purchase Agreement. (g) Contract Backlog Report. As soon as available, but in any event within forty-five (45) days after the close of each fiscal quarter of each Fiscal Year of the Borrower, a contract backlog report for the Borrower, its Restricted Subsidiaries and Affiliates signed by a Responsible Officer of the Borrower. 65 (h) Other Information. Such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Restricted Subsidiaries, including any reports delivered to the Securities and Exchange Commission as the Administrative Agent or any Lender may reasonably request. SECTION 8.5 Notice of Litigation and Other Matters. Prompt (but in no event later than ten (10) days after an officer of the Borrower obtains knowledge thereof) telephonic and written notice of: (a) Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the Borrower or any Restricted Subsidiary thereof or any of their respective properties, assets or businesses; (b) Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, any notice of any violation received by the Borrower or any Restricted Subsidiary thereof from any Governmental Authority including, without limitation, any notice of violation of Environmental Laws; (c) Except for any such matter that could not reasonably be expected to create a Material Adverse Effect, any labor controversy that has resulted in, or threatens to result in, a strike or other work action against the Borrower or any Restricted Subsidiary thereof; (d) any attachment, judgment, lien, levy or order exceeding $2,500,000 that may be assessed against or threatened in writing against the Borrower or any Restricted Subsidiary thereof; (e) (i) any Default or Event of Default, (ii) the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default or (iii) any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Material Contract to which the Borrower or any of its Restricted Subsidiaries is a party or by which the Borrower or any Restricted Subsidiary thereof or any of their respective properties may be bound; (f) (i) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy thereof), (ii) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iii) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; 66 (g) any event which makes any of the representations set forth in Section 7.1 inaccurate in any respect; and (h) any change in the government contracting status of the Borrower or its Restricted Subsidiaries with respect to the government of the United States or any department or agency thereof that could reasonably be expected to have a Material Adverse Effect. SECTION 8.6 Accuracy of Information. All written information, reports, statements and other papers and data furnished by or on behalf of the Borrower to the Administrative Agent or any Lender whether pursuant to this Article VIII or any other provision of this Agreement, or any of the Security Documents, shall, at the time the same is so furnished, comply with the representations and warranties set forth in Section 7.1. ARTICLE IX AFFIRMATIVE COVENANTS Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner provided for in Section 14.11, the Borrower will, and will cause each of its Restricted Subsidiaries to: SECTION 9.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 11.4, preserve and maintain (a) its separate corporate existence and (b) all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction where the nature and scope of its activities require it to so qualify under Applicable Law except (with respect to this clause (b) only) to the extent such failure to preserve or maintain could not reasonably be expected to have a Materially Adverse Effect. SECTION 9.2 Maintenance of Property. In addition to the requirements of any of the Security Documents, protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names, service marks and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be conducted in a commercially reasonable manner. SECTION 9.3 Insurance. Maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law and as are required by any Security Documents, and on the Closing Date and from time to time thereafter deliver to the Administrative Agent upon its request a reasonably detailed list of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. 67 SECTION 9.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties. SECTION 9.5 Payment and Performance of Obligations. Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay or perform (a) except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (b) except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided, that the Borrower or such Restricted Subsidiary may contest any item described in clauses (a) or (b) of this Section 9.5 in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP. SECTION 9.6 Compliance With Laws and Approvals. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, observe and remain in compliance in all respects with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case applicable to the conduct of its business. SECTION 9.7 Environmental Laws. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, in addition to and without limiting the generality of Section 9.6, (a) comply with, and make commercially reasonable efforts to ensure such compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and make commercially reasonable efforts to ensure that all tenants and subtenants, if any, obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the presence of Hazardous Materials, or the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower or any such Restricted Subsidiary, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor. SECTION 9.8 Compliance with ERISA. In addition to and without limiting the generality of Section 9.6, (a) except where the failure to so comply could not, individually or in 68 the aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply with all material applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, (ii) not take any action or fail to take action the result of which could be a liability to the PBGC or to a Multiemployer Plan, (iii) not participate in any prohibited transaction that could result in any civil penalty under ERISA or tax under the Code and (iv) operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code and (b) furnish to the Administrative Agent upon the Administrative Agent's request such additional information about any Employee Benefit Plan as may be reasonably requested by the Administrative Agent. SECTION 9.9 Compliance With Agreements. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, comply in all respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of its business including, without limitation, any Material Contract; provided, that the Borrower or any such Restricted Subsidiary may contest any such lease, agreement or other instrument in good faith through applicable proceedings so long as adequate reserves are maintained in accordance with GAAP. SECTION 9.10 Inspection of Property; Books and Records; Discussions. Except for information and records which the Borrower may not under Applicable Law disseminate or disclose to the Administrative Agent and/or the Lenders, the Borrower, its Restricted Subsidiaries and Affiliates shall permit any authorized representative(s) designated by the Administrative Agent and/or the Lenders to visit, to conduct a field audit or to otherwise inspect any of the Borrower's, its Restricted Subsidiaries' and/or Affiliates' respective properties, including their financial and accounting records, and to make copies and take extracts therefrom, and to discuss the Borrower's, its Restricted Subsidiaries' and/or Affiliates' respective affairs, finances and accounts with the Administrative Agent's and the Lenders' officers, employees, representatives or independent certified public accountants, upon reasonable notice and during normal business hours. All information furnished to the Administrative Agent and/or the Lenders shall be received and maintained by the Administrative Agent and the Lenders in strict confidence and in accordance with Applicable Law, and they shall not disseminate said information to any Person for so long as said information has or retains a confidential or proprietary nature, except where required by and in accordance with Applicable Law, or pursuant to subpoena or other legal process or where contemplated by the Loan Documents (including, without limitation, in connection with the enforcement of any rights or remedies thereunder). The Administrative Agent and the Lenders agree that it shall not take any action or omit to take any action which would cause or result in the violation of Applicable Law (including without limitation, any export control law) by the Borrower, its Restricted Subsidiaries and Affiliates. Each such visitation and inspection by or on behalf of the Administrative Agent and/or the Lenders after the occurrence and during the continuance of an Event of Default shall be at the Borrower's own reasonable cost and expense. The Borrower shall, and shall cause its Restricted Subsidiaries and Affiliates, to keep proper books and records and account in accordance with GAAP and Applicable Law. 69 SECTION 9.11 Additional Subsidiaries. (a) Within forty-five (45) days after (i) the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary in accordance with Section 9.11(c) below or (ii) the creation or acquisition of any Domestic Subsidiary (any such Subsidiary, a "New Subsidiary") of the Borrower or any Restricted Subsidiary (including in connection with any Permitted Acquisition), cause to be executed and delivered to the Administrative Agent (A) a duly executed joinder agreement in form and substance reasonably satisfactory to the Administrative Agent joining such New Subsidiary (to the extent such New Subsidiary is a Restricted Subsidiary) to the Subsidiary Guaranty Agreement, the Collateral Agreement and any other applicable Security Documents, (B) updated Schedules 7.1(a) and 7.1(b) reflecting the creation or acquisition of such Subsidiary, (C) favorable legal opinions covering such matters consistent with opinions for this Agreement and addressed to the Administrative Agent and Lenders in form and substance reasonably satisfactory thereto with respect to such joinder agreement, (D) original stock or other certificates and stock or other transfer powers evidencing the ownership interests of the Borrower or Restricted Subsidiary, as applicable, in such New Subsidiary, and (E) any other documents and certificates as may be reasonably requested by the Administrative Agent or the Required Lenders (through the Administrative Agent). (b) Within forty-five (45) days after the creation of any first tier Foreign Subsidiary of the Borrower or any Restricted Subsidiary (including in connection with a Permitted Acquisition), cause to be executed and delivered to the Administrative Agent, (A) a supplement to the applicable Security Documents previously executed and delivery by the Borrower or such Restricted Subsidiary, as applicable, to provide for the pledge of sixty-five percent (65%) of the capital stock or other ownership interests of such Foreign Subsidiary, (B) updated Schedules 7.1(a) and 7.1(b) reflecting the creation or acquisition of such Subsidiary, (C) favorable legal opinions addressed to the Administrative Agent and Lenders in form and substance reasonably satisfactory thereto with respect to such supplement, (D) original stock or other certificates and stock or other transfer powers evidencing the ownership interests of the Borrower or such Restricted Subsidiary in such Foreign Subsidiary, and (E) any other documents and certificates as may be reasonably requested by the Administrative Agent or the Required Lenders (through the Administrative Agent). (c) The Borrower may, at any time and upon written notice to the Administrative Agent, redesignate an Unrestricted Subsidiary as a Restricted Subsidiary. Further, promptly after the date on which the Borrower or the Administrative Agent determines that: (i) any individual Unrestricted Subsidiary and its respective Subsidiaries (A) represent five percent (5%) or more of (I) the Consolidated assets of the Borrower and its Subsidiaries as of the most recently ended fiscal quarter prior to such date or (II) Consolidated EBITDA (notwithstanding the definition thereof, calculated to include all Unrestricted Subsidiaries) of the Borrower and its Subsidiaries for the four (4) consecutive fiscal quarters most recently ended prior to such date or (B) is or becomes the obligor on any Debt (notwithstanding the definition thereof, determined by reference to such Unrestricted Subsidiary) which is guaranteed by, credit supported by, or recourse to the Borrower or any Restricted Subsidiary, or 70 (ii) all Unrestricted Subsidiaries and their respective Subsidiaries represent ten percent (10%) or more of (A) the Consolidated assets of the Borrower and its Subsidiaries as of the most recently ended fiscal quarter prior to such date or (B) Consolidated EBITDA (notwithstanding the definition thereof, calculated to include all Unrestricted Subsidiaries) for the four consecutive fiscal quarters most recently ended prior to such date, then, in the case of clause (i), such Unrestricted Subsidiary shall be redesignated as a Restricted Subsidiary and in the case of clause (ii), the Borrower shall promptly identify in writing to the Administrative Agent such Unrestricted Subsidiaries to be redesignated as Restricted Subsidiaries to cause such remaining Unrestricted Subsidiaries and their Subsidiaries (after giving effect to such redesignation) to represent less than ten percent (10%) of (A) the Consolidated assets of the Borrower and its Subsidiaries as of the most recently ended fiscal quarter prior to such date and (B) Consolidated EBITDA (notwithstanding the definition thereof, calculated to include all Unrestricted Subsidiaries) for the four consecutive fiscal quarters most recently ended prior to such date. (d) So long as no Default or Event of Default has occurred and is continuing, the Borrower shall be permitted, on prior written notice to the Administrative Agent, to redesignate any Restricted Subsidiary as an Unrestricted Subsidiary (or designate any newly formed or acquired Subsidiary as an Unrestricted Subsidiary; provided that such formation or acquisition is otherwise permitted hereunder), so long as the following conditions have been satisfied as reasonably determined by the Administrative Agent: (i) any such individual Subsidiary and its respective Subsidiaries to be designated (or redesignated, as applicable) as an Unrestricted Subsidiary (A) represent less than five percent (5%) of (I) the Consolidated assets of the Borrower and its Subsidiaries as of the most recently ended fiscal quarter prior to such date and (II) Consolidated EBITDA (notwithstanding the definition thereof, calculated to include all Unrestricted Subsidiaries) of the Borrower and its Subsidiaries for the four (4) consecutive fiscal quarters most recently ended prior to such date and (B) is not the obligor on any Debt (notwithstanding the definition thereof, determined by reference to such Unrestricted Subsidiary) which is guaranteed by, credit supported by, or recourse to the Borrower or any Restricted Subsidiary; and (ii) at the time of such proposed designation (or redesignation, as applicable), and after giving effect thereto, all Unrestricted Subsidiaries and their respective Subsidiaries (including the Subsidiary and its respective Subsidiaries to be designated (or redesignated, as applicable) as an Unrestricted Subsidiary) represent less than ten percent (10%) of (A) the Consolidated assets of the Borrower and its Subsidiaries as of the most recently ended fiscal quarter prior to such date and (B) Consolidated EBITDA (notwithstanding the definition thereof, calculated to include all Unrestricted Subsidiaries) for the four consecutive fiscal quarters most recently ended prior to such date. 71 Such designation (or redesignation, as applicable) shall have an effective date mutually acceptable to the Administrative Agent and Borrower, but in no event earlier than five (5) Business Days following receipt by the Administrative Agent of such written notice. SECTION 9.12 Reserved. SECTION 9.13 Use of Proceeds. The Borrower shall use the proceeds of the Extensions of Credit (a) to finance the Acquisition (b) to finance Permitted Acquisitions, (c) to refinance existing indebtedness of the Borrower, (d) to finance Capital Expenditures of the Borrower, and (e) for working capital and general corporate requirements of the Borrower and its Restricted Subsidiaries, including the payment of certain fees and expenses incurred in connection with the Acquisition and the other transactions contemplated hereby and Letters of Credit. SECTION 9.14 Conduct of Business. Engage only in businesses in substantially the same fields as the business conducted on the Closing Date and in lines of business reasonably related thereto. SECTION 9.15 Account Designation. Designate only accounts with the Administrative Agent as the location for all deposits and payments required to be made to the Borrower as Buyer pursuant to the terms of the Asset Purchase Agreement. SECTION 9.16 Debt Rating. Maintain an up to date debt rating with both Standard & Poor's Corporation and Moody's Investors Service or, in the event one or both such entities cease to provide any such rating, such other rating agency or agencies that are reasonably acceptable to the Administrative Agent. SECTION 9.17 Existing Letters of Credit. Cause each Existing Letter of Credit to be replaced (if required by the beneficiary thereof) on or before the current expiration date of such Existing Letter of Credit. SECTION 9.18 Further Assurances. Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Administrative Agent or the Required Lenders (through the Administrative Agent) may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure the Administrative Agent and the Lenders their respective rights under this Agreement, the Notes, the Letters of Credit and the other Loan Documents. ARTICLE X FINANCIAL COVENANTS Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 14.11, the Borrower and its Restricted Subsidiaries on a Consolidated basis will not: 72 SECTION 10.1 Maximum Total Leverage Ratio: As of any fiscal quarter end, permit the ratio (the "Total Leverage Ratio") of (a) the sum of (i) Debt less (ii) the outstanding amount of all Performance Based Letters of Credit, in each case as of such date to (b) EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to be greater than the corresponding ratio set forth in Table A below; provided, however, that if the Borrower consummates an equity issuance in a minimum amount of $40,000,000 (a "Qualifying Equity Issuance"), the ratios set forth in Table B shall apply. For purposes of calculating the Total Leverage Ratio, any prepayment of Debt with the proceeds of a Qualifying Equity Issuance occurring within five (5) Business Days following any fiscal quarter end shall be deemed to have been made as of the last day of such fiscal quarter.
TABLE A Period Ratio ------ ----- Fiscal quarter ending 3.50 to 1.00 12/31/01 Fiscal quarters ending 3.25 to 1.00 3/31/02 and 6/30/02 Fiscal quarters ending 3.00 to 1.00 9/30/02 and 12/31/02 Fiscal quarters ending 2.75 to 1.00 3/31/03, 6/30/03, 9/30/03 and 12/31/03 Fiscal quarters ending 2.50 to 1.00 3/31/04 and thereafter
TABLE B Period Ratio ------ ----- Fiscal quarter end 12/31/01 3.00 to 1.00 Fiscal quarters ending 2.75 to 1.00 3/31/02 and 6/30/02 Fiscal quarters ending 2.50 to 1.00 9/30/02 and thereafter
SECTION 10.2 Minimum Fixed Charge Coverage Ratio: As of any fiscal quarter end, permit the ratio of (a) the sum of (i) EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date minus (ii) Capital Expenditures for such period to (b) Fixed Charges for the period of four (4) consecutive fiscal quarters ending on 73 or immediately prior to such date to be less than the corresponding ratio set forth below; provided that (i) for the fiscal quarter ending 12/31/01, Fixed Charges (other than cash taxes) shall be calculated by multiplying the actual amount of Fixed Charges (other than cash taxes) for such fiscal quarter by four (4), (ii) for the fiscal quarter ending 3/31/02, Fixed Charges (other than cash taxes) shall be calculated by multiplying the actual amount of Fixed Charges (other than cash taxes) for such two fiscal quarters by two (2), and (iii) for the fiscal quarter ending 6/30/02, Fixed Charges (other than cash taxes) shall be calculated by multiplying the actual amount of Fixed Charges (other than cash taxes) for such three fiscal quarters by four-thirds (4/3), and for each of the foregoing fiscal quarters, cash taxes shall be calculated on the basis of actual cash taxes during the four (4) consecutive fiscal quarter period ending on such date.
Period Ratio ------ ----- Fiscal quarters ending 1.20 to 1.00 12/31/01 through 3/31/02 Fiscal quarters ending 1.25 to 1.00 6/30/02 through 12/31/03 Fiscal quarters ending 1.50 to 1.00 3/31/04 and thereafter
SECTION 10.3 Maximum Capital Expenditures. Permit Capital Expenditures during any Fiscal Year to be greater than the maximum aggregate amount corresponding to such Fiscal Year set forth below:
Fiscal Year Maximum Capital Expenditures ----------- ---------------------------- 2002 $22,000,000 2003 $25,000,000 2004 and thereafter $20,000,000
Notwithstanding the foregoing, the maximum amount of Capital Expenditures permitted by this Section 10.3 in any Fiscal Year shall be increased by an amount equal to the lesser of (a) $5,000,000 and (b) the excess of (i) the amount of Capital Expenditures that were permitted to be made under this Section 10.3 in the immediately preceding Fiscal Year (without giving effect to any carryover amount from prior Fiscal Years) over (ii) the amount of Capital Expenditures actually made during such preceding Fiscal Year. ARTICLE XI NEGATIVE COVENANTS Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 14.11, the Borrower has not and will not and will not permit any of its Restricted Subsidiaries to: 74 SECTION 11.1 Limitations on Debt. Create, incur, assume or suffer to exist any Debt except: (a) the Obligations (excluding Hedging Obligations permitted pursuant to Section 11.1(b)); (b) Debt incurred in connection with a Hedging Agreement with a counterparty and upon terms and conditions (including interest rate) reasonably satisfactory to the Administrative Agent; provided, that any counterparty that is a Lender shall be deemed satisfactory to the Administrative Agent. (c) Debt existing on the Closing Date and not otherwise permitted under this Section 11.1, as set forth on Schedule 7.1(t) and the renewal, refinancing, extensions and replacements (but not the increase in the aggregate principal amount) thereof; (d) Debt of the Borrower and its Restricted Subsidiaries incurred in connection with Capitalized Leases in an aggregate amount not to exceed $5,000,000 on any date of determination; (e) purchase money Debt of the Borrower and its Restricted Subsidiaries in an aggregate amount not to exceed $5,000,000 on any date of determination; (f) Guaranty Obligations in favor of the Administrative Agent for the benefit of the Administrative Agent and the Lenders; (g) other unsecured Debt in an aggregate principal amount not exceeding $2,000,000 at any time outstanding; (h) Debt of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that if requested by the Administrative Agent any such loans and advances made by a Borrower or any other Restricted Subsidiary that are evidenced by a promissory note or other instrument shall be pledged pursuant to the Collateral Agreement; (i) Guaranty Obligations with respect to Debt permitted pursuant to subsections (a) through (f) of this Section 11.1; and (j) Unsecured Debt of DRS Technologies Canada Company in an aggregate amount not to exceed $15,000,000 (US Dollars) on any date of determination; provided, that no agreement or instrument with respect to Debt permitted to be incurred by this Section shall restrict, limit or otherwise encumber (by covenant or otherwise) the ability of any Restricted Subsidiary of the Borrower to make any payment to the Borrower or any of its Restricted Subsidiaries (in the form of dividends, intercompany advances or otherwise) for the purpose of enabling the Borrower to pay the Obligations. 75 SECTION 11.2 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including, without limitation, shares of capital stock or other ownership interests), real or personal, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (b) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings; (c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation; (d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate are not substantial in amount and which do not, in any case, detract from the value of such property or impair the use thereof in the ordinary conduct of business; (e) Liens of the Administrative Agent for the benefit of the Administrative Agent and the Lenders; (f) Liens not otherwise permitted by this Section 11.2 and in existence on the Closing Date and described on Schedule 11.2; (g) Liens securing Debt permitted under Sections 11.1(d) and (e); provided that (i) such Liens shall be created substantially simultaneously with the acquisition or lease of the related asset, (ii) such Liens do not at any time encumber any property other than the property financed by such Debt, (iii) the amount of Debt secured thereby is not increased and (iv) the principal amount of Debt secured by any such Lien shall at no time exceed one hundred percent (100%) of the original purchase price or lease payment amount of such property at the time it was acquired; and (h) any Lien existing on any property or asset (other than properties or assets acquired pursuant to the Acquisition) prior to the acquisition thereof by the Borrower or any Restricted Subsidiary or existing on any property or asset of any Person that becomes a Restricted Subsidiary after the date of consummation of the Acquisition prior to the time such Person becomes a Restricted Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Restricted 76 Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary and (iii) such Lien shall secure only those obligations that it secures on the date of such acquisition or the date such Person becomes a Restricted Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (i) deposits to secure the performance of bids, trade contracts, obligations for utilities, leases, Bonding Obligations permitted pursuant to Section 11.14 and other obligations of a like nature (other than obligations for borrowed money of other Debt), in each case in the ordinary course of business. SECTION 11.3 Limitations on Loans, Advances, Investments and Acquisitions. Purchase, own, invest in or otherwise acquire, directly or indirectly, any capital stock, interests in any partnership or joint venture (including, without limitation, the creation or capitalization of any Restricted Subsidiary), evidence of Debt or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person except: (a) investments (i) in Restricted Subsidiaries existing on the Closing Date, (ii) in Restricted Subsidiaries formed or acquired after the Closing Date so long as the Borrower and its Restricted Subsidiaries comply with the applicable provisions of Section 9.11 and Section 11.3(d) and (iii) the other loans, advances and investments described on Schedule 11.3 existing on the Closing Date; (b) investments in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within one hundred twenty (120) days from the date of acquisition thereof, (ii) commercial paper maturing no more than one hundred twenty (120) days from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more than one hundred twenty (120) days from the date of creation thereof issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of "A" or better by a nationally recognized rating agency; provided, that the aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, (iv) time deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the FDIC or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder; or (v) repurchase agreements with a Lender or a bank or trust company or a recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America (such investments described in items (i) through (v) above, "Cash Equivalents"); and 77 (c) the Acquisition; (d) investments by the Borrower or any Restricted Subsidiary thereof in the form of acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of capital stock, assets or any combination thereof) of any other Person if each such acquisition meets all of the following requirements (such acquisitions being, "Permitted Acquisitions"): (i) the Person to be acquired shall be in a substantially similar line of business as the Borrower, (ii) evidence of approval of the acquisition by the acquiree's board of directors or equivalent governing body or a copy of the opinion of counsel delivered by legal counsel to the acquiree in connection with the acquisition which evidences such approval shall be delivered to the Administrative Agent at the time the documents referred to in clause (vi) of this Section 11.3(d) are required to be delivered; (iii) a description of the acquisition in the form customarily prepared by the Borrower shall have been delivered to the Administrative Agent and the Lenders prior to the consummation of the acquisition; (iv) the Borrower or any Restricted Subsidiary shall be the surviving Person and no Change of Control shall have been effected thereby; (v) the Borrower shall have demonstrated to the Administrative Agent (A) pro forma compliance (as of the date of the proposed acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) with each covenant contained in and in the manner set forth in, Article X, (B) pro forma Asset Coverage Ratio (as of the date of the proposed acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) equal to or exceeding 1.00 to 1.00, (C) maintenance of at least $25,000,000 of availability under the Revolving Credit Facility both before and after giving effect to the proposed acquisition; and (D) a Maximum Total Leverage Ratio at least .25 below the applicable ratio set forth in Section 10.1 prior to consummating the acquisition, and no Default or Event of Default shall have occurred and be continuing both before and after giving effect to the acquisition; (vi) the Borrower shall have delivered to the Administrative Agent such documents reasonably requested by the Administrative Agent or the Required Lenders (through the Administrative Agent) pursuant to Section 8.11 to be delivered at the time required pursuant to Section 8.11 confirming that such Person is or will be a Subsidiary Guarantor hereunder, and its Subsidiary Guaranteed Obligations incurred in such capacity are secured by the Security Documents, said documents to include a favorable opinion of counsel to the Borrower acceptable to the Administrative Agent addressed to the Administrative Agent and the Lenders with respect to the Borrower, the Person to be acquired and the acquisition in form and substance reasonably acceptable to the 78 Administrative Agent; (vii) the aggregate amount of Permitted Acquisition Consideration for such acquisition shall not exceed (A) $15,000,000 in the aggregate per Fiscal Year for all such Permitted Acquisitions; provided, however, that any time Maximum Total Leverage Ratio is less than 2.50 to 1.00, the aggregate amount of Permitted Acquisition Consideration for such acquisitions shall not exceed $25,000,000 for any one such Permitted Acquisition; (viii) the Person to be acquired shall demonstrate positive EBITDA for the most recent twelve (12) month period then ended, both prior to the acquisition and after giving effect thereto, by providing the Administrative Agent and Lenders copies of the most recent financial statements and projections, all in form and substance reasonably satisfactory to the Administrative Agent and Lenders; (ix) the Borrower shall provide such other documents and other information as may be reasonably requested by the Administrative Agent or the Required Lenders (through the Administrative Agent) in connection with the proposed acquisition; (e) Hedging Agreements permitted pursuant to Section 11.1; (f) loans or advances made by the Borrower to any Restricted Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; provided that any such loans and advances made by a Borrower or any other Restricted Subsidiary that are evidenced by a promissory note or other instrument shall be pledged pursuant to the Collateral Agreement; (g) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (h) investments made after the Closing Date in joint ventures and other business entities (in each case that are not Subsidiaries of the Borrower) that are engaged in the same line or lines of business as the Borrower and its Restricted Subsidiaries in an aggregate amount not to exceed $5,000,000; (i) loans to employees of the Borrower and the Restricted Subsidiaries in their capacity as such, in an aggregate principal amount not to exceed $1,000,000 at any time outstanding; (j) any investment received as consideration, in whole or in part, for any asset sale otherwise permitted hereunder in an aggregate principal amount not to exceed $5,000,000; and (k) purchases of assets in the ordinary course of business. SECTION 11.4 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself 79 (or suffer any liquidation or dissolution) except: (a) any Wholly-Owned Subsidiary of the Borrower may merge with the Borrower or any other Wholly-Owned Restricted Subsidiary of the Borrower; provided that (i) in any merger involving the Borrower, the Borrower shall be the surviving entity and (ii) in any merger involving a Restricted Subsidiary, the Restricted Subsidiary shall be the surviving entity; (b) any Wholly-Owned Subsidiary of the Borrower may merge into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with a Permitted Acquisition (and, in the case of any merger involving a Restricted Subsidiary, such Person is or becomes a Restricted Subsidiary); and (c) any Wholly-Owned Subsidiary of the Borrower may wind-up into the Borrower or any other Wholly-Owned Restricted Subsidiary of the Borrower. SECTION 11.5 Limitations on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale-leaseback or similar transaction), whether now owned or hereafter acquired except: (a) the sale of inventory in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of the Borrower or any of its Subsidiaries; (c) the transfer of assets to the Borrower or any Restricted Subsidiary of the Borrower pursuant to Section 11.4 (c); (d) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (e) the sale of DRS Data Systems, Inc.; (f) the sale, transfer and other disposition of assets of the Borrower or its Restricted Subsidiaries (other than less than 100% of the equity ownership interest in a Subsidiary) that are not permitted by any other clause of this Section 11,5; provided that (i) the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (f) in the aggregate shall not exceed $2,000,000 in a Fiscal Year and (ii) the Borrower or applicable Restricted Subsidiary complies with the provisions of Section 4.4(b); and (g) assets acquired in connection with any Permitted Acquisition that the Borrower intended to sell at the time of such Permitted Acquisition; provided (i) such assets were identified in writing to the Administrative Agent at the time of such Permitted Acquisition and (ii) the aggregate amount of such assets does not exceed $2,000,000 per each such Permitted Acquisition and (iii) the Borrower or applicable Restricted Subsidiary complies with the provisions of Section 4.4(b). 80 SECTION 11.6 Limitations on Dividends and Distributions. Declare or pay any dividends upon any of its capital stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock, or make any distribution of cash, property or assets among the holders of shares of its capital stock, or make any change in its capital structure which such change in its capital structure could reasonably be expected to have a Material Adverse Effect; provided that: (a) the Borrower or any Restricted Subsidiary may pay dividends in shares of its own capital stock; (b) any Restricted Subsidiary may pay cash dividends to the Borrower; and (c) the Borrower or any Restricted Subsidiary may make any distribution (whether direct or indirect and whether in the form of cash, property, securities or otherwise) to shareholders, employees or other permitted distributees under Borrower's 1996 Omnibus Plan and other benefit or retirement plans maintained and created by the Borrower, its Restricted Subsidiaries and Affiliates. SECTION 11.7 Limitations on Exchange and Issuance of Capital Stock. Issue, sell or otherwise dispose of any class or series of capital stock that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or passage of time would be, (a) convertible or exchangeable into Debt or (b) required to be redeemed or repurchased, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due, except for any class or series of capital stock that is not required to be redeemed or repurchased prior to the date which is one (1) year and one (1) day following the Term Loan Maturity Date. SECTION 11.8 Transactions with Affiliates. Except for transactions permitted by 11.6, 11.7, 11.3 and those listed on Schedule 11.8, directly or indirectly (a) make any loan or advance to, or purchase or assume any note or other obligation to or from, any of its officers, directors, shareholders or other Affiliates, or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates, or subcontract any operations to any of its Affiliates or (b) enter into, or be a party to, any other transaction not described in clause (a) above with any of its Affiliates, except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are fully disclosed to and approved in writing by the Required Lenders prior to the consummation thereof and are no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not its Affiliate. SECTION 11.9 Certain Accounting Changes; Organizational Documents. (a) Change its Fiscal Year end, or make any change in its accounting treatment and reporting practices except as required by GAAP or (b) amend, modify or change its articles of incorporation (or corporate charter or other similar organizational documents) or amend, modify or change its bylaws (or other similar documents) in any manner materially adverse in any respect to the rights or interests of the Lenders. 81 SECTION 11.10 Amendments; Payments and Prepayments of Subordinated Debt. Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any Subordinated Debt, or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any Subordinated Debt. SECTION 11.11 Amendments, Consents and Waivers under Asset Purchase Agreement. Materially amend, modify, waive (or permit the material amendment, modification of or waiver of) any of the terms or provisions of the Asset Purchase Agreement without the prior written approval of the Administrative Agent and Required Lenders, which shall not be unreasonably withheld. SECTION 11.12 Restrictive Agreements. (a) Enter into any Debt which contains any negative pledge on assets or any covenants more restrictive than the provisions of Articles IX, X, XI hereof, or which restricts, limits or otherwise encumbers its ability to incur Liens on or with respect to any of its assets or properties other than the assets or properties securing such Debt. (b) Enter into or permit to exist any agreement which impairs or limits the ability of any Restricted Subsidiary of the Borrower to pay dividends to the Borrower. SECTION 11.13 Nature of Business. Alter in any material respect the character or conduct of the business conducted by the Borrower and its Restricted Subsidiaries as of the Closing Date. SECTION 11.14 Limitation on Bonding Obligations. Create, incur, assume or suffer to exist Bonding Obligations in an aggregate amount in excess of $5,000,000 outstanding at any time during the term hereof. SECTION 11.15 Impairment of Security Interests. Take or omit to take any action, which might or would have the result of materially impairing the security interests in favor of the Administrative Agent with respect to the Collateral or grant to any Person (other than the Administrative Agent for the benefit of itself and the Lenders pursuant to the Security Documents) any interest whatsoever in the Collateral, except for Liens permitted under Section 11.2 and asset sales permitted under Section 11.5. ARTICLE XII DEFAULT AND REMEDIES SECTION 12.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or 82 be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment of Principal of Loans and Reimbursement Obligations. The Borrower shall default in any payment of principal of any Loan, Note or Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or otherwise). (b) Other Payment Default. The Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Loan, Note or Reimbursement Obligation or the payment of any other Obligation and such default shall continue for a period of three (3) Business Days. (c) Misrepresentation. Any representation or warranty made or deemed to be made by the Borrower or any of its Restricted Subsidiaries under this Agreement, any other Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made or deemed made. (d) Default in Performance of Certain Covenants. The Borrower shall default in the performance or observance of any covenant or agreement contained in Sections 8.1, 8.2, 8.4(b), (c) or (d) or 8.5(e)(i) or Articles X or XI of this Agreement. (e) Default in Performance of Other Covenants and Conditions. The Borrower or any Restricted Subsidiary thereof shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 12.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Administrative Agent. (f) Hedging Agreement. The Borrower shall default in the performance or observance of any terms, covenant, condition or agreement (after giving effect to any applicable grace or cure period) under any Hedging Agreement and such default causes the termination of such Hedging Agreement or permits any counter party to such Hedging Agreement to terminate any such Hedging Agreement. (g) Debt Cross-Default. The Borrower or any of its Restricted Subsidiaries shall (i) default in the payment of any Debt (other than the Notes or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $5,000,000 beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Notes or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $5,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired). 83 (h) Other Cross-Defaults. The Borrower or any of its Restricted Subsidiaries shall default in the payment when due, or in the performance or observance, of any obligation or condition of any Material Contract, which such default, either individually, or in the aggregate with all other outstanding defaults under other Material Contracts (including, for purposes hereof, the effect of termination of any other Material Contracts that could reasonably be expected to be terminated as a result of such existing default or defaults), could reasonably be expected to have a Material Adverse Effect. (i) Change in Control. Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) shall obtain ownership or control in one or more series of transactions of more than thirty percent (30%) of the common stock or thirty percent (30%) of the voting power of the Borrower entitled to vote in the election of members of the board of directors of the Borrower or there shall have occurred under any indenture or other instrument evidencing any Debt in excess of $5,000,000 any "change in control" (as defined in such indenture or other evidence of Debt) obligating the Borrower to repurchase, redeem or repay all or any part of the Debt or capital stock provided for therein (any such event, a "Change in Control"). (j) Voluntary Bankruptcy Proceeding. The Borrower or any Restricted Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing. (k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Restricted Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Borrower or any Restricted Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (l) Failure of Agreements. Any provision of this Agreement or any provision of any other Loan Document shall for any reason cease to be valid and binding on the Borrower or any Restricted Subsidiary party thereto or any such Person shall so state in writing, or any Loan Document shall for any reason cease to create a valid and perfected first priority Lien on, or 84 security interest in, any of the collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof. (m) Termination Event. Except where the failure to do so could not reasonably be expected to create a Material Adverse Effect, the occurrence of any of the following events: (i) the Borrower or any ERISA Affiliate fails to make full payment when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code, the Borrower or any ERISA Affiliate is required to pay as contributions thereto, (ii) an accumulated funding deficiency occurs or exists, whether or not waived, with respect to any Pension Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under one or more Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has incurred a withdrawal liability. (n) Judgment. A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $5,000,000 in any Fiscal Year shall be entered against the Borrower or any of its Restricted Subsidiaries by any court and such judgment or order shall continue without discharge or stay for a period of thirty (30) days. (o) Environmental. Any one or more Environmental Claims shall have been asserted against the Borrower or any of its Restricted Subsidiaries; the Borrower and its Restricted Subsidiaries would be reasonably likely to incur liability as a result thereof; and such liability would be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (p) Government Contracts. Any of the Borrower, its Restricted Subsidiaries or Affiliates, (i) is debarred or suspended by any Governmental Authority, or has been issued a notice of proposed debarment or notice of proposed suspension by any Governmental Authority; (ii) is the subject of an investigation by any Governmental Authority (other than a normal and customary review) involving or possibly involving fraud or willful misconduct which could reasonably be expected to result in criminal liability, civil liability or expense in excess of $250,000, suspension, debarment or any other adverse administrative action; and (iii) is a party to any Material Contract with any Governmental Authority which has been actually terminated due to the Borrower's, such Restricted Subsidiary's or Affiliate's alleged fraud or willful misconduct. SECTION 12.2 Remedies. Upon the occurrence of an Event of Default (which such Event of Default has not previously been cured or waived in accordance with Section 14.11), with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower: (a) Acceleration; Termination of Facilities. Declare the principal of and interest on the Loans, the Notes and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be entitled to present the documents required thereunder) and all other Obligations (other than Hedging 85 Obligations), to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 12.1(j) or (k), the Credit Facility shall be automatically terminated and all Obligations (other than Hedging Obligations) shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or in any other Loan Document to the contrary notwithstanding. (b) Letters of Credit. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired Dollar Equivalent amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations on a pro rata basis. After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. (c) Rights of Collection. Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's Obligations. SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. 86 ARTICLE XIII THE ADMINISTRATIVE AGENT SECTION 13.1 Appointment. Each of the Lenders hereby irrevocably designates and appoints First Union as Administrative Agent of such Lender under this Agreement and the other Loan Documents for the term hereof and each such Lender irrevocably authorizes First Union, as Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Administrative Agent. Any reference to the Administrative Agent in this Article XIII shall be deemed to refer to the Administrative Agent solely in its capacity as Administrative Agent and not in its capacity as a Lender. In performing its functions and duties under this Agreement and each of the other Loan Documents or in connection with them and in respect of anything relating to them, the Administrative Agent shall act solely as the administrative agent of (but not as trustee for (except to the extent specifically required pursuant to the Security Documents)) the Lenders, and the Administrative Agent shall not have any fiduciary duty towards any Person (except as expressly referred to above) or be under any obligation other than those expressly provided for in this Agreement and any of the other Loan Documents. The Administrative Agent shall not in any way whatsoever assume, nor shall it be deemed to have assumed, any obligation as agent of or trustee for, or any relationship of agency or trust with or for, the Borrower or any Subsidiary thereof. SECTION 13.2 Delegation of Duties. The Administrative Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Administrative Agent with reasonable care. SECTION 13.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, 87 enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. SECTION 13.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless such Note shall have been transferred in accordance with Section 14.10. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders (or, when expressly required hereby or by the relevant other Loan Documents, all the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Required Lenders (or, when expressly required hereby, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 13.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless it has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, it shall promptly give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, when expressly required hereby, all the Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, except to the extent that other provisions of this Agreement expressly require that any such action be taken or not be taken only with the consent and authorization or the request of the Lenders or Required Lenders, as applicable. SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has 88 made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder or by the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates. SECTION 13.7 Indemnification. The Lenders severally agree to indemnify the Administrative Agent in its capacity as such and (to the extent that the Administrative Agent shall be entitled to be, and shall not have been reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Revolving Credit Commitment Percentages and/or Term Loan Percentages, as applicable, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents, reports or other information provided to the Administrative Agent or any Lender or contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 13.7 shall survive the payment of the Notes, any Reimbursement Obligation and all other amounts payable hereunder and the termination of this Agreement. SECTION 13.8 The Administrative Agent in Its Individual Capacity. The Administrative Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the 89 Administrative Agent were not the Administrative Agent hereunder. With respect to any Loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit issued by it or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent. Subject to the appointment and acceptance of a successor as provided below, the Administrative Agent may resign at any time by giving thirty (30) days notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, which successor shall have minimum capital and surplus of at least $500,000,000 (so long as no Default or Event of Default has occurred and is continuing) and be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the Administrative Agent's giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which successor shall have minimum capital and surplus of at least $500,000,000 and be reasonably acceptable to the Borrower (so long as no Default or Event of Default has occurred and is continuing). Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 13.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. SECTION 13.10 Trustee Powers. Except as otherwise expressly provided in this Agreement and any of the other Loan Documents, in its capacity as trustee under certain of the Security Documents the Administrative Agent shall have: (a) the benefit of all the provisions in this Article XIII and all other agency, indemnification and exculpatory provisions set forth in any other Loan Documents; (b) all the powers of an absolute owner of the Lien constituted by such Security Documents; (c) the power of appointing new and/or additional trustees; and (d) all the powers and discretions conferred on trustees by the Trustee Act 1925 of the laws of England (to the extent not inconsistent with this Agreement and the other Loan Documents) and on the Administrative Agent by this Agreement and the other Loan Documents (including without limitation the power to invest all monies which are received by the Administrative Agent under the trusts contained 90 in such Security Documents in its name or under its control in any investment for the time being authorized by United States, English or other applicable law for the investment by trustees of trust money or in any other investments which may be selected by the Administrative Agent). Additionally, the Administrative Agent shall have the power to place such monies on deposit in its name or under its control at such bank or institution (including at the Administrative Agent) and on such terms as the Administrative Agent may determine. SECTION 13.11 Documentation and Syndication Agent. The Documentation and Syndication Agents, in their respective capacities as documentation and syndication agents, shall have no duties or responsibilities under this Agreement or any other Loan Document. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to the Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to the Borrower: DRS Technologies, Inc. Corporate Headquarters 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Richard Schneider, Executive Vice-President Telephone No.: (973) 898-6021 Telecopy No.: (973) 898-0952 91 If to First Union as First Union National Bank Administrative Agent: Charlotte Plaza, CP-23 201 South College Street Charlotte, North Carolina 28288-0680 Attention: Syndication Agency Services Telephone No.: (704) 374-2698 Telecopy No.: (704) 383-0288 If to any Lender: To the address set forth on Schedule 1 hereto (c) Administrative Agent's Office. The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and Lenders, as the Administrative Agent's Office referred to herein, to which payments due are to be made and at which Loans will be disbursed and Letters of Credit issued. SECTION 14.2 Expenses; Indemnity. The Borrower will (a) pay all reasonable out-of-pocket expenses of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement and each other Loan Document, whenever the same shall be executed and delivered, including, without limitation, all out-of-pocket syndication and due diligence expenses and reasonable fees and disbursements of counsel for the Administrative Agent and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Administrative Agent or the Lenders relating to this Agreement or any other Loan Document, including, without limitation, reasonable fees and disbursements of counsel for the Administrative Agent, (b) after the occurrence and during the continuance of an Event of Default, pay all reasonable out-of-pocket expenses of the Administrative Agent and each Lender actually incurred in connection with the administration and enforcement of any rights and remedies of the Administrative Agent and Lenders under the Credit Facility including, without limitation, in connection with any workout, restructuring, bankruptcy or other similar proceeding, creating and perfecting Liens in favor of Administrative Agent on behalf of Lenders pursuant to any Security Document, enforcing any Obligations of or collecting any payments due from the Borrower or any Subsidiary Guarantor by reason of an Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty Agreement, consulting with appraisers, accountants, engineers, attorneys and other Persons concerning the nature, scope or value of any right or remedy of the Administrative Agent or any Lender hereunder or under any other Loan Document or any factual matters in connection therewith, which expenses shall include without limitation the reasonable fees and disbursements of such Persons, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any losses, penalties, fines, liabilities, settlements, damages, costs and expenses, suffered by any such Person in connection with any claim (including, without limitation, any Environmental Claims), investigation, litigation or other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with the Loans, this Agreement, any other Loan Document, or any documents, reports or other information provided to the Administrative Agent or any Lender or contemplated by or referred 92 to herein or therein or the transactions contemplated hereby or thereby, including, without limitation, reasonable attorney's and consultant's fees, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor. SECTION 14.3 Set-off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders and any assignee or participant of a Lender in accordance with Section 14.10 are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lenders, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Administrative Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 12.2 and although such Obligations shall be contingent or unmatured. Notwithstanding the preceding sentence, each Lender agrees to notify within three (3) Business Days the Borrower and the Administrative Agent after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 14.4 Governing Law. This Agreement, the Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), without regard to the conflicts of law provisions of such state. SECTION 14.5 Jurisdiction and Venue. (a) Jurisdiction. The Borrower hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in New York, New York (and any courts from which an appeal from any of such courts must or may be taken), in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Notes and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. The Borrower hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Administrative Agent or any Lender in connection with this Agreement, the Notes or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 14.1. Nothing in this Section 14.5 shall affect the right of the Administrative Agent or any Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of the Administrative Agent or any Lender to bring any action or proceeding against the Borrower or its properties in the courts of any other jurisdictions. 93 (b) Venue. The Borrower hereby irrevocably waives any objection it may have now or in the future to the laying of venue in the aforesaid jurisdiction in any action, claim or other proceeding arising out of or in connection with this Agreement, any other Loan Document or the rights and obligations of the parties hereunder or thereunder. The Borrower irrevocably waives, in connection with such action, claim or proceeding, any plea or claim that the action, claim or other proceeding has been brought in an inconvenient forum. SECTION 14.6 Binding Arbitration; Waiver of Jury Trial. (a) Binding Arbitration. Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Loan Document ("Disputes"), between or among parties hereto and to the other Loan Documents shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA") and the Federal Arbitration Act. All arbitration hearings shall be conducted in New York, New York or Charlotte, North Carolina. The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitations shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. Notwithstanding anything foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one hundred twenty (120) days after such demand. These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days. The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of the AAA. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. The parties hereto do not waive any applicable Federal or state substantive law except as provided herein. Notwithstanding the foregoing, this paragraph shall not apply to any Hedging Agreement. (b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. (c) Preservation of Certain Remedies. Notwithstanding the preceding binding 94 arbitration provisions, the parties hereto and the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute. Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. SECTION 14.7 Reversal of Payments. To the extent the Borrower makes a payment or payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative Agent receives any payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or otherwise required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause (whether by demand, settlement, litigation or otherwise), then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent. SECTION 14.8 Injunctive Relief; Punitive Damages. (a) The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lenders. Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. (b) The Administrative Agent, the Lenders and the Borrower (on behalf of itself and its Subsidiaries) hereby agree that no such Person shall have a remedy of punitive or exemplary damages against any other party to a Loan Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in connection with any Dispute, whether such Dispute is resolved through arbitration or judicially. SECTION 14.9 Accounting Matters. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time, provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the 95 Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance therewith. SECTION 14.10 Successors and Assigns; Participations. (a) Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and the Lenders, all future holders of the Notes, and their respective successors and assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Assignment by Lenders. Each Lender may, in the ordinary course of its business and in accordance with Applicable Law, sell or assign to any Lender, any Affiliate of a Lender or in the case of the Term Loans any Approved Fund and with the consent of the Borrower (so long as no Default or Event of Default has occurred and is continuing) and the consent of the Administrative Agent, which consents shall not be unreasonably withheld or delayed, assign to one or more other Eligible Assignees (any of the forgoing assignees or purchasers, a "Purchasing Lender") all or a portion of its interests, rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Extensions of Credit at the time owing to it and the Notes held by it); provided that: (i) each such assignment shall be of a constant, and not a varying, percentage of the Revolving Credit Commitment and/or the Term Loan Commitment, as applicable, of the assigning Lender's rights and obligations under this Agreement; (ii) if less than all of the assigning Lender's Revolving Credit Commitment or Term Loan Commitment, as applicable, is to be assigned, the Commitment so assigned shall not be less than $5,000,000 with respect to the Revolving Credit Facility and $1,000,000 (or otherwise agreed by the Administrative Agent and Borrower) with respect to the Term Loan Facility, unless such sale or assignment is made to an existing Lender, to an Affiliate thereof, or (with respect to any Term Loan) to an Approved Fund, in which case no minimum amount shall apply; (iii) the Purchasing Lender shall have delivered to the Administrative Agent all United States Internal Revenue Service Forms required pursuant to Section 5.11(e) and all of the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance substantially in the form of Exhibit G attached hereto (an "Assignment and Acceptance"), together with (to the extent requested by any Purchasing Lender) any Note or Notes subject to such assignment; (iv) no assignment of a Revolving Credit Commitment, or participation in L/C Obligations or Swingline Loans shall be made without the prior written consent of the 96 Administrative Agent, the Swingline Lender, the Issuing Lender and (so long as no Default or Event of Default has occurred and is continuing) the Borrower (which consents shall not be unreasonably withheld); (v) where consent of the Borrower to an assignment to a Purchasing Lender is required hereunder (including consent to an assignment to an Approved Fund), the Borrower shall be deemed to have given its consent five (5) Business Days after the date written notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrower prior to such fifth (5th) Business Day; (vi) such assignment shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Loans or the Notes under the blue sky laws of any state; and (vii) the assigning Lender shall pay to the Administrative Agent an assignment fee of $2,500 upon the execution by such Lender of the Assignment and Acceptance; provided that no such fee shall be payable upon any assignment by a Lender to an Affiliate thereof. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof (unless otherwise agreed to by the Administrative Agent), (A) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereby and (B) the Lender thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement. (c) Rights and Duties Upon Assignment. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Purchasing Lender thereunder confirm to and agree with each other and the other parties hereto as set forth in such Assignment and Acceptance. (d) Register. The Administrative Agent shall maintain a copy of each Assignment and Acceptance and each Lender Addition and Acknowledgment delivered to it and a register for the recordation of the names and addresses of the Lenders and the amount of the Extensions of Credit with respect to each Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Issuance of New Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and a Purchasing Lender together with any Note or Notes (if 97 applicable) subject to such assignment and (if applicable) the written consent to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of Exhibit G: (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; (iii) give prompt notice thereof to the Lenders and the Borrower; and (iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower. Within five (5) Business Days after receipt of notice, the Borrower shall execute and deliver to the Administrative Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such Purchasing Lender (to the extent requested thereby) in amounts equal to the Revolving Credit Commitment and/or Term Loan Commitment assumed by it pursuant to such Assignment and Acceptance and a new Note or Notes to the order of the assigning Lender (to the extent requested thereby) in an amount equal to the Revolving Credit Commitment and/or Term Loan Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be canceled and returned to the Borrower. Notwithstanding anything in this Agreement to the contrary, any Lender which has not been issued a Note or Notes hereunder may at any time deliver a written request for a Note or Notes to the Administrative Agent and Borrower. Within five (5) Business Days after receipt of notice, the Borrower shall execute and deliver to the Administrative Agent, a Note or Notes (as applicable) to the order of such Lender in amounts equal to the Revolving Credit Commitment and/or Term Loan Commitment of such Lender. Upon receipt thereby, the Administrative Agent shall promptly deliver such Note or Notes to such Lender. (f) Participations. Each Lender may, without notice to or the consent of the Borrower or the Administrative Agent, in the ordinary course of its commercial banking business and in accordance with Applicable Law, sell participations to one or more banks or other entities (any such bank or other entity, a "Participant") in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Extensions of Credit and the Notes held by it); provided that: (i) such Lender's obligations under this Agreement (including, without limitation, its Revolving Credit Commitment and/or Term Loan Commitment, as applicable) shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; 98 (iii) such Lender shall remain the holder of the Notes held by it for all purposes of this Agreement; (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement; (v) such Lender shall not permit such Participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on any Loan or Reimbursement Obligation, extend the term or increase the amount of the Revolving Credit Commitment and/or Term Loan Commitment of such Lender, reduce the amount of any fees to which such Participant is entitled, extend any scheduled payment date for principal of any Loan or, except as expressly contemplated hereby or thereby, release substantially all of the Collateral; and (vi) any such disposition shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify the Loans or the Notes under the blue sky law of any state. The Borrower agrees that each Participant shall be entitled to the benefits of Section 5.7, Section 5.8, Section 5.9, Section 5.10, Section 5.11 and Section 14.3 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 14.10; provided that a Participant shall not be entitled to receive any greater payment under Section 5.7, Section 5.8, Section 5.9, Section 5.10, and Section 5.11 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent and such Participant shall have delivered to the Administrative Agent all United States Internal Revenue Service Forms required pursuant to Section 5.11(e). (g) Disclosure of Information; Confidentiality. The Administrative Agent and the Lenders shall hold all non-public information with respect to the Borrower obtained pursuant to the Loan Documents (or any Hedging Agreement with a Lender or the Administrative Agent) in accordance with their customary procedures for handling confidential information; provided, that the Administrative Agent may disclose information relating to this Agreement to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information customarily found in such publications and provided further, that the Administrative Agent or any Lender may disclose any such information to the extent such disclosure is (i) required by law or requested or required pursuant to any legal process, (ii) requested by, or required to be disclosed to, any rating agency, or regulatory or similar authority (including, without limitation, the National Association of Insurance Commissioners) or (iii) used in any suit, action or proceeding for the purpose of defending itself, reducing its liability or protecting any of its claims, rights, remedies or interests under or in connection with the Loan Documents (or any Hedging Agreement with a Lender or the Administrative Agent). Any Lender may, in connection with any assignment, proposed assignment, participation or proposed participation 99 pursuant to this Section 14.10, disclose to the Purchasing Lender, proposed Purchasing Lender, Participant, proposed Participant, or to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided, that prior to any such disclosure, each such Purchasing Lender, proposed Purchasing Lender, Participant, proposed Participant, contractual counterparty or professional advisor shall agree to be bound by the provisions of this Section 14.10(g). (h) Certain Pledges or Assignments. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement or any other Loan Document to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 14.11 Amendments, Waivers and Consents. Except as set forth below or as specifically provided in any Loan Document, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Borrower; provided, that no amendment, waiver or consent shall: (a) (i) increase the Revolving Credit Commitment of any Lender, (ii) reduce the rate of, or forgive any, interest or fees payable on any Revolving Credit Loan or Reimbursement Obligation, (iii) reduce or forgive the principal amount of any Revolving Credit Loan or Reimbursement Obligation, (iv) extend the originally scheduled time or times of payment of the principal of any Revolving Credit Loan or Reimbursement Obligation or the time or times of payment of interest on any Revolving Credit Loan or Reimbursement Obligation or any fee or commission with respect hereto, (v) permit any subordination of the principal or interest on any Revolving Credit Loan or Reimbursement Obligation or (vi) extend the time of the obligation of the Revolving Credit Commitment Lenders to make or issue or participate in Letters or Credit or Swingline Loans, in any case, without the written consent of each Lender holding Revolving Credit Loans or a Revolving Credit Commitment; (b) (i) except as otherwise provided in Section 4.6, increase the Term Loan Commitment of any Lender, (ii) reduce the rate of, or forgive any, interest or fees payable on any Term Loan, (iii) reduce or forgive the principal amount of any Term Loan, (iv) permit any subordination of the principal or interest on, or any Lien securing, any Term Loan or (v) extend the originally scheduled time or times of payment of the principal of any Term Loan or the time or times of payment of interest on any Term Loan or any fee or commission with respect thereto, in any case, without the written consent of each Lender holding a Term Loan or a Term Loan Commitment; (c) release any material portion of the Collateral or release any Security 100 Document or release any Subsidiary Guarantor (other than in connection with the redesignation of a Restricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 9.11, with a sale of assets permitted pursuant to Section 11.5, or as otherwise specifically permitted in this Agreement or the applicable Security Document), amend the provisions of this Section 14.11, or amend the definition or percentage of Required Lenders without the written consent of each Lender or amend the definition, or any percentage therein, of Borrowing Base; or (d) release any Borrower from all or any material portion of the Obligations (other than Hedging Obligations) hereunder or under any other Loan Document or permit any assignment (other than as specifically permitted or contemplated in this Agreement or any other Loan Document) of any Borrower's rights and obligations hereunder or under any other Loan Document without the written consent of each Lender. In addition, no amendment, waiver or consent to the provisions of (a) Article XIII shall be made without the written consent of the Administrative Agent and (b) Article III without the written consent of the Issuing Lender. SECTION 14.12 Performance of Duties. The Borrower's obligations under this Agreement and each of the other Loan Documents shall be performed by the Borrower at its sole cost and expense. SECTION 14.13 Syndication of Credit Facility. The Administrative Agent shall be entitled, after consultation with the Borrower, to change the pricing, terms or structure of the Credit Facility, either before or after the Closing Date, if the Administrative Agent determines in its sole discretion that such changes are advisable in order to ensure a successful syndication or an optimal capital structure; provided, that the aggregate amount of the Credit Facility shall remain unchanged. SECTION 14.14 All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied, any of the Commitments remain in effect or the Credit Facility has not been terminated. SECTION 14.15 Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this Article XV and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before. SECTION 14.16 Titles and Captions. Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. 101 SECTION 14.17 Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.18 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. SECTION 14.19 Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations arising hereunder or under any other Loan Document shall have been indefeasibly and irrevocably paid and satisfied in full and all Commitments have been terminated. The Administrative Agent is hereby permitted to release all Liens on the Collateral in favor of the Administrative Agent, for the ratable benefit of itself and the Lenders, upon repayment of the outstanding principal of and all accrued interest on the Loans, payment of all outstanding fees and expenses hereunder and the termination of the Lender's Commitments. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination. SECTION 14.20 Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel. SECTION 14.21 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. SECTION 14.22 Inconsistencies with Other Documents; Independent Effect of Covenants. (a) In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided, that any provision of the Security Documents which imposes additional burdens on the Borrower or its Subsidiaries or further restricts the rights of the Borrower or its Subsidiaries or gives the Administrative Agent or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect. (b) The Borrower expressly acknowledges and agrees that each covenant contained in Articles IX, X, or XI hereof shall be given independent effect. Accordingly, the Borrower shall not engage in any transaction or other act otherwise permitted under any covenant contained in Articles IX, X, or XI if, before or after giving effect to such transaction or act, the Borrower shall or would be in breach of any other covenant contained in Articles IX, X, or XI. 102 [Signature pages to follow] 103 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above. [CORPORATE SEAL] DRS TECHNOLOGIES, INC., as Borrower By: /s/ Mark S. Newman ------------------------------- Name: Mark S. Newman Title: Chairman of the Board CEO & President FIRST UNION NATIONAL BANK, as Administrative Agent and Lender By: /s/ Chris Hetterly ------------------------------ Name: Chris Hetterly Title: Director [ADDITIONAL LENDERS], as Lender By: __________________________________ Name: ___________________________ Title: ___________________________ ACKNOWLEDGED AND AGREED: [SUBSIDIARY GUARANTORS], as Subsidiary Guarantor By: __________________________________ Name: ___________________________ Title: ___________________________ ================================================================================ CREDIT AGREEMENT dated as of September 28, 2001, by and among DRS TECHNOLOGIES, INC., as Borrower, the Lenders referred to herein, FIRST UNION NATIONAL BANK, as Administrative Agent, TD SECURITIES (USA) INC., as Syndication Agent and MELLON BANK, N.A., as Documentation Agent ================================================================================ FIRST UNION SECURITIES, INC., as Co-Lead Arranger and Book Manager, and MELLON BANK, N.A., as Co-Lead Arranger TABLE OF CONTENTS ARTICLE I DEFINITIONS............................................................................. 1 SECTION 1.1 Definitions................................................................... 1 SECTION 1.2 General....................................................................... 22 SECTION 1.3 Other Definitions and Provisions.............................................. 22 ARTICLE II REVOLVING CREDIT FACILITY.............................................................. 22 SECTION 2.1 Revolving Credit Loans........................................................ 22 SECTION 2.2 Swingline Loans............................................................... 23 SECTION 2.3 Procedure for Advances of Revolving Credit and Swingline Loans................ 24 SECTION 2.4 Repayment of Loans............................................................ 25 SECTION 2.5 Notes......................................................................... 27 SECTION 2.6 Permanent Reduction of the Revolving Credit Commitment........................ 27 SECTION 2.7 Termination of Revolving Credit Facility...................................... 28 ARTICLE III LETTER OF CREDIT FACILITY............................................................. 28 SECTION 3.1 L/C Commitment................................................................ 28 SECTION 3.2 Procedure for Issuance of Letters of Credit................................... 28 SECTION 3.3 Commissions and Other Charges................................................. 29 SECTION 3.4 L/C Participations............................................................ 29 SECTION 3.5 Reimbursement Obligation of the Borrower...................................... 30 SECTION 3.6 Obligations Absolute.......................................................... 31 SECTION 3.7 Effect of Application......................................................... 31 SECTION 3.8 Existing Foreign Currency Letters of Credit................................... 32 ARTICLE IV TERM LOAN FACILITY..................................................................... 32 SECTION 4.1 Term Loans.................................................................... 32 SECTION 4.2 Procedure for Advance of Term Loan............................................ 32 SECTION 4.3 Repayment of Term Loan........................................................ 32 SECTION 4.4 Prepayments of Term Loan...................................................... 33 SECTION 4.5 Term Notes.................................................................... 36 SECTION 4.6 Optional Increase In Term Loan Commitment..................................... 36 ARTICLE V GENERAL LOAN PROVISIONS................................................................. 38 SECTION 5.1 Interest...................................................................... 38 SECTION 5.2 Notice and Manner of Conversion or Continuation of Loans...................... 41 SECTION 5.3 Fees.......................................................................... 42 SECTION 5.4 Manner of Payment............................................................. 42 SECTION 5.5 Crediting of Payments and Proceeds............................................ 43 SECTION 5.6 Adjustments................................................................... 43 SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption
i by the Administrative Agent .................................................. 43 SECTION 5.8 Changed Circumstances......................................................... 44 SECTION 5.9 Indemnity..................................................................... 46 SECTION 5.10 Capital Requirements.......................................................... 47 SECTION 5.11 Taxes......................................................................... 47 SECTION 5.12 Security...................................................................... 49 ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING........................................... 50 SECTION 6.1 Closing....................................................................... 50 SECTION 6.2 Conditions to Closing and Initial Extensions of Credit........................ 50 SECTION 6.3 Conditions to All Extensions of Credit........................................ 55 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWER........................................ 55 SECTION 7.1 Representations and Warranties................................................ 55 SECTION 7.2 Survival of Representations and Warranties, Etc............................... 63 ARTICLE VIII FINANCIAL INFORMATION AND NOTICES.................................................... 63 SECTION 8.1 Financial Statements and Projections.......................................... 63 SECTION 8.2 Officer's Compliance Certificate.............................................. 64 SECTION 8.3 Accountants' Certificate...................................................... 64 SECTION 8.4 Other Reports................................................................. 65 SECTION 8.5 Notice of Litigation and Other Matters........................................ 66 SECTION 8.6 Accuracy of Information....................................................... 67 ARTICLE IX AFFIRMATIVE COVENANTS.................................................................. 67 SECTION 9.1 Preservation of Corporate Existence and Related Matters....................... 67 SECTION 9.2 Maintenance of Property....................................................... 67 SECTION 9.3 Insurance..................................................................... 67 SECTION 9.4 Accounting Methods and Financial Records...................................... 68 SECTION 9.5 Payment and Performance of Obligations........................................ 68 SECTION 9.6 Compliance With Laws and Approvals............................................ 68 SECTION 9.7 Environmental Laws............................................................ 68 SECTION 9.8 Compliance with ERISA......................................................... 68 SECTION 9.9 Compliance With Agreements.................................................... 69 SECTION 9.10 Inspection of Property; Books and Records; Discussions........................ 69 SECTION 9.11 Additional Subsidiaries....................................................... 70 SECTION 9.12 Reserved...................................................................... 72 SECTION 9.13 Use of Proceeds............................................................... 72 SECTION 9.14 Conduct of Business........................................................... 72 SECTION 9.15 Account Designation........................................................... 72 SECTION 9.16 Debt Rating................................................................... 72 SECTION 9.17 Existing Letters of Credit.................................................... 72 SECTION 9.18 Further Assurances............................................................ 72
ii ARTICLE X FINANCIAL COVENANTS..................................................................... 72 SECTION 10.1 Maximum Total Leverage Ratio.................................................. 73 SECTION 10.2 Minimum Fixed Charge Coverage Ratio........................................... 73 SECTION 10.3 Maximum Capital Expenditures.................................................. 74 ARTICLE XI NEGATIVE COVENANTS..................................................................... 74 SECTION 11.1 Limitations on Debt........................................................... 75 SECTION 11.2 Limitations on Liens.......................................................... 76 SECTION 11.3 Limitations on Loans, Advances, Investments and Acquisitions.................. 77 SECTION 11.4 Limitations on Mergers and Liquidation........................................ 79 SECTION 11.5 Limitations on Sale of Assets................................................. 80 SECTION 11.6 Limitations on Dividends and Distributions.................................... 81 SECTION 11.7 Limitations on Exchange and Issuance of Capital Stock......................... 81 SECTION 11.8 Transactions with Affiliates.................................................. 81 SECTION 11.9 Certain Accounting Changes; Organizational Documents.......................... 81 SECTION 11.10 Amendments; Payments and Prepayments of Subordinated Debt..................... 81 SECTION 11.11 Amendments, Consents and Waivers under Asset Purchase Agreement............... 82 SECTION 11.12 Restrictive Agreements........................................................ 82 SECTION 11.13 Nature of Business............................................................ 82 SECTION 11.14 Limitation on Bonding Obligations............................................. 82 SECTION 11.15 Impairment of Security Interests.............................................. 82 ARTICLE XII DEFAULT AND REMEDIES.................................................................. 82 SECTION 12.1 Events of Default............................................................. 82 SECTION 12.2 Remedies...................................................................... 85 SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc............................... 86 ARTICLE XIII THE ADMINISTRATIVE AGENT............................................................. 87 SECTION 13.1 Appointment................................................................... 87 SECTION 13.2 Delegation of Duties.......................................................... 87 SECTION 13.3 Exculpatory Provisions........................................................ 87 SECTION 13.4 Reliance by the Administrative Agent.......................................... 88 SECTION 13.5 Notice of Default............................................................. 88 SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders.................... 88 SECTION 13.7 Indemnification............................................................... 89 SECTION 13.8 The Administrative Agent in Its Individual Capacity........................... 89 SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent....... 90 SECTION 13.10 Trustee Powers................................................................ 90 SECTION 13.11 Documentation and Syndication Agent........................................... 91 ARTICLE XIV MISCELLANEOUS......................................................................... 91 SECTION 14.1 Notices....................................................................... 91 SECTION 14.2 Expenses; Indemnity........................................................... 92 SECTION 14.3 Set-off....................................................................... 93
iii SECTION 14.4 Governing Law................................................................. 93 SECTION 14.5 Jurisdiction and Venue........................................................ 93 SECTION 14.6 Binding Arbitration; Waiver of Jury Trial..................................... 94 SECTION 14.7 Reversal of Payments.......................................................... 95 SECTION 14.8 Injunctive Relief; Punitive Damages........................................... 95 SECTION 14.9 Accounting Matters............................................................ 95 SECTION 14.10 Successors and Assigns; Participations........................................ 96 SECTION 14.11 Amendments, Waivers and Consents.............................................. 100 SECTION 14.12 Performance of Duties......................................................... 101 SECTION 14.13 Syndication of Credit Facility................................................ 101 SECTION 14.14 All Powers Coupled with Interest.............................................. 101 SECTION 14.15 Survival of Indemnities....................................................... 101 SECTION 14.16 Titles and Captions........................................................... 101 SECTION 14.17 Severability of Provisions.................................................... 102 SECTION 14.18 Counterparts.................................................................. 102 SECTION 14.19 Term of Agreement............................................................. 102 SECTION 14.20 Advice of Counsel............................................................. 102 SECTION 14.21 No Strict Construction........................................................ 102 SECTION 14.22 Inconsistencies with Other Documents; Independent Effect of Covenants......... 102
iv EXHIBITS Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Swingline Note Exhibit A-3 - Form of Term Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Notice of Account Designation Exhibit D - Form of Notice of Prepayment Exhibit E - Form of Notice of Conversion/Continuation Exhibit F - Form of Officer's Compliance Certificate Exhibit G - Form of Assignment and Acceptance Exhibit H - Form of Subsidiary Guaranty Agreement Exhibit I - Form of Collateral Agreement Exhibit J - Form of Lender Addition and Acknowledgment Exhibit K - Form of Borrowing Base Certificate Exhibit L - Form of Pledge Agreement SCHEDULES Schedule 1 - Lenders and Commitments Schedule 2 - Unrestricted Subsidiaries Schedule 6.2(c)(v) - Environmental Reports Schedule 7.1(a) - Jurisdictions of Organization and Qualification Schedule 7.1(b) - Subsidiaries and Capitalization Schedule 7.1(i) - ERISA Plans Schedule 7.1(l) - Material Contracts Schedule 7.1(m) - Labor and Collective Bargaining Agreements Schedule 7.1(r) - Owned and Leased Real Property Schedule 7.1(t) - Debt, Guaranty and Bonding Obligations Schedule 7.1(u) - Litigation Schedule 11.2 - Existing Liens Schedule 11.3 - Existing Loans, Advances and Investments v FIRST AMENDMENT March 26, 2002 First Union National Bank, as Administrative Agent Attn: Barbara Van Meerten NC-0760 301 South College Street Charlotte, NC 28288-0760 Re: Credit Agreement dated as of September 28, 2001 among DRS Technologies, Inc. (the "Company"), the Lenders party thereto, and First Union National Bank, as Administrative Agent (as amended hereby and as further amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). In your capacity as Administrative Agent under the Credit Agreement, you have informed us that the Company has requested to amend Section 8.1(c) of the Credit Agreement by deleting the phrase "thirty (30) days prior to" in the first sentence of such Section and inserting the phrase "forty-five (45) days following" in lieu thereof. By executing this First Amendment in the space below, the undersigned hereby consents to amend the Credit Agreement as provided herein. Upon consent by the Required Lenders, this First Amendment shall have an effective date of January 1, 2002. Please deliver an executed copy of this First Amendment via fax to Ruben Veliz at Kennedy, Covington, Lobdell & Hickman, L.L.P. (704-331-7598) no later than Tuesday, April 2, 2002. ______________________________________ [Insert name of financial institution] By:___________________________________ Name: ________________________________ Title:________________________________ SECOND AMENDMENT, WAIVER AND CONSENT TO THE CREDIT AGREEMENT THIS SECOND AMENDMENT, WAIVER AND CONSENT TO THE CREDIT AGREEMENT (this "Agreement") is made and entered into as of this 23rd day of May, 2002, effective in accordance with Section 5 below, by and among DRS TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), the financial institutions from time to time party to the Credit Agreement referred to below (the "Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union National Bank), a national banking association, as Administrative Agent for the Lenders (the "Administrative Agent"). Statement of Purpose The Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of September 28, 2001 (as amended by the First Amendment, dated as of March 26, 2002, as amended hereby, and as may be further amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among the Borrower, the Lenders, the Administrative Agent, TD Securities (USA) Inc., as Syndication Agent and Mellon Bank, N.A., as Documentation Agent pursuant to which the Lenders have extended certain credit facilities to the Borrowers; DRS Air, Inc. (now known as DRS Unmanned Technologies, Inc.), an Unrestricted Subsidiary of the Borrower, acquired assets of Meggitt Defense Systems, Inc., a Texas corporation (the "Acquisition") for a purchase price of $750,000 pursuant to the Asset Sale Purchase Agreement dated as April 4, 2002 by and among DRS Air, Inc., as Buyer, Meggitt Defense Systems, Inc., as Seller and Meggitt-USA Inc., as Parent. The funding for the Acquisition (the "Acquisition Funding") was provided to DRS Air, Inc. by the Borrower or one of its Restricted Subsidiaries. DRS Data Systems, Inc., a Restricted Subsidiary of the Borrower desires to sell its remaining assets (the "Data Asset Sale") to members of its management in exchange for a promissory note (the "Seller Note") in the amount of $2,813,000 as such amount may be adjusted in accordance with the terms contained in the definitive asset sale agreement. Although the Data Asset Sale is contemplated by Section 11.5(e) of the Credit Agreement, Section 11.8 of the Credit Agreement prohibits transactions with Affiliates unless prior written approval is given by the Required Lenders and Section 11.3 of the Credit Agreement prohibits the Borrower and its Restricted Subsidiaries from making the loan contemplated by the Seller Note without the consent of the Required Lenders. The Borrower has requested that the Lenders (a) waive the Default and Event of Default resulting from the breach of Section 11.3 of the Credit Agreement on account of the Acquisition Funding, (b) consent to the Borrower's sale of certain assets of DRS Data Systems, Inc. to an Affiliate of the Borrower and to the financing of the Data Asset Sale with the Seller Note, and (c) amend the Credit Agreement in certain respects as more fully described below; Subject to the terms and conditions of this Agreement, the Administrative Agent and the Lenders are willing to agree to the requested waivers, consents and amendments; NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized, undefined terms used in this Agreement shall have the meanings assigned thereto in the Credit Agreement. SECTION 2. Waiver. Pursuant to Section 14.11 of the Credit Agreement and effective as of the date upon which the conditions specified in Section 5 below are satisfied, the Administrative Agent and the Lenders hereby waive any breach that may have occurred under Section 11.3 of the Credit Agreement on account of the Acquisition Funding. SECTION 3. Consent. Pursuant to Section 14.11 of the Credit Agreement and effective as of the date upon which the conditions specified in Section 5 below are satisfied, the Administrative Agent and the Lenders hereby consent to the Data Asset Sale and the loan contemplated by the Seller Note notwithstanding the applicable provisions of Section 11.3 of the Credit Agreement or applicable provisions of Section 11.8 of the Credit Agreement. Furthermore, the Lenders hereby agree that the Seller Note shall not be applied against the $5,000,000 basket set forth in Section 11.3(j) of the Credit Agreement. SECTION 4. Amendments. Pursuant to Section 14.11 of the Credit Agreement and effective as of the date upon which the conditions specified in Section 5 below are satisfied, the Administrative Agent and the Lenders hereby: (a) Amendment of Section 3.1. Amend Section 3.1 "L/C Commitment", by adding the phrase "or in an amount less than $100,000 if approved in writing by the Administrative Agent in its sole discretion" between the phrase "in a minimum amount of $100,000" and the parenthetical in clause (i) of the second sentence of Section 3.1. (b) Amendment of Section 11.8. Amend Section 11.8 "Transactions with Affiliates", by replacing the words "the Required Lenders" contained therein with the following: "(i) the Administrative Agent; provided that the aggregate of all such transactions approved by the Administrative Agent does not exceed $5,000,000, (ii) the Required Lenders, if the aggregate of all such transactions exceeds $5,000,000,". SECTION 5. Effectiveness. (a) Consents. Each consent set forth in Section 3 shall become effective on the date hereof. (b) Waiver and Amendments. The waiver set forth in Section 2 and each amendment set forth in Section 4 of this Agreement shall become effective upon (i) the receipt by the Administrative Agent of a duly authorized and executed original of this Agreement by the parties hereto, (ii) the Borrower's payment of all outstanding fees and expenses of the 2 Administrative Agent (including without limitation, legal fees and expenses) incurred in connection with the preparation and negotiation of this Agreement and all documents, certificates and other instruments delivered in connection therewith, (iii) the receipt by the Administrative Agent, in form and substance satisfactory to the Administrative Agent, of the final definitive asset sale agreement (including all schedules and exhibits thereto) and all related transaction documents with respect to the Data Asset Sale, (iv) the receipt by the Administrative Agent, in form and substance satisfactory to the Administrative Agent, of the final definitive acquisition agreement (including all schedules and exhibits thereto) and all related transaction documents with respect to the Acquisition, (v) the receipt by the Administrative Agent of the original Seller Note along with all necessary endorsements, and (vi) the receipt by the Administrative Agent of written notice by the Borrower of its intention to designate DRS Unmanned Technologies, Inc. as a Restricted Subsidiary pursuant to Section 9.11. SECTION 6. Post-Closing Conditions. (a) The Administrative Agent shall have received any other agreement or document required to be delivered in accordance with Section 9.11 of the Credit Agreement (including, without limitation, any other agreement or document required to be delivered in connection with any Loan Document). Notwithstanding any timing requirement set forth in Section 9.11(a) to the contrary, the Borrower shall cause DRS Unmanned Technologies, Inc. to be redesignated as a Restricted Subsidiary within forty-five (45) days of the effectiveness of this Agreement or within such time as may be reasonably determined by the Administrative Agent, provided that such time shall not exceed sixty (60) days after the effectiveness of this Agreement without the approval of the Required Lenders. (b) The Administrative Agent shall have received, within forty-five (45) days of the effectiveness of this Agreement or within such time as may be reasonably determined by the Administrative Agent, provided that such time shall not exceed sixty (60) days after the effectiveness of this Agreement without the approval of the Required Lenders, duly authorized, executed and delivered copies of such additional certificates, instruments and other documents in connection with the Data Asset Sale (including, without limitation, collateral assignments of representations, warranties, payment rights and security interests) (each in form and substance satisfactory thereto) as are reasonably requested by the Administrative Agent to create and perfect a security interest, for the ratable benefit of the Administrative Agent and the Lenders, in all of the Borrower's rights to receive payments under the Data Asset Sale to secure its Obligations under the Credit Agreement. (c) The Administrative Agent shall have received, within forty-five (45) days of the effectiveness of this Agreement or within such time as may be reasonably determined by the Administrative Agent, provided that such time shall not exceed sixty (60) days after the effectiveness of this Agreement without the approval of the Required Lenders, duly authorized, executed and delivered copies of such additional certificates, instruments and other documents in connection with the Acquisition (including, without limitation, a collateral assignment of representations, warranties, payment rights and security interests) (each in form and substance satisfactory thereto) as are reasonably requested by the Administrative Agent to create and perfect a security interest, for the ratable benefit of the Administrative Agent and the Lenders, in all of the 3 Borrower's rights to receive payments under the Acquisition to secure its Obligations under the Credit Agreement. SECTION 7. Limited Waiver, Consent and Amendment. Except as expressly provided in this Agreement, the Credit Agreement and each other Loan Document shall continue to be, and shall remain, in full force and effect. This Agreement shall not be deemed or otherwise construed (a) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document, (b) to prejudice any other right or remedies that the Administrative Agent or the Lenders, or any of them, may now have or may have in the future under or in connection with the Credit Agreement or the Loan Documents, as such documents may be amended, restated or otherwise modified from time to time, (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Borrower or any other person, firm or corporation with respect to any waiver, amendment, modification or any other change to the Credit Agreement or the Loan Documents or any rights or remedies arising in favor of the Lenders or the Administrative Agent, or any of them, under or with respect to any such documents or (d) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of any other agreement by and among the Borrower, on the one hand, and the Administrative Agent or any other Lender, on the other hand. SECTION 8. Representations and Warranties/No Default. By its execution hereof, and after giving effect to this Agreement, the Borrower hereby certifies that (a) each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents is true and correct as of the date hereof as if fully set forth herein (other than representations and warranties which speak as of a specific date pursuant to the Credit Agreement, which representations and warranties shall have been true and correct as of such specific dates) and that as of the date hereof (after giving effect to the provisions of this Agreement) no Default or Event of Default, other than as specifically waived hereby, has occurred and is continuing, (b) each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents will be true and correct as of the date hereof as if fully set forth herein (other than representations and warranties which speak as of a specific date pursuant to the Credit Agreement, which representations and warranties shall have been true and correct as of such specific dates) and that as of the date hereof (after giving effect to the provisions of this Agreement) no Default or Event of Default, other than as specifically waived hereby, will have occurred and be continuing and (c) the execution, delivery and performance of this Agreement have been authorized by all requisite corporate action on the part of the Borrower. SECTION 9. Confirmation of all Loan Documents. The Borrower hereby expressly consents to the consents, releases, modifications and amendments set forth in this Agreement. The Borrower hereby (a) reaffirms all of its respective covenants, representations, warranties and other obligations set forth in the Credit Agreement, the Collateral Agreement and the other Loan Documents to which it is a party and (b) acknowledges, represents and agrees that its respective covenants, representations, warranties and other obligations set forth in the Credit Agreement, the Collateral Agreement and the other Loan Documents to which it is a party remain in full force and effect 4 SECTION 10. Expenses. The Borrower shall pay all reasonable out-of-pocket expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent. SECTION 11. Governing Law. This Agreement, the Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), without regard to the conflicts of law provisions of such state. SECTION 12. Counterparts. This Agreement may be executed in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. [Signature Pages Follow] 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized representatives, all as of the day and year first above written. [CORPORATE SEAL] DRS TECHNOLOGIES, INC., as Borrower By: __________________________________ Name: ___________________________ Title: ___________________________ WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union National Bank), as Administrative Agent and Lender, on behalf of itself and the Required Lenders at the direction of the Required Lenders By: __________________________________ Name: ___________________________ Title: ___________________________ THIRD AMENDMENT AND CONSENT TO THE CREDIT AGREEMENT THIS THIRD AMENDMENT AND CONSENT TO THE CREDIT AGREEMENT (this "Agreement") is made and entered into as of this 15th day of July, 2002, with an effective date determined (the "Effective Date") in accordance with Section 4 below, by and among DRS TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), the financial institutions from time to time party to the Credit Agreement referred to below (the "Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union National Bank), a national banking association, as Administrative Agent for the Lenders (the "Administrative Agent"). Statement of Purpose The Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of September 28, 2001 (as amended by the First Amendment, dated as of March 26, 2002, as amended by the Second Amendment, Waiver and Consent dated as of May 23, 2002, and as may be further amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among the Borrower, the Lenders, the Administrative Agent, TD Securities (USA) Inc., as Syndication Agent and Mellon Bank, N.A., as Documentation Agent pursuant to which the Lenders have extended certain credit facilities to the Borrowers. The Borrower has signed an agreement to acquire the Navy Controls Division of Eaton Corp. for an approximate purchase price of $92,200,000 pursuant to the Purchase Agreement dated as of May 24, 2002 by and between the Borrower and Eaton Corporation and as more fully described in Annex A attached hereto (the "NCD Acquisition"). In addition to the foregoing, during the fourth quarter of the Fiscal Year ended March 31, 2002, Borrower reached a settlement agreement with the federal government in connection with United States v. Tress. The settlement involved, among other things, a payment to the federal government of $2,500,000 by DRS Photronics, Inc. (the "Settlement"). The Borrower has requested that the Lenders (a) consent to the NCD Acquisition, (b) consent to Borrower adding $2,500,000 to its EBITDA calculations for each quarter of the current Fiscal Year to account for the Settlement and (c) amend the Credit Agreement in certain respects as more fully described below; Subject to the terms and conditions of this Agreement, the Administrative Agent and the Lenders are willing to agree to the requested consent and amendments; NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized, undefined terms used in this Agreement shall have the meanings assigned thereto in the Credit Agreement. SECTION 2. Consent. (a) Pursuant to Section 14.11 of the Credit Agreement and effective as of the Effective Date, the Administrative Agent and the Lenders hereby consent to the NCD Acquisition. (b) The Lenders hereby consent to the addition of $2,500,000 to the EBITDA calculations of the Borrower for each fiscal quarter of the current Fiscal Year. SECTION 3. Amendments. Pursuant to Section 14.11 of the Credit Agreement, the Credit Agreement is hereby amended as follows (which amendments shall become effective from and after the Effective Date): (a) Amendment to Exhibits. The Exhibits to the Credit Agreement are hereby amended by inserting Exhibit K-2 titled "Form of Asset Coverage Ratio Certificate", a copy of which is attached hereto. (b) Amendment to Exhibit K. Exhibit K to the Credit Agreement, "Form of Borrowing Base Certificate", is hereby redesignated as "Exhibit K-1" and all references in any Loan Document to "Exhibit K" is deemed to refer to "Exhibit K-1". (c) Amendments to Definitions. Section 1.1 of the Credit Agreement is hereby amended by adding or amending, as applicable, the following defined terms (in alphabetical order): "Asset Coverage Ratio Certificate" means the certificate delivered by the Borrower substantially in the form of Exhibit K-2. "L/C Commitment" means Seventy-Five Million Dollars ($75,000,000)." "Third Amendment and Consent" means the Third Amendment and Consent to the Credit Agreement dated as of June 28, 2002. "Third Amendment Effective Date" means June 28, 2002. (d) Amendment to Section 2.4(b)(i). Section 2.4(b)(i) of the Credit Agreement is hereby amended by replacing the term "Borrowing Base Certificate" located in the second line of such subsection with the term "Asset Coverage Ratio Certificate". (e) Amendment to Section 8.4(b). Section 8.4(b) of the Credit Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: "(b) Borrowing Base Certificate; Asset Coverage Ratio Certificate. (i) Borrowing Base Certificate. As soon as available, but in any event within twenty-five (25) days after the end of each calendar 2 month (and, upon the occurrence and during the continuation of an Event of Default, on a more frequent basis if requested by the Administrative Agent or at such other times as required pursuant to the terms of this Agreement) a Borrowing Base Certificate; provided, that so long as the rating on the debt of the Borrower under this Agreement is "BB-" or better by Standard & Poor's Corporation and "Ba3" or better by Moody's Investors Service, the Borrower's obligation to deliver the Borrowing Base Certificate shall be suspended. Such suspension shall be immediately terminated upon a downgrade of the rating on debt issued pursuant to this Agreement and a Borrowing Base Certificate shall be promptly delivered on the earlier to occur of (i) five (5) days after such downgrade or (ii) twenty-five (25) days after the end of the most recent calendar month. (ii) Asset Coverage Ratio Certificate. As soon as available, but in any event within twenty-five (25) days after the end of each calendar month (and, upon the occurrence and during the continuation of an Event of Default, on a more frequent basis if requested by the Administrative Agent or at such other times as required pursuant to the terms of this Agreement), an Asset Coverage Ratio Certificate which shall include a calculation of the Asset Coverage Ratio as of such date." (f) Amendment to Section 8.4(c) and (d). Subsections (c) and (d) of Section 8.4 are hereby amended by replacing each occurrence of the phrase "each calendar month" with the phrase "each fiscal quarter of each Fiscal Year". (g) Amendment to Section 10.3. Section 10.3 of the Credit Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: "Maximum Capital Expenditures. Permit Capital Expenditures during any Fiscal Year to exceed an aggregate amount of Thirty-Five Million Dollars ($35,000,000). Notwithstanding the foregoing, the maximum amount of Capital Expenditures permitted by this Section 10.3 in any Fiscal Year shall be increased by an amount equal to the lesser of (a) $5,000,000 and (b) the excess of (i) the amount of Capital Expenditures that were permitted to be made under this Section 10.3 in the immediately preceding Fiscal Year (without giving effect to any carryover amount from prior Fiscal Years) over (ii) the amount of Capital Expenditures actually made during such preceding Fiscal Year." (h) Amendment to Section 11.1(d). Section 11.1(d) of the Credit Agreement is hereby amended by replacing the dollar amount of "$5,000,000" located in the second line of such subsection with the dollar amount of "$15,000,000". (i) Amendment to Section 11.3(d). 3 (i) Section 11.3(d)(v) is hereby amended by deleting subsection "(D)" within such section and substituting in lieu thereof the following: "(D) a pro forma Maximum Total Leverage Ratio (as of the date of the proposed acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) at least 0.25 below the applicable ratio set forth in Section 10.1, and no Default or Event of Default shall have occurred and be continuing both before and after giving effect to the acquisition;" (ii) Section 11.3(d)(vi) of the Credit Agreement is hereby amended by replacing "Section 8.11" with "Section 9.11" located in the third and fourth lines of such subsection. (j) Amendments to Section 11.5(f). Section 11.5(f) of the Credit Agreement is hereby amended by: (i) replacing the dollar amount of "$2,000,000" in the fifth line thereof with the dollar amount of "$25,000,000", (ii) replacing "Section 11,5" with "Section 11.5" located in the third line of such subsection and (iii) replacing the "; and" located at the end of such subsection with ".". (k) Amendment to Section 11.5(g). Section 11.5(g) of the Credit Agreement is hereby deleted in its entirety. SECTION 4. Effectiveness. This Agreement shall become effective upon (i) the receipt by the Administrative Agent of a duly authorized and executed original of this Agreement by the parties hereto, (ii) the receipt by the Administrative Agent of a Borrowing Base Certificate dated as of the Effective Date and after giving effect to the NCD Acquisition, (iii) the Borrower's payment of all outstanding fees and expenses of the Administrative Agent (including without limitation, legal fees and expenses) incurred in connection with the preparation and negotiation of this Agreement and all documents, certificates and other instruments delivered in connection therewith, (iv) the Borrower's payment of all applicable amendment fees due and payable to the Lenders executing this agreement on or before 5:00 P.M. (Eastern Time) on June 28, 2002 and (v) the receipt by the Administrative Agent of an executed acquisition certificate with all attachments, in form and substance satisfactory to the Administrative Agent, together with the final definitive acquisition agreement (including all schedules and exhibits thereto) and all related transaction documents with respect to the NCD Acquisition. SECTION 5. Post-Closing Conditions. The Administrative Agent shall have received, within forty-five (45) days of the effectiveness of this Agreement or within such time as may be reasonably determined by the Administrative Agent; provided that such time shall not exceed sixty (60) days after the effectiveness of this Agreement without the approval of the Required Lenders, duly authorized, executed and delivered copies of such additional certificates, instruments and other documents in connection with the NCD Acquisition (including, without limitation, each agreement or document required to be delivered in accordance with Section 9.11 of the Credit Agreement and a collateral assignment of representations, warranties, payment rights and security interests) (each in form and substance satisfactory thereto) as are reasonably requested by the Administrative Agent to create and perfect a security interest, for the ratable benefit of the Administrative Agent and the Lenders, in all of the Borrower's acquired assets and rights to receive payments under the NCD Acquisition to secure its Obligations under the Credit Agreement. 4 SECTION 6. Limited Consent and Amendment. Except as expressly provided in this Agreement, the Credit Agreement and each other Loan Document shall continue to be, and shall remain, in full force and effect. This Agreement shall not be deemed or otherwise construed (a) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document, (b) to prejudice any other right or remedies that the Administrative Agent or the Lenders, or any of them, may now have or may have in the future under or in connection with the Credit Agreement or the Loan Documents, as such documents may be amended, restated or otherwise modified from time to time, (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Borrower or any other person, firm or corporation with respect to any waiver, amendment, modification or any other change to the Credit Agreement or the Loan Documents or any rights or remedies arising in favor of the Lenders or the Administrative Agent, or any of them, under or with respect to any such documents or (d) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of any other agreement by and among the Borrower, on the one hand, and the Administrative Agent or any other Lender, on the other hand. SECTION 7. Representations and Warranties/No Default. By its execution hereof, and after giving effect to this Agreement, the Borrower hereby certifies that (a) each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents is true and correct as of the date hereof as if fully set forth herein (other than representations and warranties which speak as of a specific date pursuant to the Credit Agreement, which representations and warranties shall have been true and correct as of such specific dates) and that as of the date hereof (after giving effect to the provisions of this Agreement) no Default or Event of Default, other than as specifically waived hereby, has occurred and is continuing, (b) each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents will be true and correct as of the date hereof as if fully set forth herein (other than representations and warranties which speak as of a specific date pursuant to the Credit Agreement, which representations and warranties shall have been true and correct as of such specific dates) and that as of the date hereof (after giving effect to the provisions of this Agreement) no Default or Event of Default, other than as specifically waived hereby, will have occurred and be continuing and (c) the execution, delivery and performance of this Agreement have been authorized by all requisite corporate action on the part of the Borrower. SECTION 8. Confirmation of all Loan Documents. The Borrower hereby expressly consents to the consents, releases, modifications and amendments set forth in this Agreement. The Borrower hereby (a) reaffirms all of its respective covenants, representations, warranties and other obligations set forth in the Credit Agreement, the Collateral Agreement and the other Loan Documents to which it is a party and (b) acknowledges, represents and agrees that its respective covenants, representations, warranties and other obligations set forth in the Credit Agreement, the Collateral Agreement and the other Loan Documents to which it is a party remain in full force and effect. SECTION 9. Expenses. The Borrower shall pay all reasonable out-of-pocket expenses of the Administrative Agent in connection with the preparation, execution and delivery of 5 this Agreement, including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent. SECTION 10. Governing Law. This Agreement, the Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), without regard to the conflicts of law provisions of such state. SECTION 11. Counterparts. This Agreement may be executed in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized representatives, all as of the day and year first above written. [CORPORATE SEAL] DRS TECHNOLOGIES, INC., as Borrower By: __________________________________ Name: ___________________________ Title: ___________________________ WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union National Bank), as Administrative Agent and Lender, on behalf of itself and the Required Lenders at the direction of the Required Lenders By: __________________________________ Name: ___________________________ Title: ___________________________ ACKNOWLEDGEMENT AND CONSENT Dated as of June , 2002 The undersigned, as Guarantors under the Subsidiary Guaranty Agreement dated September 28, 2001 (as amended or supplemented, the "Guaranty Agreement") in favor of the Administrative Agent for the Lenders parties to the Credit Agreement referred to in the foregoing Third Amendment and Consent to Credit Agreement, hereby (a) consent to the said Third Amendment and Consent to Credit Agreement, (b) acknowledge and hereby confirm and agree that the Guaranty Agreement is, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects. [CORPORATE SEAL] DRS TECHNOLOGIES CANADA, INC. DRS INTERNATIONAL, INC. DRS COMMUNICATIONS COMPANY, LLC By: DRS Technologies, Inc., its Sole Member and Manager DRS INFRARED TECHNOLOGIES, LP By: DRS FPA, Inc., its General Partner DRS FPA, INC. as Guarantors By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS ELECTRONIC SYSTEMS, INC. DRS TECHNICAL SERVICES, INC. LAUREL TECHNOLOGIES PARTNERSHIP By: DRS Systems Management Corporation, a General Partner RS SURVEILLANCE SUPPORT SYSTEMS, INC. DRS SYSTEMS MANAGEMENT CORPORATION NAI TECHNOLOGIES, INC. as Guarantors By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] LAUREL TECHNOLOGIES PARTNERSHIP, as Guarantor By: Sunburst Management Corporation, a General Partner By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS PHOTRONICS, INC. DRS PRECISION ECHO, INC. as Guarantors By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS OPTRONICS, INC. DRS SENSOR SYSTEMS, INC. DRS SENSORS & TARGETING SYSTEMS, INC. as Guarantors By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS DATA SYSTEMS, INC., as Guarantor By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS ADVANCED PROGRAMS, INC., as Guarantor By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS SYSTEMS, INC., as Guarantor By: __________________________________ Name: ___________________________ Title: ___________________________ [CORPORATE SEAL] DRS UNMANNED TECHNOLOGIES, INC., as Guarantor By: __________________________________ Name: ___________________________ Title: ___________________________ EX-99.B.2 13 y64755texv99wbw2.txt COMMITMENT LETTER Exhibit (b)(2) [WACHOVIA SECURITIES LOGO] October 27, 2002 DRS Technologies, Inc. Corporate Headquarters 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Richard Schneider Executive Vice President, Chief Financial Officer and Treasurer Re: Commitment for Arrangement of Facilities and Financing Ladies and Gentlemen: You have advised us that DRS Technologies, Inc. (the "Borrower") seeks financing to finance a tender offer (the "Tender Offer") by the Borrower to acquire at least a majority of the issued and outstanding shares of capital stock of a public company that has previously been identified in writing to the Administrative Agent (the "Target"). Following the successful completion of the Tender Offer, the Target shall merge with the Borrower or one of its wholly-owned subsidiaries (the "Merger"). Furthermore, we understand that contemporaneously with the closing of the Tender Offer (the "Closing Date") the Borrower intends to amend and restate its existing Credit Agreement dated as of September 28, 2001 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the "Existing Credit Agreement") by and among the Borrower, the Lenders who are or may become party thereto, and Wachovia Bank, National Association ("Wachovia"), as Administrative Agent in accordance with the Summary of Terms and Conditions (the "Term Sheet") attached hereto. The Term Sheet describes the general terms and condition (including, but not limited to, certain provisions that permit the Tender Offer and Merger) for an aggregate $313.6 million senior secured credit facility to be allocated as a $100 million senior secured revolving credit facility and a $213.6 million senior secured term loan facility (collectively, the "Facilities"). The Merger, the Tender Offer and the amendment and restatement of the Existing Credit Agreement are collectively referred to as the Transactions. Based upon and subject to the terms and conditions set forth in this Commitment Letter (the "Commitment Letter"), in the Term Sheet and in the fee letter of even date (the "Fee Letter"), Wachovia is pleased to advise you of its commitment to provide the Facilities and act as Administrative Agent in respect thereof. As set forth more fully below and in the Term Sheet, the closing of the Facilities is subject to certain conditions precedent. Although Wachovia is committing to provide the Facilities on the terms referenced herein and in the Term Sheet, Wachovia Securities, Inc. ("Wachovia Securities"), hereby agrees to act as sole Lead Arranger and sole Book Manager for the Facilities in connection with arranging a syndicate of financial DRS Technologies, Inc. Page 2 institutions (collectively, the "Lenders") reasonably acceptable to the Borrower and Wachovia Securities to provide all or a portion of the Facilities. Wachovia will act as sole and exclusive Administrative Agent for any such Lenders. The commitments of Wachovia and Wachovia Securities hereunder are based upon the financial and other information regarding the Borrower and its subsidiaries, the Target and the Merger previously provided to Wachovia and Wachovia Securities. Accordingly, the commitments hereunder are subject to the condition, among others, that (i) there shall not have occurred after the date of such financial and other information any material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries taken as a whole or the Target and its subsidiaries taken as a whole, (ii) the information concerning the Borrower and its subsidiaries, the Target and its subsidiaries and the Merger shall not differ in any material respect from the information previously provided to Wachovia and Wachovia Securities by the Borrower, (iii) the Borrower and its subsidiaries, the Target and its subsidiaries, the Merger and the Transactions shall be in compliance with all applicable laws and regulations (including compliance of this Commitment Letter and the other Transactions) with all applicable federal banking laws, rules and regulations), (iv) the determination of Wachovia and Wachovia Securities that, prior to and during the primary syndication of the Facilities, there shall be no competing issuance of debt, securities or commercial bank facilities of the Borrower, any of its subsidiaries, the Target, or any of its subsidiaries being offered, placed or arranged except with the prior written consent of Wachovia and Wachovia Securities, and (v) Wachovia and Wachovia Securities shall have had a reasonable opportunity and reasonable period of time (not to exceed forty (40) days following the date of acceptance of this Commitment Letter by you) in which to complete a syndication of the Facilities prior to the Closing Date. Further, the commitments of Wachovia and Wachovia Securities are subject to there not having occurred any material disruption or adverse change in the financial, banking or capital markets that could, in the reasonable judgment of Wachovia or Wachovia Securities, materially impair the syndication of the Facilities. You agree to actively assist Wachovia Securities (including, if applicable, after the closing of the Facilities) in achieving a syndication of the Facilities that is satisfactory to Wachovia Securities and you. Such syndication may be accomplished by a variety of means, including direct contact during the syndication between senior management and advisors of the Borrower and its subsidiaries and the proposed syndicate members. To assist Wachovia Securities in the syndication efforts you hereby agree (i) to provide and cause your advisors to provide Wachovia Securities and the other syndicate members upon request with all information deemed reasonably necessary by Wachovia Securities to complete the syndication, including, but not limited to, information and evaluations prepared by you and any of your subsidiaries and their advisors, or on their behalf, relating to the transactions contemplated hereby (including, without limitation, the Transactions), but excluding such non-confidential information related to the Transactions when the disclosure of such confidential information conflicts with the role of Wachovia Securities as the financial advisor to the Target, (ii) to assist Wachovia Securities upon its reasonable request in the preparation of an Information Memorandum to be used in connection with the syndication of the DRS Technologies, Inc. Page 3 Facilities and (iii) to otherwise assist Wachovia Securities in its syndication efforts, including making officers and advisors of the Borrower and its subsidiaries available from time to time to attend and make presentations regarding the business and prospects of the Borrower and its subsidiaries, as appropriate, at a meeting or meetings of Lenders or prospective Lenders and at a meeting or meetings of Moody's Investors Service, Standard & Poor's Corporation and any other applicable rating agencies (collectively, the "Rating Agencies"). You agree to afford Wachovia and its affiliates an opportunity to offer proposals to provide, arrange, underwrite or administer (i) any interest rate caps, currency swaps or other hedging transactions to be entered into by you or any of your subsidiaries or affiliates, (ii) any cash management, funds transfer, trade, corporate trust and securities services to be obtained by you or any of your subsidiaries or affiliates and (iii) any public or private debt or equity instruments or securities to be issued by you or any of your subsidiaries or affiliates. You hereby represent, warrant and covenant that (i) all information, other than Projections (as defined below), which has been or is hereafter made available to Wachovia, Wachovia Securities or the Lenders by you or any of your representatives in connection with the Transactions ("Information") when taken as a whole is and will be complete and correct in all material respects as of the date made available to Wachovia, Wachovia Securities or the Lenders and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not materially misleading and (ii) all financial projections concerning the Borrower and its subsidiaries and the Target and its subsidiaries that have been or are hereafter made available to Wachovia, Wachovia Securities or the Lenders by you (the "Projections") have been or will be prepared in good faith based upon assumptions believed by management to be reasonable at the time of preparation. You agree to supplement the Information and the Projections from time to time until the closing date so that the representation and warranty in the preceding sentence is materially correct on the closing date. In arranging and syndicating the Facilities, Wachovia and Wachovia Securities will be using and relying on the Information and the Projections. By executing this Commitment Letter, you agree to reimburse Wachovia and Wachovia Securities from time to time on demand for all reasonable out-of-pocket fees, syndication expenses and other expenses (including, but not limited to, (i) the reasonable fees, disbursements and other charges of Kennedy Covington Lobdell & Hickman, L.L.P., as counsel to Wachovia and Wachovia Securities, and professional fees of any consultants or local counsel and other experts and (ii) the reasonable fees, disbursements and other charges of the Rating Agencies) incurred in connection with the Facilities, including the preparation of definitive documentation for the Facilities and the other Transactions. By executing this Commitment Letter, you further agree to indemnify and hold harmless Wachovia, Wachovia Securities, each other Lender and each director, officer, employee, attorney and affiliate of Wachovia, Wachovia Securities and each other Lender (each such person or entity referred to hereafter in this paragraph as an "Indemnified Person") from any losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) to which any Indemnified Person may become subject, insofar DRS Technologies, Inc. Page 4 as such losses, claims, costs, damages, expenses or liabilities (or actions, suits, or proceedings, including any inquiry or investigation, with respect thereto) arise out of, in any way relate to, or result from, this Commitment Letter, the Facilities, the other Transactions (including, without limitation, reports or other information provided to any Indemnified Person in connection therewith) and to reimburse upon demand each Indemnified Person for any and all legal and other expenses incurred in connection with investigating, preparing to defend or defending any such loss, claim, cost, damage, expense or inquiry or investigation, with respect thereto; provided, that you shall have no obligation to any Indemnified Person under this indemnity provision for liabilities to the extent that such liabilities are determined by a final non-appealable judgment of a court of competent jurisdiction to have resulted solely from gross negligence or willful misconduct of such Indemnified Person. The foregoing provisions of this paragraph shall be in addition to any right that an Indemnified Person shall have at common law or otherwise. This Commitment Letter is addressed solely to the Borrower and is not intended to confer any obligations to or on or benefits on any third party. No Indemnified Person shall be responsible or liable for consequential damages which may be alleged as a result of this Commitment Letter. The provisions of the immediately preceding two paragraphs shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the commitment of Wachovia or Wachovia Securities hereunder. It is understood and agreed that Wachovia Securities, after consultation with you, will manage and control all aspects of the syndication, including decisions as to the selection of proposed Lenders and any titles offered to proposed Lenders, when commitments will be accepted and the final allocations of the commitments among the Lenders. You also acknowledge and agree that the services of Wachovia as sole Administrative Agent and the services of Wachovia Securities as sole Lead Arranger and sole Book Manager will be on an exclusive basis during the term of this Commitment Letter and that, during such term, no other bank or other financial institution will be engaged or otherwise consulted or contacted by you regarding any other proposed senior bank facility for the Borrower or its subsidiaries to finance the Tender Offer. This commitment and the Term Sheet do not summarize all of the terms, conditions, covenants, representations, warranties and other provisions which will be contained in the definitive credit documentation for the Facilities and the transactions contemplated thereby (including, without limitation, the Transactions). Wachovia and Wachovia Securities shall have the right to require that such credit documentation include, in addition to the provisions outlined herein and in the Term Sheet, provisions considered appropriate by Wachovia and Wachovia Securities for this type of financing transaction, as well as provisions that Wachovia and Wachovia Securities may deem appropriate after they are afforded the opportunity to conduct and complete, to their satisfaction, their due diligence review. Except as required by applicable law, this Commitment Letter, the Fee Letter and the Term Sheet and the contents of such documents shall not be disclosed by you to any third party without the prior consent of Wachovia and Wachovia Securities, other than to your attorneys, financial advisors, accountants, and, with respect to the Commitment Letter and Term Sheet only, the Target DRS Technologies, Inc. Page 5 and the representatives of the Target, in each case who need to know the terms hereof, in connection with their evaluation of the Transactions; provided that (i) each of such persons shall agree to be bound by the confidentiality provisions hereof and (ii) you shall be liable for any breach of such confidentiality provisions by any such person), except as may be required by law or applicable judicial process. Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter to us as provided below, you may: (a) make public disclosure of the existence of this Commitment Letter and Wachovia's identity as administrative agent; (b) file a copy of this Commitment Letter (but not the Fee Letter or any portion thereof incorporated herein) in any public record in which it is required by law to be filed, provided, however, that with respect to disclosures described in clauses (a) and (b), (i) such disclosure is accompanied by a statement that neither Wachovia nor Wachovia Securities or any of their officers, directors, employees, affiliates or agents shall be liable to any third party for any reason whatsoever as a result of their reliance on the contents of such documents and that no third party beneficiary relationship shall be established by virtue of such disclosure and (ii) you hereby agree to indemnify us and hold us harmless from and against any such third party claim, liability, loss, cost and expense; provided, that you shall have no obligation to any indemnify either Wachovia or Wachovia Securities under this indemnity provision for liabilities to the extent that such liabilities are determined by a final non-appealable judgment of a court of competent jurisdiction to have resulted solely from gross negligence or willful misconduct of either Wachovia or Wachovia Securities; and (c) make such other public disclosures of the terms and conditions hereof as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof). We agree that we will not disclose your consideration of the Merger or any information furnished to us by you or the Target except (i) in connection with the syndication of the Facilities to financial institutions that agree to maintain the confidentiality of such information or (ii) as required by law or regulatory authorities and (iii) to the extent that such information becomes publicly available through no fault of Wachovia or Wachovia Securities. You acknowledge and agree that Wachovia and Wachovia Securities may share with their respective affiliates any information relating to the Facilities, the Borrower and its subsidiaries, the Target and its Subsidiaries and the Transactions, but excluding such non-confidential information related to the Transactions when the disclosure of such confidential information conflicts with the role of Wachovia Securities as the financial advisor to the Target. You further acknowledge and agree to the disclosure by Wachovia and Wachovia Securities of information relating to the Facilities to Gold Sheets and other similar bank trade publications, with such information (i) to consist of deal terms and other information customarily found in such publications and (ii) to be subject to the reasonable review of the Borrower. Wachovia shall have the right to review and approve any public announcement or public filing made after the date hereof relating to any of the Transactions or relating to Wachovia or any of its affiliates, as the case may be, before any such announcement or filing is made (such approval not to be unreasonably withheld or delayed). Wachovia's commitment with respect to the Facilities set forth above shall terminate at 5:00 p.m. on October 28, 2002 (the "Acceptance Date") unless this Commitment Letter is accepted DRS Technologies, Inc. Page 6 by the Borrower in writing prior to such time and, if accepted prior to such time, shall expire at the earlier of (i) consummation of the Merger and the Tender Offer, (ii) termination of the definitive merger agreement with regard to the Merger, (iv) the occurrence of any event that Wachovia reasonably believes in good faith has, or could be expected to have, a material adverse effect on the business, assets, liabilities, (actual or contingent) operations, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries taken as a whole, the Target and its subsidiaries taken as a whole or the feasibility of the Transactions, and (iv) 5:00 p.m. on December 31, 2002 if the closing of the Tender Offer shall not have occurred by such time (any of the foregoing, the "Termination Date"). This Commitment Letter may be executed in counterparts which, taken together, shall constitute an original. This Commitment Letter, together with the Term Sheet and the Fee Letter, of even date herewith embodies the entire agreement and understanding between Wachovia, Wachovia Securities and the Borrower with respect to the specific matters set forth above and supersedes all prior agreements and understandings relating to the subject matter hereof. No party has been authorized by Wachovia or Wachovia Securities to make any oral or written statements inconsistent with this Commitment Letter. THIS COMMITMENT LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), without regard to the conflicts of law provisions of such state. This Commitment Letter may not be assigned without the prior written consent of Wachovia and Wachovia Securities. [Signature Page Follows] DRS Technologies, Inc. Page 7 If you are in agreement with the foregoing, please execute the enclosed copy of this Commitment Letter and the Fee Letter no later than the Acceptance Date. This Commitment Letter will become effective upon your delivery to Wachovia Securities of executed counterparts of this Commitment Letter and the Fee Letter. This Commitment Letter shall terminate if not accepted by you prior to that time. Very truly yours, WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ David S. Sozia ------------------------------------- Name: David S. Sozia ------------------------------------- Title: Managing Director ------------------------------------- WACHOVIA SECURITIES, INC. By: /s/ David S. Sozia ------------------------------------- Name: David S. Sozia ------------------------------------- Title: Managing Director ------------------------------------- COMMITMENT ACCEPTED AND AGREED TO THIS 27th DAY OF OCTOBER, 2002: ---- ------- DRS TECHNOLOGIES, INC. By: /s/ Richard A. Schneider ------------------------------------- Name: Richard A. Schneider ------------------------------------- Title: Executive Vice President ------------------------------------- DRS TECHNOLOGIES, INC. SUMMARY OF TERMS AND CONDITIONS OCTOBER 27, 2002 BORROWER: DRS Technologies, Inc. (the "Borrower"). GUARANTORS: The Facilities shall be irrevocably and unconditionally guaranteed by (i) all material domestic subsidiaries of the Borrower existing as of the Closing Date (as defined in the Commitment Letter) of the Facilities (as defined below) (provided that the Target, as defined below, and its material domestic subsidiaries shall not be required to guarantee the Facilities until the consummation of the Merger, as defined below) and (ii) such other material domestic subsidiaries that are subsequently acquired or organized (the "Guarantors") pursuant to guaranty agreements in form and substance satisfactory to the Administrative Agent (each a "Guaranty Agreement"). All Guaranty Agreements shall be guarantees of payment and not of collection. ADMINISTRATIVE AGENT: Wachovia Bank, National Association ("Wachovia" or the "Administrative Agent") will act as the sole and exclusive administrative agent. LEAD ARRANGER AND SOLE BOOK MANAGER: Wachovia Securities, Inc. ("Wachovia Securities" or the "Lead Arranger"). LENDERS: A syndicate of financial institutions (including Wachovia) arranged by the Lead Arranger, which institutions shall be reasonably acceptable to the Borrower and the Administrative Agent (collectively, the "Lenders"). 1 FACILITIES: Revolving Credit Facility: A $100,000,000 revolving credit facility (the "Revolving Credit Facility"). The Revolving Credit Facility shall include a sublimit acceptable to the Borrower and the Administrative Agent for the issuance of standby letters of credit (each a "Letter of Credit"). Term Loan Facility: A $213,600,000 term loan facility (the "Term Loan Facility" and, together with the Revolving Credit Facility, the "Facilities"). INCREMENTAL FACILITY: $50,000,000 Uncommitted Incremental Term Loan Facility (the "Incremental Facility"), which will be available upon the request of the Borrower at any time for up to two years after the Closing Date from the existing and/or new Lenders who commit thereto, with the timing and approval mechanics of such Incremental Term Loan Facility to be determined; provided that the Incremental Facility shall be available, only if, after giving effect thereto, no default or event of default would exist under the credit documentation and the Borrower would be in pro forma compliance with the financial covenants. The interest rate margins applicable to the Incremental Facility will be determined at the time such Incremental Facility is made available; provided that to the extent that the interest rate margins with respect to the Incremental Facility exceed the interest rate margins with respect to the Term Loan Facility, the interest rate margins with respect to the Term Loan Facility shall be increased to be equal to the interest rate margins with respect to the Incremental Facility. SWINGLINE LOANS: A portion of the Revolving Credit Facility not in excess of $10,000,000 shall be available for swingline loans to the Borrower (the "Swingline Loans") from Wachovia on same day notice. Any such Swingline Loans shall reduce the available commitment under the Revolving Credit Facility. Each of the Lenders shall acquire, under certain circumstances, an irrevocable and unconditional pro rata participation in each such Swingline Loan. MATURITY DATE: Revolving Credit Facility: The Revolving Credit Facility shall terminate and all amounts outstanding thereunder shall be due and payable in full on September 30, 2006 (the "Revolving Credit Maturity Date"). 2 Term Loan Facility: The Term Loan Facility shall terminate and all amounts outstanding thereunder shall be due and payable in full on September 30, 2008 (the "Term Loan Maturity Date"). PURPOSE: The Facilities shall be used to (i) finance a tender offer (the "Tender Offer") by the Borrower to acquire all of the issued and outstanding shares of capital stock of a public company that has previously been identified in writing to the Administrative Agent (the "Target"), (ii) the subsequent merger of the Target with the Borrower or one of its wholly-owned subsidiaries (the "Merger"), including to pay for costs and expenses related to the Tender Offer and the Merger, (iii) to refinance certain existing indebtedness of the Target and its subsidiaries, (iv) to finance future capital expenditure requirements of the Borrower, and (v) to finance on-going working capital requirements, general corporate purposes and letters of credit. SECURITY: The Administrative Agent (on behalf of the Lenders) shall receive a first priority perfected security interest in: (i) One hundred percent (100%) of the outstanding capital stock of each existing and subsequently acquired or organized direct and indirect material subsidiary (including, without limitation, the Target and its material domestic subsidiaries following the consummation of the Merger) of the Borrower (which pledge, in the case of any material foreign subsidiary shall be limited to the capital stock of "first tier" foreign subsidiaries and shall be limited to sixty-five percent (65%) of the capital stock of such "first tier" foreign subsidiary to the extent, and for so long as, the pledge of any greater percentage would have adverse tax consequences for the Borrower); (ii) all tangible and intangible assets of the Borrower and its direct and indirect material domestic subsidiaries (including, without limitation, the Target and its material domestic subsidiaries following the consummation of the Merger) including, but not limited to, all accounts, all equipment, all investment property, all inventory, all general intangibles, and all contract rights; and (iii) all present and future intercompany notes. 3 In connection therewith, upon the occurrence and during the continuance of a default or event of default, the Administrative Agent shall have the right to require the Borrower and the Guarantors to make all such filings and deliver such assignments and other documents as are necessary to permit the Administrative Agent and Lenders to enforce their rights and otherwise comply with the Federal Assignment of Claims Act with respect to all material contracts. All the above-described pledges and security interests shall be created on terms, and pursuant to customary documentation, satisfactory to the Administrative Agent and none of the collateral shall be subject to any other pledges or security interests. INTEREST RATE OPTIONS: The Borrower's option of: (1) Base Rate: The Base Rate plus the Applicable Base Rate Margin, as set forth in the pricing grid attached hereto as Exhibit I. Loans bearing interest at the Base Rate shall be for a minimum amount of $2,500,000 and $100,000 increments in excess thereof. The Base Rate means the greater of (i) the Administrative Agent's Prime Rate or (ii) the overnight federal funds rate plus 0.50%. The Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. Swingline Loans shall be maintained solely at the Base Rate plus the Applicable Base Rate Margin and may be borrowed in minimum increments of $50,000. (2) LIBOR Rate: The LIBOR Rate plus the Applicable LIBOR Rate Margin as set forth in the pricing grid attached hereto as Exhibit I. Loans bearing interest at the LIBOR Rate shall be for a minimum amount of $2,500,000 and $100,000 increments in excess thereof. The LIBOR Rate shall mean reserve adjusted LIBOR as set forth on Dow Jones Markets Screen Page 3750 or as determined by the Administrative Agent if such information 4 is not available. The LIBOR Rate option is available for Interest Periods of 1, 2, 3, or 6 months. No more than six (6) Interest Periods may be in effect at any time. LIBOR Rate interest and all fees shall be calculated on a 360 day basis, while Base Rate interest shall be calculated on a 365/366 day basis. LOANS UNDER THE FACILITY: Borrowings may be requested upon three (3) business days notice for LIBOR Rate Loans and same business day notice for Base Rate Loans and Swingline Loans. Notice must be given to the Administrative Agent by 11:00 a.m., Charlotte, North Carolina time, on the day on which such notice is required. The aggregate of all outstanding LIBOR Rate Loans, Base Rate Loans, Swingline Loans and Letters of Credit will be considered usage for purposes of determining availability under the Facilities. INTEREST PAYMENTS: Interest on Base Rate Loans will be due and payable quarterly in arrears. Interest on LIBOR Rate Loans will be due and payable at the end of each applicable Interest Period or, in the case of a 6 month LIBOR Rate Loan, every 3 months. DEFAULT RATE: Upon the occurrence and during the continuance of an Event of Default, at the option of the Required Lenders, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans or Swingline Loans, (ii) all amounts due and payable with respect to LIBOR Rate Loans and Swingline Loans shall bear interest at a rate per annum of two percent (2%) in excess of the rate then applicable to such Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans and (iii) all amounts due and payable with respect to Base Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans. LETTER OF CREDIT FEES AND EXPENSES: Letter of Credit Fee: An amount equal to the applicable LIBOR Rate Margin with respect to the Revolving Credit Facility on a per annum basis multiplied by the face amount of each Letter of Credit, 5 payable to the Administrative Agent, for the account of the Lenders, quarterly in arrears. Fronting Fee: An amount equal to 0.125% per annum multiplied by the face amount of each Letter of Credit, payable to the Administrative Agent (as Issuing Lender), for its own account, quarterly in arrears. Other: All normal costs and expenses of the Administrative Agent (as Issuing Lender) in connection with the issuance, transfer or other administration of the Letters of Credit shall be for the account of the Borrower. COMMITMENT FEE AND OTHER FEES: Commitment Fee: The Borrower shall pay a Commitment Fee on a per annum basis, at a rate per annum as reflected on the attached Exhibit I, on the average daily unused portion of the Revolving Credit Facility. The Commitment Fee shall be payable quarterly in arrears. Swingline Loans shall not constitute usage for purposes of calculating the Commitment Fee. Administrative Agent's and Other Fees: As set forth in the accompanying Fee Letter. REPAYMENT/ AMORTIZATION: Revolving Credit Facility: The Revolving Credit Facility shall be repaid in full, including accrued and unpaid fees and interest, on the Revolving Credit Maturity Date. Term Loan Facility: Outstanding principal of the Term Loan Facility will be payable quarterly in annual amounts based on the following amortization schedule: 6
QUARTER ENDING ON THE DATE SET AMOUNT OF QUARTERLY FORTH BELOW PRINCIPAL INSTALLMENT ----------- --------------------- December 31, 2002 $537,500 March 31, 2003 $537,500 June 30, 2003 $537,500 September 30, 2003 $537,500 December 31, 2003 $537,500 March 31, 2004 $537,500 June 30, 2004 $537,500 September 30, 2004 $537,500 December 31, 2004 $537,500 March 31, 2005 $537,500 June 30, 2005 $537,500 September 30, 2005 $537,500 December 31, 2005 $537,500 March 31, 2006 $537,500 June 30, 2006 $537,500 September 30, 2006 $537,500 December 31, 2006 $537,500 March 31, 2007 $537,500 June 30, 2007 $537,500 September 30, 2007 $537,500 December 31, 2007 $33,087,500 March 31, 2008 $33,087,500 June 30, 2008 $33,087,500 September 30, 2008 $103,587,500
The Term Loan Facility shall be repaid in full, including any unpaid interest, on the Term Loan Maturity Date MANDATORY PREPAYMENTS: The Facilities will include the following mandatory prepayments (i) one hundred percent (100%) of the net cash proceeds of asset sales, debt issuance and insurance and condemnation recoveries (excluding certain customary exceptions and customary reinvestment rights), (ii) fifty percent (50%) of equity issuances, and (iii) fifty percent (50%) of excess cash flow. With respect to items (ii) and (iii) above, the applicable prepayments shall only be required to the extent that the Total Leverage Ratio (as defined on Exhibit I attached hereto) is greater than [TBD] to 1.00. 7 All mandatory prepayments shall be applied first to the Term Loan Facility to reduce the remaining amortization payments in the inverse order of maturity (provided that the Term Loan Lenders may elect to refuse any such mandatory prepayment to the extent that there are outstandings under the Revolving Credit Facility) and then to the Revolving Credit Facility to prepay the aggregate outstandings thereunder (and, with respect to any mandatory prepayment in connection with an asset sale, to permanently reduce the aggregate commitment of the Lenders thereunder). OPTIONAL PREPAYMENTS: Base Rate Loans and Swingline Loans may be prepaid at any time without penalty. LIBOR Rate Loans may be prepaid at the end of the applicable Interest Period without penalty. Prepayment of the LIBOR Rate Loans prior to the end of the applicable Interest Period is subject to payment of any funding losses. CONDITIONS PRECEDENT: The closing and funding of the Facilities will be subject to satisfaction of the conditions set forth in the Commitment Letter, the execution and delivery of satisfactory definitive documentation with respect to the Facilities and other conditions precedent usual and customary in the context of the proposed transaction including, but not limited to, the following: 1. All consents and approvals of the boards of directors, shareholders, governmental entities and other applicable third parties necessary in connection with the Facilities and the Tender Offer shall have been obtained and remain in effect. 2. All documentation related to the Tender Offer, and the final terms and conditions thereof (including without limitation, any amendments, modifications and waivers thereto) shall be satisfactory to the Administrative Agent in its sole discretion, including, without limitation, the price per share and number of shares to be acquired (unless the number of shares acquired exceeds fifty-one percent (51%) of all issued and outstanding voting shares of the Target, and that ownership of such shares is sufficient to permit the 8 Borrower to approve the Merger without the approval of the Merger by any other shareholders of the Target). 3. All documentation related to the Merger, and the final terms and conditions thereof (including without limitation, any amendments, modifications and waivers thereto) shall be reasonably satisfactory to the Administrative Agent. 4. The Administrative Agent shall be satisfied with the proposed tax and accounting treatment of the Tender Offer and the Merger as well as the proposed corporate and capital structure of the Borrower and its subsidiaries, after giving effect to the Tender Offer and the Merger; it being agreed that the tax and accounting treatment of the Tender Offer and Merger as well as the proposed corporate and capital structure of the Borrower and its subsidiaries previously described in writing to the Administrative Agent are acceptable. 5. No material adverse change shall have occurred in the business, properties, prospects, operations or condition (financial or otherwise) of the Borrower or any of its subsidiaries taken as a whole or the Target or any of its subsidiaries taken as a whole. In connection therewith, the closing balance sheet and the operations of the Borrower, after giving effect to the closing of the Facilities, the Tender Offer, the Merger, shall not be materially and adversely different from the projections previously delivered to the Administrative Agent. 6. There shall be no pending or threatened litigation, proceeding, bankruptcy or insolvency, injunction, order or claim with respect to the Borrower or any of its subsidiaries, the Target or any of its subsidiaries, the Facilities, the Tender Offer or the Merger, that could reasonably be expected to have a materially adverse effect. 9 7. The Existing Credit Agreement (as defined in the Commitment Letter) shall be refinanced in full by the Facilities. 8. The Borrower shall deliver an opinion of counsel (including local counsel) in form and substance acceptable to the Administrative Agent and the Lenders which shall include, without limitation, an opinion as to compliance on the closing date of the Facilities by the Borrower and its subsidiaries (after giving effect to the Tender Offer) with all corporate instruments and agreements. 9. All filings, recordations and other actions necessary or in the Administrative Agent's opinion desirable to perfect the Administrative Agent's liens and security interests in the collateral securing the Facilities shall have been made or taken, or arrangements satisfactory to the Administrative Agent for the completion thereof shall have been made. 10. The Administrative Agent shall have received the unaudited interim consolidated financial statements of the Borrower and its subsidiaries and the Target and its subsidiaries, in each case, for each fiscal month and quarterly period ended subsequent to the date of the latest audited financial statements delivered thereto, and such other financial statements of the Borrower and Target as may be required or, in the opinion of the Administrative Agent, reasonably desirable in connection with the Facilities, in each case, prepared in accordance with GAAP and Regulation S-X, it being agreed that delivery to the Administrative Agent of the 10-Q of each of the Borrower and the Target for the fiscal quarter ending September 30, 2002 on the required filing date (without giving effect to any extensions thereof) of such financial information with the Securities and Exchange Commission shall be sufficient to satisfy this condition precedent. 11. The Administrative Agent shall have received payment of all fees set forth in the Fee Letter. 10 CONDITIONS PRECEDENT TO THE MERGER: SUBJECT TO THE FOLLOWING CONDITIONS, THE BORROWER SHALL BE PERMITTED TO CONSUMMATE THE MERGER: 1. ALL CONSENTS AND APPROVALS OF THE BOARDS OF DIRECTORS, SHAREHOLDERS, GOVERNMENTAL ENTITIES AND OTHER APPLICABLE THIRD PARTIES NECESSARY IN CONNECTION WITH THE MERGER SHALL HAVE BEEN OBTAINED AND REMAIN IN EFFECT. 2. NO MATERIAL ADVERSE CHANGE SHALL HAVE OCCURRED IN THE BUSINESS, PROPERTIES, PROSPECTS, OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TAKEN AS A WHOLE OR THE TARGET OR ANY OF ITS SUBSIDIARIES TAKEN AS A WHOLE. 3. All of the existing indebtedness for borrowed money of the Target and its subsidiaries shall be repaid in full and all liens or guarantees relating thereto shall be extinguished on or prior to the closing date of the Merger, except to the extent expressly permitted by the Lenders. 4. THE TARGET AND ITS SUBSIDIARIES SHALL EXECUTE AND DELIVER SUCH DOCUMENTS, INSTRUMENTS AND OTHER AGREEMENTS (INCLUDING SATISFACTORY LEGAL OPINIONS) AS ARE REASONABLY REQUESTED BY THE ADMINISTRATIVE AGENT TO JOIN THE TARGET AND ITS SUBSIDIARIES AS GUARANTORS AND TO PLEDGE THEIR ASSETS TO SECURE THE FACILITIES AS DESCRIBED IN THE "SECURITY" REFERRED TO ABOVE. CONDITIONS PRECEDENT TO ALL BORROWINGS: Customary for facilities of this nature, including, but not limited to, accuracy of representations and warranties and absence of defaults. REPRESENTATIONS AND WARRANTIES: Customary for facilities of this nature, including, but not limited to, corporate existence; corporate and governmental authorization; enforceability; financial information; no material adverse changes; compliance with laws and agreements (including environmental laws); compliance with ERISA; no material litigation; payment of taxes; financial condition; and full disclosure; provided that subject to the terms and conditions hereof, such provisions will not restrict or limit the Tender Offer or the Merger. AFFIRMATIVE COVENANTS: Customary for facilities of this nature, including, but not limited to, receipt of financial information; notification of litigation, investigations and other adverse changes; payment and performance of obligations; conduct of business; maintenance of existence; maintenance of property and insurance (including hazard and business interruption coverage); maintenance of records and accounts; inspection of property and books and records; compliance with laws (including environmental laws); maintenance of an up to date debt rating with both Standard & Poor's Corporation and Moody's Investors Service or, in the event one or both such entities cease to provide any such rating, such other rating agency or agencies that are reasonably acceptable to the Administrative Agent; agreement to obtain within an agreed upon number of days after the closing date interest rate protection for a portion of the Borrower's funded debt to be agreed on terms and conditions satisfactory to the Administrative Agent; payment of taxes and ERISA; provided that subject to the terms and conditions hereof, such provisions will not restrict or limit the Tender Offer or the Merger. FINANCIAL COVENANTS: Financial covenants shall include, but not be limited to, Asset Coverage Test (as defined below); Maximum Total Leverage Ratio; Minimum Fixed Charge Coverage and Maximum Capital Expenditures. Each of the foregoing financial covenants shall be defined and calculated in a manner acceptable to the Administrative Agent and shall include step-downs or step-ups, as applicable, to be determined. 11 "Asset Coverage Test" shall be calculated as the ratio of (a) the sum of cash plus gross accounts receivable and gross inventory to (b) total senior debt, at levels to be determined. NEGATIVE COVENANTS: Customary for facilities of this nature, including, but not limited to, restrictions and limitations on: indebtedness (subject to a basket for the issuance of subordinated high yield debt on market terms in an amount reasonably acceptable to the Administrative Agent); liens; guaranty obligations; changes in business; mergers; sales of assets; acquisitions; loans and investments; transactions with affiliates; sale and leaseback transactions; restrictive agreements; and changes in fiscal year or accounting method. EVENTS OF DEFAULT: Customary for facilities of this nature, including, but not limited to, failure to pay any interest, principal or fees under the Facilities when due; failure to perform any covenant or agreement; inaccurate or false representation or warranties; cross defaults (including cross-defaults to defaults under material contracts); insolvency or bankruptcy; ERISA; judgment defaults; and change in control. ASSIGNMENTS AND PARTICIPATIONS: Assignments in minimum amounts acceptable to the Administrative Agent with respect to the Facilities and shall be permitted subject to the consent of the Administrative Agent and subject (so long as no default or event of default has occurred and is continuing) to consent of the Borrower, such consents not to be unreasonably withheld or delayed. In connection with each assignment, the Administrative Agent shall receive an assignment fee of $2,500. Participations shall be permitted in minimum amounts acceptable to the Administrative Agent with respect to the Facilities. INCREASED COSTS/ CHANGE OF CIRCUMSTANCES: Provisions customary in facilities of this type protecting the Lenders in the event of unavailability of funding, illegality, capital adequacy requirements, increased costs, withholding taxes and funding losses. REQUIRED LENDERS: On any date of determination, any combination of Lenders holding at least fifty-one percent (51%) of both (a) the commitments under 12 the Revolving Credit Facility (or the aggregate outstandings thereunder if such commitments have been terminated) and (b) the aggregate outstandings under the Term Loan Facility. WAIVER OF JURY TRIAL, GOVERNING LAW: New York law to govern; waiver of jury trial, submission to jurisdiction and mandatory binding arbitration in New York, New York. COUNSEL TO THE ADMINISTRATIVE AGENT: Kennedy Covington Lobdell & Hickman, L.L.P. EXPENSES: The Borrower shall be responsible for all reasonable legal and other out-of-pocket expenses incurred by the Administrative Agent related to due diligence performed by the Administrative Agent in connection with the transaction, the syndication of the transaction, the preparation and execution of the loan documentation, and future administration of the definitive credit documentation. MISCELLANEOUS: This summary of terms and conditions does not purport to summarize all the conditions, covenants, representations, warranties and other provisions which would be contained in definitive credit documentation for the Facilities contemplated hereby. 13 EXHIBIT I Pricing Grid Revolving Credit Facility Pricing under the Revolving Credit Facility shall be determined in accordance with the pricing grid set forth below based on the ratio of Total Debt of the Borrower to Total EBITDA of the Borrower (the "Total Leverage Ratio").
Applicable LIBOR Applicable Base Commitment Level Total Leverage Ratio Rate Margin (bps) Rate Margin (bps) Fee (bps) - --------------------------------------------------------------------------------------------------- I < 2.00x 225.0 125.0 50.0 II > 2.00x but < 2.50x 250.0 150.0 50.0 III > 2.50x but < 3.00x 275.0 175.0 50.0 IV > 3.00x 300.0 200.0 50.0
Term Loan Facility Pricing under the Term Loan Facility shall be determined in accordance with the pricing grid set forth below based on the Total Leverage Ratio.
Applicable LIBOR Applicable Base Level Total Leverage Ratio Rate Margin (bps) Rate Margin (bps) - ---------------------------------------------------------------------------------- I < 2.50x 300.0 200.0 II > 2.50x 325.0 225.0
The Applicable Margins set forth above are based upon a senior debt rating for the Borrower of "BB-" or better by Standard & Poor's Corporation and "Ba3" or better by Moody's Investors 14 EX-99.D.1 14 y64755texv99wdw1.txt AGREEMENT AND PLAN OF MERGER Exhibit (d)(1) EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER by and among DRS TECHNOLOGIES, INC., PRINCE MERGER CORPORATION and PARAVANT INC. Dated as of October 23, 2002 ================================================================================ THIS COPY OF THE AGREEMENT AND PLAN OF MERGER IS BEING DELIVERED IN COMPLIANCE WITH SECTION 607.1104 OF THE FLORIDA BUSINESS CORPORATION ACT. TABLE OF CONTENTS
Page ---- ARTICLE I THE OFFER..................................................................................... 2 Section 1.1 The Offer......................................................................... 2 Section 1.2 Company Actions................................................................... 3 Section 1.3 Directors of the Company.......................................................... 5 ARTICLE II THE MERGER................................................................................... 6 Section 2.1 The Merger........................................................................ 6 Section 2.2 Effective Time; Closing........................................................... 6 Section 2.3 Effect of the Merger.............................................................. 6 Section 2.4 Articles of Incorporation and Bylaws.............................................. 6 Section 2.5 Directors and Officers............................................................ 7 Section 2.6 Conversion of Shares.............................................................. 7 Section 2.7 Exchange of Certificates.......................................................... 8 Section 2.8 Shareholders' Meeting............................................................. 10 Section 2.9 Further Action.................................................................... 11 Section 2.10 Dissenting Shares................................................................. 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 12 Section 3.1 Organization; Standing; Charter Documents; Subsidiaries........................... 12 Section 3.2 Capital Structure................................................................. 13 Section 3.3 Authority; Non-Contravention; Necessary Consents.................................. 14 Section 3.4 SEC Filings; Financial Statements................................................. 16 Section 3.5 Absence of Certain Changes or Events.............................................. 17 Section 3.6 Taxes............................................................................. 17 Section 3.7 Intellectual Property............................................................. 18 Section 3.8 Compliance; Permits............................................................... 19 Section 3.9 Litigation........................................................................ 20 Section 3.10 Brokers' and Finders' Fees........................................................ 20 Section 3.11 Transactions With Affiliates...................................................... 20 Section 3.12 Employee Benefit Plans; ERISA; Employees.......................................... 21 Section 3.13 Environmental Matters............................................................. 24 Section 3.14 Contracts......................................................................... 25 Section 3.15 Government Contracts.............................................................. 26 Section 3.16 Disclosure........................................................................ 27 Section 3.17 Fairness Opinion.................................................................. 27 Section 3.18 Takeover Statutes................................................................. 28 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................... 28 Section 4.1 Organization; Standing; Charter Documents; Subsidiaries........................... 28 Section 4.2 Authority; Non-Contravention; Necessary Consents.................................. 29 Section 4.3 Brokers' and Finders' Fees........................................................ 30 Section 4.4 Disclosure........................................................................ 30
i Section 4.5 Sufficient Funds.................................................................. 31 ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME........................................................... 31 Section 5.1 Conduct of Business by the Company................................................ 31 ARTICLE VI ADDITIONAL AGREEMENTS........................................................................ 34 Section 6.1 Acquisition Proposals............................................................. 34 Section 6.2 Confidentiality; Access to Information; No Modification of Representations, Warranties or Covenants .......................................................... 38 Section 6.3 Public Disclosure................................................................. 38 Section 6.4 Regulatory Filings; Reasonable Efforts............................................ 39 Section 6.5 Notification of Certain Matters................................................... 41 Section 6.6 Third-Party Consents.............................................................. 41 Section 6.7 Equity Awards and Employee Benefits............................................... 41 Section 6.8 Indemnification................................................................... 43 Section 6.9 Conveyance Taxes.................................................................. 44 ARTICLE VII CONDITIONS TO THE MERGER.................................................................... 44 Section 7.1 Conditions to the Obligations of Each Party to Effect the Merger.................. 44 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................... 45 Section 8.1 Termination....................................................................... 45 Section 8.2 Notice of Termination; Effect of Termination...................................... 47 Section 8.3 Fees and Expenses................................................................. 47 Section 8.4 Amendment......................................................................... 49 Section 8.5 Extension; Waiver................................................................. 49 ARTICLE IX GENERAL PROVISIONS........................................................................... 49 Section 9.1 Non-Survival of Representations and Warranties.................................... 49 Section 9.2 Notices........................................................................... 49 Section 9.3 Interpretation; Knowledge......................................................... 50 Section 9.4 Counterparts...................................................................... 51 Section 9.5 Entire Agreement; Third-Party Beneficiaries....................................... 51 Section 9.6 Severability...................................................................... 52 Section 9.7 Other Remedies; Specific Performance.............................................. 52 Section 9.8 Governing Law..................................................................... 52 Section 9.9 Rules of Construction............................................................. 52 Section 9.10 Assignment........................................................................ 52 Section 9.11 Consent to Jurisdiction; Waiver of Trial by Jury.................................. 53
ANNEX A Conditions to the Merger ii AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of October 23, 2002, by and among DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and direct wholly-owned subsidiary of Parent ("Merger Sub"), and Paravant Inc., a Florida corporation (the "Company"). RECITALS WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have deemed it advisable and in the best interests of their respective corporations and stockholders that Parent and the Company consummate the business combination and other transactions provided for herein in order to advance their respective long-term strategic business interests; WHEREAS, it is intended that the acquisition be accomplished by Merger Sub commencing a cash tender offer (as such offer may be amended from time to time, the "Offer") for all of the outstanding shares of Common Stock, par value $0.015 per share, of the Company ("Company Common Stock") upon the terms and subject to the conditions set forth in this Agreement (the shares of Company Common Stock subject to the Offer are hereinafter referred to as the "Shares") in an amount of $4.75 per Share (the "Offer Consideration") to be followed by the Merger (as defined in Section 2.1); WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved the Offer and have adopted and approved, in accordance with applicable provisions of the laws of the state of Delaware and the state of Florida ("Florida Law"), this Agreement and the transactions contemplated hereby, including the Merger; WHEREAS, the Board of Directors of the Company has resolved to recommend that the shareholders of the Company accept the Offer, tender their Shares in the Offer, approve and adopt this Agreement and approve the Merger; WHEREAS, Parent, as the sole shareholder of Merger Sub, has approved the Offer, has approved and adopted this Agreement and approved the Merger; WHEREAS, simultaneously with the execution and delivery of this Agreement, and as a condition to Parent's and Merger Sub's willingness to enter into this Agreement, certain officers and directors of the Company are entering into separate voting agreements (the "Shareholder Tender and Voting Agreements"), pursuant to which such individuals are agreeing, among other things, to tender their Shares in the Offer and to grant Parent a proxy to vote their respective shares of Company Common Stock in favor of the Merger, upon the terms and subject to the conditions set forth therein; and WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties and agreements in connection with the Offer and the Merger and also to prescribe certain conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Article I THE OFFER Section 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated and none of the events set forth in Section (a) through (i) of Annex A attached hereto and made a part hereof ("Annex A") shall have occurred and be continuing (and shall not have been waived by Merger Sub), Merger Sub shall, and Parent shall cause Merger Sub to, commence (within the meaning of Rule 14d-2 of the Exchange Act (as defined in Section 2.8(a)) the Offer as promptly as reasonably practicable after the date hereof. The obligation of Merger Sub to accept for payment and pay for the Shares tendered pursuant to the Offer shall be subject only to the satisfaction of the condition that there be validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which represents at least a majority of the then outstanding Shares on a fully-diluted basis (the "Minimum Condition") and to the satisfaction or waiver by Merger Sub of the other conditions set forth in Annex A (the Minimum Condition and the conditions set forth in Annex A collectively, the "Offer Conditions"). The Company agrees that no Shares held by the Company or any of its Subsidiaries (as defined in Section 3.1) will be tendered to Merger Sub pursuant to the Offer. Merger Sub expressly reserves the right to waive any of the Offer Conditions (other than the Minimum Condition), to increase the price per Share payable in the Offer and to make any other changes in the terms of the Offer; provided, however, that no change may be made without the prior written consent of the Company which decreases the price per Share payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer, changes the form of consideration to be paid in the Offer, imposes conditions to the Offer in addition to the conditions set forth in Annex A, waives or changes the Minimum Condition or makes other changes in the terms and conditions of the Offer that are in any manner adverse to the holders of Shares or, except as provided below, extends the Offer. Subject to the terms of the Offer and this Agreement and the satisfaction of the Minimum Condition and the satisfaction or earlier waiver of all the conditions of the Offer set forth in Annex A as of any expiration date of the Offer, Merger Sub will accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as it is permitted to do so under applicable Legal Requirements. Notwithstanding the foregoing, Merger Sub may, without the consent of the Company, (i) extend the Offer beyond the scheduled expiration date, which initially shall be twenty (20) Business Days following the date of commencement of the Offer (counting for such purposes the day the Offer is commenced as the first day of such period), if, at the scheduled expiration of the Offer, any of the Offer Conditions shall not be satisfied or, to the extent permitted by this Agreement, waived, (ii) extend the Offer for any period required by any rule, regulation or interpretation of the United States Securities and Exchange Commission (the "SEC"), the 2 staff thereof or the Nasdaq National Market ("NASDAQ") applicable to the Offer, (iii) if on the then scheduled expiration date of the Offer, there shall not have been validly tendered and not withdrawn at least 80% of the outstanding Shares on a fully-diluted basis, extend the Offer for a period not to exceed ten (10) Business Days or (iv) provide a "subsequent offering period" in accordance with Rule 14d-11 under the Exchange Act. On or prior to the dates that Merger Sub becomes obligated to accept for payment and pay for Shares pursuant to the Offer, Parent shall provide or cause to be provided to Merger Sub the funds necessary to pay for all Shares that Merger Sub becomes so obligated to accept for payment and pay for pursuant to the Offer. The Offer Price shall, subject to any required withholding of Taxes (as defined in Section 3.6), be net to the seller in cash, upon the terms and subject to the conditions of the Offer. (b) On the date of the commencement of the Offer, Merger Sub shall file with the SEC a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the "Schedule TO") with respect to the Offer. The Schedule TO shall contain or incorporate by reference an offer to purchase and forms of the related letter of transmittal and all other ancillary Offer documents (collectively, together with all amendments and supplements thereto, the "Offer Documents"). Parent and Merger Sub shall cause the Offer Documents to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. Parent and Merger Sub, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and Merger Sub will cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule TO before it is filed with the SEC. In addition, Parent and Merger Sub agree to provide the Company and its counsel with any comments, whether written or oral, that Parent or Merger Sub or either of their counsel may receive from time to time from the SEC or its staff with respect to the Schedule TO promptly after the receipt of such comments and to consult with the Company and its counsel prior to responding to any such comments (and provide the Company and its counsel with copies of any such written response and telephonic notification of any such verbal response). If the Offer is terminated or withdrawn by Merger Sub, Parent and Merger Sub shall use their respective reasonable best efforts to cause the Depositary to cause all tendered Shares to be returned to the registered holders of the Shares represented by the certificate or certificates surrendered to the Paying Agent (as defined below). Section 1.2 Company Actions. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Company's Board of Directors, by resolutions adopted by unanimous vote at a meeting of all Directors called and held and not rescinded in any way (the "Company Board Approval"), has duly (i) determined that the terms of this Agreement, the Offer and the Merger are fair to and in the best interests of the shareholders of the Company, (ii) approved and adopted this Agreement and 3 approved and adopted the transactions contemplated hereby, including the Offer and the Merger, (iii) approved the Shareholder Tender and Voting Agreement and (iv) resolved to recommend that (A) the shareholders of the Company accept the Offer, tender their Shares to Merger Sub thereunder and, if required by Legal Requirements, approve and adopt this Agreement and the Merger and (B) such matters be submitted to the Company's shareholders at the Company Shareholder Meeting. Subject to 6.1(e), the Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Company's Board of Directors described in this Section 1.2(a). (b) As promptly as practicable after the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") which shall contain the recommendation referred to in clause (iv) of Section 1.2(a) hereof (subject to Section 6.1(e)). The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of the Shares as and to the extent required by applicable federal securities laws. The Company, on the one hand, and each of Parent and Merger Sub, on the other hand, will promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company will cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Parent, Merger Sub and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and to consult with Parent, Merger Sub and their counsel prior to responding to any such comments (and provide Parent, Merger Sub and their counsel with copies of any such written response and telephonic notification of any such verbal response). (c) The Company shall promptly furnish Merger Sub with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of Shares. The Company shall furnish Merger Sub with such additional information, including updated listings and computer files of the shareholders of the Company, mailing labels and security position listings, and such other assistance as Parent, Merger Sub or their Representatives (as defined in Section 6.1(a)) may reasonably require in communicating the Offer to the record and beneficial holders of the Shares. Subject to the requirements of applicable Legal Requirements, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Merger Sub shall hold in confidence the information contained in such labels, listings and files, shall use such information solely in connection with the Offer and the Merger, and, if this Agreement is terminated or if the Offer is otherwise terminated, shall promptly destroy, or cause to be destroyed, 4 or deliver, or cause to be delivered, to the Company all copies of such information, labels, listings and files then in their possession or in the possession of their Representatives and shall certify in writing to the Company their compliance with this Section 1.2(c). Section 1.3 Directors of the Company. (a) Promptly upon the purchase of and payment for a number of Shares that satisfies the Minimum Condition by Merger Sub pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product obtained by multiplying the total number of directors on such Board (after giving effect to the directors designated by Parent pursuant to this sentence) by the percentage that the number of Shares so purchased and paid for bears to the total number of Shares then outstanding. In furtherance thereof, the Company shall, upon request of Merger Sub, promptly increase the size of its Board of Directors or exercise its reasonable best efforts to secure the resignations of such number of directors, or both, as is necessary to enable Parent's designees to be so elected or appointed to the Company's Board of Directors and, subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, shall cause Parent's designees to be so elected or appointed. At such time, the Company shall, if requested by Parent, also cause directors designated by Parent and Merger Sub to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of each Board of Directors of each Subsidiary of the Company and committee of the Company's Board of Directors. Notwithstanding the foregoing, if Parent's designees are appointed or elected to the Company's Board of Directors hereunder, until the Effective Time the Company and Parent shall use reasonable efforts to have at least two (2) members of the Company's Board of Directors who are directors on the date hereof and who are neither officers of the Company nor designees of Parent. (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under Section 1.3(a), including mailing to its shareholders together with the Schedule 14D-9 the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected to the Company's Board of Directors. Parent and Merger Sub will supply the Company any information with respect to them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this Section 1.3(b) are in addition to and shall not limit any rights that any of Merger Sub, Parent or any of their respective affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (c) Following the election or appointment of Parent's designees pursuant to Section 1.3(a) and until the Effective Time, the approval of a majority of the directors then in office who were neither designated by Parent nor employed by the Company shall be required to authorize any amendment of this Agreement or the Company Charter Documents (as defined in Section 3.1(b)), any termination of this 5 Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Merger Sub or Parent, any waiver of any of the Company's rights hereunder or any action as to which consent or agreement of the Company is required hereunder. Article II. THE MERGER Section 2.1 The Merger. At the Effective Time (as defined in Section 2.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Florida Law, Merger Sub shall be merged with and into the Company (the "Merger"), the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the "Surviving Corporation". Section 2.2 Effective Time; Closing. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing Articles of Merger with the Secretary of State of the State of Florida in accordance with the relevant provisions of Florida Law (the "Articles of Merger") (the time of such filing with the Secretary of State of the State of Florida (or such later time as may be agreed in writing by the Company and Parent and specified in the Articles of Merger) being the "Effective Time") as soon as practicable on or after the Closing Date (as defined below). The closing of the Merger (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at Four Times Square, New York, New York, at a time and date to be specified by the parties, which shall be no later than the second Business Day after the satisfaction or waiver of the conditions set forth in Article VII, or at such other time, date and location as the parties hereto agree in writing (the "Closing Date"). Section 2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Florida Law. Section 2.4 Articles of Incorporation and Bylaws. At the Effective Time, the Articles of Incorporation of the Company shall be amended and restated in its entirety to be identical to the Articles of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Florida Law and as provided in such Articles of Incorporation; provided, however, that at the Effective Time, Article I of the Articles of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: "The name of the corporation is Paravant Inc." At the Effective Time, the Bylaws of the Company shall be amended and restated in their entirety to be identical to the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Florida Law and as provided in such Bylaws. 6 Section 2.5 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall become the directors of the Surviving Corporation from and after the Effective Time, until their respective successors are duly elected or appointed and qualified. The officers of the Company immediately prior to the Effective Time shall become the officers of the Surviving Corporation from and after the Effective Time, until their respective successors are duly appointed. Section 2.6 Conversion of Shares. As of the Effective Time, by virtue of the Merger and without any action on the part of the parties or the holders of any Shares of the Company: (a) Each issued and outstanding Share (other than Shares to be canceled in accordance with Section 2.6(c)) automatically shall be converted into the right to receive the Offer Consideration (as defined in the recitals) in cash (the "Merger Consideration") payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.7, of the certificate that formerly evidenced such Share. All such Shares, when so converted, shall no longer be outstanding and automatically shall be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.7. Any payment made pursuant to this Section 2.6(a) shall be made net of applicable withholding taxes in accordance with Section 2.7(f) to the extent that such withholding is required by applicable Legal Requirements. (b) Each issued and outstanding share of common stock, par value $0.01 per share, of Merger Sub shall be converted into and become one validly-issued, fully-paid and nonassessable share of common stock of the Surviving Corporation. (c) All Shares that are owned at the Effective Time by the Company, Parent, Merger Sub or any other direct or indirect wholly-owned Subsidiary (as defined in Section 3.1(a)) of the Company, Parent or Merger Sub shall be canceled and retired and no Merger Consideration shall be delivered in exchange therefor. (d) At the Effective Time, all Company Options (as defined in Section 3.2(b)) outstanding under the Company's Incentive Stock Option Plan, as amended June 4, 1999, the Company's Stock Incentive Plan and the Non-employee Directors' Stock Plan, as amended August 30, 2001, and each other plan or Contract (as defined in Section 3.2(a)) of any nature with any Person pursuant to which any stock, option, warrant, or other right to purchase or acquire capital stock of the Company or right to payment based on the value of Company capital stock has been granted or issued, but in any case excluding the Company's Employee Stock Purchase Plan (collectively, the "Company Stock Option Plans") shall be treated as set forth in Section 6.7(a). Rights outstanding under the Company's Employee Stock Purchase Plan (the "Company Purchase Plan") shall be treated as set forth in Section 6.7(d). 7 (e) At the Effective Time, all Company Warrants (as defined in Section 3.2(d)) outstanding as of such time shall be cancelled in exchange for a single lump sum cash payment to be paid by the Surviving Company as soon as practicable following the Closing to the holder of such Company Warrant upon receipt by Parent of a release or other documentation by the holder of such Company Warrant reasonably satisfactory to Parent relinquishing any right or benefit under the terms of the Company Warrant or any obligation on the part of Parent, Merger Sub or Company after the Effective Time (the "Company Warrantholder Release") equal to the product of (i) the number of shares of Company Common Stock subject to such Company Warrant and (ii) the excess, if any, of the Merger Consideration for a share of Company Common Stock at the Effective Time over the exercise price per share of such Company Warrant. The Company shall use its reasonable best efforts to obtain the Company Warrantholder Release promptly after the date hereof and, in any event, prior to the expiration of the Offer. (f) The Merger Consideration shall be adjusted to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization, reclassification or other like change with respect to Company Common Stock having a record date on or after the date hereof and prior to the Effective Time. Section 2.7 Exchange of Certificates. (a) Prior to the Effective Time, Parent shall designate an agent reasonably acceptable to the Company to act as agent for the holders of the Shares (other than the Shares held by Parent, Merger Sub, the Company or any of their Subsidiaries) in connection with the Merger (the "Paying Agent") to receive in trust, the aggregate Merger Consideration to which holders of Shares shall become entitled pursuant to Section 2.6(a). At the Effective Time, Parent shall deposit the Merger Consideration with the Paying Agent. The Merger Consideration shall be invested by the Paying Agent as directed by Parent or the Surviving Corporation. If for any reason (including losses) the funds held by the Paying Agent are inadequate to pay the amounts to which the Shareholders shall be entitled under Section 2.6(a), Parent and the Surviving Corporation shall be liable for the payment thereof. (b) As promptly as practicable after the Effective Time, Parent and the Surviving Corporation shall cause to be mailed to each record holder, as of the Effective Time, of an outstanding certificate or certificates which immediately prior to the Effective Time represented Shares (the "Certificates" or individually, a "Certificate"), whose Shares were converted pursuant to Section 2.6(a) into the right to receive the Merger Consideration, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to a Certificate shall pass, only upon proper delivery of the Certificate to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and instructions for effecting the surrender of a Certificate in exchange for the Merger Consideration for the Shares. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as 8 may be appointed by Parent, together with such letter of transmittal duly executed and completed in accordance with the instructions thereto, and any other required documents, the holder of such Certificate shall receive promptly in exchange therefor the Merger Consideration for each Share formerly evidenced thereby, and such Certificate shall forthwith be canceled. No interest will be paid or accrued on the cash payable upon the surrender of a Certificate. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall (i) have paid any transfer and other Taxes required by reason of the payment to a Person other than the registered holder of the Certificate surrendered or (ii) have established to the satisfaction of the Surviving Corporation that such Taxes have been paid or that payment of Taxes is not applicable. Until surrendered as contemplated by this Section 2.7, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration for each Share in cash as contemplated by Section 2.6. (c) At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no transfers on the stock transfer books of the Company of the Shares which were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of Certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable Legal Requirements. If, after the Effective Time, Certificates are presented to the Paying Agent or the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration in accordance with the procedures set forth in this Article II. (d) At any time following the six (6) month anniversary of the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent, and holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (e) In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Article II, provided, that the Person to whom the Merger Consideration is paid shall, as a condition precedent to the payment thereof, give the Surviving Corporation a bond in such sum as it may direct or otherwise indemnify the Surviving Corporation in a manner satisfactory to it against any claim that 9 may be made against the Surviving Corporation with respect to the Shares represented by the Certificate claimed to have been lost, stolen or destroyed. (f) Parent, Merger Sub and the Surviving Corporation shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the Offer Price or the Merger Consideration payable to a holder of Shares pursuant to the Offer or the Merger any or all such amounts as are required to be deducted and withheld under the Code (and the regulations promulgated thereunder), and/or any applicable provision of state, local or foreign Tax law or under any other applicable Legal Requirement. To the extent that amounts are so deducted and withheld by Parent, Merger Sub, the Surviving Corporation or the Paying Agent, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares to which such consideration would otherwise have been paid. Section 2.8 Shareholders' Meeting. (a) Following the purchase of the Shares pursuant to the Offer, if required by applicable Legal Requirements in order to consummate the Merger, (i) the Company, acting through its Board of Directors, shall, in accordance with applicable Legal Requirements, duly call, give notice of, convene and hold a special meeting of its shareholders (the "Company Shareholders' Meeting") and submit this Agreement to a vote of the Company's shareholders; (ii) the Company shall prepare a preliminary proxy statement (the "Preliminary Statement") relating to the Merger and this Agreement which shall comply as to form with all applicable Legal Requirements and which shall include all information concerning the Company, Parent and Merger Sub required to be set forth therein pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the applicable rules and regulations thereunder (the "1934 Act Rules", the 1934 Act Rules together with the 1934 Act, the "Exchange Act"); (iii) the Company shall, subject to review of the Preliminary Statement by the SEC and notification (either orally or in writing) to the Company that the SEC has no further comments relating to such Preliminary Statement, distribute to the Company's shareholders a letter to shareholders, notice of meeting, proxy statement and form of proxy in connection with the Merger (collectively, including any amendments or supplements thereto, the "Proxy Statement"); (iv) the Company shall file a definitive form of the Proxy Statement, which shall reflect compliance with or resolution of the comments and requests in accordance with the Exchange Act from the SEC as the Company and Parent shall deem appropriate; (v) the Company shall distribute the definitive Proxy Statement to the Company's shareholders in accordance with applicable Legal Requirements; and 10 (vi) subject to Section 6.1(e), the Company shall take all such other reasonable action necessary or appropriate to obtain the lawful approval of this Agreement by the Company's shareholders including soliciting from holders of Shares proxies in favor of the adoption and approval of this Agreement, the Merger and the transactions contemplated hereby. (b) Parent and Merger Sub shall furnish to the Company all information concerning Parent, Merger Sub and their affiliates required by the Exchange Act or as otherwise required by the SEC to be set forth in the Proxy Statement. (c) Each of the Company and Parent shall consult and confer with the other and the other's counsel regarding the Preliminary Statement and the Proxy Statement and each shall have the opportunity to comment on the Preliminary Statement and the Proxy Statement and any amendments and supplements thereto before the Preliminary Statement and the Proxy Statement, and any amendments or supplements thereto, are filed with the SEC or mailed to the Company's shareholders. Each of the Company and Parent will provide to the other copies of all correspondence between it (or its advisors) and the SEC relating to the Preliminary Statement and the Proxy Statement. (d) Parent will vote, or cause to be voted, all Shares acquired by Parent, Merger Sub or any other Subsidiary of Parent in favor of the Merger and the approval of this Agreement. (e) Notwithstanding the provisions of Sections 2.8 (a) and (b), in the event that Parent, Merger Sub and any other Subsidiaries of Parent shall acquire in the aggregate at least 80% of the outstanding shares of each class of capital stock of the Company pursuant to the Offer or otherwise, the parties hereto shall, subject to Article VII hereof, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders, in accordance with Sections 607.0704 and 607.1104 of Florida Law. Section 2.9 Further Action. At and after the Effective Time, the officers and directors of Parent and the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company and Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company and Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. Section 2.10 Dissenting Shares. Pursuant to Section 607.1302(4) of Florida Law, no shareholder of the Company shall be entitled to exercise dissenters' rights under Sections 607.1301-607.1302 and 607.1320 of Florida Law as a result of the transactions contemplated by this Agreement, including the Merger. 11 Article III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Merger Sub, subject to the exceptions specifically disclosed in writing in the disclosure letter supplied by the Company to Parent, dated as of the date hereof, and certified by a duly authorized officer of the Company (the "Company Disclosure Letter") (it being agreed that disclosure of any item under a Section of this Article III in the Company Disclosure Letter shall be deemed disclosure with respect to other Sections of this Article III if the applicability of such item to any other Section is reasonably apparent from the face of the Company Disclosure Letter), and except as disclosed in the Company SEC Reports (to the extent that a disclosure is reasonably apparent from the face of an item in the Company SEC Report), as follows: Section 3.1 Organization; Standing; Charter Documents; Subsidiaries. (a) Organization; Standing. The Company and each of its Subsidiaries (as defined below) is a corporation or other organization duly organized, validly existing and in good standing or with active status under the laws of the jurisdiction of its incorporation or organization, has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or with active status would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined in Section 9.3(c)) on the Company, and is duly qualified and in good standing or with active status to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary other than in such jurisdictions where the failure to so qualify or to be good standing or with active status would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. For purposes of this Agreement, "Subsidiary", when used with respect to any party, shall mean any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. (b) Charter Documents. The Company has delivered or made available to Parent: (i) a true and correct copy of the articles of incorporation (including any certificate of designations) and bylaws of the Company, each as amended to date (collectively, the "Company Charter Documents") and (ii) the articles of incorporation and bylaws, or like organizational documents, of each of its Subsidiaries, each as amended to date (collectively, "Subsidiary Charter Documents"), and each such instrument is in full force and effect. The Company is not in violation of any of the 12 provisions of the Company Charter Documents and each Subsidiary is not in violation of its respective Subsidiary Charter Documents. (c) Subsidiaries. Section 3.1(c) of the Company Disclosure Letter sets forth a list of all the Subsidiaries of the Company. All the outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company, free and clear of all pledges, claims, liens, charges, encumbrances, options and security interests of any kind or nature whatsoever (collectively, "Liens"), including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests, except for restrictions imposed by applicable securities laws. Section 3.2 Capital Structure. (a) Capital Stock. The authorized capital stock of the Company consists of: (i) 30,000,000 shares of Company Common Stock and (ii) 2,000,000 shares of preferred stock, par value $10.00 per share (the "Company Preferred Stock"). As of the date hereof: (i) 17,354,040 shares of Company Common Stock are issued and outstanding and (ii) no shares of the Company Preferred Stock are issued and outstanding. All of the outstanding shares of capital stock of the Company are, and all shares of capital stock of the Company which may be issued as contemplated or permitted by this Agreement will be when issued, duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights. (b) Stock Options. As of the date hereof, 3,808,682 shares of Company Common Stock are subject to issuance pursuant to outstanding options to purchase Company Common Stock under the Company Stock Option Plans (equity or other equity-based awards, whether payable in cash, shares or otherwise granted under or pursuant to the Company Stock Option Plans are referred to in this Agreement as "Company Options"). Section 3.2(b) of the Company Disclosure Letter sets forth a list, as of the date hereof, of each outstanding Company Stock Option and (a) the name and location of the holder of such Company Option, (b) the number and type of shares of Company Common Stock subject to such Company Option, (c) the exercise price of such Company Option, (4) the date on which such Company Option was granted, (d) the applicable vesting schedule, and the extent to which such Company Option is vested and exercisable, and (e) the date on which such Company Option expires. All shares of Company Common Stock subject to issuance under the Company Stock Option Plans, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and nonassessable. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Option as a result of the Merger (whether alone or upon the occurrence of any additional or subsequent events). There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company. No more than 24,250 shares of Company Common Stock will be issued under the Company Employee Stock Purchase Plan with respect to the offering period terminated as of the date hereof pursuant to Section 6.7(d). 13 (c) Voting Debt. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which shareholders of the Company may vote ("Voting Debt") is issued or outstanding as of the date hereof. (d) Other Securities. As of the date hereof, 165,000 shares of Company Common Stock are subject to issuance pursuant to outstanding warrants (the "Company Warrants"). Except as otherwise set forth in this Section 3.2, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, Voting Debt or other voting securities of the Company or any of its Subsidiaries, or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. All outstanding shares of Company Common Stock, all outstanding Company Options, and all outstanding shares of capital stock of each Subsidiary of the Company have been issued and granted in compliance in all material respects with (i) all applicable securities laws and all other applicable Legal Requirements (as defined below) and (ii) all requirements set forth in applicable material Contracts. For purposes of this Agreement, "Legal Requirements" shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity. Section 3.3 Authority; Non-Contravention; Necessary Consents. (a) Authority. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the Offer and the Merger, have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consummate the Offer and the Merger and the other transactions contemplated hereby, subject only to the approval and adoption of this Agreement and the approval of the Merger by the Company's shareholders and the filing of the Articles of Merger pursuant to Florida Law. The affirmative vote of the holders of record of not less than a majority of all votes entitled to be cast by the holders of the outstanding shares of Company Common Stock to approve and adopt this Agreement and approve the Merger is the only vote of the holders of any class or series of Company capital stock necessary to approve and adopt this Agreement, approve the Merger and consummate the Merger and the other transactions contemplated hereby (the "Company Shareholders' Approval"). This Agreement has been duly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws 14 of general applicability relating to or affecting creditors' rights and to general equity principles. (b) Non-Contravention. The execution and delivery of this Agreement by the Company does not, and performance of this Agreement by the Company will not: (i) conflict with or violate the Company Charter Documents or any Subsidiary Charter Documents, (ii) subject to obtaining the Company Shareholders' Approval and compliance with the requirements set forth in Section 3.3(c), conflict with or violate any Legal Requirement applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a material default) under, or impair the Company's rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the material properties or assets of the Company or any of its Subsidiaries pursuant to, any Company Material Contract (as defined in Section 3.14 except in the case of clauses (ii) and (iii) above, for any conflict, violation, breach, violation, impairment, alteration, termination, amendment, acceleration, cancellation or creation that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Section 3.3(b) of the Company Disclosure Letter lists all consents, waivers and approvals under any of the Company's or any of its Subsidiaries' Contracts required to be obtained in connection with the consummation of the transactions contemplated hereby, except those the failure of which to be obtained would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. (c) Necessary Consents. No consent, approval, order or authorization of, or registration, declaration or filing with any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority or instrumentality, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority (a "Governmental Entity") is required to be obtained or made by the Company in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Articles of Merger with the Secretary of State of the State of Florida and appropriate documents with the relevant authorities of other states in which the Company and/or Parent are qualified to do business, (ii) the filing of (A) the Proxy Statement with the SEC in accordance with Exchange Act, if approval of the Company's shareholders is required by Florida Law and (B) the filing of the Schedule TO and (C) the filing of the Schedule 14D-9, (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal, foreign and state securities (or related) laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv) the consents listed on Section 3.3(c) of the Company Disclosure Letter, (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities or "blue sky" laws and the securities laws of any foreign country and (vi) such other consents, authorizations, filings, approvals and 15 registrations which if not obtained or made would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or Parent or materially adversely affect the ability of the parties hereto to consummate the Merger within the time frame in which the Merger would otherwise be consummated in the absence of the need for such consent, approval, order, authorization, registration, declaration or filings. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) through (v) are referred to herein as the "Necessary Consents". Section 3.4 SEC Filings; Financial Statements. (a) SEC Filings. The Company has filed all required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be filed by it with the SEC since January 1, 1998. The Company has delivered or made available to Parent all such registration statements, prospectuses, reports, schedules, forms, statements and other documents in the form filed with the SEC to the extent such documents are not available on the SEC's Electronic Data, Gathering, Analysis and Retrieval system ("EDGAR"). All such required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including those that the Company may file subsequent to the date hereof), as amended, are referred to herein as the "Company SEC Reports". As of their respective dates, the Company SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected prior to the date hereof by a subsequently filed Company SEC Report. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the "Company Financials"), including each Company SEC Report filed after the date hereof until the Closing: (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) was prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of the Company's operations and cash flows for the periods indicated. The balance sheet of the Company contained in the Company SEC Reports as of June 30, 2002 is hereinafter referred to as the "Company Balance Sheet". Except as disclosed in the Company Financials, since the date of the Company Balance Sheet, 16 neither the Company nor any of its Subsidiaries has incurred any liabilities required under GAAP to be set forth on a consolidated balance sheet (absolute, accrued, contingent or otherwise) which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. Section 3.5 Absence of Certain Changes or Events. Since the date of the Company Balance Sheet, the Company and each of its Subsidiaries have conducted their businesses in the ordinary course consistent with past practice and, since such date, there has not been (a) an event or development which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company or (b) any event or development which, individually or in the aggregate, would reasonably be expected to prevent or materially delay the performance of this Agreement by the Company. Section 3.6 Taxes. For the purposes of this Agreement, the term "Tax" or, collectively, "Taxes", shall mean any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, and any obligations with respect to such amounts arising as a result of being a member of an affiliated, consolidated, combined or unitary group for any period or under any agreements or arrangements with any other Person and including any liability for taxes of a predecessor entity. The Company and each of its Subsidiaries, and any consolidated, combined, unitary or aggregate group for Tax purposes of which the Company or any of its Subsidiaries is or has been a member, (i) have filed all material federal, state, local and foreign returns, estimates, information statements and reports relating to Taxes ("Tax Returns") required to be filed by any of them in the manner prescribed by law, which Tax Returns are true, complete and correct and have been prepared in accordance with applicable laws, except to the extent any failures to file or failures to be true, correct, or accurate would not, individually or in the aggregate, have a Material Adverse Effect on the Company, (ii) have timely paid all Taxes required to be paid by them and have provided adequate reserves in their financial statements according to GAAP for any Taxes for taxable periods (or portions thereof) ending on or prior to the Closing Date that have not been paid, whether or not shown as being due on any Tax Returns, except to the extent that any failures to pay or reserve would not, individually or in the aggregate, have a Material Adverse Effect on the Company and (iii) have complied in all respects with all rules and regulations relating to the withholding of Taxes, except for failures to comply that would not, individually or in the aggregate, have a Material Adverse Effect on the Company. No claim for unpaid Taxes has become a lien or encumbrance of any kind against the assets of the Company or any of its Subsidiaries except for statutory liens for Taxes not yet due and payable. There are no pending or threatened audits, examinations, investigations, deficiencies, claims or other proceedings (whether judicial or administrative) in respect of Taxes relating to the Company or any of its Subsidiaries. No written waiver of any statute of limitations relating to the Company or to any of its Subsidiaries has been given and is in effect. Neither the Company nor any of its Subsidiaries has ever filed any consent 17 agreement under Section 341(f) of the Code. No jurisdiction where the Company or any of its Subsidiaries does not file a Tax Return has made a claim (or provided notice) that the Company or any of its Subsidiaries as the case may be, is required to file a Tax Return for such jurisdiction. Neither the Company nor any of its Subsidiaries is a party to any tax sharing agreement or tax indemnity agreement under which it could be liable for Taxes payable to a Governmental Entity or payments with respect to Taxes payable to a third party. Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any person other than the Company or one of its Subsidiaries (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) or (ii) as a transferee or successor. Neither the Company nor any of its Subsidiaries has been either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder) with the Merger. Section 3.7 Intellectual Property. (a) As used herein, the term "Intellectual Property" means all trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, together with goodwill, registrations and applications relating to the foregoing; patents, copyrights (including registrations and applications for any of the foregoing) and the content and information contained on any Web site; computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all data and collections of data, all documentation, including user manuals and training materials, related to any of the foregoing (collectively, "Software"); confidential information, technology, know-how, inventions, processes, formulae, algorithms, models and methodologies (such confidential items, collectively "Trade Secrets") held for use or used in the business of the Company or its Subsidiaries as conducted as of the Closing Date and any licenses to use any of the foregoing. (b) Except as would not have a Material Adverse Effect on the Company: (i) the Company or its Subsidiaries own or have the right to use all Intellectual Property, free and clear of all liens or other encumbrances; (ii) any Intellectual Property owned or used by the Company or its Subsidiaries has been duly maintained, is valid and subsisting, in full force and effect and have been properly maintained or where necessary renewed; (iii) the Company and its Subsidiaries have not received written notice from any third party regarding any actual or potential infringement or misappropriation by the Company or its Subsidiaries of any intellectual property of such 18 third party, and the Company has no Knowledge of any basis for such a claim against the Company or its Subsidiaries; (iv) the Company and its Subsidiaries have not received written notice from any third party regarding any assertion or claim challenging the validity of any Intellectual Property owned or used by the Company or its Subsidiaries and the Company has no Knowledge of any basis for such a claim; (v) no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned by the Company or its Subsidiaries; (vi) the agreements granting or obtaining any right to use or practice any rights under any Intellectual Property, to which the Company or its Subsidiaries are a party or otherwise bound, as licensee or licensor thereunder, including, without limitation, license agreements, settlement agreements and covenants not to sue (collectively, the "License Agreements") are valid and binding obligations of the Company or its Subsidiaries, enforceable in accordance with their terms, and there exists no event or condition which will result in a violation or breach of, or constitute a default by the Company or its Subsidiaries or, to the Knowledge of the Company, the other party thereto, under any such License Agreement; (vii) the Company and its Subsidiaries take reasonable measures to protect the confidentiality of Trade Secrets. To the Knowledge of the Company, no Trade Secret of the Company or its Subsidiaries has been disclosed or authorized to be disclosed to any third party other than pursuant to a written nondisclosure agreement that adequately protects the Company and its applicable Subsidiaries' proprietary interests in and to such Trade Secrets; (viii) the consummation of the transactions contemplated hereby will not result in the loss or impairment of the Company or its Subsidiaries rights to own, use, or to bring any action for the infringement of, any Intellectual Property, nor will such consummation require the consent of any third party in respect of any Intellectual Property; and (ix) to the Knowledge of the Company, the consummation of the transactions contemplated by this Agreement will not result in: (A) the granting by Company or its Subsidiaries of any rights or licenses to any Intellectual Property of Company or its Subsidiaries, to any third party (including a covenant not to sue with respect to any Intellectual Property of Company or its Subsidiaries); or (B) Parent or any of its Subsidiaries (other than the Company) being bound by any material non-compete or other material restriction on the operation of any business of the Parent or its Subsidiaries. Section 3.8 Compliance; Permits. (a) Compliance. Except with respect to Taxes and Environmental Laws (which are the subject of Sections 3.6 and 3.13, respectively), neither the Company nor any of its Subsidiaries is in conflict with, or in default or in 19 violation of any Legal Requirement applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective businesses or properties is, or the Company believes is reasonably likely to be, bound or affected, except, in each case, or in the aggregate, for conflicts, violations and defaults that would not have a Material Adverse Effect on the Company. As of the date hereof, no material investigation or review by any Governmental Entity is pending or, to the Knowledge of the Company, has been threatened in a writing delivered to the Company or any of its Subsidiaries, against the Company or any of its Subsidiaries. There is no material judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries which has or would reasonably be expected to have the effect of prohibiting or materially impairing any material business practice of the Company or any of its Subsidiaries, any acquisition of material property by the Company or any of its Subsidiaries or the conduct of business by the Company and its Subsidiaries as currently conducted. (b) Permits. The Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals from Governmental Entities ("Permits") that are required for the operation of the business of the Company, as currently conducted, the failure to hold which would reasonably be expected to have a Material Adverse Effect on the Company (collectively, the "Company Permits"). As of the date hereof, no suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company, threatened. The Company and its Subsidiaries are in compliance in all material respects with the terms of the Company Permits. Section 3.9 Litigation. As of the date hereof, there are no claims, suits, actions or proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated hereby or which would reasonably be expected, either singularly or in the aggregate with all such claims, actions or proceedings, to have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is subject to any outstanding and unsatisfied judgment, writ, order, decree or arbitration ruling, award or finding. Section 3.10 Brokers' and Finders' Fees. Except for fees payable to Wachovia Securities, Inc. pursuant to an engagement letter dated October 19, 1999, a copy of which has been provided to Parent, the Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. Section 3.11 Transactions With Affiliates. Except as set forth in the Company SEC Reports, since the date of the Company's last proxy statement filed with the SEC, no event has occurred as of the date hereof that would be required to be reported by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC. 20 Section 3.12 Employee Benefit Plans; ERISA; Employees. (a) Section 3.12(a) of the Company Disclosure Letter contains a true and complete list of each employment, bonus, deferred compensation, incentive compensation, stock purchase, stock option, stock appreciation right or other stock-based incentive, severance, change-in-control, or termination pay, hospitalization or other medical, disability, life or other insurance, supplemental unemployment benefits, profit-sharing, pension, or retirement plan, program, agreement or arrangement and each other employee benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to or required to be contributed to by the Company or any of its Subsidiaries, or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with the Company or any of its Subsidiaries would be deemed a "single employer" within the meaning of Section 4001(b)(1) of ERISA, for the benefit of any current or former employee or director of the Company, or any of its Subsidiaries or any ERISA Affiliate, whether formal or informal and whether legally binding or not (the "Plans"). Section 3.12(a) of the Company Disclosure Letter identifies each of the Plans that is an "employee welfare benefit plan," or "employee pension benefit plan" as such terms are defined in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred to collectively as the "ERISA Plans"). None of the Company, any of its Subsidiaries nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Plan or modify or change any existing Plan that would affect any current or former employee or director of the Company, any of its Subsidiaries or any ERISA Affiliate. (b) With respect to each of the Plans, the Company has heretofore delivered to the Parent true and complete copies of each of the following documents, as applicable: (i) a copy of the Plan (including all amendments thereto) for each written Plan or a written description of any Plan that is not otherwise in writing; (ii) a copy of the annual report or Internal Revenue Service Form 5500 Series, if required under ERISA, with respect to each ERISA Plan for the last three Plan years ending prior to the date of this Agreement for which such a report was filed; (iii) a copy of the actuarial report, if required under ERISA, with respect to each ERISA Plan for the last three Plan years ending prior to the date of this Agreement; (iv) a copy of the most recent Summary Plan Description, together with all Summary of Material Modifications issued with respect to such Summary Plan Description, if required under ERISA, with respect to each ERISA Plan, and all other material employee communications relating to each ERISA Plan; (v) if the Plan is funded through a trust or any other 21 funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto) and the latest financial statements thereof, if any; (vi) all contracts relating to the Plans with respect to which the Company, any of its Subsidiaries or any ERISA Affiliate may have any liability, including insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; and (vii) the most recent determination letter received from the IRS with respect to each Plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). ---- (c) No liability under Title IV of ERISA has been incurred by the Company, any of its Subsidiaries or any ERISA Affiliate since the Effective Date of ERISA that has not been satisfied in full, and no condition exists that presents a material risk to the Company, or any of its Subsidiaries or any ERISA Affiliate of incurring any liability under such Title, other than liability for premiums due to the Pension Benefit Guaranty Corporation ("PBGC"), which payments have been or will be made when due. (d) No Plan is subject to Title IV of ERISA. (e) None of the Company, any of its Subsidiaries, any ERISA Affiliate, any of the ERISA Plans, any trust created thereunder, nor to the Company's Knowledge, any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action in connection with which the Company, any of its Subsidiaries or any ERISA Affiliate could be subject to any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the Code. (f) All contributions and premiums required to be paid under the terms of each of the ERISA Plans have, to the extent due, been paid in full or properly recorded on the financial statements or records of the Company or its Subsidiaries. (g) No Plan is a "multi-employer pension plan," as such term is defined in Section 3(37) of ERISA. (h) Each of the Plans has been operated and administered in all material respects in accordance with applicable Legal Requirements, including but not limited to ERISA and the Code. (i) Each of the ERISA Plans that is intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified. The Company has applied for and received a currently effective determination letter from the IRS stating that it is so qualified, and, to the Knowledge of the Company, no event has occurred which would affect such qualified status. 22 (j) Any fund established under an ERISA Plan that is intended to satisfy the requirements of Section 501(c)(9) of the Code has so satisfied such requirements. (k) No amounts payable under any of the Plans or any other contract, agreement or arrangement with respect to which the Company or any of its Subsidiaries may have any liability could fail to be deductible for federal income tax purposes by virtue of Section 162(m) or Section 280G of the Code. (l) No Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of the Company, its Subsidiaries or any ERISA Affiliate after retirement or other termination of service (other than (i) coverage mandated by applicable laws, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii) benefits, the full direct cost of which is borne by the current or former employee (or beneficiary thereof)). (m) The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with any other event, (i) entitle any current or former employee, officer, director or consultant of the Company, any of its Subsidiaries or any ERISA Affiliate to severance pay, unemployment compensation or any other similar termination payment, or (ii) accelerate the time of payment or vesting, or increase the amount of, or otherwise enhance, any benefit due to any such employee, officer, director or consultant. No agreement, arrangement or understanding has been entered into by or on behalf of the Company or any of its Subsidiaries, on the one hand, and any current or former employee, officer, director or consultant of the Company or any of its Subsidiaries in contemplation of the negotiation or execution of this Agreement or the consummation of the transactions contemplated hereby or any other transaction involving a direct or indirect sale of control of the Company, in each case that would entitle any such current or former employee, officer, director or consultant of the Company or any of its Subsidiaries to any payment or compensation (in the form of a severance payment, non-compete payment, change in control bonus, stay bonus, unemployment benefit or otherwise) as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby. (n) There are no pending or, to the Company's Knowledge, threatened or anticipated claims by or on behalf of any Plan, by any employee or beneficiary under any such Plan or otherwise involving any such Plan (other than routine claims for benefits). (o) No employee of the Company is covered by a collective bargaining agreement and no collective bargaining agreement is being negotiated by the Company or any of its Subsidiaries. As of the date of this Agreement, there is no material labor dispute, strike or work stoppage against the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened which may interfere with the respective business activities of the Company or any of its Subsidiaries. As of the date of this Agreement, none of the Company, any of its Subsidiaries or any of 23 their respective representatives or employees has committed any material unfair labor practice in connection with the operation of the respective businesses of the Company or any of its Subsidiaries, and there is no material charge or complaint against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable governmental agency pending or threatened in writing. Section 3.13 Environmental Matters. (a) The Company is in compliance with all applicable Environmental Laws, holds all permits and authorizations required under such laws ("Environmental Permits") and complies with their terms and conditions, except where the failure to be in compliance or hold such Environmental Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has not received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company is not in such compliance. No proceeding is pending, or to the Company's Knowledge threatened, to revoke, suspend, fail to renew, or materially change the terms of any Environmental Permit held by the Company. (b) There is no Environmental Claim pending or, to the Company's Knowledge, threatened against the Company or, to the Company's Knowledge, against any Person whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law. (c) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the presence, release, emission, discharge or disposal of any Hazardous Material at any property currently or formerly owned or operated by the Company or at any other location as a result of the Company's operations, that could form the basis of any Environmental Claim against the Company or, to the Company's Knowledge, against any Person whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law, except as would not have a Material Adverse Effect on the Company. (d) The Company has made available to Parent copies of all material investigations, audits, reports, and test results in its possession concerning the Company's compliance with or liability pursuant to applicable Environmental Laws or the presence of Hazardous Material at any property currently or formerly owned or operated by the Company. (e) For purposes of this Agreement, "Environmental Claim" shall mean, with respect to any Person, any written notice by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (i) the presence, or release into the environment of any Hazardous Material at any location, whether or not owned or operated by such Person or (ii) circumstances forming the basis 24 of any violation, or alleged violation, of any Environmental Law; "Environmental Laws" shall mean all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials; and "Hazardous Materials" shall mean any substance that has been designated pursuant to Environmental Law as radioactive, toxic, hazardous or otherwise a danger to human health or the environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all substances designated as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the Resource Conservation and Recovery Act. Section 3.14 Contracts. (a) Material Contracts. For purposes of this Agreement, "Company Material Contract" shall mean: (i) any "material contracts" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to the Company and its Subsidiaries; (ii) any Contract containing any covenant: (A) limiting the right of the Company or its Subsidiaries to engage in any material line of business, make use of any material Intellectual Property (via License Agreement or otherwise) or compete with any Person in any material line of business, (B) granting any exclusive distribution or supply rights, or (C) otherwise having an adverse effect on the right of the Company and its Subsidiaries to sell, distribute or manufacture any material products or services or to purchase or otherwise obtain any material software, components, parts or subassemblies; and (iii) any Contract, or group of Contracts with a Person (or group of affiliated Persons), the termination or breach of which would be reasonably expected to have a Material Adverse Effect on the Company. For purposes of this Agreement, "Contract" shall mean any written, oral or other agreement, contract, subcontract, settlement agreement, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, as in effect as of the date hereof or as may hereinafter be in effect. (b) Schedule. Section 3.14(b) of the Company Disclosure Letter sets forth a list of all the Company Material Contracts to which the Company or one of its Subsidiaries is a party or is bound by as of the date hereof which are described in Sections 3.14(a)(i) through 3.14(a)(iii) hereof. 25 (c) No Breach. All the Company Material Contracts are valid and in full force and effect except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Company Material Contract, except in each case for those violations and defaults which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Section 3.15 Government Contracts. (a) With respect to each Government Contract to which the Company or any of its Subsidiaries is a party or Bid: (i) the Company or its Subsidiary that is a party to such Government Contract (as defined in Section 3.15(d)) or Bid (as defined in Section 3.15(d)) has complied with all material terms and conditions and all applicable requirements of statute, rule, regulation, order or agreement, whether incorporated expressly, by reference or by operation of law; (ii) all representations and certifications were current, accurate and complete in all material respects when made, and the Company has complied with all such representations and certifications; (iii) no allegation has been made, either orally or in writing, that the Company or its Subsidiary that is a party to such Government Contract or Bid is in breach or violation of any statutory, regulatory or contractual requirement; (iv) no termination for convenience, termination for default, cure notice or show cause notice has been issued and received by the Company; (v) no cost incurred by the Company or one of its Subsidiaries or one of their respective subcontractors has been questioned or disallowed; and (vi) no money due to the Company or one of its Subsidiaries has been (or has threatened to be) withheld or set off. (b) Neither the Company, any of its Subsidiaries or any of their current or, to the Company's Knowledge former employees is (or for the last three years has been) (i) under administrative, civil or criminal investigation, indictment or information, audit or internal investigation with respect to any alleged irregularity, misstatement or omission regarding a Government Contract or Bid, or (ii) suspended or debarred from doing business with the U.S. Government or any state or local government or declared nonresponsible or ineligible for government contracting. Neither the Company nor any of its Subsidiaries has made a voluntary disclosure to any U.S. Government, state or local government entity with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid. The Company does not have Knowledge of any circumstances that would warrant the institution of suspension or debarment proceedings or the finding of nonresponsibility or ineligibility on the part of the Company or one of its Subsidiaries or any of the current employees in the future. (c) Neither the U.S. Government, any state or local government nor any prime contractor, subcontractor or vendor has asserted any claim or initiated any 26 dispute proceeding against the Company or any of its Subsidiaries or one of their current employees, nor has the Company or one of its Subsidiaries asserted any claim or initiated any dispute proceeding, directly or indirectly, against any such party, concerning any Government Contract or Bid. The Company has no Knowledge of any facts upon which such a claim or dispute proceeding may be based. (d) For purposes of this Section 3.15, the following terms shall have the meanings set forth below: (i) "Bid" means any quotation, bid or proposal by the Company or any of its Subsidiaries which, if accepted or awarded, would lead to a contract with the U.S. Government or any other entity, including a prime contractor or a higher tier subcontractor to the U.S. Government, for the design, manufacture or sale of products or the provision of services by the Company or one of its Subsidiaries. (ii) "Government Contract" means any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, letter contract, purchase order, delivery order, Bid, change order, arrangement or other commitment of any kind relating to the business of the Company or one of its Subsidiaries between the Company or one of its Subsidiaries and (i) the U.S. Government, (ii) any prime contractor to the U.S. Government or (iii) any subcontractor with respect to any contract described in clause (i) or (ii). (iii) "U.S. Government" means the United States government including any and all agencies, commissions, branches, instrumentalities and departments thereof. Section 3.16 Disclosure. Neither the Proxy Statement, the Schedule 14D-9 nor any information supplied by the Company for inclusion in the Offer Documents will, at the respective times the Proxy Statement, the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to the Company's shareholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement and the Schedule 14D-9, will, when filed by the Company with the SEC, comply as to form in all material respects with the applicable provisions of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to information supplied by or on behalf of Parent or Merger Sub which is contained in any of the foregoing documents, or which Parent or Acquisition failed to supply. Section 3.17 Fairness Opinion. The Company's Board of Directors has received a written opinion from Wachovia Securities, Inc. ("Wachovia"), dated as of October 21, 2002, to the effect that, as of such date, the cash consideration to be received by the Company's shareholders in the Offer and the Merger is fair from a financial point of view to such shareholders, and has delivered to Parent a copy of such opinion. The 27 Company has been authorized by Wachovia to permit the inclusion of such opinion in its entirety in the Offer Documents, the Schedule 14D-9 and the Proxy Statement. Section 3.18 Takeover Statutes. The Board of Directors of the Company has taken all actions so that the restrictions contained in Sections 607.0901 and 607.0902 of the Florida Law applicable to Parent, and any other similar Legal Requirement, will not apply to Parent during the pendency of this Agreement, including the execution, delivery or performance of this Agreement and the consummation of the Offer and the Merger and the other transactions contemplated hereby. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Parent and Merger Sub represent and warrant to the Company, subject to the exceptions specifically disclosed in writing in the disclosure letter supplied by Parent and Merger Sub to the Company, dated as of the date hereof, and certified by a duly authorized officer of each of Parent and Merger Sub (the "Parent Disclosure Letter") (it being agreed that disclosure of any item under a Section of this Article IV in the Parent Disclosure Letter shall be deemed disclosure with respect to other Sections of this Article IV if the applicability of such item to any other Section is reasonably apparent from the face of the Parent Disclosure Letter), and except as disclosed in the Parent SEC Reports (to the extent that a disclosure is reasonably apparent from the face of an item in the Parent SEC Report), as follows: Section 4.1 Organization; Standing; Charter Documents; Subsidiaries. (a) Organization; Standing and Power. Parent and each of its Subsidiaries is a corporation or other organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing would not reasonably be expected to have a Material Adverse Effect on Parent, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary other than in such jurisdictions where the failure to so qualify or to be good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent. (b) Charter Documents. Parent has delivered or made available to the Company (i) a true and correct copy of the Certificate of Incorporation (including any Certificate of Designations) and Bylaws of Parent, each as amended to date (collectively, the "Parent Charter Documents") and (ii) the Subsidiary Charter Documents of each of its Subsidiaries, and each such instrument is in full force and effect. Parent is 28 not in violation of any of the provisions of the Parent Charter Documents and each Subsidiary is not in violation of its respective Subsidiary Charter Documents. (c) Subsidiaries. Section 4.1(c) of the Parent Disclosure Letter sets forth a list of all the Subsidiaries of Parent. All the outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by Parent, free and clear of all Liens, including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests, except for restrictions imposed by applicable securities laws, except in the case of a Subsidiary, as would not reasonably be expected to have a Material Adverse Effect on Parent or a Material Adverse Effect on such Subsidiary. Except as contemplated by this Agreement, Merger Sub does not hold, nor has it held, any material assets or incurred any material liabilities nor has Merger Sub carried on any business activities other than in connection with the Merger and the transactions contemplated by this Agreement. Section 4.2 Authority; Non-Contravention; Necessary Consents. (a) Authority. Each of Parent and Merger Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Offer or the Merger and the other transactions contemplated hereby, subject to the filing of the Articles of Merger pursuant to Florida Law. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due execution and delivery by the Company, constitutes the valid and binding obligation of Parent, enforceable against Parent and Merger Sub in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (b) Non-Contravention. The execution and delivery of this Agreement by Parent and Merger Sub does not, and performance of this Agreement by Parent will not: (i) conflict with or violate the Parent Charter Documents, the Articles of Incorporation or Bylaws of Merger Sub or any other Subsidiary Charter Documents of any Subsidiary of Parent, (ii) conflict with or violate any material Legal Requirement applicable to Parent, Merger Sub or any of Parent's other Subsidiaries or by which Parent, Merger Sub or any of Parent's other Subsidiaries or any of their respective properties is bound or affected or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give rise to any rights of termination, amendment, acceleration under or cancellation of, Parent's Credit Agreement (assuming the receipt of an appropriate amendment to Parent's Credit Agreement or the receipt of an appropriate consent from the lenders under Parent's Credit Agreement to permit Parent to draw down funds under Parent's Credit Agreement to pay for the Shares that Merger Sub becomes obligated to accept for payment and pay for 29 pursuant to the Offer and to pay the aggregate Merger Consideration pursuant to the Merger), except, in the case of clauses (ii) and (iii) above, for any conflict, violation, breach, violation, impairment, alteration, termination, amendment, acceleration, cancellation or creation that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent. For purposes of this Agreement, "Parent's Credit Agreement" shall mean the Credit Agreement, dated as of September 28, 2001, by and among Parent, as borrower, the lenders who are or may become a party to such Credit Agreement, as lenders, First Union National Bank, a national banking association, as administrative agent for the lenders, TD Securities (USA) Inc., as syndication agent and Mellon Bank, N.A., as documentation agent. (c) Necessary Consents. No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by Parent in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for (i) the Necessary Consents and (ii) such other consents, authorizations, filings, approvals and registrations which if not obtained or made would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, Merger Sub or the Company or materially adversely affect the ability of the parties hereto to consummate the Merger within the time frame in which the Merger would otherwise be consummated in the absence of the need for such consent, approval, order, authorization, registration, declaration or filings. Section 4.3 Brokers' and Finders' Fees. Except for fees payable to Bear Stearns Inc., Parent has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. Section 4.4 Disclosure. None of the information supplied by Parent or Merger Sub for inclusion in the Preliminary Statement, the Proxy Statement or the Schedule 14D-9 will, at the date mailed to the Company's shareholders and at the time of the Company Shareholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Preliminary Statement and the Proxy Statement or necessary in order to make the statements in the Preliminary Statement and the Proxy Statement, in light of the circumstances under which they are made, not misleading. The Schedule TO, the Offer Documents and any information supplied by Parent or Merger Sub for inclusion in the Schedule 14D-9 will not, at the respective times the Schedule TO, the Offer Documents, the Schedule 14D-9 or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to the Company's shareholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Schedule TO will, when filed by Parent with the SEC, comply as to form in all material aspects with the applicable provisions of the Exchange Act. Notwithstanding the foregoing, Parent makes no representation or warranty with respect to information supplied by or on behalf of the Company, which is contained in any of the foregoing documents, or which the Company failed to supply. 30 Section 4.5 Sufficient Funds. Parent and Merger Sub will have sufficient cash available to pay for the Shares that Merger Sub becomes obligated to accept for payment and pay for pursuant to the Offer and to pay the aggregate Merger Consideration pursuant to the Merger. ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME Section 5.1 Conduct of Business by the Company. (a) Ordinary Course. During the period from the date hereof and continuing until the earlier of (x) the termination of this Agreement pursuant to its terms, (y) the Effective Time or (z) such time the designees of Parent shall constitute a majority of the Company's Board of Directors, the Company shall, and shall cause each of its Subsidiaries to, except as otherwise expressly contemplated by this Agreement or to the extent that Parent shall otherwise consent in writing, carry on its business in the usual, regular and ordinary course, in substantially the same manner as heretofore conducted, and use all reasonable efforts consistent with past practices and policies to (i) preserve intact its present business organization, (ii) keep available the services of the Company Key Employees, and (iii) preserve its relationships with customers, suppliers, licensors, licensees, and others with which it has business dealings. (b) Required Consent. In addition, without limiting the generality of Section 5.1(a), except as permitted by the terms of this Agreement, and except as provided in Article V of the Company Disclosure Letter or as reflected in the Company's budget as previously delivered to Parent, without the prior written consent of Parent, during the period from the date hereof and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Effective Time, the Company shall not do, and shall not permit its Subsidiaries to do, any of the following: (i) Enter into any new line of business material to it and its Subsidiaries taken as a whole; (ii) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock (other than dividends or distributions paid by wholly-owned Subsidiaries of the Company to the Company or to other wholly-owned Subsidiaries of the Company); (iii) Purchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or the capital stock of its Subsidiaries, except repurchases of unvested shares at cost in connection with the termination of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on the date hereof; 31 (iv) Issue, deliver, sell, authorize, pledge or otherwise encumber any shares of capital stock, Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or subscriptions, rights, warrants or options to acquire any shares of capital stock or Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or enter into other agreements or commitments of any character obligating it to issue any such securities or rights, other than issuances of Company Common Stock upon the exercise of Company Options existing on the date hereof in accordance with their present terms (including cashless exercises); (v) Cause, permit or propose any amendments to its Charter Documents or any of the Subsidiary Charter Documents of its Subsidiaries; (vi) Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any Person or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to its business, other than acquisitions of inventory and other assets in the ordinary course of business consistent with past practices; (vii) Enter into any joint ventures, strategic partnerships or alliances that are material to any of its divisions or business units if such entry would (A) present a material risk of delaying the Merger or make it more difficult to obtain any Necessary Consent or (B) require a consent of the other party thereto to consummate the Merger; (viii) Sell, pledge, dispose of, transfer, lease, license, or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, or encumbrance of, any material property or assets of the Company or any of its Subsidiaries, except (A) sales, pledges, dispositions, transfers, leases, licenses or encumbrances pursuant to existing Contracts which have been made available to Parent prior to the date hereof, or (B) sales or dispositions of inventory and other tangible current assets in the ordinary course of business consistent with past practices; (ix) Make any loans, advances or capital contributions to, or investments in, any other Person, other than loans or investments by the Company or one of its Subsidiaries to or in the Company or one of its wholly-owned Subsidiaries; (x) Except as required by GAAP or the SEC as concurred in by its independent auditors, make any material change in its methods or principles of accounting; (xi) Make or change any material Tax election; (xii) Settle any material claim (including any Tax claim), action or proceeding involving money damages, except (A) in the ordinary course of business consistent with past practice or (B) to the extent subject to reserves existing as of the date hereof in accordance with GAAP; 32 (xiii) Except as required by Legal Requirements or Contracts currently binding on the Company or its Subsidiaries, (1) increase in any manner the amount of compensation or fringe benefits of, pay any bonus to or grant severance or termination pay to, any executive officer or director of the Company or key employee of the Company or any Subsidiary, division or business unit of the Company (collectively, "Company Key Employees") or materially increase the foregoing with respect to employees of the Company and its Subsidiaries generally, (2) make any increase in, or commitment to increase, any Company Benefit Plan (including any severance plan), adopt or amend, or make any commitment to adopt or amend, any Company Benefit Plan or make any contribution, other than regularly scheduled contributions, to any Company Benefit Plan, (3) waive any stock repurchase rights, accelerate, amend or change the period of exercisability of Company Options or restricted stock, or reprice any Company Options or authorize cash payments in exchange for any Company Options, (4) enter into any employment, severance, termination or indemnification agreement with any Company employee, (5) make any material oral or written representation or commitment with respect to any material aspect of any Company Benefit Plan that is not materially in accordance with the existing written terms and provision of such Company Benefit Plan, (6) grant any stock appreciation right, phantom stock award, stock-related award or performance award (whether payable in cash, shares or otherwise) (each, a "SAR") to any Person (including any Company Employee), or (7) enter into any agreement with any Company employee the benefits of which are (in whole or in part) contingent or the terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby; (xiv) Subject Parent or the Surviving Corporation or any of their respective Subsidiaries to any non-compete or other material restriction on any of their respective businesses following the Closing; (xv) Enter into any agreement or commitment the effect of which would be to grant to a third party following the Merger any actual or potential right of license to any material Intellectual Property owned by Parent or any of its Subsidiaries; (xvi) Enter into, modify or amend in a manner adverse in any material respect to such party, or terminate any Company Material Contract or waive, release or assign any material rights or claims thereunder, in each case, in a manner adverse in any material respect to such party, other than any modification, amendment or termination of any such Company Material Contract in the ordinary course of business consistent with past practice; (xvii) (i) Incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of it, guarantee any debt securities of another Person, enter into any "keep well" or other agreement to maintain any financial statement condition of any other Person (other than any wholly-owned Subsidiary of the Company) or enter into any arrangement having the economic 33 effect of any of the foregoing (collectively, "Indebtedness"), except for Indebtedness for borrowed money under the Company's existing credit facilities or replacement credit facilities in an aggregate amount not materially larger than the Company's existing credit facilities, or (ii) make or authorize any capital expenditure materially in excess of the Company's budget as disclosed to Parent prior to the date hereof; (xviii) Write up, write down or write off the book value of any assets other than in the ordinary course of business or otherwise not in excess of $2 million; (xix) Take any action to render inapplicable, or to exempt any third party from any state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, except to the extent that the Company would be permitted to effect a Change of Company Recommendation pursuant to Section 6.1(e); or (xx) Agree in writing or otherwise to take any of the actions described in (i) through (xix) above. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.1 Acquisition Proposals. (a) No Solicitation. After the execution of this Agreement and prior to the Effective Time, the Company agrees that neither it nor any of its Subsidiaries nor any of their respective officers, directors, advisors, agents, accountants, consultants, employees, investment bankers and legal counsel (collectively, "Representatives") shall directly or indirectly: (i) solicit, initiate, encourage, knowingly facilitate or induce any inquiry with respect to, or the making, submission or announcement of, any Acquisition Proposal (as defined in Section 6.1(g)(i)), (ii) participate in any discussions or negotiations regarding, or furnish to any Person any nonpublic information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any Person with respect to any Acquisition Proposal, except as to the existence of these provisions, (iv) approve, endorse or recommend any Acquisition Proposal (except to the extent specifically permitted pursuant to Section 6.1(e)), or (v) enter into any letter of intent or similar document or any contract agreement or commitment contemplating or otherwise relating to any Acquisition Proposal or any transaction contemplated thereby. The Company shall immediately terminate, and shall cause each of its Subsidiaries and its and their Representatives to immediately terminate, all activities, discussions or negotiations, if any, with any third party with respect to, or any that could reasonably be expected to lead to or contemplate the possibility of, an Acquisition Proposal. The Company shall promptly request that each person which has heretofore executed a confidentiality agreement with the 34 Company or any of its affiliates or Subsidiaries or any of its or their Representatives with respect to such Person's consideration of a possible Acquisition Proposal to promptly return or destroy (which destruction shall be certified in writing by such person to the Company) all confidential information heretofore furnished by the Company or any of its affiliates or Subsidiaries or any of its or their Representatives to such person or any of its affiliates or Subsidiaries or any of its or their Representatives. (b) Notification Of Unsolicited Acquisition Proposals. (i) As promptly as practicable after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which it reasonably believes could lead to an Acquisition Proposal, the Company shall provide Parent with oral and written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the Person or group making any such Acquisition Proposal, request or inquiry and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. The Company shall provide Parent as promptly as practicable oral and written notice setting forth all such information as is reasonably necessary to keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry and shall promptly provide to Parent a copy of all written materials subsequently provided in connection with such Acquisition Proposal, request or inquiry. (ii) The Company shall provide Parent with forty-eight (48) hours prior notice (or such lesser prior notice as is provided to the members of its Board of Directors) of any meeting of its Board of Directors at which its Board of Directors is reasonably expected to discuss or consider any Acquisition Proposal. (c) Superior Offers. Notwithstanding anything to the contrary contained in Section 6.1(a), prior to the acceptance of a majority of the then outstanding Shares by Merger Sub in the Offer, in the event that the Company receives an unsolicited, bona fide written Acquisition Proposal from a third party that its Board of Directors has in good faith concluded (following consultation with its outside legal counsel and its financial advisor), is, or is reasonably likely to result in, a Superior Offer, it may then take the following actions (but only (A) if and to the extent that its Board of Directors concludes in good faith, following consultation with its outside legal counsel, that there is a reasonable possibility that the failure to do so would result in a breach of its fiduciary obligations under applicable Legal Requirements and (B) after the Company has given written notice ("Superior Offer Notice") to Parent that expressly states (1) that it has received a bona fide, written Acquisition Proposal from a third party that the Company's Board of Directors has in good faith concluded (following consultation with its outside legal counsel and its financial advisor), is, or is reasonably likely to result in, a Superior Offer, (2) that the Company's Board of Directors has concluded in good faith, following consultation with its outside legal counsel, that there is a reasonable possibility that the failure to take such action would result in a breach of its fiduciary obligations under applicable Legal Requirements, (3) the identity of the third party making such 35 Acquisition Proposal and the material terms and conditions of such Acquisition Proposal, and (4) the nature of the action that the Company intends to take): (i) Furnish nonpublic information to the third party making such Acquisition Proposal, provided that (A) it receives from the third party an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such third party on its behalf, the terms of which are at least as restrictive as the terms contained in the Confidentiality Agreement (as defined in Section 6.2(a)) and (B) contemporaneously with furnishing any such nonpublic information to such third party, it furnishes such nonpublic information to Parent (to the extent such nonpublic information has not been previously so furnished); and (ii) Engage in negotiations with the third party with respect to the Acquisition Proposal. (d) For a period of not less than three (3) Business Days after Parent's receipt from the Company of each Superior Offer Notice, the Company shall, if requested by Parent, negotiate in good faith with Parent to revise this Agreement so that the Acquisition Proposal that constituted a Superior Offer no longer constitutes a Superior Offer. (e) Changes of Recommendation. Neither the Company's Board of Directors nor any committee thereof shall withdraw, modify or change, or propose publicly to withdraw, modify or change, in a manner adverse to Parent, the Company Board of Director's recommendation that the shareholders of the Company accept the Offer, tender their Shares to Merger Sub thereunder and, if required by Legal Requirements, approve and adopt this Agreement and the Merger. Notwithstanding the foregoing, (A) in response to the receipt of a Superior Offer that has not been withdrawn and continues to constitute a Superior Offer after the Company's compliance with Section 6.1(d), the Board of Directors of the Company may withhold or withdraw its recommendation that the shareholders of the Company accept the Offer, tender their Shares to Merger Sub thereunder and, if required by Legal Requirements, approve and adopt this Agreement and the Merger, and, (B) in the case of a Superior Offer that is a tender or exchange offer made directly to its shareholders, may recommend that its shareholders accept the tender or exchange offer (any of the foregoing actions in (A) or (B), whether by a Board of Directors or a committee thereof, a "Change of Company Recommendation"), if in the case of (A) or (B) all of the following conditions in clauses (i) through (iv) are met: (i) Merger Sub shall not yet have accepted a majority of the then outstanding Shares in the Offer; (ii) It shall have (A) provided to Parent written notice which shall state expressly (1) that it has received a Superior Offer, (2) the material terms and conditions of the Superior Offer and the identity of the Person or group making the Superior Offer, and (3) that it intends to effect a Change of Company Recommendation 36 and the manner in which it intends to do so, and (B) provided to Parent a copy of all written materials delivered to the Person or group making the Superior Offer; (iii) Its Board of Directors has concluded in good faith, after consultation with its outside legal counsel, that, in light of such Superior Offer, there is a reasonable possibility that failure of the Company Board of Directors to effect a Change of Company Recommendation would result in a breach of its fiduciary obligations to its shareholders under applicable Legal Requirements; and (iv) It shall not have breached in any material respect any of the provisions set forth in this Section 6.1. (f) Compliance with Tender Offer Rules. Nothing contained in this Agreement shall prohibit the Company or the Company Board of Directors, in connection with a tender or exchange offer for the Company's outstanding securities by a third party, from taking and disclosing to its shareholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or making any disclosure to the Company's shareholders if, the Company's Board of Directors has concluded in good faith, after consultation with its outside legal counsel, that the failure to do so would be inconsistent with applicable Legal Requirements; provided that the content of any such disclosure thereunder shall be governed by the terms of this Agreement. Without limiting the foregoing proviso, the Company shall not effect a Change of Company Recommendation unless specifically permitted pursuant to the terms of Section 6.1(e). (g) Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (i) "Acquisition Proposal", with respect to the Company, shall mean any offer or proposal, relating to any transaction or series of related transactions involving: (A) any purchase from the Company or acquisition by any Person or "group" (as defined under Section 13(d) of the Exchange Act) of more than a ten percent (10%) interest in the total outstanding voting securities of the Company or any of its Subsidiaries or any tender or exchange offer that if consummated would result in any Person or group beneficially owning ten percent (10%) or more of the total outstanding voting securities of the Company or any of its Subsidiaries or any merger, consolidation, business combination or similar transaction involving the Company or any of its Subsidiaries, (B) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of more than ten percent (10%) of the assets of the Company (including its Subsidiaries taken as a whole), or (C) any liquidation or dissolution of the Company; and (ii) "Superior Offer," with respect to the Company, shall mean an unsolicited, bona fide written offer made by a third party to acquire, directly or indirectly, pursuant to a tender or exchange offer, merger, consolidation or other business combination, all or substantially all of the assets of the Company or a majority of the total outstanding voting securities of the Company and as a result of which the shareholders of the Company immediately preceding such transaction would 37 hold less than fifty percent (50%) of the equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent or subsidiary thereof, on terms that the Board of Directors of the Company has in good faith concluded (following consultation with its outside legal counsel and its financial adviser), taking into account, among other things, all legal, financial, regulatory and other aspects of the offer and the Person making the offer, to be more favorable, from a financial point of view, to the Company's shareholders (in their capacities as shareholders) than the terms of the Offer and the Merger and is reasonably capable of being consummated. Section 6.2 Confidentiality; Access to Information; No Modification of Representations, Warranties or Covenants. (a) Confidentiality. The parties acknowledge that the Company and Parent have previously executed a Confidentiality Agreement dated April 24, 2002 (the "Confidentiality Agreement"), which Confidentiality Agreement will continue in full force and effect in accordance with its terms and each of Parent and the Company will hold, and will cause its respective Representatives to hold, any Information (as defined in the Confidentiality Agreement) confidential in accordance with the terms of the Confidentiality Agreement. (b) Access to Information. Each of the Company, Merger Sub and Parent will afford the other and the other's Representatives reasonable access during normal business hours to its properties, books, records and personnel during the period prior to the Effective Time to obtain all information concerning its business, including the status of product development efforts, properties, results of operations and personnel, as such other party may reasonably request, and, during such period, upon request by the other party hereto, each of Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall, and shall cause each of their respective Subsidiaries to, furnish promptly to the other party a copy of any report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities laws; provided, however, that any party may restrict the foregoing access to the extent that any law, treaty, rule or regulation of any Governmental Entity applicable to such party requires such party or its Subsidiaries to restrict or prohibit access to any such properties or information. (c) No Modification of Representations and Warranties or Covenants. No information or knowledge obtained in any investigation or notification pursuant to this Section 6.2, Section 6.4 or Section 6.5 shall affect or be deemed to modify any representation or warranty contained herein, the covenants or agreements of the parties hereto, the conditions to the obligations of the parties or the remedies available to any of the parties under this Agreement. Section 6.3 Public Disclosure. Without limiting any other provision of this Agreement, Parent and the Company will consult with each other before issuing, and provide each other the opportunity to review, comment upon and concur with, and use all reasonable efforts to agree on, any press release or public statement with respect to this Agreement and the transactions contemplated hereby, including the Offer, 38 the Merger, and any Acquisition Proposal and will not issue any such press release or make any such public statement prior to such consultation and agreement, except as may be required by applicable Legal Requirements or any listing agreement with the NYSE, NASDAQ or any other applicable national or regional securities exchange. The parties have agreed to the text of the joint press release announcing the signing of this Agreement. Section 6.4 Regulatory Filings; Reasonable Efforts. (a) Regulatory Filings. Each of Parent, Merger Sub and the Company shall coordinate and cooperate with one another and shall each use all reasonable efforts to comply with, and shall each refrain from taking any action that would impede compliance with, all Legal Requirements, and, as promptly as practicable after the date hereof, each of Parent, Merger Sub and the Company shall make all filings, notices, petitions, statements, registrations, submissions of information, application or submission of other documents required by any Governmental Entity in connection with the Offer and the Merger and the transactions contemplated hereby, including, without limitation: (i) Notification and Report Forms with the United States Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") as required by the HSR Act, (ii) any other filing necessary to obtain any Necessary Consent, (iii) filings under any other comparable pre-merger notification forms required by the merger notification or control laws of any applicable jurisdiction, as agreed by the parties hereto, and (iv) any filings required under the Securities Act, the Exchange Act, any applicable state or securities or "blue sky" laws and the securities laws of any foreign country, or any other Legal Requirement relating to the Merger. Each of Parent and the Company will cause all documents that it is responsible for filing with any Governmental Entity under this Section 6.4(a) to comply in all material respects with all applicable Legal Requirements. (b) Exchange of Information. Parent, Merger Sub and the Company each shall promptly supply the other with any information which may be required in order to effectuate any filings or application pursuant to Section 6.4(a). Except where prohibited by applicable Legal Requirements, and subject to the Confidentiality Agreement, each of the Company and Parent shall consult with the other prior to taking a position with respect to any such filing, shall permit the other to review and discuss in advance, and consider in good faith the views of the other in connection with any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and proposals before making or submitting any of the foregoing to any Governmental Entity by or on behalf of any party hereto in connection with any investigations or proceedings in connection with this Agreement or the transactions contemplated hereby (including under any antitrust or fair trade Legal Requirement), coordinate with the other in preparing and exchanging such information and promptly provide the other (and its counsel) with copies of all filings, presentations or submissions (and a summary of any oral presentations) made by such party with any Governmental Entity in connection with this Agreement or the transactions contemplated hereby, provided that with respect to any such filing, presentation or submission, each of Parent and the Company need not supply the other (or its counsel) with copies (or in case of oral 39 presentations, a summary) to the extent that applicable Legal Requirements require such party or its Subsidiaries to restrict or prohibit access to any such properties or information. (c) Notification. Each of Parent, Merger Sub and the Company will notify the other promptly upon the receipt of: (i) any comments from any officials of any Governmental Entity in connection with any filings made pursuant hereto and (ii) any request by any officials of any Governmental Entity for amendments or supplements to any filings made pursuant to, or information provided to comply in all material respects with, any applicable Legal Requirement. Whenever any event occurs that is required to be set forth in an amendment or supplement to any filing made pursuant to Section 6.4(a), Parent, Merger Sub or the Company, as the case may be, will promptly inform the other of such occurrence and cooperate in filing with the applicable Governmental Entity such amendment or supplement. (d) Reasonable Efforts. Each of the parties agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement, including using all reasonable efforts to accomplish the following: (i) the taking of all reasonable acts necessary to cause the Offer Conditions and the conditions set forth in Article VII to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from Governmental Entities and the making of all necessary registrations, declarations and filings (including registrations, declarations and filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to avoid any suit, claim, action, investigation or proceeding by any Governmental Entity, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, including all Necessary Consents, (iv) the defending of any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (v) the execution or delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, the Company and its Board of Directors shall, if any takeover statute or other Legal Requirement is or becomes applicable to the Offer, the Merger, this Agreement or any of the transactions contemplated by this Agreement, use all reasonable efforts to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to render inapplicable or minimize the effect of such takeover statute or other Legal Requirement on the Merger, this Agreement and the transactions contemplated hereby. (e) Limitation on Divestiture. Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall be deemed to require Parent or the Company or any Subsidiary or affiliate thereof to take or agree to 40 take any Action of Divestiture (as defined below). For purposes of this Agreement, an "Action of Divestiture" shall mean making proposals, executing or carrying out agreements or submitting to Legal Requirements providing for the license, sale or other disposition or holding separate (through the establishment of a trust or otherwise) of any assets or categories of assets that are material to Parent, the Company or any of their respective Subsidiaries or the holding separate of the Company capital stock or imposing or seeking to impose any limitation on the ability of Parent, the Company or any of their respective Subsidiaries, to conduct their respective businesses or own such assets or to acquire, hold or exercise full rights of ownership of the Company's business. Section 6.5 Notification of Certain Matters. (a) By the Company. The Company shall give prompt notice to Parent and Merger Sub of any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate, or any failure of the Company to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. (b) By Parent. Parent and Merger Sub shall give prompt notice to the Company of any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate, or any failure of Parent to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. Section 6.6 Third-Party Consents. As soon as practicable following the date hereof, Parent and the Company will each use all reasonable efforts to obtain any material consents, waivers and approvals under any of its or its Subsidiaries' respective Contracts required to be obtained in connection with the consummation of the transactions contemplated hereby. Section 6.7 Equity Awards and Employee Benefits. (a) Treatment of Stock Options. Each Company Option that is outstanding immediately prior to the Effective Time, whether or not then vested or exercisable, shall, effective as of the Effective Time, be cancelled in exchange for a single lump sum cash payment, to be paid by the Surviving Corporation as soon as practicable following the Closing upon its receipt of a release or other documentation by the holder of such Company Option reasonably satisfactory to the Parent and the Surviving Corporation, equal to the product of (i) the number of shares of Company Common Stock subject to such Company Option and (ii) the excess, if any, of the Merger Consideration for a share of Company Common Stock at the Effective Time over the exercise price per share of such Company Option (the aggregate amount payable under this Section 6.7(a), the "Option Consideration"). Prior to the expiration date of the Offer, the Company shall (i) obtain any required consents from holders of Company Options and (ii) take all actions necessary to give effect to the provisions of paragraph (a) of this Section 6.7. 41 (b) Waivers. The Company shall cause, within 10 Business Days following the date hereof, the individuals listed on Section 6.7(b) of the Company Disclosure Letter to waive such individuals' rights to payment made pursuant to Section 6.7(a) above, to the extent that such payment would be subject (in whole or part) to excise tax, as a result of section 4999 of the Code, to the extent necessary to make such payment not subject to such excise tax. (c) Termination of Stock Option Plans. Except as otherwise agreed to by the parties, prior to the Effective Time, (i) the Company shall cause the Company Stock Option Plans to be terminated as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of Company Common Stock or any equity securities in any of the Subsidiaries to be deleted as of the Effective Time, and (ii) the Company shall take all action necessary to ensure that the payments or conversions into the right to receive cash set forth in Section 6.7(a) extinguish all rights of participants under the Company Stock Option Plans and such plans, programs and arrangements to receive equity securities of the Company or any of its Subsidiaries and that following the Effective Time no such participant shall have any right thereunder to acquire equity securities of the Company, the Surviving Corporation, the Parent or any of their respective Subsidiaries. (d) Termination of the Company Employee Stock Purchase Plans. The Company Purchase Plan shall be terminated on the date of this Agreement. The rights of participants in each the Company Purchase Plan with respect to the offering period currently underway under the Company Purchase Plan shall be determined by treating the last Business Day prior to, or if more administratively advisable, the last payroll date of the Company immediately prior to, the date hereof, as the last day of such offering period and by making such other pro-rata adjustments as may be necessary to reflect the shortened offering period but otherwise treating such shortened offering period as a fully effective and completed offering period for all purposes under the Company Purchase Plan. (e) Service Credit. Following the Effective Time, Parent will use all reasonable efforts to give employees of the Surviving Corporation or its Subsidiaries who were employees of Company or its Subsidiaries immediately prior to the Effective Time ("Continuing Employees") full credit for prior service with the Company or its Subsidiaries for purposes of eligibility and vesting under any employee benefit plan maintained by Parent or its Subsidiaries except where such crediting would (A) result in a duplication of benefits or (B) otherwise cause Parent or its Subsidiaries or any employee benefit plan maintained by Parent or its Subsidiaries to accrue or pay for benefits that relate to any time period prior to the Continuing Employee's participation in such plan. (f) Employee Communications. With respect to matters described in this Agreement, the Company will consult with Parent (and consider in good faith the advice of Parent) prior to sending any notices or other communication materials to its employees. 42 (g) The Company shall terminate any and all 401(k) plans of the Company, effective not later than the day immediately preceding the Closing Date. The Company shall provide Parent with evidence that such 401(k) plan(s) have been terminated pursuant to resolution of Company's Board of Directors (the form and substance of which shall be subject to review and approval by Parent) not later than the day immediately preceding the Closing Date. Section 6.8 Indemnification. (a) Indemnity. From and after the Effective Time, Parent will, and will cause the Surviving Corporation to, fulfill and honor in all respects the obligations of the Company pursuant to any indemnification agreements between the Company and its directors and officers immediately prior to the Effective Time (the "Indemnified Parties"), subject to applicable Legal Requirements. The Articles of Incorporation and Bylaws of the Surviving Corporation will contain provisions with respect to exculpation and indemnification that are at least as favorable to the Indemnified Parties as those contained in the Articles of Incorporation and Bylaws of the Company as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, immediately prior to the Effective Time, were directors, officers, employees or agents of the Company, unless such modification is required by applicable Legal Requirements. (b) Insurance. For a period of six years after the Effective Time, Parent shall cause, or shall cause the Surviving Corporation, to be maintained in effect for the benefit of the Company's current directors and officers liability insurance covering those persons who are covered by the Company's directors' and officers' liability insurance policy as of the date hereof on terms no less favorable to those applicable to the current directors and officers of the Company for a period of six (6) years; provided, however, that in no event will the Surviving Corporation be required to expend in excess of two hundred (200%) of the annual premium currently paid by the Company for such coverage (and to the extent annual premium would exceed two hundred (200%) of the annual premium currently paid by the Company for such coverage, the Surviving Corporation shall use all reasonable efforts to cause to be maintained the maximum amount of coverage as is available for such two hundred (200%) of such annual premium). (c) Obligation. For six years after the Effective Time, Parent shall indemnify and hold harmless the Indemnified Parties to the fullest extent permitted under applicable Legal Requirements, with respect to all actions or omissions by them prior to the Effective Time in their capacities as officers or directors of the Company or any of its Subsidiaries (including with respect to all acts or omissions by them in their capacities as officers or directors of the Company or any of its Subsidiaries in connection with the adoption and approval of this Agreement and the transactions contemplated hereby). In the event any claim in respect of which indemnification is available pursuant to the foregoing provisions is asserted or made within such six-year period, all rights to 43 indemnification shall continue until such claim is disposed of or all judgments, orders, decrees or other rulings in connection with such claim are duly satisfied. (d) Third-Party Beneficiaries. This Section 6.8 is intended to be for the benefit of, and shall be enforceable by the Indemnified Parties and their heirs and personal representatives and shall be binding on Parent and the Surviving Corporation and its successors and assigns. In the event Parent or the Surviving Corporation or its successor or assign (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each case, proper provision shall be made so that the successor and assign of Parent or the Surviving Corporation, as the case may be, honor the obligations set forth with respect to Parent or the Surviving Corporation, as the case may be, in this Section 6.8. Section 6.9 Conveyance Taxes. Parent, Merger Sub and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration or other fees or any similar taxes which become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed on or before the Effective Time. All such taxes will be paid by the party bearing the legal responsibility for such payment; provided, however, that, as between Parent and the Company, the Company shall pay on behalf of those Persons holding Company Common Stock immediately prior to the Effective Time any real estate transfer or similar Taxes payable by such Person in connection with Merger. ARTICLE VII CONDITIONS TO THE MERGER Section 7.1 Conditions to the Obligations of Each Party to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions: (a) Company Shareholders' Approval. The Company Shareholders' Approval shall have been obtained; provided that Parent may not assert this condition if it fails to vote all Shares held by it or Merger Sub in favor of the Merger and the Company may not assert this condition if it fails to comply with Section 2.8 (b) No Order. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which (i) is in effect and (ii) has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger (which illegality or prohibition would have a material impact on Parent and its Subsidiaries, on a combined 44 basis with the Company and its Subsidiaries, if the Merger were consummated notwithstanding such statute, rule, regulation, executive order, decree, injunction or other order). (c) Purchase of Shares. Parent or Merger Sub shall have purchased Shares pursuant to the Offer, except that this condition shall not be a condition to Parent's and Merger Sub's obligation to effect the Merger if Parent or Merger Sub shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under this Agreement; and (d) HSR Act. Any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER Section 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the Board of Directors of the terminating party or parties, and except as provided below, whether before or after the Company Shareholders' Approval is obtained: (a) by mutual written consent duly authorized by the Boards of Directors of Parent and the Company; (b) By either the Company or Parent, if as a result of any of the Offer Conditions being incapable of being satisfied (i) Merger Sub shall have failed to commence the Offer within 30 days following the date of this Agreement or (ii) the Offer shall have expired without any Shares being purchased pursuant thereto; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement or the Offer has been the cause of, or resulted in, the failure of the Shares to have been purchased pursuant to the Offer; (c) By either the Company or Parent, if the Offer has not been consummated on or before April 30, 2003 (the "End Date"); provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement or the Offer has been the cause of, or resulted in, the failure of the Offer to have been consummated by such date; (d) by either the Company or Parent, if a Governmental Entity shall have issued an order, decree or ruling or taken any other action (including the failure to have taken an action), in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger, which order, decree, ruling or other action is final and nonappealable; 45 (e) by Parent, if a Company Triggering Event (as defined below in this Section 8.1) shall have occurred; (f) by the Company, (i) if Merger Sub or Parent shall have materially breached any of their respective covenants, obligations or other agreements under this Agreement, or (ii) if the representations and warranties of Parent and Merger Sub set forth in this Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of the Agreement and as of the expiration of the date of termination of this Agreement (except to the extent expressly made as of an earlier date, in which case as of such date) except where the failure to be so true and correct, individually or in the aggregate would not reasonably be expected to have, a Material Adverse Effect on the Parent; provided, further that the breach of the covenant, obligation, agreement, representation or warranty is incapable of being or has not been cured by Parent or Merger Sub prior to or on the date which is 30 calendar days immediately following written notice by the Company to Parent of such breach or failure to perform; or (g) by Parent, (i) if the Company shall have materially breached any of its respective covenants, obligations or other agreements under this Agreement, or (ii) if the representations and warranties of the Company set forth in this Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of the Agreement and as of the expiration of the date of termination of this Agreement (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure to be so true and correct, individually or in the aggregate would not reasonably be expected to have, a Material Adverse Effect on the Company; provided, further that the breach of the covenant, obligation, agreement, representation or warranty is incapable of being or has not been cured by the Company prior to or on the date which is 30 calendar days immediately following written notice by Parent to the Company of such breach or failure to perform. For the purposes of this Agreement, a "Company Triggering Event" shall be deemed to have occurred if: (i) a Change of Company Recommendation shall have occurred for any reason, (ii) the Company shall have failed to include in the Preliminary Proxy, the Proxy Statement or the Schedule 14D-9 the recommendation of its Board of Directors in favor of the adoption and approval of the Agreement and the approval of the Merger and that the shareholders of the Company accept the Offer, tender their Shares to Merger Sub pursuant to the Offer, (iii) the Company Board of Directors fails to reaffirm (publicly, if so requested) its recommendation in favor of the adoption and approval of the Agreement and the approval of the Merger and that the shareholders of the Company accept the Offer, tender their Shares to Merger Sub pursuant to the Offer within three (3) calendar days after Parent requests in writing that such recommendation be reaffirmed, (iv) the Company Board of Directors or any committee thereof shall have approved or recommended any Acquisition Proposal, (v) a tender or exchange offer relating to the Company's securities shall have been commenced by a Person unaffiliated with Parent and (A) the Company shall not have sent to its securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act, within ten (10) Business Days after such tender or 46 exchange offer is first published, sent or given, a statement disclosing that the Board of Directors of the Company recommends rejection of such tender or exchange offer or (B) such tender or exchange offer shall result in such Person beneficially owning fifty (50) percent or greater of the Company's outstanding equity securities, or (vi) any Person unaffiliated with Parent shall beneficially own twenty-five (25) percent or more of the Company's outstanding equity securities. Section 8.2 Notice of Termination; Effect of Termination. Any termination of this Agreement under Section 8.1 above will be effective immediately upon the delivery of a valid written notice of the terminating party to the other party hereto. In the event of the termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect, except (i) as set forth in Section 6.2(a), this Section 8.2, Section 8.3 and Article IX, each of which shall survive the termination of this Agreement and (ii) nothing herein shall relieve any party from liability for any willful breach of this Agreement. No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms. Section 8.3 Fees and Expenses. (a) General. Except as set forth in this Section 8.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Merger is consummated; provided, however, that Parent and the Company shall share equally any SEC filing fees and Parent shall pay the filing fee for the Notification and Report Forms filed with the FTC and DOJ under the HSR Act and premerger notification and reports forms under similar applicable laws of other jurisdictions, in each case pursuant to Section 6.4(a). (b) Payments. (i) Payment by the Company. In the event that this Agreement is terminated (1) by Parent or the Company pursuant to Sections 8.1(b) or 8.1(c), the Company shall pay Parent a fee equal to four million dollars ($4,000,000) in immediately available funds (the "Company Termination Fee"); provided, that (A) such payment shall be made only if following the date hereof and prior to the termination of this Agreement, there has been public disclosure of an Acquisition Proposal with respect to the Company and (1) within nine (9) months following the termination of this Agreement an Acquisition (as defined in Section 8.3(b)(iv)) is consummated or (2) within nine (9) months following the termination of this Agreement the Company enters into an agreement providing for an Acquisition of the Company and an Acquisition is consummated within eighteen (18) months of the termination of this Agreement and (B) such payment shall be made promptly, but in no event 47 later than two (2) Business Days after the consummation of such Acquisition. (2) by Parent pursuant to 8.1(e), the Company shall promptly, but in no event later than two (2) Business Days after the date of such termination, pay Parent the Company Termination Fee. (ii) Parent Expenses. In the event that (A) this Agreement is terminated by Parent or the Company, as applicable, pursuant to Section 8.1(b) or 8.1(c) and following the date hereof and prior to the termination of this Agreement there has been public disclosure of an Acquisition Proposal with respect to the Company, or (B) this Agreement is terminated by Parent pursuant to Section 8.1(e), then the Company shall pay Parent promptly and from time to time (as applicable) an amount equal to Parent's documented or documentable out-of-pocket expenses (including attorneys', accountants' and financial advisors' fees and any fees incurred by Parent in connection with the filing of the Schedule TO or the Proxy Statement with the SEC and the filing of the Notification and Report Forms with the FTC and DOJ under the HSR Act and any premerger notification and reports forms under similar applicable Legal Requirements of other jurisdictions, in each case pursuant to Section 6.4(a)), but which amount shall in no event exceed one million dollars ($1,000,000). (iii) Interest and Costs; Other Remedies. The Company acknowledges that the agreements contained in this Section 8.3(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails to pay in a timely manner the amounts due pursuant to this Section 8.3(b), and, in order to obtain such payment, Parent makes a claim that results in a judgment against the Company for the amounts set forth in this Section 8.3(b), the Company shall pay to Parent its reasonable costs and expenses (including reasonable attorneys' fees and expenses) in connection with such suit, together with interest on the amounts set forth in this Section 8.3(b) at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made. Payment of the fees described in this Section 8.3(b) shall not be in lieu of damages incurred in the event of breach of this Agreement. (iv) Certain Definitions. For the purposes of this Section 8.3(b) only, "Acquisition" shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company pursuant to which the shareholders of the Company immediately preceding such transaction hold less than sixty percent (60%) of the aggregate equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent thereof, (ii) a sale or other disposition by the Company of assets representing in excess of forty percent (40%) of the aggregate fair market value of the Company's business immediately prior to such sale, or (iii) the acquisition by any Person or group (including by way of a tender offer or an exchange offer or issuance by the Company or such Person or group), directly or indirectly, of beneficial ownership or a right to acquire 48 beneficial ownership of shares representing in excess of forty percent (40%) of the voting power of then outstanding shares of capital stock of the Company. Section 8.4 Amendment. Subject to applicable Legal Requirements, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after the Company Shareholders' Approval is obtained, provided, after any such approval, no amendment shall be made which by law or in accordance with the rules of any relevant stock exchange requires further approval by such shareholders without such further shareholder approval. This Agreement may not be amended except by execution of an instrument in writing signed on behalf of each of Parent, Merger Sub and the Company. Section 8.5 Extension; Waiver. At any time prior to the Effective Time either party hereto, by action taken or authorized by its Board of Directors, may, to the extent legally allowed: (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right. ARTICLE IX GENERAL PROVISIONS Section 9.1 Non-Survival of Representations and Warranties. The representations and warranties of the Company, Parent and Merger Sub contained in this Agreement, or any instrument delivered pursuant to this Agreement, shall terminate at the Effective Time, and only the covenants that by their terms survive the Effective Time and this Article IX shall survive the Effective Time. Section 9.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date is not a Business Day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date is not a Business Day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way 49 Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: (973) 898-0717 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to the Company, to: Paravant Inc. 89 Headquarters Plaza North, Suite 1421 Morristown, New Jersey 07960 Attention: William R. Craven Telephone No.: (973) 631-6190 Telecopy No.: (973) 993-1757 with copies to: Holland & Knight LLP 200 South Orange Avenue Suite 2600 Orlando, FL 32801 Attention: Tom McAleavey Telephone No.: (407) 244-5108 Telecopy No.: (407) 244-5288 Section 9.3 Interpretation; Knowledge. (a) When a reference is made in this Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement unless otherwise indicated. When a reference is made in this Agreement to Sections, such reference shall be to a section of this Agreement unless otherwise indicated. For purposes of this Agreement, the words "include," "includes" and "including," when used herein, shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made herein to "the business of" an entity, such reference shall be deemed to include the business of all such entity and its Subsidiaries, taken as a whole. An exception or disclosure made in the Company Disclosure Letter with regard to a representation of the Company, or in the Parent Disclosure Letter with regard to a representation of Parent or Merger Sub, shall 50 only be deemed made with respect to any other representation by such party if an express cross-reference is set forth herein. (b) For purposes of this Agreement, the term "Knowledge" means, with respect to any matter in question, the actual knowledge of such matter of the executive officers of the Company and the presidents of its Subsidiaries. (c) For purposes of this Agreement, the term "Material Adverse Effect", when used in connection with an entity, means any fact, change, event, violation, inaccuracy, circumstance or effect (any such item, an "Effect"), individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, that is or could be reasonably expected to (i) be materially adverse to the business, assets (including intangible assets), capitalization, financial condition or results of operations of such entity taken as a whole with its Subsidiaries or (ii) materially impede the consummation of the transactions contemplated by this Agreement, including the Offer, in accordance with the terms hereof and applicable Legal Requirements excluding with respect to clauses (i) and (ii) Effects (A) generally affecting the industry in which such entity and its Subsidiaries operate or arising from changes in general business or economics conditions, or (B) affecting the securities markets generally. (d) For purposes of this Agreement, the term "Person" shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity. (e) For purposes of this Agreement, the term "Business Day" means any day on which banks are not required or authorized to close in the City of New York. Section 9.4 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Section 9.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the documents and instruments and other agreements among the parties hereto as contemplated by or referred to herein, including the Company Disclosure Letter and the Parent Disclosure Letter (i) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, it being understood that the Confidentiality Agreement shall continue in full force and effect until the Closing and shall survive any termination of this Agreement and (ii) are not intended to confer upon any other Person any rights or remedies hereunder, except as specifically provided, following the Effective Time, in Section 6.8. 51 Without limiting the foregoing, it is expressly understood and agreed that the provisions of Section 6.7 are statements of intent and no Continuing Employee or other Person (including any party hereto) shall have any rights or remedies, including rights of enforcement, with respect thereto and no Continuing Employee or other Person is or is intended to be a third-party beneficiary thereof. Section 9.6 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the greatest extent possible, the economic, business and other purposes of such void or unenforceable provision. Section 9.7 Other Remedies; Specific Performance. (a) Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. (b) Specific Performance. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof, except that Florida Law shall govern the Merger. Section 9.9 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. Section 9.10 Assignment. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties. Any purported assignment in violation of this Section 9.10 shall be void. Subject to the preceding sentence, this Agreement shall be 52 binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Notwithstanding the foregoing, Merger Sub reserves the right to transfer or assign, in whole or in part, to Parent or to any affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Merger Sub of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Section 9.11 Consent to Jurisdiction; Waiver of Trial by Jury. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (a) agrees not to commence any such action or proceeding except in such courts, (b) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by Law, in such Federal court, (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (d) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.11. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by Law. (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO 53 THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11(b). ***** 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized respective officers as of the date first written above. DRS TECHNOLOGIES, INC., a Delaware corporation By: /s/ Mark S. Newman ------------------------------------------ Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: /s/ Mark S. Newman ------------------------------------------ Name: Mark S. Newman Title: President PARAVANT INC., a Florida corporation By: /s/ William R. Craven ------------------------------------------ Name: William R. Craven Title: President and Chief Executive Officer ****AGREEMENT AND PLAN OF MERGER**** Annex A CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, Merger Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Merger Sub's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may postpone the acceptance for payment of and payment for Shares tendered, and, except as set forth in this Agreement, terminate the Offer as to any Shares not then paid for if (i) the Minimum Condition shall not have been satisfied at the scheduled expiration date of the Offer, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or (iii) immediately prior to the expiration of the Offer, any of the following conditions shall exist: (a) there shall have been instituted or be pending, by any Governmental Entity or any other Person or threatened by any Governmental Entity, any suit, action or proceeding against Parent, Merger Sub or the Company challenging or seeking (i) to make illegal, restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent or Merger Sub, or the consummation of the Merger transaction, (ii) to prohibit or limit materially the ownership or operation by the Company, Parent, Merger Sub or any of their affiliates of all or any material portion of the business or assets of the Company, Parent or any of their affiliates, or compel the Company, Parent or any of their affiliates to effect an Action of Divestiture, (iii) to impose or confirm limitations on the ability of Parent, Merger Sub or any other affiliate of Parent to exercise full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Merger Sub pursuant to the Offer or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of this Agreement and the transactions contemplated by this Agreement, (iv) to require divestiture by Parent or Merger Sub of any Shares; or (v) which otherwise seeks damages or relief which could reasonably be expected to have a Material Adverse Effect on Parent or the Company; (b) there shall have been entered, enforced, enacted or deemed applicable to (A) Parent, Merger Sub or the Company or (B) the Agreement, the Offer or the Merger, in any case, any statute, rule, regulation, legislation, judgment, order, injunction or decree by any Governmental Entity or any other Person that is reasonably likely to, directly or indirectly, result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above. (c) a Company Triggering Event shall have occurred; (d) the representations and warranties of the Company set forth in the Agreement shall not be true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) at and as of the date of this Agreement and the expiration of the Offer (except to the extent that such representations and warranties A-1 speak as of a specific date, in which case as of such specific date), except where the failure to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company; (e) the Company shall have materially breached any covenant, obligation or other agreement to be performed or complied by it under the Agreement; (f) the Agreement shall have been terminated in accordance with its terms; (g) any of the following shall have occurred: (1) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, the American Stock Exchange or the NASDAQ for a period in excess of 24 hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (3) a commencement or material worsening of a war, armed hostilities or other national or international calamity directly or indirectly involving the United States or any terrorist activities which materially and adversely affects Parent, Merger Sub or the Company or the ability of financial institutions in the United States to extend credit or syndicate loans, (4) any limitation (whether or not mandatory) by any Governmental Entity on the extension of credit generally by banks or other financial institutions, or (5) a change in general financial, bank or capital market conditions which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans; (h) Merger Sub and the Company shall have agreed that Merger Sub shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; or (i) any party to the Shareholder Tender and Voting Agreements other than Merger Sub and Parent shall have breached or failed to perform any of its covenants or agreements under such agreements or breached any of its representations and warranties in any of such agreements, or any of such agreements shall not be valid, binding and enforceable, except for such breaches or failures to be valid, binding and enforceable that do not materially and adversely affect the benefits expected to be received by Parent and Merger Sub under the Merger Agreement or the Shareholder Tender and Voting Agreements. The foregoing conditions are for the benefit of Merger Sub and Parent and may be asserted by Merger Sub or Parent regardless of the circumstances giving rise to any such condition or may be waived by Merger Sub or Parent in whole or in part at any time and from time to time in their sole and absolute discretion. The failure by Parent or Merger Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-2 INDEX OF DEFINED TERMS
Page ---- 1934 Act......................................................................10 1934 Act Rules................................................................10 Acquisition...................................................................49 Acquisition Proposal..........................................................37 Action of Divestiture.........................................................41 Agreement......................................................................1 Annex A........................................................................2 Articles of Merger.............................................................6 Bid...........................................................................27 Business Day..................................................................51 Certificate....................................................................8 Certificates...................................................................8 Change of Company Recommendation..............................................36 Closing........................................................................6 Closing Date...................................................................6 Code..........................................................................22 Company........................................................................1 Company Balance Sheet.........................................................17 Company Board Approval.........................................................4 Company Charter Documents.....................................................13 Company Common Stock...........................................................1 Company Disclosure Letter.....................................................12 Company Financials............................................................16 Company Key Employees.........................................................33 Company Material Contract.....................................................25 Company Options...............................................................13 Company Permits...............................................................20 Company Preferred Stock.......................................................13 Company Purchase Plan..........................................................8 Company SEC Reports...........................................................16 Company Shareholders' Approval................................................15 Company Shareholders' Meeting.................................................10 Company Stock Option Plans.....................................................8 Company Termination Fee.......................................................48 Company Triggering Event......................................................47 Company Warrantholder Release..................................................8 Company Warrants..............................................................14 Confidentiality Agreement.....................................................38 Continuing Employees..........................................................42 Contract......................................................................25 DOJ...........................................................................39 EDGAR.........................................................................16 Effect........................................................................51
Effective Time.................................................................6 End Date......................................................................46 Environmental Claim...........................................................24 Environmental Laws............................................................25 Environmental Permits.........................................................24 ERISA Affiliate...............................................................21 ERISA Plans...................................................................21 Exchange Act..................................................................10 Florida Law....................................................................1 FTC...........................................................................39 GAAP..........................................................................16 Government Contract...........................................................27 Governmental Entity...........................................................15 Hazardous Materials...........................................................25 HSR Act.......................................................................16 include.......................................................................51 Indebtedness..................................................................34 Indemnified Parties...........................................................43 Intellectual Property.........................................................18 Knowledge.....................................................................51 Legal Requirements............................................................14 License Agreements............................................................19 Liens.........................................................................13 Material Adverse Effect.......................................................51 Merger.........................................................................6 Merger Consideration...........................................................7 Merger Sub.....................................................................1 Minimum Condition..............................................................2 NASDAQ.........................................................................3 Necessary Consents............................................................16 Offer..........................................................................1 Offer Conditions...............................................................2 Offer Consideration............................................................1 Offer Documents................................................................3 Option Consideration..........................................................41 Parent.........................................................................1 Parent Charter Documents......................................................29 Parent Disclosure Letter......................................................28 Parent's Credit Agreement.....................................................30 Paying Agent...................................................................8 PBGC..........................................................................22 Permits.......................................................................20 Person........................................................................51 Plans.........................................................................21 Preliminary Statement.........................................................10 Proxy Statement...............................................................10
Representatives...............................................................34 SAR...........................................................................33 Schedule 14D-9.................................................................4 Schedule TO....................................................................3 SEC............................................................................3 Securities Act................................................................16 Shareholder Tender and Voting Agreements.......................................1 Shares.........................................................................1 Software......................................................................18 Subsidiary....................................................................12 Subsidiary Charter Documents..................................................13 Superior Offer................................................................37 Superior Offer Notice.........................................................35 Surviving Corporation..........................................................6 Tax...........................................................................17 Tax Returns...................................................................17 Taxes.........................................................................17 Trade Secrets.................................................................18 U.S. Government...............................................................27 Voting Debt...................................................................14 Wachovia......................................................................27
EX-99.D.2 15 y64755texv99wdw2.txt TENDER AND VOTING AGREEMENT Exhibit (d)(2) EXECUTION COPY Annex B-1 SHAREHOLDER TENDER AND VOTING AGREEMENT This SHAREHOLDER TENDER AND VOTING AGREEMENT (this "Agreement") is entered into as of October 23, 2002, by and between DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Krishan K. Joshi, Vicky M. Joshi and UES Inc., an Ohio corporation, referred to collectively herein as ("Shareholders"). W I T N E S S E T H: WHEREAS, as of the date hereof, the Shareholders "beneficially own" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and are entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, par value $0.015 per share (the "Common Stock"), of [Prince] Inc., a Florida corporation (the "Company"), set forth opposite such Shareholders' name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the power to dispose of or vote over which such Shareholders acquire during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the "Subject Shares"); WHEREAS, Parent, Merger Sub and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides for Merger Sub to commence a tender offer (the "Offer") for all of the issued and outstanding shares of the Common Stock and the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, the Shareholders are executing this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I TENDER AGREEMENT AND IRREVOCABLE PROXY Section 1.1 Tender Agreement. The Shareholders hereby agree that unless this Agreement is terminated pursuant to Article V hereof, (a) the Shareholders shall tender the Subject Shares to Merger Sub in the Offer as promptly as practicable, and in any event no later than the tenth Business Day, following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement; provided, however, that with respect to 11,400 Subject Shares held by Vicky M. Joshi in an individual retirement account, such Shareholder shall tender the 11,400 Subject Shares as promptly as practicable under the circumstances and (b) the Shareholders shall not withdraw any Subject Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer. Section 1.2 Grant of Irrevocable Proxy. The Shareholders hereby appoint Parent and any designee of Parent, and each of them individually, as the Shareholders' proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect the Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of the Shareholders contained in this Agreement, and (z) except with the written consent of Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Acquisition Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company as such board is constituted as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its Subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement; provided, however, that nothing in this Agreement shall limit or affect Krishan K. Joshi from acting in accordance with his fiduciary duties as an officer or director of the Company. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. The Shareholders agree not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article I. This proxy is given to secure the performance of the duties of the Shareholders under this Agreement. The Shareholders shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. The Shareholders shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. (a) The proxy and power of attorney granted pursuant to Section 1.2(a) by the Shareholders is executed in accordance with Section 607.0722 of Florida Law and shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholders. The power of attorney granted by the Shareholders herein is a durable power of attorney and shall survive the 2 dissolution, bankruptcy, death or incapacity of the Shareholders. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. ARTICLE II COVENANTS Section 2.1 Generally. The Shareholders agree that prior to the termination of this Agreement, except as contemplated by the terms of this Agreement, they shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer"), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting their ability to perform their obligations under this Agreement. (a) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction. (b) The Shareholders agree to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Subject Shares, and shall use their reasonable best efforts to cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares: (c) THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND VOTING AGREEMENT, DATED AS OF OCTOBER 23, 2002, BY AND AMONG DRS TECHNOLOGIES INC., PRINCE MERGER CORPORATION AND THE SHAREHOLDERS. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. Section 2.2 Standstill Obligations of the Shareholders. The Shareholders covenant and agree with Parent that: (a) the Shareholders shall not, nor shall the Shareholders permit any of their affiliates to, nor shall the Shareholders act in concert with or permit any of their affiliates to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the 3 Company accept the Offer, tender their shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement. (b) the Shareholders shall not, nor shall the Shareholders permit any of their affiliates to, nor shall such Shareholders act in concert with or permit any of their affiliates to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock. (c) the Shareholders shall not, and shall direct their Representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Parent, relating to any Acquisition Proposal. The Shareholders hereby represent that they are not now engaged in discussions or negotiations with any party other than Parent with respect to any Acquisition Proposal. Promptly after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which they reasonably believe could lead to an Acquisition Proposal, the Shareholders shall provide Parent with written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry, and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. After receipt of the Acquisition Proposal, request or inquiry, the Shareholders shall promptly keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS The Shareholders hereby represent and warrant, jointly and severally, to Parent as follows: Section 3.1 Authority. The Shareholders have all necessary legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Shareholders have been duly authorized by all necessary action on the part of such Shareholders. Section 3.2 Ownership of Shares. Schedule I sets forth, opposite the Shareholders' name, the number of shares of Common Stock over which the Shareholders have record and beneficial ownership as of the date hereof. The Shareholders are the lawful owners of the shares of Common Stock denoted as being owned by the Shareholders on Schedule I and have the sole power to dispose of (or cause to be disposed of) or vote (or cause to be voted) such shares of Common Stock. The 4 Shareholders have good and valid title to the Common Stock denoted as being owned by such Shareholders on Schedule I, free and clear of any and all Liens, other than those Liens created by this Agreement. Section 3.3 No Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by the Shareholders and the consummation by the Shareholders of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by the Shareholders, the consummation by the Shareholders of the transactions contemplated hereby or compliance by the Shareholders with any of the provisions hereof shall (A) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which the Shareholders are a party or by which the Shareholders or any of their Subject Shares or assets may be bound, or (B) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 3.4 Reliance by Parent. The Shareholders understand and acknowledge that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by the Shareholders. Section 3.5 No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon the Shareholders execution and delivery of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Shareholders as follows: Section 4.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent have been duly authorized by all necessary action on the part of Parent. Section 4.2 Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in, or give rise to, a violation 5 or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 4.3 Reliance by Shareholders. Parent understands and acknowledges that the Shareholders are entering into this Agreement in reliance upon the execution and delivery of the Merger Agreement by Parent. ARTICLE V TERMINATION Section 5.1 Termination. This Agreement shall terminate, and neither Parent nor the Shareholders shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Parent and the Shareholders, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms; provided, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.1, 6.5, 6.6 and 6.14 of this Agreement shall survive the termination of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Publication. The Shareholders hereby permit Parent and Merger Sub to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable Legal Requirements, the Proxy Statement their identity and ownership of shares of Common Stock and the nature of their commitments, arrangements and understandings pursuant to this Agreement. Section 6.2 HSR Requirements. The Shareholders agree promptly to make all necessary filings, if any, and thereafter make any other required submissions, if any, with respect to the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement required under the HSR Act, any antitrust and competition laws of any other applicable jurisdiction and any other applicable Legal Requirements. The Shareholders shall cooperate with Parent in connection with the making of any such filings referenced in the preceding sentence, including providing copies of all such documents to Parent and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Section 6.3 Further Actions. Each of the parties hereto agrees that it will use its reasonable best efforts to do all things necessary to effectuate this 6 Agreement. Section 6.4 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 6.5 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 6.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to any of the Shareholders, to: 7 Krishan K. Joshi 2580 Lantz Road Beavercreek, Ohio 45434 Vicky M. Joshi 2580 Lantz Road Beavercreek, Ohio 45434 UES, Inc. 4401 Dayton-Xenia Road Beavercreek, Ohio 45432 Section 6.7 Capitalized Terms. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement. Section 6.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. Section 6.10 Entire Agreement. This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. Section 6.11 Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that each of Parent and Merger Sub may assign and transfer its rights and obligations hereunder to any direct or indirect Subsidiary of Parent. Section 6.12 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8 Section 6.13 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. Section 6.14 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. (a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the application of Delaware principles of conflicts of laws. (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.6. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO 9 ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.14(c). Section 6.15 Counterparts. This Agreement may be executed in counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 6.16 Capacity. Krishan K. Joshi makes no agreement or understanding herein as a director or officer of the Company. Mr. Joshi signs this Agreement solely in his capacity as a record and beneficial owner of the Subject Shares, and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company. * * * * * 10 IN WITNESS WHEREOF, Parent, Merger Sub and each of the Shareholders have caused this Agreement to be duly executed as of the day and year first above written. DRS TECHNOLOGIES, INC., a Delaware corporation By: --------------------------------------- Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: --------------------------------------- Name: Mark S. Newman Title: President ------------------------------------------ Krishan K. Joshi ------------------------------------------ Vicky M. Joshi UES, INC., an Ohio corporation By: --------------------------------------- Name: Title: Schedule I Ownership of Common Stock
Name and Address of Shareholder Number of Shares ------------------------------- ---------------- Krishan K. Joshi 859,342 2580 Lantz Road Beavercreek, Ohio 45434 Vicky M. Joshi 338,880 2580 Lantz Road Beavercreek, Ohio 45434 UES Inc. 130,620 4402 Dayton-Xenia Road Dayton, Ohio 45432
EX-99.D.3 16 y64755texv99wdw3.txt TENDER AND VOTING AGREEMENT Exhibit (d)(3) EXECUTION COPY Annex B-2 SHAREHOLDER TENDER AND VOTING AGREEMENT This SHAREHOLDER TENDER AND VOTING AGREEMENT (this "Agreement") is entered into as of October 23, 2002, by and between DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and William R. Craven, an individual (the "Shareholder"). W I T N E S S E T H: WHEREAS, as of the date hereof, Shareholder "beneficially owns" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, par value $0.015 per share (the "Common Stock"), of [Prince] Inc., a Florida corporation (the "Company"), set forth opposite such Shareholder's name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the power to dispose of or vote over which such Shareholder acquires during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the "Subject Shares"); WHEREAS, Parent, Merger Sub and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides for Merger Sub to commence a tender offer (the "Offer") for all of the issued and outstanding shares of the Common Stock and the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, the Shareholder is executing this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I TENDER AGREEMENT AND IRREVOCABLE PROXY Section 1.1 Tender Agreement. The Shareholder hereby agrees that unless this Agreement is terminated pursuant to Article V hereof, (a) the Shareholder shall tender the Subject Shares to Merger Sub in the Offer as promptly as practicable, and in any event no later than the tenth Business Day, following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and (b) the Shareholder shall not withdraw any Subject Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer. Section 1.2 Grant of Irrevocable Proxy. Shareholder hereby appoints Parent and any designee of Parent, and each of them individually, as Shareholder's proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect the Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of the Shareholder contained in this Agreement, and (z) except with the written consent of Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Acquisition Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company as such board is constituted as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its Subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement; provided, however, that nothing in this Agreement shall limit or affect Shareholder from acting in accordance with his fiduciary duties as an officer or director of the Company. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Shareholder agrees not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article I. This proxy is given to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. (a) The proxy and power of attorney granted pursuant to Section 1.2(a) by the Shareholder is executed in accordance with Section 607.0722 of Florida Law and shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. 2 ARTICLE II COVENANTS Section 2.1 Generally. The Shareholder agrees that prior to the termination of this Agreement, except as contemplated by the terms of this Agreement, he shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer"), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its obligations under this Agreement. (a) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction. (b) The Shareholder agrees to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Subject Shares, and shall use its reasonable best efforts to cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares: (c) THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND VOTING AGREEMENT, DATED AS OF OCTOBER 23, 2002, BY AND AMONG DRS TECHNOLOGIES INC., PRINCE MERGER CORPORATION AND THE SHAREHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. Section 2.2 Standstill Obligations of Shareholder. The Shareholder covenants and agrees with Parent that: (a) the Shareholder shall not, nor shall Shareholder permit any of his affiliates to, nor shall Shareholder act in concert with or permit any of his affiliates to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company accept the Offer, tender their shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement. (b) the Shareholder shall not, nor shall the Shareholder permit any of his affiliates to, nor shall such Shareholder act in concert with or permit any of his 3 affiliates to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock. (c) the Shareholder shall not, and shall direct its Representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Parent, relating to any Acquisition Proposal. Shareholder hereby represents that he is not now engaged in discussions or negotiations with any party other than Parent with respect to any Acquisition Proposal. Promptly after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which he reasonably believes could lead to an Acquisition Proposal, Shareholder shall provide Parent with written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry, and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. After receipt of the Acquisition Proposal, request or inquiry, Shareholder shall promptly keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER The Shareholder hereby represents and warrants, to Parent as follows: Section 3.1 Authority. The Shareholder has all necessary legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Shareholder have been duly authorized by all necessary action on the part of such Shareholder. Section 3.2 Ownership of Shares. Schedule I sets forth, opposite the Shareholder's name, the number of shares of Common Stock over which the Shareholder has record and beneficial ownership as of the date hereof. The Shareholder is the lawful owner of the shares of Common Stock denoted as being owned by the Shareholder on Schedule I and has the sole power to dispose of (or cause to be disposed of) or vote (or cause to be voted) such shares of Common Stock. Shareholder has good and valid title to the Common Stock denoted as being owned by such Shareholder on Schedule I, free and clear of any and all Liens, other than those Liens created by this Agreement. Section 3.3 No Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement 4 by Shareholder and the consummation by the Shareholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Shareholder, the consummation by the Shareholder of the transactions contemplated hereby or compliance by the Shareholder with any of the provisions hereof shall (A) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Shareholder is a party or by which Shareholder or any of its Subject Shares or assets may be bound, or (B) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 3.4 Reliance by Parent. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by the Shareholder. Section 3.5 No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon the Shareholder' execution and delivery of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Shareholder as follows: Section 4.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent have been duly authorized by all necessary action on the part of Parent. Section 4.2 Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 4.3 Reliance by Shareholder. Parent understands and acknowledges that the Shareholder is entering into this Agreement in reliance upon the 5 execution and delivery of the Merger Agreement by Parent. ARTICLE V TERMINATION Section 5.1 Termination. This Agreement shall terminate, and neither Parent nor the Shareholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Parent and the Shareholder, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms; provided, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.1, 6.5, 6.6 and 6.14 of this Agreement shall survive the termination of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Publication. The Shareholder hereby permits Parent and Merger Sub to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable Legal Requirements, the Proxy Statement his identity and ownership of shares of Common Stock and the nature of its commitments, arrangements and understandings pursuant to this Agreement. Section 6.2 HSR Requirements. The Shareholder agrees promptly to make all necessary filings, if any, and thereafter make any other required submissions, if any, with respect to the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement required under the HSR Act, any antitrust and competition laws of any other applicable jurisdiction and any other applicable Legal Requirements. The Shareholder shall cooperate with Parent in connection with the making of any such filings referenced in the preceding sentence, including providing copies of all such documents to Parent and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Section 6.3 Further Actions. Each of the parties hereto agrees that it will use its reasonable best efforts to do all things necessary to effectuate this Agreement. Section 6.4 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon 6 compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 6.5 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 6.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to Shareholder, to: William R. Craven 26 Normandy Court Basking Ridge, New Jersey 07920 Section 6.7 Capitalized Terms. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed 7 to them in the Merger Agreement. Section 6.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. Section 6.10 Entire Agreement. This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. Section 6.11 Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that each of Parent and Merger Sub may assign and transfer its rights and obligations hereunder to any direct or indirect Subsidiary of Parent. Section 6.12 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 6.13 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. Section 6.14 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury(a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the application of Delaware principles of conflicts of laws. (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in 8 Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.6. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.14(c). Section 6.15 Counterparts. This Agreement may be executed in counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 6.16 Capacity. Shareholder makes no agreement or understanding herein as a director or officer of the Company. Shareholder signs this Agreement solely in his capacity as a record and beneficial owner of the Subject Shares, and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company. 9 * * * * * 10 IN WITNESS WHEREOF, Parent, Merger Sub and the Shareholder have caused this Agreement to be duly executed as of the day and year first above written. DRS TECHNOLOGIES, INC., a Delaware corporation By: --------------------------------------- Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: --------------------------------------- Name: Mark S. Newman Title: President ------------------------------------------ William R. Craven Schedule I Ownership of Common Stock
Name and Address of Shareholder Number of Shares ------------------------------- ---------------- William R. Craven 381,377 26 Normandy Court Basking Ridge, New Jersey 07920
EX-99.D.4 17 y64755texv99wdw4.txt TENDER AND VOTING AGREEMENT Exhibit (d)(4) EXECUTION COPY Annex B-3 SHAREHOLDER TENDER AND VOTING AGREEMENT This SHAREHOLDER TENDER AND VOTING AGREEMENT (this "Agreement") is entered into as of October 23, 2002, by and between DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Richard P. McNeight, an individual (the "Shareholder"). W I T N E S S E T H: WHEREAS, as of the date hereof, Shareholder "beneficially owns" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, par value $0.015 per share (the "Common Stock"), of [Prince] Inc., a Florida corporation (the "Company"), set forth opposite such Shareholder's name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the power to dispose of or vote over which such Shareholder acquires during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the "Subject Shares"); WHEREAS, Parent, Merger Sub and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides for Merger Sub to commence a tender offer (the "Offer") for all of the issued and outstanding shares of the Common Stock and the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, the Shareholder is executing this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I TENDER AGREEMENT AND IRREVOCABLE PROXY Section 1.1 Tender Agreement. The Shareholder hereby agrees that unless this Agreement is terminated pursuant to Article V hereof, (a) the Shareholder shall tender the Subject Shares to Merger Sub in the Offer as promptly as practicable, and in any event no later than the tenth Business Day, following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and (b) the Shareholder shall not withdraw any Subject Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer. Section 1.2 Grant of Irrevocable Proxy. Shareholder hereby appoints Parent and any designee of Parent, and each of them individually, as Shareholder's proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect the Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of the Shareholder contained in this Agreement, and (z) except with the written consent of Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Acquisition Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company as such board is constituted as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its Subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement; provided, however, that nothing in this Agreement shall limit or affect Shareholder from acting in accordance with his fiduciary duties as an officer or director of the Company. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Shareholder agrees not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article I. This proxy is given to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. (a) The proxy and power of attorney granted pursuant to Section 1.2(a) by the Shareholder is executed in accordance with Section 607.0722 of Florida Law and shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. 2 ARTICLE II COVENANTS Section 2.1 Generally. The Shareholder agrees that prior to the termination of this Agreement, except as contemplated by the terms of this Agreement, he shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer"), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its obligations under this Agreement. (a) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction. (b) The Shareholder agrees to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Subject Shares, and shall use its reasonable best efforts to cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares: (c) THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND VOTING AGREEMENT, DATED AS OF OCTOBER 23, 2002, BY AND AMONG DRS TECHNOLOGIES INC., PRINCE MERGER CORPORATION AND THE SHAREHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. Section 2.2 Standstill Obligations of Shareholder. The Shareholder covenants and agrees with Parent that: (a) the Shareholder shall not, nor shall Shareholder permit any of his affiliates to, nor shall Shareholder act in concert with or permit any of his affiliates to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company accept the Offer, tender their shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement. (b) the Shareholder shall not, nor shall the Shareholder permit any of his affiliates to, nor shall such Shareholder act in concert with or permit any of his 3 affiliates to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock. (c) the Shareholder shall not, and shall direct its Representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Parent, relating to any Acquisition Proposal. Shareholder hereby represents that he is not now engaged in discussions or negotiations with any party other than Parent with respect to any Acquisition Proposal. Promptly after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which he reasonably believes could lead to an Acquisition Proposal, Shareholder shall provide Parent with written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry, and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. After receipt of the Acquisition Proposal, request or inquiry, Shareholder shall promptly keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER The Shareholder hereby represents and warrants, to Parent as follows: Section 3.1 Authority. The Shareholder has all necessary legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Shareholder have been duly authorized by all necessary action on the part of such Shareholder. Section 3.2 Ownership of Shares. Schedule I sets forth, opposite the Shareholder's name, the number of shares of Common Stock over which the Shareholder has record and beneficial ownership as of the date hereof. The Shareholder is the lawful owner of the shares of Common Stock denoted as being owned by the Shareholder on Schedule I and has the sole power to dispose of (or cause to be disposed of) or vote (or cause to be voted) such shares of Common Stock. Shareholder has good and valid title to the Common Stock denoted as being owned by such Shareholder on Schedule I, free and clear of any and all Liens, other than those Liens created by this Agreement and except with respect to 148,617 Subject Shares which are held by National City Bank as collateral for a personal loan to Richard P. McNeight. Shareholder shall use reasonable best efforts to remove such Lien on such 148,617 Subject Shares. . Section 3.3 No Conflicts. (i) Except for filings under the HSR Act 4 and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Shareholder and the consummation by the Shareholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Shareholder, the consummation by the Shareholder of the transactions contemplated hereby or compliance by the Shareholder with any of the provisions hereof shall (A) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Shareholder is a party or by which Shareholder or any of its Subject Shares or assets may be bound, or (B) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 3.4 Reliance by Parent. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by the Shareholder. Section 3.5 No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon the Shareholder' execution and delivery of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Shareholder as follows: Section 4.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent have been duly authorized by all necessary action on the part of Parent. Section 4.2 Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. 5 Section 4.3 Reliance by Shareholder. Parent understands and acknowledges that the Shareholder is entering into this Agreement in reliance upon the execution and delivery of the Merger Agreement by Parent. ARTICLE V TERMINATION Section 5.1 Termination. This Agreement shall terminate, and neither Parent nor the Shareholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Parent and the Shareholder, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms; provided, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.1, 6.5, 6.6 and 6.14 of this Agreement shall survive the termination of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Publication. The Shareholder hereby permits Parent and Merger Sub to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable Legal Requirements, the Proxy Statement his identity and ownership of shares of Common Stock and the nature of its commitments, arrangements and understandings pursuant to this Agreement. Section 6.2 HSR Requirements. The Shareholder agrees promptly to make all necessary filings, if any, and thereafter make any other required submissions, if any, with respect to the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement required under the HSR Act, any antitrust and competition laws of any other applicable jurisdiction and any other applicable Legal Requirements. The Shareholder shall cooperate with Parent in connection with the making of any such filings referenced in the preceding sentence, including providing copies of all such documents to Parent and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Section 6.3 Further Actions. Each of the parties hereto agrees that it will use its reasonable best efforts to do all things necessary to effectuate this Agreement. Section 6.4 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. 6 The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 6.5 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 6.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to Shareholder, to: Richard P. McNeight 146 Windward Way Indian Harbour Beach, Florida 32937 7 Section 6.7 Capitalized Terms. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement. Section 6.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. Section 6.10 Entire Agreement. This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. Section 6.11 Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that each of Parent and Merger Sub may assign and transfer its rights and obligations hereunder to any direct or indirect Subsidiary of Parent. Section 6.12 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 6.13 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. Section 6.14 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. (a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the application of Delaware principles of conflicts of laws. 8 (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.6. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.14(c). Section 6.15 Counterparts. This Agreement may be executed in counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 6.16 Capacity. Shareholder makes no agreement or understanding herein as a director or officer of the Company. Shareholder signs this Agreement solely in his capacity as a record and beneficial owner of the Subject Shares, 9 and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company. * * * * * 10 IN WITNESS WHEREOF, Parent, Merger Sub and the Shareholder have caused this Agreement to be duly executed as of the day and year first above written. DRS TECHNOLOGIES, INC., a Delaware corporation By: ----------------------------------- Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: ----------------------------------- Name: Mark S. Newman Title: President ----------------------------------- Richard P. McNeight Schedule I Ownership of Common Stock Name and Address of Shareholder Number of Shares - ------------------------------- ---------------- Richard P. McNeight 835,235 146 Windward Way Indian Harbour Beach, Florida 32937 EX-99.D.5 18 y64755texv99wdw5.txt TENDER AND VOTING AGREEMENT Exhibit (d)(5) EXECUTION COPY Annex B-4 SHAREHOLDER TENDER AND VOTING AGREEMENT This SHAREHOLDER TENDER AND VOTING AGREEMENT (this "Agreement") is entered into as of October 23, 2002, by and between DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and James E. Clifford, an individual (the "Shareholder"). W I T N E S S E T H: WHEREAS, as of the date hereof, Shareholder "beneficially owns" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, par value $0.015 per share (the "Common Stock"), of [Prince] Inc., a Florida corporation (the "Company"), set forth opposite such Shareholder's name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the power to dispose of or vote over which such Shareholder acquires during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the "Subject Shares"); WHEREAS, Parent, Merger Sub and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides for Merger Sub to commence a tender offer (the "Offer") for all of the issued and outstanding shares of the Common Stock and the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, the Shareholder is executing this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I TENDER AGREEMENT AND IRREVOCABLE PROXY Section 1.1 Tender Agreement. The Shareholder hereby agrees that unless this Agreement is terminated pursuant to Article V hereof, (a) the Shareholder shall tender the Subject Shares to Merger Sub in the Offer as promptly as practicable, and in any event no later than the tenth Business Day, following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and (b) the Shareholder shall not withdraw any Subject Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer. Section 1.2 Grant of Irrevocable Proxy. Shareholder hereby appoints Parent and any designee of Parent, and each of them individually, as Shareholder's proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect the Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of the Shareholder contained in this Agreement, and (z) except with the written consent of Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Acquisition Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company as such board is constituted as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its Subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement; provided, however, that nothing in this Agreement shall limit or affect Shareholder from acting in accordance with his fiduciary duties as an officer or director of the Company. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Shareholder agrees not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article I. This proxy is given to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. (a) The proxy and power of attorney granted pursuant to Section 1.2(a) by the Shareholder is executed in accordance with Section 607.0722 of Florida Law and shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. 2 ARTICLE II COVENANTS Section 2.1 Generally. The Shareholder agrees that prior to the termination of this Agreement, except as contemplated by the terms of this Agreement, he shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer"), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its obligations under this Agreement. (a) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction. (b) The Shareholder agrees to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Subject Shares, and shall use its reasonable best efforts to cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares: (c) THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND VOTING AGREEMENT, DATED AS OF OCTOBER 23, 2002, BY AND AMONG DRS TECHNOLOGIES INC., PRINCE MERGER CORPORATION AND THE SHAREHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. Section 2.2 Standstill Obligations of Shareholder. The Shareholder covenants and agrees with Parent that: (a) the Shareholder shall not, nor shall Shareholder permit any of his affiliates to, nor shall Shareholder act in concert with or permit any of his affiliates to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company accept the Offer, tender their shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement. (b) the Shareholder shall not, nor shall the Shareholder permit any of his 3 affiliates to, nor shall such Shareholder act in concert with or permit any of his affiliates to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock. (c) the Shareholder shall not, and shall direct its Representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Parent, relating to any Acquisition Proposal. Shareholder hereby represents that he is not now engaged in discussions or negotiations with any party other than Parent with respect to any Acquisition Proposal. Promptly after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which he reasonably believes could lead to an Acquisition Proposal, Shareholder shall provide Parent with written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry, and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. After receipt of the Acquisition Proposal, request or inquiry, Shareholder shall promptly keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER The Shareholder hereby represents and warrants, to Parent as follows: Section 3.1 Authority. The Shareholder has all necessary legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Shareholder have been duly authorized by all necessary action on the part of such Shareholder. Section 3.2 Ownership of Shares. Schedule I sets forth, opposite the Shareholder's name, the number of shares of Common Stock over which the Shareholder has record and beneficial ownership as of the date hereof. The Shareholder is the lawful owner of the shares of Common Stock denoted as being owned by the Shareholder on Schedule I and has the sole power to dispose of (or cause to be disposed of) or vote (or cause to be voted) such shares of Common Stock. Shareholder has good and valid title to the Common Stock denoted as being owned by such Shareholder on Schedule I, free and clear of any and all Liens, other than those Liens created by this Agreement. Section 3.3 No Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement 4 by Shareholder and the consummation by the Shareholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Shareholder, the consummation by the Shareholder of the transactions contemplated hereby or compliance by the Shareholder with any of the provisions hereof shall (A) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Shareholder is a party or by which Shareholder or any of its Subject Shares or assets may be bound, or (B) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 3.4 Reliance by Parent. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by the Shareholder. Section 3.5 No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon the Shareholder' execution and delivery of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Shareholder as follows: Section 4.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent have been duly authorized by all necessary action on the part of Parent. Section 4.2 Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 4.3 Reliance by Shareholder. Parent understands and acknowledges that the Shareholder is entering into this Agreement in reliance upon the 5 execution and delivery of the Merger Agreement by Parent. ARTICLE V TERMINATION Section 5.1 Termination. This Agreement shall terminate, and neither Parent nor the Shareholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Parent and the Shareholder, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms; provided, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.1, 6.5, 6.6 and 6.14 of this Agreement shall survive the termination of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Publication. The Shareholder hereby permits Parent and Merger Sub to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable Legal Requirements, the Proxy Statement his identity and ownership of shares of Common Stock and the nature of its commitments, arrangements and understandings pursuant to this Agreement. Section 6.2 HSR Requirements. The Shareholder agrees promptly to make all necessary filings, if any, and thereafter make any other required submissions, if any, with respect to the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement required under the HSR Act, any antitrust and competition laws of any other applicable jurisdiction and any other applicable Legal Requirements. The Shareholder shall cooperate with Parent in connection with the making of any such filings referenced in the preceding sentence, including providing copies of all such documents to Parent and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Section 6.3 Further Actions. Each of the parties hereto agrees that it will use its reasonable best efforts to do all things necessary to effectuate this Agreement. Section 6.4 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon 6 compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 6.5 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 6.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to Shareholder, to: James E. Clifford 10801 E. Happy Valley Road Scottsdale, Arizona 85255 with copies to: 7 UES, Inc. 4401 Dayton-Xenia Road Dayton, Ohio 45432-1894 Attention: Dee Dee Donley Section 6.7 Capitalized Terms. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement. Section 6.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. Section 6.10 Entire Agreement. This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. Section 6.11 Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that each of Parent and Merger Sub may assign and transfer its rights and obligations hereunder to any direct or indirect Subsidiary of Parent. Section 6.12 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 6.13 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. Section 6.14 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. 8 (a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the application of Delaware principles of conflicts of laws. (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.6. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.14(c). Section 6.15 Counterparts. This Agreement may be executed in 9 counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 6.16 Capacity. Shareholder makes no agreement or understanding herein as a director or officer of the Company. Shareholder signs this Agreement solely in his capacity as a record and beneficial owner of the Subject Shares, and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company. * * * * * 10 IN WITNESS WHEREOF, Parent, Merger Sub and the Shareholder have caused this Agreement to be duly executed as of the day and year first above written. DRS TECHNOLOGIES, INC., a Delaware corporation By: ______________________________ Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: ______________________________ Name: Mark S. Newman Title: President __________________________________ James E. Clifford Schedule I Ownership of Common Stock
Name and Address of Shareholder Number of Shares ------------------------------- ---------------- James E. Clifford 706,588 10801 E. Happy Valley Road Scottsdale, Arizona 85255
EX-99.D.6 19 y64755texv99wdw6.txt TENDER AND VOTING AGREEMENT Exhibit (d)(6) EXECUTION COPY Annex B-5 SHAREHOLDER TENDER AND VOTING AGREEMENT This SHAREHOLDER TENDER AND VOTING AGREEMENT (this "Agreement") is entered into as of October 23, 2002, by and between DRS Technologies, Inc., a Delaware corporation ("Parent"), Prince Merger Corporation, a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and C. Hyland Schooley, an individual (the "Shareholder"). W I T N E S S E T H: WHEREAS, as of the date hereof, Shareholder "beneficially owns" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, par value $0.015 per share (the "Common Stock"), of [Prince] Inc., a Florida corporation (the "Company"), set forth opposite such Shareholder's name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the power to dispose of or vote over which such Shareholder acquires during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the "Subject Shares"); WHEREAS, Parent, Merger Sub and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides for Merger Sub to commence a tender offer (the "Offer") for all of the issued and outstanding shares of the Common Stock and the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, the Shareholder is executing this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I TENDER AGREEMENT AND IRREVOCABLE PROXY Section 1.1 Tender Agreement. The Shareholder hereby agrees that unless this Agreement is terminated pursuant to Article V hereof, (a) the Shareholder shall tender the Subject Shares to Merger Sub in the Offer as promptly as practicable, and in any event no later than the tenth Business Day, following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and (b) the Shareholder shall not withdraw any Subject Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer. Section 1.2 Grant of Irrevocable Proxy. Shareholder hereby appoints Parent and any designee of Parent, and each of them individually, as Shareholder's proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect the Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of the Shareholder contained in this Agreement, and (z) except with the written consent of Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Acquisition Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company as such board is constituted as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its Subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement; provided, however, that nothing in this Agreement shall limit or affect Shareholder from acting in accordance with his fiduciary duties as an officer or director of the Company. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Shareholder agrees not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article I. This proxy is given to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. (a) The proxy and power of attorney granted pursuant to Section 1.2(a) by the Shareholder is executed in accordance with Section 607.0722 of Florida Law and shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. 2 ARTICLE II COVENANTS Section 2.1 Generally. The Shareholder agrees that prior to the termination of this Agreement, except as contemplated by the terms of this Agreement, he shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer"), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its obligations under this Agreement. (a) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction. (b) The Shareholder agrees to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Subject Shares, and shall use its reasonable best efforts to cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares: (c) THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND VOTING AGREEMENT, DATED AS OF OCTOBER 23, 2002, BY AND AMONG DRS TECHNOLOGIES INC., PRINCE MERGER CORPORATION AND THE SHAREHOLDER. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. Section 2.2 Standstill Obligations of Shareholder. The Shareholder covenants and agrees with Parent that: (a) the Shareholder shall not, nor shall Shareholder permit any of his affiliates to, nor shall Shareholder act in concert with or permit any of his affiliates to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a "solicitation" of "proxies" (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company accept the Offer, tender their shares in the Offer, vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement. (b) the Shareholder shall not, nor shall the Shareholder permit any of his affiliates to, nor shall such Shareholder act in concert with or permit any of his 3 affiliates to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock. (c) the Shareholder shall not, and shall direct its Representatives not to, directly or indirectly, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Parent, relating to any Acquisition Proposal. Shareholder hereby represents that he is not now engaged in discussions or negotiations with any party other than Parent with respect to any Acquisition Proposal. Promptly after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which he reasonably believes could lead to an Acquisition Proposal, Shareholder shall provide Parent with written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry, and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. After receipt of the Acquisition Proposal, request or inquiry, Shareholder shall promptly keep Parent informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER The Shareholder hereby represents and warrants, to Parent as follows: Section 3.1 Authority. The Shareholder has all necessary legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Shareholder have been duly authorized by all necessary action on the part of such Shareholder. Section 3.2 Ownership of Shares. Schedule I sets forth, opposite the Shareholder's name, the number of shares of Common Stock over which the Shareholder has record and beneficial ownership as of the date hereof. The Shareholder is the lawful owner of the shares of Common Stock denoted as being owned by the Shareholder on Schedule I and has the sole power to dispose of (or cause to be disposed of) or vote (or cause to be voted) such shares of Common Stock. Shareholder has good and valid title to the Common Stock denoted as being owned by such Shareholder on Schedule I, free and clear of any and all Liens, other than those Liens created by this Agreement. Section 3.3 No Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement 4 by Shareholder and the consummation by the Shareholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Shareholder, the consummation by the Shareholder of the transactions contemplated hereby or compliance by the Shareholder with any of the provisions hereof shall (A) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Shareholder is a party or by which Shareholder or any of its Subject Shares or assets may be bound, or (B) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 3.4 Reliance by Parent. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by the Shareholder. Section 3.5 No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon the Shareholder' execution and delivery of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Shareholder as follows: Section 4.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent have been duly authorized by all necessary action on the part of Parent. Section 4.2 Conflicts. (i) Except for filings under the HSR Act and the Exchange Act, no filing with any Governmental Entity, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation. Section 4.3 Reliance by Shareholder. Parent understands and acknowledges that the Shareholder is entering into this Agreement in reliance upon the 5 execution and delivery of the Merger Agreement by Parent. ARTICLE V TERMINATION Section 5.1 Termination. This Agreement shall terminate, and neither Parent nor the Shareholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Parent and the Shareholder, (ii) the Effective Time, and (iii) the date of termination of the Merger Agreement in accordance with its terms; provided, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.1, 6.5, 6.6 and 6.14 of this Agreement shall survive the termination of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Publication. The Shareholder hereby permits Parent and Merger Sub to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable Legal Requirements, the Proxy Statement his identity and ownership of shares of Common Stock and the nature of its commitments, arrangements and understandings pursuant to this Agreement. Section 6.2 HSR Requirements. The Shareholder agrees promptly to make all necessary filings, if any, and thereafter make any other required submissions, if any, with respect to the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement required under the HSR Act, any antitrust and competition laws of any other applicable jurisdiction and any other applicable Legal Requirements. The Shareholder shall cooperate with Parent in connection with the making of any such filings referenced in the preceding sentence, including providing copies of all such documents to Parent and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Section 6.3 Further Actions. Each of the parties hereto agrees that it will use its reasonable best efforts to do all things necessary to effectuate this Agreement. Section 6.4 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon 6 compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 6.5 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 6.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Parent or Merger Sub, to: DRS Technologies, Inc. 5 Sylvan Way Parsippany, New Jersey 07054 Attention: Nina L. Dunn Telephone No.: (973) 898-1500 Telecopy No.: with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Jeffrey W. Tindell Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 (b) if to Shareholder, to: C. Hyland Schooley 601 Woods Road Dayton, Ohio 45419 Section 6.7 Capitalized Terms. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed 7 to them in the Merger Agreement. Section 6.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. Section 6.10 Entire Agreement. This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. Section 6.11 Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that each of Parent and Merger Sub may assign and transfer its rights and obligations hereunder to any direct or indirect Subsidiary of Parent. Section 6.12 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 6.13 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. Section 6.14 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. (a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the application of Delaware principles of conflicts of laws. (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any 8 Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.6. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.14(c). Section 6.15 Counterparts. This Agreement may be executed in counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 6.16 Capacity. Shareholder makes no agreement or understanding herein as a director or officer of the Company. Shareholder signs this Agreement solely in his capacity as a record and beneficial owner of the Subject Shares, and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company. 9 * * * * * 10 IN WITNESS WHEREOF, Parent, Merger Sub and the Shareholder have caused this Agreement to be duly executed as of the day and year first above written. DRS TECHNOLOGIES, INC., a Delaware corporation By: _______________________________ Name: Mark S. Newman Title: Chairman, President and Chief Executive Officer PRINCE MERGER CORPORATION, a Florida corporation By: _______________________________ Name: Mark S. Newman Title: President ___________________________________ C. Hyland Schooley Schedule I Ownership of Common Stock
Name and Address of Shareholder Number of Shares ------------------------------- ---------------- C. Hyland Schooley 677,410 601 Woods Road Dayton, Ohio 45419
EX-99.D.7 20 y64755texv99wdw7.txt CONFIDENTIALITY AGREEMENT Exhibit (d)(7) CONFIDENTIALITY AGREEMENT First Union Securities, Inc. (dba) Wachovia Securities 301 South College Street Charlotte, North Carolina 28288-0745 Ladies and Gentlemen: You have advised us that you are acting on behalf of Paravant Inc. (together with its subsidiaries and affiliates collectively, "Paravant" or the "Company") in its consideration of a possible sale of the Company and you have agreed to discuss with us a possible transaction (the "Transaction") involving the Company and/or its stockholders, which may include a possible merger, acquisition of stock or assets, or other extraordinary transaction involving the Company. As a condition to such discussions, you have required that we agree to keep strictly confidential all Information (as defined below) conveyed to us regarding this matter. This letter will confirm our agreement with you and Paravant to retain in strict confidence all information (whether oral or written) conveyed to us by Paravant, its agents, or you regarding the Company (collectively, the "Information"), unless such Information is publicly available, we can clearly establish that such Information was known to us, without any direct or indirect obligation of confidentiality, prior to your disclosure, or such Information is or becomes available to us on a nonconfidential basis from a source other than you, Paravant, or its agents, provided that such other source is not bound by a confidentiality agreement with you or Paravant. We will use such Information only in connection with our consideration of whether to enter into the Transaction and will not otherwise use it in our business or disclose it to others, except that we shall have the right to communicate the Information to such of our directors, officers, advisors, employees, and affiliates (if any) who are required by their duties to have knowledge thereof, provided that each such person is informed that such Information is strictly confidential and subject to this agreement and agrees not to disclose or use such Information except as provided herein. We hereby agree to be responsible for any breach of this agreement by our officers, directors, advisors, employees, and/or affiliates or any of our representatives. In the event that we become legally compelled by deposition, subpoena, or other court or governmental action to disclose any of the confidential Information covered by this agreement, we shall provide Paravant with prompt prior written notice to that effect, and we will cooperate with Paravant if it seeks to obtain a protective order concerning such confidential Information. Except during the ordinary course of business, we agree not to initiate contact, or engage in discussions, with any employee, customer, or supplier of Paravant without the express prior written consent of you or the Company. Unless we complete a Transaction with the Company, we agree not to solicit for employment any officers or management employees of the Company, without the written consent of the Company, for a period of two years from the date of this letter. Until the expiration of two years from the date of this letter, we will not and will ensure that our officers, directors, advisors, employees, and affiliates will not, without the prior written CONFIDENTIALITY AGREEMENT Page 2 approval of the Board of Directors of the Company, (i) acquire or agree to acquire or make any proposal to acquire directly or indirectly any securities or property of the Company; (ii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) to vote, or seek to advise or influence any person with respect to the voting of, any voting securities of the Company; (iii) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any voting securities of the Company; or (iv) otherwise act alone or in concert with others, directly or indirectly, to seek to control, advise, change, or influence the management, Board of Directors, or policies of the Company. We acknowledge that neither Paravant nor any of its directors, officers, employees, stockholders, or agents make any representation as to the accuracy or completeness of the Information and that neither Paravant nor any of its directors, officers, employees, stockholders, or agents shall have any liability to us as a result of our use of such Information. We also agree that without prior written consent of Paravant, we and our officers, directors, advisors, employees, and affiliates will not disclose to any other person that we have received such Information, that we are in discussions or negotiations with you and Paravant in connection with the Transaction, or that the Board of Directors of Paravant is contemplating the Transaction. We acknowledge and will advise all of our directors, officers, employees, affiliates, and other representatives who are informed of the matters which are the subject of this letter that U.S. securities law prohibit any person who has material, nonpublic information concerning an issuer of publicly held securities from purchasing or selling such securities. We acknowledge that Paravant reserves the right to reject any or all offers relating to the Transaction. We further acknowledge that Paravant reserves the right to discontinue discussions at any time and to conduct the process relating to the Transaction as in its sole discretion it shall determine (including, without limitation, negotiating with any prospective purchasers, and entering into a definitive agreement without prior notice to us or any other person or to change any procedures relating to such sale without notice to us or any other person). We shall have no claim against Paravant or any of its directors, officers, representatives, affiliates, or agents arising out of or relating to any Transaction other than as against them as named parties to a definitive agreement and only in accordance with the express terms and conditions thereof. We agree to take all reasonable precautions to prevent loss or theft of any Information while in our possession. Upon the Company's request, we agree to return to you all written Information provided to us relating to Paravant We also agree to destroy any memoranda, notes, emails, or other writings or electronic files prepared by us or our representatives based on such Information, together with all copies of such Information in our possession or under our control to which we have access. We agree that neither Paravant nor First Union Securities, Inc. shall be obligated to pay any fees on our behalf to any brokers, finders, or other parties claiming to represent us in this Transaction. Without limiting the generality of the nondisclosure agreements CONFIDENTIALITY AGREEMENT Page 3 contained herein above, it is further understood that we are strictly prohibited by this letter from acting as a broker or an agent using any of the Information provided to us. We agree that Paravant or First Union Securities, Inc. shall be entitled to specific performance or other equitable relief, including injunction, in the event of any breach or threatened breach of the provisions of this letter, without prejudice to the related legal or equitable rights of DRS Technologies, Inc. Such remedy shall not be deemed to be the exclusive remedy for a breach of this letter but shall be in addition to all other remedies at law or equity. The parties hereto acknowledge that any action or proceeding arising out of or relating to this letter agreement shall be determined by the United States District Court for the Middle District of Florida and this agreement shall be interpreted and construed in its entirety in accordance with the laws of the State of Florida. Name: /s/ Nina L. Dunn ------------------------------------- Title: Exec. Vice President, General Counsel ------------------------------------- Company: DRS Technologies, Inc. ------------------------------------- Date: 4/24/02 ------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----