10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
Commission file number 1-8533

DRS Technologies, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
13-2632319
(IRS Employer Identification No.)

5 Sylvan Way, Parsippany, New Jersey 07054
(Address of principal executive offices)
(973) 898-1500
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/        No / /

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes /x/         No / /

        As of November 13, 2003, 26,804,520 shares of DRS Technologies, Inc. common stock, $0.01 par value, were outstanding.

DRS TECHNOLOGIES, INC. AND SUBSIDIARIES

Index to Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2003

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets—September 30, 2003 and March 31, 2003	1
	Consolidated Statements of Earnings—Three and Six Months Ended     September 30, 2003 and 2002	2
	Consolidated Statements of Cash Flows—Six Months Ended September 30, 2003     and 2002	3
	Notes to Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 4.	Submission of Matters to a Vote of Security Holders	29
Item 6.	Exhibits and Reports on Form 8-K	30
SIGNATURES		31

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)

			September 30, 2003		March 31, 2003
Assets
Current assets
	Cash and cash equivalents		$	102,651	$	95,938
	Accounts receivable, net of allowances for doubtful accounts of $3.3 million and $2.9 million as of September 30, 2003 and March 31, 2003, respectively			138,834		163,048
	Inventories, net			134,962		114,102
	Prepaid expenses, deferred income taxes and other current assets			20,405		16,211
		Total current assets		396,852		389,299
Property, plant and equipment, less accumulated depreciation and amortization of $61,275 and $53,151 at September 30, 2003 and March 31, 2003, respectively				87,585		87,610
Acquired intangible assets, net				45,902		44,781
Goodwill				437,906		436,863
Deferred income taxes and other noncurrent assets				12,837		13,568
		Total assets	$	981,082	$	972,121
Liabilities and Stockholders' Equity
Current liabilities
	Current installments of long-term debt		$	7,615	$	7,717
	Short-term bank debt			195		521
	Accounts payable			59,698		68,340
	Accrued expenses and other current liabilities			209,842		212,697
		Total current liabilities		277,350		289,275
Long-term debt, excluding current installments				215,529		216,837
Other liabilities				28,237		27,829
		Total liabilities		521,116		533,941
Commitments and contingencies (Notes 6, 11 and 12)
Stockholders' equity
	Preferred stock, no par value. Authorized 2,000,000 shares; none issued at September 30, 2003 and March 31, 2003			—		—
	Common Stock, $.01 par value per share. Authorized 30,000,000 shares; issued 22,481,348 and 22,421,986 shares at September 30, 2003 and March 31, 2003, respectively			225		224
	Additional paid-in capital			344,509		343,605
	Retained earnings			111,266		94,527
	Accumulated other comprehensive earnings (losses)			3,966		(176	)
		Total stockholders' equity		459,966		438,180
		Total liabilities and stockholders' equity	$	981,082	$	972,121

See accompanying Notes to Consolidated Financial Statements.

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DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per-share data)
(Unaudited)

		Three Months Ended September 30,				Six Months Ended September 30,
		2003		2002		2003			2002
Revenues		$	206,240	$	161,196	$	373,438		$	292,434
Costs and expenses			185,009		144,473		335,847			263,038
	Operating income		21,231		16,723		37,591			29,396
Interest income			179		205		516			683
Interest and related expenses			4,149		2,472		7,178			4,755
Other income (expense), net			152		131		(249	)		(390	)
	Earnings before minority interest and income taxes		17,413		14,587		30,680			24,934
Minority interest			550		396		789			680
	Earnings before income taxes		16,863		14,191		29,891			24,254
Income taxes			7,420		6,528		13,152			11,157
	Net earnings	$	9,443	$	7,663	$	16,739		$	13,097
Net earnings per share of common stock:
	Basic earnings per share	$	0.42	$	0.45	$	0.75		$	0.78
	Diluted earnings per share	$	0.41	$	0.44	$	0.73		$	0.74

See accompanying Notes to Consolidated Financial Statements.

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DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)

(Unaudited)

			Six Months Ended September 30,
			2003			2002
Cash Flows from Operating Activities
Net earnings			$	16,739		$	13,097
Adjustments to reconcile net earnings to cash flows from operating activities:
	Depreciation and amortization			11,018			7,586
	Deferred income taxes			82			(9	)
	Other, net			2,111			1,202
	Changes in assets and liabilities, net of effects from business combinations and divestitures:
		Decrease in accounts receivable		25,557			33
		(Increase) decrease in inventories		(19,431	)		10,565
		Increase in prepaid expenses and other current assets		(2,899	)		(6,721	)
		Decrease in accounts payable		(9,195	)		(7,428	)
		Decrease in accrued expenses and other current liabilities		(9,905	)		(755	)
		Increase in customer advances		9,515			7,215
		Other, net		687			(164	)
	Net cash provided by operating activities			24,279			24,621
Cash Flows from Investing Activities
	Capital expenditures			(9,112	)		(9,316	)
	Payments pursuant to business combinations, net of cash acquired			(7,568	)		(93,600	)
	Other, net			321			206
	Net cash used in investing activities			(16,359	)		(102,710	)
Cash Flows from Financing Activities
	Net (payments) borrowings of short-term debt			(352	)		678
	Repayment of long-term debt			(1,410	)		(895	)
	Proceeds from stock option exercises			572			334
	Other, net			90			30
	Net cash (used in) provided by financing activities			(1,100	)		147
Effect of exchange rates on cash and cash equivalents				(107	)		367
Net increase (decrease) in cash and cash equivalents				6,713			(77,575	)
Cash and cash equivalents, beginning of period				95,938			117,782
	Cash and cash equivalents, end of period		$	102,651		$	40,207

See accompanying Notes to Consolidated Financial Statements

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DRS TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1.     Basis of Presentation

        The accompanying unaudited Consolidated Financial Statements of DRS Technologies, Inc. and its Subsidiaries (DRS or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of the Company, the interim financial information provided herein reflects all adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation of the Company's consolidated financial position as of September 30, 2003, the results of operations for the three- and six-month periods ended September 30, 2003 and 2002, and cash flows for the six-month periods ended September 30, 2003 and 2002. The results of operations for the three- and six-month periods ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year. Certain fiscal 2003 amounts have been reclassified to conform to the fiscal 2004 presentation.

        These interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements of the Company for the fiscal year ended March 31, 2003, included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2003.

2.     Stock-Based Compensation

        The Company has one stock-based compensation plan, the 1996 Omnibus Plan (Omnibus Plan). Under the terms of the Omnibus Plan, stock options may be granted to key employees, directors and consultants of the Company. The Company accounts for stock options granted to employees and directors under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Compensation expense for a stock option granted to an employee or director is recognized in earnings based on the excess, if any, of the quoted market price of DRS common stock at the grant date of the award, or other measurement date, over the amount an employee or director must pay to acquire the stock. When the exercise price of the option granted to an employee or director equals or exceeds the quoted market price of DRS common stock at the date of grant, the Company does not recognize compensation expense. The Company elected not to adopt the fair value based method of accounting for stock-based employee compensation as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123." Had the Company adopted the fair value based method provisions of SFAS 123, it would have recorded a non-cash expense for the estimated fair value of the stock options that the Company has granted to its employees and directors.

        The table below compares the "as reported" net earnings and earnings per share to the "pro forma" net earnings and earnings per share that the Company would have reported if it had elected to recognize compensation expense in accordance with the fair value based method of accounting of

4

SFAS 123. For purposes of determining the pro forma effects of SFAS 123, the estimated fair value of options granted was calculated using the Black-Scholes option pricing valuation model.

		Three Months Ended September 30,						Six Months Ended September 30,
		2003			2002			2003			2002
		(in thousands, except per-share data)
Net earnings, as reported		$	9,443		$	7,663		$	16,739		$	13,097
Add: Stock-based compensation expense included in reported net earnings, net of related tax effects			—			23			—			46
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects			(737	)		(481	)		(1,467	)		(937	)
Pro forma net earnings		$	8,706		$	7,205		$	15,272		$	12,206
Earnings per share:
	Basic—as reported	$	0.42		$	0.45		$	0.75		$	0.78
	Basic—pro forma	$	0.39		$	0.43		$	0.68		$	0.72
	Diluted—as reported	$	0.41		$	0.44		$	0.73		$	0.74
	Diluted—pro forma	$	0.38		$	0.41		$	0.67		$	0.69

3.     Inventories

        Inventories are summarized as follows:

	September 30, 2003			March 31, 2003
	(in thousands)
Work-in-process	$	165,625		$	142,083
Raw material and finished goods		13,021			13,139
		178,646			155,222
Less progress payments		(43,684	)		(41,120	)
Total	$	134,962		$	114,102

        Inventoried contract costs for the Company's businesses that are primarily government contractors include general and administrative (G&A) costs, including internal research and development costs (IRAD). G&A and IRAD are allowable, indirect contract costs under U.S. Government regulations. The Company allocates G&A and IRAD costs to certain contracts, and accounts for them as product costs, not as period expenses.

        The Company recorded costs for internal research and development amounting to $2.7 million and $3.6 million for the three-month periods ended September 30, 2003 and 2002, respectively, and $6.6 million and $6.4 million, respectively, for the six-month periods then ended.

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4.     Goodwill and Intangible Assets

        The following disclosure presents certain information about the Company's acquired intangible assets as of September 30, 2003 and March 31, 2003. All acquired intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual values.

Intangible Assets Subject to Amortization		Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Balance
					(in thousands)
As of September 30, 2003
	Technology-based intangibles	20 years	$	27,305	$	(7,150	)	$	20,155
	Customer-related intangibles	18 years		29,990		(4,243	)		25,747
Total			$	57,295	$	(11,393	)	$	45,902
As of March 31, 2003
	Technology-based intangibles	21 years	$	26,955	$	(6,348	)	$	20,607
	Customer-related intangibles	19 years		27,400		(3,226	)		24,174
Total			$	54,355	$	(9,574	)	$	44,781

        The aggregate acquired intangible asset amortization expense for the three-month periods ended September 30, 2003 and 2002 was $0.9 million and $0.8 million, respectively, and for the six months ended September 30, 2003 and 2002, was $1.8 million and $1.4 million, respectively. The estimated acquired intangible amortization expense, based on gross carrying amounts at September 30, 2003, is estimated to be $3.7 million for fiscal 2004, $3.5 million for fiscal 2005, and $3.4 million per year for fiscal 2006 through fiscal 2009.

        The table below reconciles the change in the carrying amount of goodwill by operating segment for the period from March 31, 2003 to September 30, 2003.

	Electronic Systems Group			Electro- Optical Systems Group		Flight Safety and Communications Group		Total
	(in thousands)
Balance as of March 31, 2003	$	284,314		$	121,116	$	31,433	$	436,863
Purchase price allocation adjustments on fiscal 2003 acquisitions		(6,798	)		1,343		—		(5,455	)
Working capital adjustment on fiscal 2003 acquisition of Power Technology Incorporated (PTI)		547			—		—		547
Acquisition earn-out—PTI		4,000							4,000
Foreign currency translation adjustment		423			—		1,528		1,951
Balance as of September 30, 2003	$	282,486		$	122,459	$	32,961	$	437,906

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        The purchase price allocation adjustments in the previous table reflect the following:

	Amount of Adjustment
	(in thousands)
Electronic Systems Group
Kaman Electromagnetics Development Center	$	(5,197	)(A)
Power Technology Incorporated		(2,063	)(B)
Navy Controls Division of Eaton Corporation		(493	)(C)
Paravant Inc.		955	(D)
Total	$	(6,798	)
Electro-Optical Systems Group
DKD, Inc. (Nytech)	$	1,371	(E)
Unmanned Aerial Vehicle business of Meggitt Defense Systems		(28	)(F)
	$	1,343

(A)

Reflects a purchase price allocation adjustment of $3.8 million (decrease to goodwill) to allocate the fair value of certain acquired identifiable intangible assets based upon a third-party valuation received in the first quarter of fiscal 2004. Also reflects a $1.4 million decrease to goodwill for changes in estimates, primarily for certain acquired contracts, acquisition related costs and certain accrued expenses.

(B)

Reflects a purchase price allocation adjustment of $1.6 million (decrease to goodwill) to allocate the fair value of certain acquired identifiable intangible assets based upon a third-party valuation received in the first quarter of fiscal 2004. Amount also reflects a net decrease to goodwill of $0.5 million for changes in estimates, primarily for certain acquired contracts, acquisition related costs and certain accrued expenses.

(C)

Reflects a decrease to goodwill for a change in estimated acquisition related costs.

(D)

Reflects a net increase to goodwill for changes in estimates on certain acquired contracts and acquisition related costs.

(E)

Reflects a purchase price allocation adjustment of $2.5 million (increase to goodwill) to adjust for the preliminary estimated fair value of certain acquired intangible assets based upon a third-party valuation received in the first quarter of fiscal 2004. Amount also reflects a $1.1 million decrease in goodwill for changes in estimated acquisition related costs and accrued expenses.

(F)

Reflects a decrease to goodwill for changes in estimated acquisition related costs.

        The $4.0 million acquisition earn-out adjustment represents a contingent purchase price payment or "earnout" for achieving certain milestones specified in the PTI purchase agreement.

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5.     Product Warranties

        Product warranty costs are accrued when the covered products are delivered to the customer. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs, considering historical claims expense. Accrued warranty costs are reduced as these costs are incurred and as the warranty period expires and may be otherwise modified as specific product performance issues are identified and resolved. The table below presents the changes in the Company's accrual for product warranties as of September 30, 2003 and 2002, which is included in accrued expenses and other current liabilities.

	Six Months Ended September 30,
	2003			2002
	(in thousands)
Balance, beginning of period	$	19,365		$	10,319
Acquisitions during the period		—			7,978
Accruals for product warranties issued during the period		2,904			1,488
Accruals related to pre-existing product warranties (including changes in estimates)		—			346
Settlements made during the period		(2,523	)		(1,044	)
Balance at end of period	$	19,746		$	19,087

6.     Debt

        A summary of debt is as follows:

		September 30, 2003		March 31, 2003
		(in thousands)
Term notes		$	211,451	$	212,525
Other obligations			11,888		12,550
			223,339		225,075
Less:
	Current installments of long-term debt		7,615		7,717
	Short-term bank debt		195		521
Total long-term debt		$	215,529	$	216,837

        In connection with its acquisition of Integrated Defense Technologies, Inc., on November 4, 2003, the Company entered into an amended and restated credit facility and issued $350.0 million of 6⁷/8% Senior Subordinated Notes, due November 1, 2013 (see note 12—Subsequent Events for additional discussion).

        At September 30, 2003, the Company had a $338.6 million credit agreement with Wachovia Bank, N.A. as the Administrative Agent (the original credit facility). The original credit facility consisted of a $125.0 million senior secured revolving line of credit and a $213.6 million senior secured term loan facility. The Company was in compliance with all covenants under its credit facility at September 30, 2003. Amounts available under the revolving line of credit were based upon a borrowing base

8

calculation, as defined in the credit agreement. As of September 30, 2003, the Company had approximately $100.3 million of additional available credit, after satisfaction of its borrowing base requirement.

        As of September 30, 2003, $211.5 million of term loans were outstanding against the original credit facility, in addition to which $27.8 million was contingently payable under letters of credit (approximately $3.1 million of the letters of credit outstanding as of September 30, 2003 were issued under the Company's previous credit agreement, and are not considered when determining the availability under the Company's revolving line of credit). As of March 31, 2003, $212.5 million of term loans were outstanding under the original credit facility. The effective interest rate on the Company's term loans was 4.2% as of September 30, 2003 (4.4% as of March 31, 2003). There were no borrowings under the Company's revolving line of credit as of September 30, 2003 and March 31, 2003.

        From time to time, the Company enters into standby letter-of-credit agreements with financial institutions and customers primarily relating to the guarantee of its future performance on certain contracts to provide products and services and to secure advanced payments it has received from its customers.

        The Company has a mortgage note payable that is secured by its DRS Tactical Systems facility (DRS TS) located in Palm Bay, Florida, and bears interest at a rate equal to the one-month LIBOR plus 1.65%. Effective April 1, 2001, DRS TS entered into a 15-year interest rate swap with an original notional amount of $3.6 million to receive interest at a variable rate equal to the one month LIBOR and to pay interest at a fixed rate of 7.85%. The balance of the mortgage as of September 30, 2003 and March 31, 2003 was $3.2 million and $3.3 million, respectively. Payment of principal and interest will continue through December 1, 2016.

        On October 15, 2002, the Company issued an $8.0 million promissory note, bearing interest at 6% per annum, related to the Nytech acquisition. Payments of $5.0 million and $3.0 million are due on the first and second anniversaries of the closing, respectively.

        On June 5, 2003, the Company entered into two interest rate swap agreements, each in the amount of $25.0 million, with Wachovia Bank, N.A. and Fleet Bank (the Banks), respectively, on its variable rate senior secured term loan facility. These swap agreements effectively converted the variable interest rate on a total of $50.0 million of the Company's term loan to a fixed interest rate. Under the terms of these swap agreements, the Company will pay or receive the difference between the variable interest rate payable by the Banks and the fixed 2.59% interest rate payable by the Company. The variable interest rate paid by the Banks is based on the three month LIBOR and is determined on the first day of each calculation period. The difference to be paid or received on these swap agreements, as interest rates change, is recorded as an adjustment to interest expense. These swap agreements are accounted for as cash flow hedges, and as such, changes in the fair values of the swap agreements are recorded as adjustments to accumulated other comprehensive earnings. The swaps are continuing to be accounted for as cash flow hedges subsequent to the November 4, 2003 amending and restating of the Company's credit facility.

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7.     Earnings Per Share

        The following table presents the computation of basic and diluted earnings per share (EPS):

		Three Months Ended September 30,				Six Months Ended September 30,
		2003		2002		2003		2002
		(in thousands, except per-share data)
Basic EPS computation
Net earnings		$	9,443	$	7,663	$	16,739	$	13,097
Weighted average common shares outstanding			22,466		16,863		22,452		16,853
Basic earnings per share		$	0.42	$	0.45	$	0.75	$	0.78
Diluted EPS computation
Net earnings		$	9,443	$	7,663	$	16,739	$	13,097
Diluted common shares outstanding:
	Weighted average common shares outstanding		22,466		16,863		22,452		16,853
	Stock options		498		711		506		756
Weighted average diluted shares outstanding			22,964		17,574		22,958		17,609
Diluted earnings per share		$	0.41	$	0.44	$	0.73	$	0.74

        At September 30, 2003, there were 1,295,497 options outstanding with weighted average exercise prices of $32.96 that were excluded from the above calculation because their inclusion would have had an antidilutive effect on EPS.

8.     Comprehensive Earnings

        The components of comprehensive earnings for the three- and six-month periods ended September 30, 2003 and 2002 consisted of the following:

		Three Months Ended September 30,					Six Months Ended September 30,
		2003		2002			2003		2002
		(in thousands)
Net earnings		$	9,443	$	7,663		$	16,739	$	13,097
Other comprehensive earnings:
	Foreign currency translation adjustments		243		(364	)		3,478		2,096
	Unrealized gains on hedging instruments arising during the period		611		128			664		146
Comprehensive earnings		$	10,297	$	7,427		$	20,881	$	15,339

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9.     Operating Segments

        Through September 30, 2003, DRS operated in three principal operating segments on the basis of products and services offered: the Electronic Systems Group (ESG), the Electro-Optical Systems Group (EOSG) and the Flight Safety and Communications Group (FSCG). All other operations are grouped in "Other." The Company will operate Integrated Defense Technologies, Inc. as a fourth operating segment called the Intelligence, Training and Test Group (see Note 12—Subsequent Events). During the fourth quarter of fiscal 2003, DRS Unmanned Technologies, Inc. was combined with DRS' Electro-Optical Systems Group for management purposes, based primarily on operational synergies. DRS Unmanned Technologies had previously been managed as part of Other. Prior-year balances and results of operations disclosed herein have been restated to give effect to this change. Information about the Company's segments as of and for the three- and six-month periods ended September 30, 2003 and 2002 is as follows:

		ESG			EOSG			FSCG			Other			Total
								(in thousands)
Three Months Ended September 30, 2003
Total revenues		$	111,097		$	75,058		$	24,164		$	—		$	210,319
	Intersegment revenues		(2,560	)		(486	)		(1,033	)		—			(4,079	)
External revenues		$	108,537		$	74,572		$	23,131		$	—		$	206,240
Operating income (loss)		$	10,862		$	8,220		$	2,164		$	(15	)	$	21,231
Total assets		$	469,963		$	285,002		$	110,584		$	115,533		$	981,082
Depreciation and amortization		$	1,859		$	2,689		$	482		$	580		$	5,610
Capital expenditures		$	1,024		$	2,695		$	71		$	1,085		$	4,875
Three Months Ended September 30, 2002
Total revenues		$	69,045		$	68,063		$	25,245		$	—		$	162,353
	Intersegment revenues		(82	)		(14	)		(1,061	)		—			(1,157	)
External revenues		$	68,963		$	68,049		$	24,184		$	—		$	161,196
Operating income (loss)		$	4,283		$	9,904		$	2,735		$	(199	)	$	16,723
Total assets		$	236,434		$	255,267		$	102,806		$	58,528		$	653,035
Depreciation and amortization		$	1,347		$	2,264		$	479		$	335		$	4,425
Capital expenditures		$	638		$	2,955		$	229		$	1,333		$	5,155
Six Months Ended September 30, 2003
Total revenues		$	193,716		$	140,769		$	45,715		$	—		$	380,200
	Intersegment revenues		(3,231	)		(547	)		(2,984	)		—			(6,762	)
External revenues		$	190,485		$	140,222		$	42,731		$	—		$	373,438
Operating income (loss)		$	19,271		$	14,433		$	3,917		$	(30	)	$	37,591
Total assets		$	469,963		$	285,002		$	110,584		$	115,533		$	981,082
Depreciation and amortization		$	3,360		$	5,611		$	955		$	1,092		$	11,018
Capital expenditures		$	2,515		$	4,540		$	238		$	1,819		$	9,112
Six Months Ended September 30, 2002
Total revenues		$	103,956		$	137,750		$	52,554		$	1,349		$	295,609
	Intersegment revenues		(82	)		(198	)		(2,895	)		—			(3,175	)
External revenues		$	103,874		$	137,552		$	49,659		$	1,349		$	292,434
Operating income (loss)		$	5,626		$	19,668		$	4,992		$	(890	)	$	29,396
Total assets		$	236,434		$	255,267		$	102,806		$	58,528		$	653,035
Depreciation and amortization		$	1,818		$	3,971		$	1,169		$	628		$	7,586
Capital expenditures		$	1,043		$	6,364		$	371		$	1,538		$	9,316

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10.   Supplemental Cash Flow Information

		Six Months Ended September 30,
		2003			2002
		(in thousands)
Cash paid for:
	Income taxes	$	5,896		$	5,414
	Interest	$	5,419		$	4,757
Noncash investing and financing activities:
	Note receivable-sales of business unit	$	—		$	3,040
	Acquisition costs for business combinations	$	(3,230	)	$	2,500

11.   Contingencies

        The Company is engaged in providing products and services under contracts or subcontracts to the U.S. government and, to a lesser degree, under foreign government contracts, some of which are funded by the U.S. government. All such contracts are subject to extensive legal and regulatory requirements, and from time-to-time are investigated by U.S. agencies to determine the Company's compliance. Under U.S. government procurement regulations, for example, an indictment of the Company by a federal grand jury could result in suspension for a period of time from eligibility to receive awards of new contracts; a conviction could result in debarment from contracting with the federal government for a specified term. Since a substantial amount of the Company's revenues are derived from contracts or subcontracts with the U.S. and foreign governments, future revenues and profits will be dependent upon continued contract awards, the volume of those awards and the Company's performance and compliance with government regulations.

        On October 3, 2001, a lawsuit was filed in the United States District Court of the Eastern District of New York by Miltope Corporation, a corporation of the State of Alabama, and IV Phoenix Group, Inc., a corporation of the State of New York, against DRS Technologies, Inc., DRS Electronic Systems, Inc. and a number of individual defendants, several of whom are employed by DRS Electronic Systems, Inc. The plaintiff's claims against DRS alleged infringement of a number of patents, breach of a confidentiality agreement, misappropriation of trade secrets, unjust enrichment and unfair competition. The claims relate generally to the activities of certain former employees of IV Phoenix Group and the hiring of some of those employees by the Company. The plaintiffs seek damages of not less than $5.0 million for each of the claims. The plaintiffs also allege claims for tortious interference with business relationships, tortious interference with contracts and conspiracy to breach fiduciary duty. The plaintiffs seek damages of not less than $47.1 million for each claim. In addition, plaintiffs seek punitive and treble damages, injunctive relief and attorney's fees. In its answer, the Company has denied the plaintiffs' allegations and intends to vigorously defend this action. In February 2002, plaintiffs filed an amended complaint, which eliminated the patent infringement claims and added claims related to statutory and common-law trademark infringement. This action is in an extended discovery period, with trial anticipated in the fall or winter of 2003-04. DRS believes that it has meritorious defenses and does not believe the action will have a material adverse effect on the Company's financial position, results of operations or liquidity.

        The Company is a party to various legal actions and claims arising in the ordinary course of its business. In the Company's opinion, the Company has adequate legal defenses for each of the actions and claims, and believes that their ultimate disposition will not have a material adverse effect on the Company's consolidated financial position, results of operations and liquidity.

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12.   Subsequent Events

        On November 4, 2003, DRS acquired all of the outstanding stock of Integrated Defense Technologies, Inc. (IDT) in a purchase business combination. The total merger consideration was $261.3 million in cash and 4,323,172 shares of DRS common stock, or an aggregate value of $367.4 million plus merger-related costs of approximately $5.0 million. The Company's common stock issued in the merger was valued at $24.55 per share using the average closing price of DRS's common stock a few days before and after the date the number of shares of DRS common stock to be issued was fixed. Upon closing of the merger the Company refinanced approximately $201.0 million of IDT's bank debt. The cash consideration for the merger and the IDT bank debt refinancing was completed with initial borrowings under the Company's amended and restated credit facility, the issuance of senior subordinated notes and existing cash on hand.

        IDT is a leading developer and provider of mission-critical, advanced electronics and technology products for the defense and intelligence industries. IDT's systems, subsystems and components are sold to all branches of the U.S. armed services, various government agencies, major prime defense contractors and international governments.

        Simultaneous with the closing of the merger, the Company entered into an amended and restated credit facility for up to an aggregate amount of $411.0 million, replacing DRS's previously existing senior credit facility. The amended and restated credit facility consist of a $175.0 million senior secured revolving line of credit and a $236.0 million senior secured term loan. The amended and restated credit facility is guaranteed by substantially all of DRS's domestic subsidiaries. In addition, it is secured by liens on substantially all of the Company's, the subsidiary guarantors' and certain of DRS's other subsidiaries' assets and by a pledge of certain of the Company's subsidiaries' capital stock. The term loan and the revolving credit facility will mature in seven and five years, respectively, from the closing date of the amended and restated credit facility. The Company drew down the full amount of the term loan to fund a portion of the merger, to repay certain of its and IDT's outstanding indebtedness and to pay related fees and expenses. There were no initial borrowings under the revolving line of credit.

        Borrowings under the amended and restated credit facility bear interest, at the Company's option, at either: a "base rate", as defined in the amended and restated credit agreement, equal to the higher of 0.50% per annum above the latest prime rate and federal funds rate, or a LIBOR rate, as defined in the amended and restated credit agreement. Revolving credit loans that are base rate loans bear interest at the base rate plus a spread ranging from 0.50% to 1.25% per annum, depending on the Company's total leverage ratio (TLR) at the time of determination. Revolving credit loans that are LIBOR rate loans bear interest at LIBOR plus a spread ranging from 1.75% to 2.50% per annum, depending on our TLR. Term loans that are base rate loans bear interest at the base rate plus a spread ranging from 1.0% to 1.25% per annum, depending on the Company's TLR. Term loans that are LIBOR rate loans bear interest at LIBOR plus a spread ranging from 2.25% to 2.50% per annum, depending on the Company's TLR. TLR is defined as total debt minus the sum of (A) performance-based letters of credit and (B) so long as there are no outstanding revolving credit loans, an amount (not to exceed $100.0 million) equal to the amount of cash and cash equivalents of the Company immediately available to repay the obligations thereof, as compared with EBITDA, as defined in the amended and restated credit agreement. There are certain covenants and restrictions placed on DRS under the amended and restated credit facility, including, but not limited to, a maximum total leverage ratio, a maximum senior leverage ratio, a minimum fixed charge coverage ratio and restrictions on equity issuances, payment of dividends on our capital stock, the issuance of additional debt, incurrence of liens and capital expenditures, and a requirement that DRS make mandatory principal prepayments in the manner set forth in the credit agreement on the revolving credit loans and the term loans

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outstanding with 50% of the aggregate net cash proceeds from any equity offering if the Company's total leverage ratio, as defined in the credit agreement, exceeds 2.00 to 1.00.

        The principal amount of revolving credit loans outstanding are due and payable in full on the fifth anniversary of the closing date of the IDT merger. The Company will repay the aggregate outstanding principal amount of the term loan in consecutive quarterly installments on the last business day of each December, March, June and September commencing on December 31, 2003. From December 31, 2003 through September 30, 2009, each such principal payment will equal $590,000. Beginning with the payment on December 31, 2009 through September 30, 2010, each principal payment will equal approximately $55.5 million.

        Also in connection with the merger, on October 30, 2003, the Company issued $350.0 million of 6⁷/8% Senior Subordinated Notes, due November 1, 2013. Interest is payable every six months on May 1 and November 1, commencing May 1, 2004. The net proceeds from the offering of the notes was $341.2 million, after deducting $8.8 million in commissions and fees related to the offering. The net proceeds of the offering, together with a portion of the Company's available cash and initial borrowings under its amended and restated credit facility, were used to fund the IDT merger, repay certain of DRS's and IDT's outstanding indebtedness and pay related fees and expenses. The notes were issued under an indenture with The Bank of New York. Subject to a number of important exceptions, the indenture restricts the Company's ability and the ability of its subsidiaries to: incur more debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. The notes are unconditionally guaranteed, jointly and severally, by certain of DRS's current and future wholly-owned domestic subsidiaries. The foreign subsidiaries and certain domestic subsidiaries of DRS do not guarantee the notes.

13.   Recently Issued Accounting Pronouncements

        In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, "Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity" (SFAS 150). The statement establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity and requires that such instruments be classified as liabilities. The statement was adopted by the Company effective July 1, 2003 and it did not have an impact on the Company's consolidated financial position or results of operations.

        In April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company adopted this statement for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The adoption of this statement did not have an impact on the Company's consolidated financial position or results of operations.

        In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143). SFAS 143 applies to legal obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal operation of a long-lived asset, except for certain obligations of lessees. This statement does not apply to obligations that arise solely from a plan to dispose of a long-lived asset. SFAS 143 requires that estimated asset retirement costs be measured at their fair values and recognized as assets and depreciated over the useful life of the related asset. Similarly, liabilities for the present value of asset retirement obligations are to be recognized and accreted each year to their estimated future value until the asset is retired. As required, the Company adopted SFAS 143 on April 1, 2003. The adoption of SFAS 143 had an immaterial impact on the Company's consolidated financial statements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following is management's discussion and analysis (MD&A) of the consolidated financial condition and results of operations of DRS Technologies, Inc. and its Subsidiaries (hereinafter, we, us, our, the Company or DRS) as of September 30, 2003, and for the three- and six-month periods ended September 30, 2003 and 2002. This discussion should be read in conjunction with the audited consolidated financial statements and related notes contained in our March 31, 2003 Form 10-K.

Forward-Looking Statements

        The following discussion and analysis contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management's beliefs and assumptions, current expectations, estimates and projections. Such statements, including statements relating to the Company's expectations for future financial performance, are not considered historical facts and are considered forward-looking statements under the federal securities laws. These statements may contain words such as "believes," "anticipates," "plans," "expects," "intends," "estimates" or similar expressions. These statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements and include, without limitation: the effect of our acquisition strategy on future operating results, including our ability to effectively integrate acquired companies into our existing operations, particularly Integrated Defense Technologies, Inc. (IDT), which represents our largest and most significant acquisition to date (see additional discussion of IDT below), the uncertainty of acceptance of new products and successful bidding for new contracts; the effect of technological changes or obsolescence relating to our products and services; and the effects of government regulation or shifts in government policy, as they may relate to our products and services and other risks or uncertainties detailed in the Company's Securities and Exchange Commission filings. Given these uncertainties, you should not rely on forward-looking statements. The Company undertakes no obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

        DRS Technologies, Inc., headquartered in Parsippany, New Jersey, provides leading edge products and services to defense, government intelligence and commercial customers. Focused on defense technology, DRS develops and manufactures a broad range of mission critical systems that positions the Company to support the military's near-term force modernization and emerging transformation initiatives. DRS's high-technology products and services are used by all branches of the U.S. military, major aerospace and defense prime contractors, government intelligence agencies, international military forces and industrial markets. Incorporated in 1968, DRS has served the defense industry for 35 years. We hold leading market positions in thermal imaging devices, combat display workstations, electronic sensor systems, power systems, battlefield digitization systems and deployable flight incident recorders. We also provide communications and surveillance systems, diagnostics and test systems, and training and simulation systems. Our products are deployed on a wide range of high-profile military platforms, such as DDG-51 Aegis destroyers, LHD-8 Amphibious Assault Ships, M1A2 Abrams Main Battle Tanks, M2A3 Bradley Fighting Vehicles, High-Mobility Multi-purpose Wheeled Vehicles (HMMWV), OH-58D Kiowa Warrior helicopters, AH-64 Apache helicopters, F/A-18E/F Super Hornet jet fighters, U.S. Army Patriot and U.S. Navy Tomahawk missile systems, and on many other platforms for military and non-military applications. We also have contracts that support future military platforms, such as the DD(X) destroyer, CVN-21 next generation aircraft carrier and Virginia class submarine. The Company employs 5,700 people worldwide.

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Company Organization and Products

        Through September 30, 2003, we operated in three principal operating segments on the basis of products and services offered. Each operating segment is comprised of separate and distinct businesses: the Electronic Systems Group, the Electro-Optical Systems Group and the Flight Safety and Communications Group. All other operations are grouped in Other. IDT will operate as our fourth operating segment, called the Intelligence, Training and Test Group.

        Our Electronic Systems Group (ESG) is a leader in high-performance combat display systems, digital information processing systems, power generation, conversion, distribution, propulsion and control systems, and battlefield digitization systems for sea, air and land applications supporting military modernization and transformation initiatives. ESG also produces radar surveillance and tracking systems, acoustic signal processing systems, flat panels and other computer peripherals, signal intelligence products, ship networks and middleware to promote interoperability and compatibility with the military's new and existing systems. ESG's products are used on various front-line platforms, such as ships, amphibious operation platforms, surveillance aircraft, submarines and mobile ground platforms, and our power systems are installed on every combatant ship in the U.S. Navy, including destroyers, aircraft carriers and attack submarines. ESG is a leader in battlefield digitization programs for the U.S. Army and the British Army. The group also provides technical support services, including worldwide field service, depot-level repair, equipment installation and integrated logistics for the Navy's fleet, avionics support for U.S. and international helicopter and airlift aircraft, hardware and software system engineering, and electronic manufacturing, testing and system integration services.

        Our Electro-Optical Systems Group (EOSG) is a leader in second-generation electro-optical infrared sighting, surveillance, targeting and weapons guidance systems, assemblies and components used in the aerospace and defense industry and is one of only two key suppliers to the U.S. government for advanced focal plane array sensor technology. EOSG product designs are based on infrared cooled and uncooled sensor system technologies. EOSG designs, manufactures and markets these systems to allow operators to detect, identify and track targets based on their infrared signatures regardless of the ambient light level. The group's cooled systems, which utilize advanced detectors and cryogenic cooler assemblies, are used on the most critical front-line ground vehicle, surface ship and weapons system platforms of the U.S. Army, Navy and Marine Corps, including the M1A2 Abrams Main Battle Tanks, M2A3 Bradley Fighting Vehicles, OH-58D Kiowa Warrior helicopters, AH-64 Apache helicopters, DDG Aegis class destroyers and cruisers, Javelin Missile Systems and the HMMWV Scout vehicles. EOSG's uncooled sighting systems are lighter weight, less expensive thermal imaging systems used for man-portable weapons, transportable gimbals, head-gear, hand-held devices and vehicle-mounted sights for enhancement of driver vision. EOSG also produces medium-range Unmanned Aerial Vehicles (UAVs) and seeks to incorporate DRS's core technologies, such as computer display systems, electro-optical and infrared sensors and targeting systems, high-speed digital cameras, data recording, communications and other intelligence gathering equipment, onto these platforms to support special military operations, surveillance and targeting missions, payload drops and civil applications.

        Our Flight Safety and Communications Group (FSCG) is a leader in deployable flight incident recorders and emergency locator beacon systems used by military and commercial search and rescue platforms to locate downed aircraft. FSCG also is a leader in the supply of Link 11 data transmission products supporting coordinated theater warfare and enhanced tactical command and control operations. FSCG provides tactical data link communication products, secure modems, telephonic products and next-generation secure voice and data communications systems for advanced digital communications networks. These technologies support the crucial exchange of tactical command and control data with ship, shore and air platforms and have applicability to a Joint Fires Network to support a network-centric warfare system for real-time intelligence correlation, sensor control, target generation, mission planning and battle damage assessment. The group also designs and produces fully integrated non-secure Naval ship communication systems, ground radar surveillance systems, infrared

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search and track systems, aircraft mission recording systems, aircraft weapons calibration systems and high-speed digital imaging systems for U.S. and international defense, aerospace and commercial customers. FSCG's equipment operates on board a wide range of U.S., Canadian and other international surface ships, carriers, fixed-wing aircraft, helicopters, ground vehicles, soldier systems and commercial space-based platforms. In addition, FSCG provides electronic manufacturing services to the defense, aerospace, commercial and space industries.

        Other includes the activities of DRS Corporate Headquarters, DRS Ahead Technology (for the period it was owned by us during the first quarter of fiscal 2003) and certain non-operating subsidiaries of the Company. The assets of DRS Ahead Technology were sold on May 27, 2002.

Merger With Integrated Defense Technologies, Inc. and Related Financing

        On November 4, 2003, we acquired all of the outstanding stock of Integrated Defense Technologies, Inc. (IDT) in a purchase business combination. The total merger consideration was $261.3 million in cash and 4,323,172 shares of DRS common stock, or an aggregate value of $367.4 million plus merger-related costs of approximately $5.0 million. Upon closing of the merger we refinanced approximately $201.0 million of IDT's bank debt. The cash consideration for the merger and the IDT bank debt refinancing was completed with initial borrowings under our amended and restated credit facility, the issuance of senior subordinated notes and existing cash on hand.

        IDT is a leading developer and provider of mission-critical, advanced electronics and technology products for the defense and intelligence industries. IDT's systems, subsystems and components are sold to all branches of the U.S. armed services, various government agencies, major prime defense contractors and international governments.

        Simultaneous with the closing of the merger, we entered into an amended and restated credit facility for up to an aggregate amount of $411.0 million, replacing our previously existing senior credit facility. The amended and restated credit facility consists of a $175.0 million senior secured revolving line of credit and a $236.0 million senior secured term loan. We drew down the full amount of the term loan to fund a portion of the merger, to repay certain of our and IDT's outstanding indebtedness and to pay related fees and expenses. There were no initial borrowings under our revolving line of credit. See Liquidity and Capital Resources below for additional information regarding our amended and restated credit facility.

        Also in connection with the merger, on October 30, 2003, we issued $350.0 million of 6⁷/8% Senior Subordinated Notes, due November 1, 2013 (the Notes). The net proceeds from the offering of the notes was $341.2 million, after deducting $8.8 million in commissions and fees related to the offering. The net proceeds of the offering, together with a portion of our available cash and initial borrowings under our amended and restated credit facility, were used to fund the IDT merger, repay certain of DRS's and IDT's outstanding indebtedness and pay related fees and expenses.

Critical Accounting Policies

        Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in Note 1 to the March 31, 2003 consolidated financial statements included in our Form 10-K. Critical accounting policies are those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies for us include revenue recognition on contracts and contract estimates, goodwill and intangible assets, long-lived assets and acquired intangible assets, valuation of

17

deferred tax assets and liabilities, and management estimates. For additional discussion of our critical accounting policies, see our MD&A in our March 31, 2003 Form 10-K.

Results of Operations

        Our operating cycle is long-term and involves various types of production contracts and varying production delivery schedules. Accordingly, operating results of a particular quarter, or quarter-to-quarter comparisons of recorded revenues and earnings, may not be indicative of future operating results. The following comparative analysis should be viewed in this context.

Consolidated Summary

Three- and Six-Month Periods Ended September 30, 2003, Compared with the Three- and Six-Month Periods Ended September 30, 2002

        Consolidated revenues and operating income for the three-month period ended September 30, 2003 were $206.2 million and $21.2 million, respectively, as compared with revenues and operating income of $161.2 million and $16.7 million, respectively, in the corresponding prior-year period. The increase in second quarter revenues was primarily driven by our fiscal 2003 acquisitions of Paravant Inc. (Paravant), Kaman's Electromagnetics Development Center (now operating as DRS Electric Power Technologies, Inc.—DRS EPT), and Power Technology Incorporated (now operating as DRS Power Technology, Inc.—DRS PTI), all of which were acquired in the second half of fiscal 2003. The Paravant, DRS EPT, and DRS PTI acquisitions contributed a total of $36.1 million of revenues to the three months ended September 30, 2003. Also contributing to the overall growth in revenues were increased shipments of combat display workstations and ground and maritime-based infrared targeting and imaging systems. Partially offsetting the overall increase in revenues were decreases from certain surface ship communications systems and advanced electronic manufacturing and integration services. The overall increase in revenues was the primary driver of our operating income growth. Partially offsetting the increase in operating income were certain program-related charges (see Operating Segments discussion below). The Paravant, DRS EPT, and DRS PTI acquisitions contributed a total of $7.1 million of operating income to the three months ended September 30, 2003. During the third quarter of fiscal 2003 we sold our DRS Advanced Programs, Inc. (DRS API) operating unit. The three months ended September 30, 2002 included revenues and an operating loss of $3.5 million and $0.5 million, respectively, from DRS API.

        Consolidated revenues and operating income for the six-month period ended September 30, 2003 were $373.4 million and $37.6 million, respectively, as compared with revenues and operating income of $292.4 million and $29.4 million, respectively, in the corresponding prior-year period. The increase in year-to-date revenues was primarily a result of our fiscal 2003 acquisitions. In addition to Paravant, DRS EPT and DRS PTI, during fiscal 2003 we also acquired the Navy Controls Division of Eaton Corporation (now operating as DRS Power & Control Technologies, Inc.—DRS PCT) and two immaterial acquisitions. Our fiscal 2003 acquisitions contributed incremental revenues (i.e., current year-to-date period over prior year-to-date period) of $98.8 million to the six month period ended September 30, 2003. Partially offsetting the overall increase in revenues were decreases from advanced electronic manufacturing and integration services and certain surface ship communications systems. The overall increase in revenues was the primary driver of our operating income growth, offset in part by certain program-related charges (see Operating Segments discussion below). Our fiscal 2003 acquisitions contributed incremental operating income of $15.8 million to the six months ended September 30, 2003. The six months ended September 30, 2002 included revenues and an operating loss of $6.7 million and $0.7 million, respectively, from DRS API.

        Interest income decreased $26 thousand and $0.2 million for the three- and six-month periods ended September 30, 2003, respectively, as compared with the prior-year periods. The decreases in interest income reflect lower average cash and cash equivalents balances and lower interest rates during the fiscal 2004-quarter and year-to-date periods, as compared to the corresponding prior-year periods. Interest and related expenses increased $1.7 million and $2.4 million for the three- and six-month

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periods ended September 30, 2003, respectively, as compared with same periods in 2002. The increases in interest expense are a result of an increase in our average borrowings outstanding in fiscal 2004, as well as $0.9 million of fees associated with our subordinated bridge loan commitment to secure financing in the event that we were unable to successfully consummate the October 30, 2003 issuance of the Notes. Partially offsetting the overall increase in expense was the benefit of lower weighted average interest rates on such borrowings, as compared with the same prior-year period. The overall increase in our average borrowings was a result of our November 27, 2002 Paravant acquisition. We had no borrowings outstanding under our revolving credit facility during the three-and six-month periods ended September 30, 2003 and 2002.

        The provision for income taxes for the quarter and year-to-date periods ended September 30, 2003, reflect an annual estimated effective income tax rate of approximately 44%, as compared with 46% in the prior-year period. Our effective income tax rate decreased as we anticipate utilizing the tax benefit associated with prior operating losses at our ESG U.K. operating unit, which is now profitable, and the growth of our operations have reduced the effect of certain non-deductible expenses. Based on the impact of the acquisition of IDT, we anticipate that our effective tax rate will be 43% for the year ending March 31, 2004.

        Earnings before net interest and related expenses (primarily amortization of debt issuance costs), income taxes, depreciation and amortization (EBITDA) for the three- and six-month periods ended September 30, 2003 was $26.4 million and $47.6 million, respectively, increases of 27% and 32%, respectively, over the same periods in the prior year. See Use of Non-GAAP Financial Measures below.

Operating Segments

        The following table sets forth, by operating segment, revenues, operating income and operating margin, and the percentage increase or decrease of those items, as compared with the corresponding prior-year period:

	Three Months Ended September 30,						Three Months Ended Percent Changes		Six Months Ended September 30,						Six Months Ended Percent Changes
	2003			2002			2003 vs. 2002		2003			2002			2003 vs. 2002
	(in thousands, except for percentages)
ESG
External revenues	$	108,537		$	68,963		57.4	%	$	190,485		$	103,874		83.4	%
Operating income	$	10,862		$	4,283		153.6	%	$	19,271		$	5,626		242.5	%
Operating margin		10.0	%		6.2	%	61.1	%		10.1	%		5.4	%	87.0	%
EOSG
External revenues	$	74,572		$	68,049		9.6	%	$	140,222		$	137,552		1.9	%
Operating income	$	8,220		$	9,904		(17.0	%)	$	14,433		$	19,668		(26.6	%)
Operating margin		11.0	%		14.6	%	(24.7	%)		10.3	%		14.3	%	(28.0	%)
FSCG
External revenues	$	23,131		$	24,184		(4.4	%)	$	42,731		$	49,659		(14.0	%)
Operating income	$	2,164		$	2,735		(20.9	%)	$	3,917		$	4,992		(21.5	%)
Operating margin		9.4	%		11.3	%	(16.8	%)		9.2	%		10.1	%	(8.9	%)
Other
External revenues	$	—		$	—		N/A		$	—		$	1,349		(100.0	%)
Operating loss	$	(15	)	$	(199	)	92.5	%	$	(30	)	$	(890	)	96.6	%
Operating margin		N/A			N/A		N/A			N/A			(66.0	%)	N/A

Electronic Systems Group

        Revenues increased $39.6 million, or 57%, to $108.5 million for the three-month period ended September 30, 2003, as compared with the corresponding prior-year period. Operating income increased $6.6 million to $10.9 million. The increase in revenues was driven primarily by our fiscal 2003

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acquisitions of DRS PCT, Paravant, DRS PTI and DRS EPT—all of which were acquired subsequent to September 30, 2002. Collectively these acquisitions contributed $36.1 million in revenues to the quarter ended September 30, 2003. Also favorably impacting revenues were increased shipments of combat display workstations and sales of rugged computers and multi-function consoles. Partially offsetting the overall increase in revenues were decreased shipments of certain search and navigation radar systems and decreased revenues from combat display workstation engineering volume. Revenues for the three months ended September 30, 2002 included $3.5 million from DRS API that was sold in the third quarter of fiscal 2003. The increase in operating income was driven primarily by the fiscal 2003 acquisitions mentioned above, which contributed $7.1 million to second quarter operating income, increased shipments of combat display workstations and our U.K. operating unit's return to profitability. These increases were partially offset by the impact of decreased revenue from certain products, particularly revenues from combat display workstation engineering volume. Fiscal 2004 second quarter operating income was also unfavorably impacted by certain charges totaling $3.7 million. The charges were recorded for program cost growth of $1.7 million on certain surface search radar programs and $2.0 million for various other programs. The three months ended September 30, 2002 included $0.8 million of charges related to cost growth and inventory write-offs on certain programs at our U.K. operating unit. DRS API recorded an operating loss of $0.5 million for the three months ended September 30, 2002.

        Revenues increased $86.6 million, or 83%, to $190.5 million for the six-month period ended September 30, 2003, as compared with the corresponding prior-year period. Operating income increased $13.6 million to $19.3 million. The increase in revenues was driven primarily by our fiscal 2003 acquisitions of DRS PCT, Paravant, DRS PTI and DRS EPT—which were acquired subsequent to September 30, 2002, except for NCD, which was acquired on July 1, 2002. Collectively these acquisitions contributed $95.3 million of incremental revenues to the six months ended September 30, 2003. Also favorably impacting revenues were increased sales of rugged computers and multi-function consoles. Partially offsetting the overall increase in revenues were decreased shipments of certain search and navigation radar systems and decreased revenues from combat display workstation engineering volume. Revenues for the six months ended September 30, 2002 included $6.7 million from DRS API which was sold in the third quarter of fiscal 2003. The increase in operating income was driven primarily by the fiscal 2003 acquisitions mentioned above, which contributed $15.5 million to operating income, and our U.K. operating unit's return to profitability. These increases were partially offset by charges totaling $5.3 million. The charges were recorded for program cost growth of $2.6 million on certain surface search radar programs and $2.7 million for various other programs. During the six months ended September 30, 2002, the group recorded $1.8 million of charges at its U.K. operating unit. The charges included $1.5 million for cost growth and inventory write-offs on certain programs and $0.3 million for employee severance. DRS API recorded an operating loss of $0.7 million for the six months ended September 30, 2002.

Electro-Optical Systems Group

        Revenues increased $6.5 million, or 10%, to $74.6 million for the three-month period ended September 30, 2003, as compared with the corresponding prior-year period. The increase in revenues was driven by an increase in our airborne-based infrared targeting and imaging systems and uncooled infrared technology programs. Also, our October 15, 2002 acquisition of DKD, Inc. (Nytech) contributed $1.7 in revenues to the quarter ended September 30, 2003. Partially offsetting the overall increase in revenues were decreased shipments of maritime-based infrared targeting and imaging systems and commercial laser vision correction systems. Operating income decreased $1.7 million, or 17%, to $8.2 million. The decrease in second quarter operating income, as compared with the corresponding prior-year period, primarily resulted from $1.9 million of net favorable program adjustments recorded during the three months ended September 30, 2002. The majority of the net favorable program adjustments resulted from a contract modification on a certain airborne-based infrared targeting and imaging system.

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        Revenues increased $2.7 million, or 2%, to $140.2 million for the six-month period ended September 30, 2003, as compared with the corresponding prior-year period. The increase in revenues was driven by increased shipments of our airborne-based infrared targeting and imaging systems and uncooled infrared technology programs. Also, our acquisition of Nytech contributed $3.5 million in revenues to the six months ended September 30, 2003. Partially offsetting the overall increase in revenues were decreased shipments of certain ground and maritime-based infrared targeting and imaging systems and commercial laser vision correction systems. Operating income decreased $5.2 million to $14.4 million. The decrease in operating income resulted from decreased sales of our ground-based infrared targeting and imaging systems, which typically generate higher margins, and a $1.0 million charge for a thermal target and acquisition system program. The six months ended September 30, 2002 also included $1.9 million of net favorable program adjustments as discussed above.

Flight Safety and Communications Group

        Revenues decreased $1.1 million, or 4%, to $23.1 million for the three-month period ended September 30, 2003, as compared with the corresponding prior-year period. Operating income decreased $0.6 million, or 21%, to $2.2 million. Decreased revenues from our advanced electronic manufacturing and integration services, surface ship communications systems and certain digital tape format mission data recorders were only partially offset by increased shipments of our coastal border surveillance systems, airborne digital imaging systems and ultra-high-speed digital imaging systems. The decrease in operating income was a result of the overall decrease in revenues, as well as decreased operating margins on certain product lines due to unfavorable overhead absorption.

        Revenues decreased $6.9 million, or 14%, to $42.7 million for the six-month period ended September 30, 2003, as compared with the corresponding prior year period. Operating income decreased $1.1 million, or 22%, to $3.9 million. Consistent with the results for the quarter, decreased revenues from our advanced electronic manufacturing and integration services, surface ship communications systems and certain digital tape format mission data recorders were the primary drivers of the decrease. Partially offsetting the overall decrease in revenues were increased shipments of our airborne digital imaging systems, ultra-high-speed digital imaging systems and certain secure communications equipment. The decrease in operating income was a result of the overall decrease in revenues, decreased operating margins on certain product lines due to unfavorable overhead absorption and a $0.6 million charge for employee benefit liabilities in the group's U.K. operating unit.

Other

        The lower operating loss in the three months ended September 30, 2003, as compared with the corresponding prior year period, is a result of higher non-allocable Corporate expenses in the prior year period. The decrease in operating loss in the six months ended September 30, 2003, as compared with the same period in the prior year, was driven by our sale of substantially all of the assets and liabilities of our DRS Ahead Technology operating unit on May 27, 2002. DRS Ahead Technology contributed $1.3 million of revenues and $0.5 million of operating losses to the six months ended September 30, 2002.

Liquidity and Capital Resources

        The following table provides our cash flow data for the six months ended September 30, 2003 and 2002:

	Six Months Ended September 30,
	2003			2002
	(in thousands)
Net cash provided by operating activities	$	24,279		$	24,621
Net cash used in investing activities	$	(16,359	)	$	(102,710	)
Net cash (used in) provided by financing activities	$	(1,100	)	$	147

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        Operating Activities    For the six months ended September 30, 2003, we generated $24.3 million of operating cash flow, $0.3 million less than the $24.6 million reported in the corresponding prior-year period. Net earnings increased $3.6 million, or 28%, over the prior-year period due mainly to the contribution of our prior-year acquisitions. Adjustments to reconcile net earnings to cash flows from operating activities increased $4.4 million over the corresponding prior-year period. Depreciation and amortization primarily increased as a result of our fiscal 2003 acquisitions, as well as increased investments in our facilities and equipment to upgrade our existing infrastructure. Amortization of deferred financing fees increased over the prior-year period related to fees that we incurred to increase our credit facility in the third quarter of fiscal 2003. These fees are amortized over the life of the credit facility and are recorded as a component of interest expense. Non-cash activity in our inventory and accounts receivable reserve accounts increased in the first six months of fiscal 2004, as compared with fiscal 2003.

        Changes in working capital accounts used $5.7 million in cash, as compared with the $2.7 million generated in the corresponding prior-year period. The $5.7 million of cash used by working capital accounts resulted from increases in inventories and decreases in accounts payable and accrued expenses and other current liabilities, partially offset by receivable collections and advanced payments received from customers. The increase in inventories resulted from an expected build-up of inventory to meet anticipated sales on certain combat display workstations, power control products and unmanned aerial vehicles. The decrease in accounts payable reflects the payments of our year-end balances. The large accounts payable balance at March 31, 2003 represented our vendor debt required to fund our fourth quarter sales volume. Our trade payables have not reached these levels as of September 30, 2003. The decrease in accrued expenses and other current liabilities resulted primarily from the liquidation of certain acquisition-related program reserves, offset in part by an increase in our income taxes payable generated by our increased profitability.

        Free cash flow (net cash provided by operating activities less capital expenditures) was $15.2 million and $15.3 million for the six months ended September 30, 2003 and 2002, respectively. See Use of Non-GAAP Financial Measures below.

        Investing Activities    We paid $9.1 million and $9.3 million for capital asset expenditures during the six months ended September 30, 2003 and 2002, respectively. Capital asset expenditures for fiscal 2004 are forecasted to be between $25.0 million and $35.0 million. It is our intention to manage the capital asset expenditures to the lower end of the forecasted range.

        The following table summarizes cash outflows during the six months ended September 30, 2003 related to certain fiscal 2003 business combinations, as well as cash outflows associated with certain merger- related costs incurred in connection with our then pending acquisition of Integrated Defense Technologies, Inc.:

Business Combinations	Earn-Out Payments		Working Capital Adjustment		Acquisition Related Payments		Total
	(in thousands)
Navy Controls Division of Eaton Corporation	$	—	$	—	$	292	$	292
DKD, Inc (Nytech)		—		—		6		6
Paravant Inc.		—		—		1,729		1,729
Kaman Electromagnetics Development Center		—		—		84		84
Power Technology Incorporated		4,000		547		68		4,615
Integrated Defense Technologies, Inc.		—		—		842		842
Totals	$	4,000	$	547	$	3,021	$	7,568

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        Financing Activities    For the fiscal period ended September 30, 2003, net financing activities used approximately $1.1 million. Scheduled payments on our term loan and net payments made on our short-term debt were partially offset by proceeds from stock option exercises.

        At September 30, 2003 we had a $338.6 million credit agreement with Wachovia Bank, N.A. as the Administrative Agent (the original credit facility). The original credit facility consisted of a $125.0 million senior secured revolving line of credit and a $213.6 million senior secured term loan facility. We were in compliance with all covenants under our original credit facility at September 30, 2003. Amounts available under the revolving line of credit were based upon a borrowing base calculation, as defined in the credit agreement. As of September 30, 2003, we had approximately $100.3 million of additional available credit, after satisfaction of our borrowing base requirement.

        As of September 30, 2003, $211.5 million of term loans were outstanding against the original credit facility, in addition to which $27.8 million was contingently payable under letters of credit (approximately $3.1 million of the letters of credit outstanding as of September 30, 2003 were issued and are not considered when determining the availability under the Company's revolving line of credit). As of March 31, 2003, $212.5 million of term loans were outstanding under the original credit facility. The effective interest rate on our term loans were 4.2% as of September 30, 2003 (4.4% as of March 31, 2003). There were no borrowings under our Company's revolving line of credit as of September 30, 2003 and March 31, 2003.

        From time to time we enter into standby letter-of-credit agreements with financial institutions and customers primarily relating to the guarantee of its future performance on certain contracts to provide products and services and to secure advanced payments it has received from its customers.

        On November 4, 2003, in connection with its acquisition of Integrated Defense Technologies, Inc., the Company entered into an amended and restated credit facility for up to an aggregate amount of $411.0 million to replace our original credit facility. The amended and restated credit facility consists of a $175.0 million senior secured revolving line of credit and a $236.0 million senior secured term loan. The amended and restated credit facility is guaranteed by substantially all of our domestic subsidiaries. In addition, it is secured by liens on substantially all of our, the subsidiary guarantors' and certain of our other subsidiaries' assets and by a pledge of certain of our subsidiaries' capital stock. The term loan and the revolving credit facility will mature in seven and five years, respectively, from the closing date of the amended and restated credit facility. The term loan requires quarterly principal payments beginning with a $590,000 payment on December 31, 2003. Borrowings under the amended and restated credit facility bear interest, at our option, at either: a "base rate", as defined in the amended and restated credit agreement, equal to the higher of 0.50% per annum above the latest prime rate and federal funds rate, or a LIBOR rate, as defined in the amended and restated credit agreement. Revolving credit loans that are base rate loans bear interest at the base rate plus a spread ranging from 0.50% to 1.25% per annum, depending on our total leverage ratio (TLR) at the time of determination. Revolving credit loans that are LIBOR rate loans bear interest at LIBOR plus a spread ranging from 1.75% to 2.50% per annum, depending on our TLR. Term loans that are base rate loans bear interest at the base rate plus a spread ranging from 1.00% to 1.25% per annum, depending on our TLR. Term loans that are LIBOR rate loans bear interest at LIBOR plus a spread ranging from 2.25% to 2.50% per annum, depending on our TLR. TLR is defined as total debt minus the sum of (A) performance-based letters of credit and (B) so long as there are no outstanding revolving credit loans, an amount (not to exceed $100.0 million) equal to the amount of cash and cash equivalents of DRS immediately available to repay the obligations thereof, as compared with EBITDA, as defined in the amended and restated credit agreement.

        There are certain covenants and restrictions placed on us under the amended and restated credit facility, including, but not limited to, a maximum total leverage ratio, a maximum senior leverage ratio, a minimum fixed charge coverage ratio and restrictions on equity issuances, payment of dividends on

23

our capital stock, the issuance of additional debt, incurrence of liens and capital expenditures, and a requirement that we make mandatory principal prepayments in the manner set forth in the credit agreement on the revolving credit loans and the term loans outstanding with 50% of the aggregate net cash proceeds from any equity offering if our total leverage ratio, as defined in the credit agreement, exceeds 2.00 to 1.00.

        The principal amount of revolving credit loans outstanding will be due and payable in full on the fifth anniversary of the closing date of the IDT merger. We will repay the aggregate outstanding principal amount of the term loan in consecutive quarterly installments on the last business day of each December, March, June and September commencing on December 31, 2003. From December 31, 2003 through September 30, 2009, each such principal payments will equal $590,000. Beginning with the payment on December 31, 2009 through September 30, 2010, each principal payment will equal approximately $55.5 million.

        Also in connection with the merger, on October 30, 2003, we issued $350.0 million of 6⁷/8% Senior Subordinated Notes, due November 1, 2013. Interest is payable every six months on May 1 and November 1, commencing May 1, 2004. The net proceeds from the offering of the notes were $341.2 million, after deducting $8.8 million in commissions and fees related to the offering. The net proceeds of the offering, together with a portion of our available cash and initial borrowings under our amended and restated credit facility, were used to fund the IDT merger, repay certain of DRS's and IDT's outstanding indebtedness and pay related fees and expenses. The notes were issued under an indenture with The Bank of New York. Subject to a number of important exceptions, the indenture restricts the Company's ability and the ability of its subsidiaries to: incur more debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. The notes are unconditionally guaranteed, jointly and severally, by certain of DRS's current and future wholly-owned domestic subsidiaries. The foreign subsidiaries and certain domestic subsidiaries of DRS do not guarantee the notes.

        We have a mortgage note payable that is secured by our DRS Tactical Systems facility (DRS TS) located in Palm Bay, Florida, and bears interest at a rate equal to the one-month LIBOR plus 1.65%. Effective April 1, 2001, DRS TS entered into a 15-year interest rate swap with an original notional amount of $3.6 million to receive interest at a variable rate equal to the one month LIBOR and to pay interest at a fixed rate of 7.85%. The balance of the mortgage as of September 30, 2003 was $3.2 million. Payment of principal and interest will continue through December 1, 2016.

        On October 15, 2002, we issued an $8.0 million promissory note, bearing interest at 6% per annum, related to the Nytech acquisition. Payments of $5.0 million and $3.0 million are due on the first and second anniversaries of the closing, respectively.

        Effective June 30, 2003, we entered into two interest rate swap agreements each in the amount of $25.0 million, with Wachovia Bank, N.A. and Fleet Bank (the Banks), respectively. These swap agreements effectively convert the variable interest rate to a fixed interest rate on $50.0 million of the principal amount outstanding under the term loan. Under the terms of these swap agreements, we will pay or receive the difference between the variable interest rate payable by the Banks and the fixed 2.59% interest rate payable by us. The variable interest rate paid by the Banks is based on the three month LIBOR and is determined on the first day of each calculation period. The difference to be paid or received on these swap agreements, as interest rates change, is recorded as an adjustment to interest expense. These swap agreements are accounted for as cash flow hedges. We are continuing to account for the swaps as cash flow hedges subsequent to the November 4, 2003 amending and restating of our credit facility.

        Based upon our anticipated level of future operations, we believe that our existing cash and cash equivalents balances and our cash from operating activities, together with available borrowings under

24

our amended and restated facility, will be adequate to meet our anticipated requirements for working capital, capital expenditures, commitments, research and development expenditures, contingent purchase prices, program and other discretionary investments, and interest payments for the foreseeable future. There can be no assurance, however, that our business will continue to generate cash flow at current levels or that currently anticipated improvements will be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the defense industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control. There can be no assurance that sufficient funds will be available to enable us to service our indebtedness, make necessary capital expenditures or to make discretionary investments.

Contractual Obligations and Contingent Commitments

        The table below presents our contractual obligations at November 4, 2003, reflecting our current obligations based on our amended and restated credit facility and the issuance of the Notes.

	Payments Due by Period
	Total		Within 1 Year		1-3 Years		4-5 Years		After 5 Years
	(in thousands)
Contractual Obligations
Long-term debt obligations	$	597,693	$	7,890	$	8,180	$	5,135	$	576,488
Operating lease commitments		73,443		14,911		26,167		19,087		13,278
Total contractual obligations	$	671,136	$	22,801	$	34,347	$	24,222	$	589,766

        The table below presents our contingent obligations at September 30, 2003.

	As of September 30, 2003
	Payments Due by Period
	Total		Within 1 Year		1-3 Years		4-5 Years		After 5 Years
	(in thousands)
Contingent Obligations
Outstanding letters of credit under our credit facility	$	24,663	$	19,463	$	5,200	$	—	$	—
Other outstanding letters of credit		3,116		1,660		1,456		—		—
Acquisition earnouts(A)		34,500		6,130		22,438		5,932		—
	$	62,279	$	27,253	$	29,094	$	5,932	$	—

(A)

Represents contingent purchase price payments or "earnouts" for certain of our acquisitions that are contingent upon the receipt of post-acquisition orders at those acquired businesses. Any amount that we pay for the earnouts will be reported as payments pursuant to business combinations within investing activities on the consolidated statement of cash flows and will be recorded as an increase to goodwill for the acquisition. The last earnout period expires on December 31, 2009.

Backlog

        Funded backlog represents products or services that our customers have committed by contract to purchase from us. Due to the general nature of defense procurement and contracting, the operating

25

cycle for our military business typically has been long-term. Military backlog currently consists of various production and engineering development contracts with varying delivery schedules and project timetables. Our backlog also includes a significant amount of commercial off-the-shelf (COTS)-based systems for the military, which favors shorter delivery times. Accordingly, revenues for a particular period, or period-to-period comparisons of reported revenues and related backlog positions, may not be indicative of future results. Our backlog at September 30, 2003 and 2002 was $899.8 million and $651.5 million, respectively. The backlog at March 31, 2003 was $867.1 million. We booked $413.9 million and $269.8 million in new orders during the six months ended September 30, 2003 and 2002, respectively.

        Our backlog is subject to fluctuations and is not necessarily indicative of future sales. Moreover, cancellations of purchase orders or reductions of product quantities in existing contracts could substantially and materially reduce our backlog and, consequently, future revenues. Our failure to replace canceled or reduced backlog would have an adverse impact on future revenues.

Recently Issued Accounting Pronouncements

        In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, "Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity" (SFAS 150). The statement establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity and requires that such instruments be classified as liabilities. The statement was adopted by us effective July 1, 2003 and it did not have an impact on our consolidated financial position or results of operations.

        In April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." We adopted this statement for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The adoption of this statement did not have an impact on our consolidated financial position or results of operations.

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Use of Non-GAAP Financial Measures

        Certain disclosures in this document include "non-GAAP (Generally Accepted Accounting Principles) financial measures." A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the Consolidated Statements of Earnings, Balance Sheets or Statements of Cash Flows of the Company. As required by the SEC's Regulation G, a reconciliation of EBITDA (earnings before interest, taxes, depreciation and amortization) and "free cash flow" with the most directly comparable GAAP measure follows:

		Three Months Ended September 30,						Six Months Ended September 30,
		2003			2002			2003			2002
		(in thousands)
Net earnings		$	9,443		$	7,663		$	16,739		$	13,097
Income taxes			7,420			6,528			13,152			11,157
Interest income			(179	)		(205	)		(516	)		(683	)
Interest and related expenses			4,149			2,472			7,178			4,755
Depreciation and amortization			5,610			4,425			11,018			7,586
	EBITDA(A)		26,443			20,883			47,571			35,912
Income taxes			(7,420	)		(6,528	)		(13,152	)		(11,157	)
Interest income			179			205			516			683
Interest and related expenses			(4,149	)		(2,472	)		(7,178	)		(4,755	)
Deferred income taxes			(79	)		149			82			(9	)
Changes in assets and liabilities, net of effects from business combinations and divestitures			8,416			10,751			(5,671	)		2,745
Other, net			660			553			2,111			1,202
	Net cash provided by operating activities		24,050			23,541			24,279			24,621
Capital expenditures			(4,875	)		(5,155	)		(9,112	)		(9,316	)
	Free cash flow(B)	$	19,175		$	18,386		$	15,167		$	15,305

(A)

We define EBITDA as earnings before net interest and related expenses (principally amortization of debt issuance costs), income taxes, depreciation and amortization. The table above presents the components of and a reconciliation of EBITDA to net cash provided by operating activities. EBITDA is presented as additional information because we believe it to be a useful indicator of an entity's debt capacity and its ability to service its debt. EBITDA is not a substitute for operating income, net earnings or cash flows from operating activities, as determined in accordance with generally accepted accounting principles. EBITDA is not a complete net cash flow measure because EBITDA is a measure of liquidity that does not include reductions for cash payments for an entity's obligation to service its debt, fund its working capital and capital expenditures and pay its income taxes. Rather, EBITDA is one potential indicator of an entity's ability to fund these cash requirements. EBITDA also is not a complete measure of an entity's profitability because it does not include costs and expenses for depreciation and amortization, interest and related expenses and income taxes. EBITDA, as we defined it, may differ from similarly named measures used by other entities and, consequently, could be misleading unless all entities calculate and define EBITDA in the same manner.

(B)

We disclose free cash flow because we believe that it is a measurement of cash flow generated that is available for investing and financing activities. Free cash flow is defined as net cash provided by operating activities less capital expenditures. We believe that the most directly comparable GAAP financial measure to free cash flow is net cash provided by operating activities. Free cash flow represents cash generated after paying for interest on borrowings, income taxes, capital expenditures and changes in working capital, but before repaying outstanding debt, investing cash to acquire businesses and making other strategic investments. Thus, key assumptions underlying free cash flow are that the Company will be able to refinance its existing debt when it matures with new debt and that the Company will be able to finance any new acquisitions it makes by raising new debt or equity capital.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Market Risk

        See Part II, Item 7A, "Qualitative and Quantitative Disclosures About Market Risk," of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2003 for a discussion of the Company's exposure to market risk. Significant changes to those risks subsequent to March 31, 2003 are discussed below.

Interest Rate Risk

        Simultaneous with the closing of the acquisition of Integrated Defense Technologies, Inc., on November 4, 2003 we entered into an amended and restated credit facility for up to an aggregate amount of $411.0 million, replacing our previously existing senior credit facility. The amended and restated credit facility consists of a $175.0 million senior secured revolving line of credit and a $236.0 million senior secured term loan. There were no initial borrowings under our revolving line of credit. Borrowings under the amended and restated credit facility bear interest at variable rates.

        Also in connection with the IDT acquisition, on October 30, 2003, the Company issued $350.0 million of 6⁷/8% Senior Subordinated Notes, due November 1, 2013. The interest rates on the Senior Subordinated Notes are fixed. The fair value of the Company's various debt instruments approximates their carrying value at November 4, 2003

Derivative Financial Instruments

        On June 5, 2003, we entered into two interest rate swap agreements with Wachovia Bank, N.A. and Fleet Bank (the Banks), respectively, each in the amount of $25.0 million, on our variable rate senior secured term loans. These swap agreements effectively convert the variable interest rate to a fixed interest rate on a total of $50.0 million of the principal amount outstanding under the term loan. Under the terms of these swap agreements, we will pay or receive the difference between the variable interest rate payable by the Banks and the fixed 2.59% interest rate payable by us. The variable interest rate paid by the Banks is based on the three month LIBOR and is determined on the first day of each calculation period. The difference to be paid or received on these swap agreements, as interest rates change, is recorded as an adjustment to interest expense. We are continuing to account for the swaps as cash flow hedges subsequent to the November 4, 2003 amending and restating of our credit facility.

Item 4.    Controls and Procedures

        (a)   Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective at the reasonable assurance level in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

        (b)   Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

        On October 3, 2001, a lawsuit was filed in the United States District Court of the Eastern District of New York by Miltope Corporation, a corporation of the State of Alabama, and IV Phoenix Group, Inc., a corporation of the State of New York, against DRS Technologies, Inc., DRS Electronic Systems, Inc. and a number of individual defendants, several of whom are employed by DRS Electronic Systems, Inc. The plaintiff's claims against us alleged infringement of a number of patents, breach of a confidentiality agreement, misappropriation of trade secrets, unjust enrichment and unfair competition. The claims relate generally to the activities of certain former employees of IV Phoenix Group and the hiring of some of those employees by us. The plaintiffs seek damages of not less than $5.0 million for each of the claims. The plaintiffs also allege claims for tortious interference with business relationships, tortious interference with contracts and conspiracy to breach fiduciary duty. The plaintiffs seek damages of not less than $47.1 million for each claim. In addition, plaintiffs seek punitive and treble damages, injunctive relief and attorney's fees. In our answer, we have denied the plaintiffs' allegations and we intend to vigorously defend this action. In February 2002, plaintiffs filed an amended complaint, which eliminated the patent infringement claims and added claims related to statutory and common-law trademark infringement. This action is in an extended discovery period, with trial anticipated in the fall or winter of 2003-04. We believe we have meritorious defenses and do not believe the action will have a material adverse effect on our earnings, financial condition or liquidity.

        We are party to various legal actions and claims arising in the ordinary course of our business. In our opinion, we have adequate legal defenses for each of the actions and claims, and we believe that their ultimate disposition will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Item 4.    Submission of Matters to a Vote of Security Holders

        On August 6, 2003, the Company held its Annual Meeting of Stockholders at The Penn Club, Spruce Room, 30 W. 44^th St., New York, New York, 10036. The following matters were submitted to a vote of stockholders:

(i)

To elect three Class II directors, each to hold office for a term of three years; and



(ii)

To consider and vote upon a proposal to ratify and approve the designation of KPMG LLP as DRS' independent certified public accountants

        With respect to the aforementioned matters, votes were tabulated and the stockholders of the Company approved all proposals as follows:

		For	Withheld
Proposal (i):
	Mark N. Kaplan	14,806,391	5,621,677
	Ira Albom	19,238,267	1,189,801
	Dennis J. Reimer	19,703,120	724,948

	For	Abstain	Against
Proposal (ii):	19,955,774	9,193	463,101

29

Item 6.    Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit No.	Description
4.1	Indenture dated as of October 30, 2003, among the Company, the Guarantors (as defined therein) and The Bank of New York, as trustee, relating to the Company's 67/8 Senior Subordinated Notes due 2013.
10.1	Second Amended and Restated Credit Agreement, dated as of November 4, 2003, by and among the Company, as Borrower, the lenders who are or may become a party to the agreement, as Lenders, Wachovia Bank, National Association, as Administrative Agent for the Lenders, Bear Stearns Corporate Lending Inc., as Syndication Agent and Fleet National Bank, as Documentation Agent.
10.2	Registration Rights Agreement dated as of October 30, 2003, by and among the Company, each of the Guarantors listed on Schedule I thereto, and Bear, Stearns & Co. Inc., Wachovia Capital Markets, LLC and Fleet Securities,  Inc., as initial purchasers, relating to the Company's 67/8% Senior Subordinated Notes due 2013.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)

Reports on Form 8-K

        We filed the following current reports on Form 8-K with the SEC during the three months ended September 30, 2003:

1.

On July 24, 2003, we filed an 8-K, discussing under Item 5, the meeting time of the 2003 Annual Meeting of our stockholders.



2.

On August 5, 2003, we furnished an 8-K, discussing under Item 9, our financial results for the three months ended June 30, 2003.



3.

On August 18, 2003, we furnished an 8-K, discussing under Items 9 and 12, that we had entered into an Agreement and Plan of Merger, dated as of August 15, 2003, with Integrated Defense Technologies, Inc. ("IDT").

30

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DRS TECHNOLOGIES, INC.         Registrant
Date: November 14, 2003	By:	/s/  RICHARD A. SCHNEIDER Richard A. Schneider Executive Vice President, Chief Financial Officer

31

QuickLinks

DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
Index to Quarterly Report on Form 10-Q For the Quarter Ended September 30, 2003
PART I—FINANCIAL INFORMATION
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (in thousands, except per-share data) (Unaudited)
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) (Unaudited)
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)
PART II. OTHER INFORMATION
SIGNATURES

EX-4.1

                                                                     Exhibit 4.1

                                                                  EXECUTION COPY
- --------------------------------------------------------------------------------


                             DRS TECHNOLOGIES, INC.

                     AND EACH OF THE GUARANTORS PARTY HERETO

                    6 7/8% SENIOR SUBORDINATED NOTES DUE 2013

                                   ----------

                                    INDENTURE

                          Dated as of October 30, 2003

                                   ----------

                                   ----------

                              THE BANK OF NEW YORK

                                     Trustee

                                   ----------


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



                             CROSS-REFERENCE TABLE*



      TRUST INDENTURE
      ACT SECTION                                                           INDENTURE SECTION
                                                                           
        310(a)(1).......................................................           7.10
           (a)(2).......................................................           7.10
           (a)(3).......................................................           N.A.
           (a)(4).......................................................           N.A.
           (a)(5).......................................................           7.10
           (b)..........................................................           7.10
           (c)..........................................................           N.A.
        311(a)..........................................................           7.11
           (b)..........................................................           7.11
           (c)..........................................................           N.A.
        312(a)..........................................................           2.05
           (b)..........................................................          13.03
           (c)..........................................................          13.03
        313(a)..........................................................           7.06
           (b)(2).......................................................        7.06; 7.07
           (c)..........................................................           7.06
           (d)..........................................................           7.06
        314(a)..........................................................      4.03;13.02; 13.05
           (c)(1).......................................................          13.04
           (c)(2).......................................................          13.04
           (c)(3).......................................................           N.A.
           (e)..........................................................          13.05
           (f)..........................................................           N.A.
        315(a)..........................................................           7.01
           (b)..........................................................        7.05,13.02
           (c)..........................................................           7.01
           (d)..........................................................           7.01
           (e)..........................................................           6.11
        316(a) (last sentence)..........................................           2.09
           (a)(1)(A)....................................................           6.05
           (a)(1)(B)....................................................           6.04
           (a)(2).......................................................           N.A.
           (b)..........................................................           6.07
           (c)..........................................................           2.12
        317(a)(1).......................................................           6.08
           (a)(2).......................................................           6.09
           (b)..........................................................           2.04
        318(a)..........................................................           N.A.
           (b)..........................................................           N.A.
           (c)..........................................................          13.01


N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.



                                TABLE OF CONTENTS



                                                                                 PAGE
                                                                               
                                     ARTICLE 1.
                            DEFINITIONS AND INCORPORATION
                                    BY REFERENCE

   Section 1.01       Definitions..................................................1
   Section 1.02       Other Definitions...........................................21
   Section 1.03       Incorporation by Reference of Trust Indenture Act...........21
   Section 1.04       Rules of Construction.......................................22

                                     ARTICLE 2.
                                      THE NOTES

   Sectio0n 2.01      Form and Dating.............................................22
   Section 2.02       Execution and Authentication................................23
   Section 2.03       Registrar and Paying Agent..................................23
   Section 2.04       Paying Agent to Hold Money in Trust.........................23
   Section 2.05       Holder Lists................................................24
   Section 2.06       Transfer and Exchange.......................................24
   Section 2.07       Replacement Notes...........................................35
   Section 2.08       Outstanding Notes...........................................36
   Section 2.09       Treasury Notes..............................................36
   Section 2.10       Temporary Notes.............................................36
   Section 2.11       Cancellation................................................36
   Section 2.12       Defaulted Interest..........................................37

                                     ARTICLE 3.
                              REDEMPTION AND PREPAYMENT

   Section 3.01       Notices to Trustee..........................................37
   Section 3.02       Selection of Notes to Be Redeemed or Purchased..............37
   Section 3.03       Notice of Redemption........................................38
   Section 3.04       Effect of Notice of Redemption..............................38
   Section 3.05       Deposit of Redemption or Purchase Price.....................39
   Section 3.06       Notes Redeemed or Purchased in Part.........................39
   Section 3.07       Optional Redemption.........................................39
   Section 3.08       Mandatory Redemption........................................40
   Section 3.09       Offer to Purchase by Application of Excess Proceeds.........40

                                     ARTICLE 4.
                                      COVENANTS

   Section 4.01       Payment of Notes............................................42
   Section 4.02       Maintenance of Office or Agency.............................42
   Section 4.03       Reports.....................................................42
   Section 4.04       Compliance Certificate......................................43
   Section 4.05       Taxes.......................................................44
   Section 4.06       Stay, Extension and Usury Laws..............................44
   Section 4.07       Restricted Payments.........................................44
   Section 4.08       Dividend and Other Payment Restrictions Affecting
   Subsidiaries...................................................................47


                                        i


                                                                            
   Section 4.09       Incurrence of Indebtedness and Issuance of Preferred Stock..48
   Section 4.10       Asset Sales.................................................51
   Section 4.11       Transactions with Affiliates................................53
   Section 4.12       Liens.......................................................54
   Section 4.13       Business Activities.........................................55
   Section 4.14       Corporate Existence.........................................55
   Section 4.15       Offer to Repurchase Upon Change of Control..................55
   Section 4.16       No Layering of Debt.........................................57
   Section 4.17       Limitation on Sale and Leaseback Transactions...............57
   Section 4.18       Payments for Consent........................................57
   Section 4.19       Additional Subsidiary Guarantees............................57
   Section 4.20       Designation of Restricted and Unrestricted Subsidiaries.....57

                                     ARTICLE 5.
                                     SUCCESSORS

   Section 5.01       Merger, Consolidation, or Sale of Assets....................58
   Section 5.02       Successor Corporation Substituted...........................58

                                     ARTICLE 6.
                                DEFAULTS AND REMEDIES

   Section 6.01       Events of Default...........................................59
   Section 6.02       Acceleration................................................61
   Section 6.03       Other Remedies..............................................61
   Section 6.04       Waiver of Past Defaults.....................................61
   Section 6.05       Control by Majority.........................................61
   Section 6.06       Limitation on Suits.........................................62
   Section 6.07       Rights of Holders of Notes to Receive Payment...............62
   Section 6.08       Collection Suit by Trustee..................................62
   Section 6.09       Trustee May File Proofs of Claim............................62
   Section 6.10       Priorities..................................................63
   Section 6.11       Undertaking for Costs.......................................63

                                     ARTICLE 7.
                                       TRUSTEE

   Section 7.01       Duties of Trustee...........................................63
   Section 7.02       Rights of Trustee...........................................64
   Section 7.03       Individual Rights of Trustee................................65
   Section 7.04       Trustee's Disclaimer........................................65
   Section 7.05       Notice of Defaults..........................................66
   Section 7.06       Reports by Trustee to Holders of the Notes..................66
   Section 7.07       Compensation and Indemnity..................................66
   Section 7.08       Replacement of Trustee......................................67
   Section 7.09       Successor Trustee by Merger, etc............................68
   Section 7.10       Eligibility; Disqualification...............................68
   Section 7.11       Preferential Collection of Claims Against Company...........68

                                     ARTICLE 8.
                      LEGAL DEFEASANCE AND COVENANT DEFEASANCE

   Section 8.01       Option to Effect Legal Defeasance or Covenant Defeasance....68

   

                                       ii


                                                                            
   Section 8.02       Legal Defeasance and Discharge..............................68
   Section 8.03       Covenant Defeasance.........................................69
   Section 8.04       Conditions to Legal or Covenant Defeasance..................69
   Section 8.05       Deposited Money and Government Securities to be Held in
   Trust; Other Miscellaneous Provisions..........................................70
   Section 8.06       Repayment to Company........................................71
   Section 8.07       Reinstatement...............................................71

                                     ARTICLE 9.
                          AMENDMENT, SUPPLEMENT AND WAIVER

   Section 9.01       Without Consent of Holders of Notes.........................72
   Section 9.02       With Consent of Holders of Notes............................72
   Section 9.03       Compliance with Trust Indenture Act.........................74
   Section 9.04       Revocation and Effect of Consents...........................74
   Section 9.05       Notation on or Exchange of Notes............................74
   Section 9.06       Trustee to Sign Amendments, etc.............................74

                                     ARTICLE 10.
                                    SUBORDINATION

   Section 10.01      Agreement to Subordinate....................................75
   Section 10.02      Liquidation; Dissolution; Bankruptcy........................75
   Section 10.03      Default on Designated Senior Debt...........................75
   Section 10.04      Acceleration of Notes.......................................76
   Section 10.05      When Distribution Must Be Paid Over.........................76
   Section 10.06      Notice by Company...........................................76
   Section 10.07      Subrogation.................................................76
   Section 10.08      Relative Rights.............................................77
   Section 10.09      Subordination May Not Be Impaired by Company................77
   Section 10.10      Distribution or Notice to Representative....................77
   Section 10.11      Rights of Trustee and Paying Agent..........................77
   Section 10.12      Authorization to Effect Subordination.......................78
   Section 10.13      Amendments..................................................78
   Section 10.14      Trustee Not Fiduciary for Holders of Senior Indebtedness....78

                          ARTICLE 11. SUBSIDIARY GUARANTEES

   Section 11.01      Guarantee...................................................78
   Section 11.02      Subordination of Subsidiary Guarantee.......................79
   Section 11.03      Limitation on Guarantor Liability...........................79
   Section 11.04      Execution and Delivery of Subsidiary Guarantee..............80
   Section 11.05      Guarantors May Consolidate, etc., on Certain Terms..........80
   Section 11.06      Releases....................................................81

                                     ARTICLE 12.
                             SATISFACTION AND DISCHARGE

   Section 12.01      Satisfaction and Discharge..................................81
   Section 12.02      Application of Trust Money..................................82

   

                                       iii


                                                                            
                                     ARTICLE 13.
                                    MISCELLANEOUS

   Section 13.01      Trust Indenture Act Controls................................83
   Section 13.02      Notices.....................................................83
   Section 13.03      Communication by Holders of Notes with Other Holders
   of Notes.......................................................................84
   Section 13.04      Certificate and Opinion as to Conditions Precedent..........84
   Section 13.05      Statements Required in Certificate or Opinion...............84
   Section 13.06      Rules by Trustee and Agents.................................85
   Section 13.07      No Personal Liability of Directors, Officers, Employees
   and Stockholders...............................................................85
   Section 13.08      Governing Law...............................................85
   Section 13.09      No Adverse Interpretation of Other Agreements...............85
   Section 13.10      Successors..................................................85
   Section 13.11      Severability................................................85
   Section 13.12      Counterpart Originals.......................................85
   Section 13.13      Table of Contents, Headings, etc............................85

   

                                    EXHIBITS

Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE

                                       iv


     INDENTURE dated as of October 30, 2003 among DRS Technologies, Inc., a
Delaware corporation (the "COMPANY"), the Guarantors (as defined) and The Bank
of New York, a New York banking corporation, as trustee (the "TRUSTEE").

     The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders (as
defined) of the 6 7/8% Senior Subordinated Notes due 2013 (the "NOTES"):

                                   ARTICLE 1.
                          DEFINITIONS AND INCORPORATION
                                  BY REFERENCE

Section 1.01  DEFINITIONS.

     "144A GLOBAL NOTE" means a Global Note substantially in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.

      "ACQUIRED DEBT" means, with respect to any specified Person:

              (1) Indebtedness of any other Person existing at the time such
     other Person is merged with or into or became a Subsidiary of such
     specified Person, whether or not such Indebtedness is incurred in
     connection with, or in contemplation of, such other Person merging with or
     into, or becoming a Restricted Subsidiary of, such specified Person; and

              (2) Indebtedness secured by a Lien encumbering any asset acquired
     by such specified Person.

     "ADDITIONAL NOTES" means an unlimited principal amount of additional Notes
(other than the Initial Notes) issued under this Indenture in accordance with
Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes.

     "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; PROVIDED that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings.

     "AGENT" means any Registrar, co-registrar, Paying Agent or additional
paying agent.

     "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

     "ASSET SALE" means

              (1) the sale, lease, conveyance or other disposition of any assets
     or rights; provided that the sale, conveyance or other disposition of all
     or substantially all of the assets of the Company



     and its Restricted Subsidiaries taken as a whole will be governed by
     Section 4.15 or 5.01 of this Indenture described above under the caption
     not by the Section 4.10 of this Indenture; and

              (2) the issuance of Equity Interests in any of the Company's
     Restricted Subsidiaries or the sale of Equity Interests in any of its
     Subsidiaries.

Notwithstanding the preceding, none of the following items will be deemed to be
an Asset Sale:

              (1) any single transaction or series of related transactions that
     involves assets having a Fair Market Value of less than $2.5 million;

              (2) a sale or transfer of assets between or among the Company and
     its Restricted Subsidiaries;

              (3) an issuance of Equity Interests by a Restricted Subsidiary of
     the Company to the Company or to a Restricted Subsidiary of the Company;

              (4) the sale or lease of products, services or accounts receivable
     in the ordinary course of business and any sale or other disposition of
     damaged, worn-out or obsolete assets in the ordinary course of business;

              (5) the sale or other disposition of cash or Cash Equivalents;

              (6) the granting of Liens not otherwise prohibited by this
     Indenture;

              (7) surrender or waiver of contract rights or the settlement,
     release or surrender of contract, tort or other claims; and

              (8) a Restricted Payment that does not violate Section 4.07 of
     this Indenture or a Permitted Investment.

     "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP; PROVIDED,
HOWEVER, that if such sale and leaseback transaction results in a Capital Lease
Obligation, the amount of Indebtedness represented thereby will be determined in
accordance with the definition of "Capital Lease Obligation."

     "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.

     "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "Person" will be deemed to have beneficial ownership
of all securities that such "Person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms "Beneficially Owns" and
"Beneficially Owned" have a corresponding meaning.

                                        2


     "BOARD OF DIRECTORS" means:

              (1) with respect to a corporation, the board of directors of the
     corporation or any committee thereof duly authorized to act on behalf of
     such board;

              (2) with respect to a partnership, the Board of Directors of the
     general partner of the partnership;

              (3) with respect to a limited liability company, the managing
     member or members or any controlling committee of managing members thereof;
     and

              (4) with respect to any other Person, the board or committee of
     such Person serving a similar function.

     "BORROWING BASE" means, as of any date, an amount equal to:

              (1) 85% of the face amount of all accounts receivable owned by the
     Company and its Restricted Subsidiaries as of the end of the most recent
     fiscal quarter preceding such date that were not more than 90 days past
     due; PLUS

              (2) 65% of the gross book value of all inventory owned by the
     Company and its Restricted Subsidiaries as of the end of the most recent
     fiscal quarter preceding such date.

     "BROKER-DEALER" has the meaning set forth in the Registration Rights
Agreement

     "BUSINESS DAY" means any day other than a Legal Holiday.

     "CAPITAL LEASE OBLIGATION" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP, and the Stated Maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be prepaid by the lessee without payment of a penalty.

     "CAPITAL STOCK" means:

              (1) in the case of a corporation, corporate stock or other
     equivalents (however designated);

              (2) in the case of an association or business entity, any and all
     shares, interests, participations, rights or other equivalents (however
     designated) of corporate stock;

              (3) in the case of a partnership or limited liability company,
     partnership interests (whether general or limited) or membership interests;
     and

              (4) any other interest or participation that confers on a Person
     the right to receive a share of the profits and losses of, or distributions
     of assets of, the issuing Person, but excluding from all of the foregoing
     any debt securities convertible into Capital Stock, whether or not such
     debt securities include any right of participation with Capital Stock.

                                        3


     "CASH EQUIVALENTS" means:

              (1) United States dollars;

              (2) securities issued or directly and fully guaranteed or insured
     by the United States government or any agency or instrumentality of the
     United States government (PROVIDED that the full faith and credit of the
     United States is pledged in support of those securities) having maturities
     of not more than one year from the date of acquisition;

              (3) certificates of deposit and eurodollar time deposits with
     maturities of one year or less from the date of acquisition, bankers'
     acceptances with maturities not exceeding six months and overnight bank
     deposits, in each case, with any domestic commercial bank having capital
     and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of
     "B" or better;

              (4) repurchase obligations with a term of not more than one year
     for underlying securities of the types described in clauses (2) and (3)
     above entered into with any financial institution meeting the
     qualifications specified in clause (3) above;

              (5) commercial paper having one of the two highest ratings
     obtainable from Moody's Investors commercial paper having one of the two
     highest ratings obtainable from Moody's Investors Service, Inc. or Standard
     & Poor's Rating Services and in each case maturing within one year after
     the date of acquisition;

              (6) marketable direct obligations issued by the United States of
     America or any political subdivision of any state or any public
     instrumentality thereof having one of the two highest ratings obtainable
     from Moody's Investors Service, Inc. or Standard & Poor's Rating Services
     and in each case maturing within one year after the date of acquisition;
     and

              (7) money market funds at least 95% of the assets of which
     constitute Cash Equivalents of the kinds described in clauses (1) through
     (6) of this definition.

     "CHANGE OF CONTROL" means the occurrence of any of the following:

              (1) the direct or indirect sale, transfer, conveyance or other
     disposition (other than by way of merger or consolidation), in one or a
     series of related transactions, of all or substantially all of the
     properties or assets of the Company and its Subsidiaries taken as a whole
     to any "person" (as that term is used in Section 13(d) of the Exchange
     Act);

              (2) the adoption of a plan relating to the liquidation or
     dissolution of the Company;

              (3) the consummation of any transaction (including, without
     limitation, any merger or consolidation) the result of which is that any
     "Person" (as defined above), directly or indirectly, becomes the Beneficial
     Owner of more than 50% of the Voting Stock of the Company, measured by
     voting power rather than number of shares; or

              (4) the Company consolidates with, or merges with or into, any
     Person, or any Person consolidates with, or merges with or into, the
     Company, in any such event pursuant to a transaction in which any of the
     outstanding Voting Stock of the Company or such other Person is converted
     into or exchanged for cash, securities or other property, other than any
     such transaction where the Voting Stock of the Company outstanding
     immediately prior to such transaction is converted into or exchanged for
     Voting Stock (other than Disqualified Stock) of the surviving or

                                        4


     transferee Person constituting a majority of the outstanding shares of such
     Voting Stock of such surviving or transferee Person (immediately after
     giving effect to such issuance).

     "CLEARSTREAM" means Clearstream Banking, S.A.

     "COMPANY"  means DRS Technologies, Inc. and any and all successors thereto.

     "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period PLUS,
without duplication:

              (1) an amount equal to any extraordinary loss plus any net loss
     realized by such Person or any of its Restricted Subsidiaries in connection
     with an Asset Sale, to the extent such losses were deducted in computing
     such Consolidated Net Income; PLUS

              (2) provision for taxes based on income or profits of such Person
     and its Restricted Subsidiaries for such period, to the extent that such
     provision for taxes was deducted in computing such Consolidated Net Income;
     PLUS

              (3) the Fixed Charges of such Person and its Restricted
     Subsidiaries for such period, to the extent that such Fixed Charges were
     deducted in computing such Consolidated Net Income; PLUS

              (4) depreciation, amortization (including amortization of
     intangibles but excluding amortization of prepaid cash expenses that were
     paid in a prior period) and other non-cash expenses (excluding any such
     non-cash expense to the extent that it represents an accrual of or reserve
     for cash expenses in any future period or amortization of a prepaid cash
     expense that was paid in a prior period) of such Person and its Restricted
     Subsidiaries for such period to the extent that such depreciation,
     amortization and other non-cash expenses were deducted in computing such
     Consolidated Net Income; MINUS

              (5) non-cash items increasing such Consolidated Net Income for
     such period, other than the accrual of revenue in the ordinary course of
     business,

in each case, on a consolidated basis and determined in accordance with GAAP.

     Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company will be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.

     "CONSOLIDATED NET INCOME" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:

              (1) the Net Income (but not loss) of any Person that is not a
     Restricted Subsidiary or that is accounted for by the equity method of
     accounting will be included only to the extent of the

                                        5


     amount of dividends or similar distributions paid in cash to the specified
     Person or a Restricted Subsidiary of the Person;

              (2) the Net Income of any Restricted Subsidiary will be excluded
     to the extent that the declaration or payment of dividends or similar
     distributions by that Restricted Subsidiary of that Net Income is not at
     the date of determination permitted without any prior governmental approval
     (that has not been obtained) or, directly or indirectly, by operation of
     the terms of its charter or any agreement, instrument, judgment, decree,
     order, statute, rule or governmental regulation applicable to that
     Restricted Subsidiary or its stockholders;

              (3) the cumulative effect of a change in accounting principles
     will be excluded; and

              (4) notwithstanding clause (1) above, the Net Income of any
     Unrestricted Subsidiary will be excluded, whether or not distributed to the
     specified Person or one of its Subsidiaries.

     "CONSOLIDATED TANGIBLE ASSETS" means, with respect to the Company as of any
date, the aggregate of the assets of the Company and its Restricted Subsidiaries
excluding goodwill, patents, trade names, trade marks, copyrights, franchises,
experimental expense, organization expense and any other assets properly
classified as intangible assets in accordance with GAAP, as of such date on a
consolidated basis, determined in accordance with GAAP. In the event that
information relating to Consolidated Tangible Assets is not available as of any
date, then the most recently available information will be utilized.

     "CORPORATE TRUST OFFICE OF THE TRUSTEE" will be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.

     "CREDIT AGREEMENT" means the Existing Credit Agreement as such credit
agreement will be amended and restated pursuant to the senior credit agreement
among the Company, the guarantors named therein, the institutions who are or may
become party thereto (the "Lenders"), Bear Stearns Corporate Lending Inc., as
Syndication Agent for the Lenders and Wachovia Bank, National Association, as
Administrative Agent for the Lenders, upon the consummation of the IDT Merger
and the occurrence of the Condition for Release, providing for a revolving
credit facility, a letter of credit facility and a term loan facility as
described in the "Description of Other Indebtedness-Senior Secured Credit
Facility" section of Offering Memorandum.

     "CREDIT FACILITIES" means, one or more debt facilities (including without
limitation the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables), synthetic leases or letters of credit, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced
(including by means of sales of debt securities to institutional investors) in
whole or in part from time to time.

     "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.

     "DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

     "DEFINITIVE NOTE" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto except that

                                        6


such Note shall not bear the Global Note Legend and shall not have the "Schedule
of Exchanges of Interests in the Global Note" attached thereto.

     "DEPOSITARY" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.

     "DESIGNATED SENIOR DEBT" means:

              (1) any Indebtedness outstanding under the Credit Agreement; and

              (2) after payment in full of all Obligations under the Credit
     Agreement, any other Senior Debt permitted under this Indenture the
     principal amount of which is $25.0 million or more and that has been
     designated by the Company as "Designated Senior Debt."

     "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require the
Company to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company may not repurchase or redeem any
such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 4.07 hereof. The amount of Disqualified Stock
deemed to be outstanding at any time for purposes of this Indenture will be the
maximum amount that the Company and its Restricted Subsidiaries may become
obligated to pay upon the maturity of, or pursuant to any mandatory redemption
provisions of, such Disqualified Stock, exclusive of accrued dividends.

     "DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of the Company that
was formed under the laws of the United States or any state of the United States
or the District of Columbia or that guarantees or otherwise provides direct
credit support for any Indebtedness of the Company. The pledge of Capital Stock
of a Restricted Subsidiary of the Company will not be considered to be a
provision of direct credit support for Indebtedness of the Company by such
Restricted Subsidiary. Notwithstanding the foregoing, Laurel Technologies
Partnership (dba DRS Laurel Technologies) and MSSC LP and their respective
subsidiaries will not be a Domestic Subsidiary for so long as such entity is not
directly or indirectly wholly-owned by the Company, PROVIDED that should Laurel
Technologies Partnership (dba DRS Laurel Technologies) or MSSC LP and their
respective subsidiaries be directly or indirectly wholly-owned by the Company at
any point after the date of this Indenture, they and their respective
subsidiaries will become Subsidiary Guarantors in compliance with Section 4.19
hereof.

     "EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

     "EQUITY OFFERING" means any public or private issuance or sale of Equity
Interests (other than Disqualified Stock) of the Company.

     "ESCROW AGREEMENT" means the agreement, dated October 30, 2003, between the
Company and The Bank of New York, as escrow agent and trustee pursuant to which
the Company will deposit the

                                        7


gross proceeds from the offering of the Notes, interest from October 30, 2003
through December 15, 2003.

     "ESCROW REDEMPTION DATE" means either:

              (1) December 16, 2003; or

              (2) the date on which the Company may redeem the notes, in whole,
     but not in part, at their sole option, on or prior to December 15, 2003, if
     in the sole judgment of the Company, the IDT Merger will not be consummated
     on or prior to December 15, 2003.

     "ESCROW REDEMPTION PRICE" means an amount of Government Securities with a
value equal to 100% of the aggregate principal amount of the notes on December
16, 2003 plus accrued interest on the notes on or prior to the Escrow Redemption
Date.

     "EUROCLEAR" means Euroclear Bank, S.A./N.V., as operator of the Euroclear
system.

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     "EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.

     "EXCHANGE OFFER" has the meaning set forth in the Registration Rights
Agreement

     "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.

     "EXISTING CREDIT AGREEMENT" means the amended and restated senior credit
agreement dated as of November 26, 2002 among the Company, the guarantors named
therein, the institutions who are or may become party thereto (the "Lenders"),
TD Securities (USA), Inc. and Bear Stearns Corporate Lending Inc., as
Syndication Agents for the Lenders, Fleet National Bank, as Documentation Agent
for the Lenders and Wachovia Bank, National Association, as Administrative Agent
for the Lenders providing for a revolving credit facility, a letter of credit
facility and a term loan facility.

     "EXISTING INDEBTEDNESS" means any and all Indebtedness of the Company and
its Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the date of this Indenture, until such amounts are repaid.

     "FAIR MARKET VALUE" means the value that would be paid by a willing buyer
to an unaffiliated willing seller in a transaction not involving distress or
necessity of either party, determined in good faith by the Board of Directors of
the Company (unless otherwise provided in this Indenture).

     "FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any
Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge
Coverage Ratio will be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase,

                                        8


redemption, defeasance or other discharge of Indebtedness, or such issuance,
repurchase or redemption of preferred stock, and the use of the proceeds
therefrom, as if the same had occurred at the beginning of the applicable
four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

              (1) acquisitions that have been made by the specified Person or
     any of its Restricted Subsidiaries, including through mergers or
     consolidations, or any Person or any of its Restricted Subsidiaries
     acquired by the specified Person or any of its Restricted Subsidiaries, and
     including any related financing transactions and including increases in
     ownership of Restricted Subsidiaries, during the four-quarter reference
     period or subsequent to such reference period and on or prior to the
     Calculation Date will be given pro forma effect (in accordance with
     Regulation S-X under the Securities Act) as if they had occurred on the
     first day of the four-quarter reference period;

              (2) the Consolidated Cash Flow attributable to discontinued
     operations, as determined in accordance with GAAP, and operations or
     businesses (and ownership interests therein) disposed of prior to the
     Calculation Date, will be excluded;

              (3) the Fixed Charges attributable to discontinued operations, as
     determined in accordance with GAAP, and operations or businesses (and
     ownership interests therein) disposed of prior to the Calculation Date,
     will be excluded, but only to the extent that the obligations giving rise
     to such Fixed Charges will not be obligations of the specified Person or
     any of its Restricted Subsidiaries following the Calculation Date;

              (4) any Person that is a Restricted Subsidiary on the Calculation
     Date will be deemed to have been a Restricted Subsidiary at all times
     during such four-quarter period;

              (5) any Person that is not a Restricted Subsidiary on the
     Calculation Date will be deemed not to have been a Restricted Subsidiary at
     any time during such four-quarter period; and

              (6) if any Indebtedness bears a floating rate of interest, the
     interest expense on such Indebtedness will be calculated as if the rate in
     effect on the Calculation Date had been the applicable rate for the entire
     period (taking into account any Hedging Obligation applicable to such
     Indebtedness if such Hedging Obligation has a remaining term as at the
     Calculation Date in excess of twelve months).

     "FIXED CHARGES" means, with respect to any specified Person for any period,
the sum, without duplication, of:

              (1) the consolidated interest expense of such Person and its
     Restricted Subsidiaries for such period, whether paid or accrued,
     including, without limitation, amortization of debt issuance costs and
     original issue discount, non-cash interest payments, the interest component
     of any deferred payment obligations, the interest component of all payments
     associated with Capital Lease Obligations, imputed interest with respect to
     Attributable Debt, commissions, discounts and other fees and charges
     incurred in respect of letter of credit or bankers' acceptance financings,
     and net of the effect of all payments made or received pursuant to Hedging
     Obligations in respect of interest rates; plus

              (2) the consolidated interest of such Person and its Restricted
     Subsidiaries that was capitalized during such period; plus

                                        9


              (3) any interest accruing on Indebtedness of another Person that
     is Guaranteed by such Person or one of its Restricted Subsidiaries or
     secured by a Lien on assets of such Person or one of its Restricted
     Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

              (4) the product of (a) all dividends, whether paid or accrued and
     whether or not in cash, on any series of preferred stock of such Person or
     any of its Restricted Subsidiaries, other than dividends on Equity
     Interests payable solely in Equity Interests of the Company (other than
     Disqualified Stock) or to the Company or a Restricted Subsidiary of the
     Company, times (b) a fraction, the numerator of which is one and the
     denominator of which is one minus the then current combined federal, state
     and local statutory tax rate of such Person, expressed as a decimal, in
     each case, on a consolidated basis and in accordance with GAAP.

     "FOREIGN BORROWING BASE" means, as of any date, an amount equal to:

              (1) 85% of the face amount of all accounts receivable owned by the
     Company's Foreign Subsidiaries as of the end of the most recent fiscal
     quarter preceding such date that were not more than 90 days past due; plus

              (2) 65% of the gross book value of all inventory owned by the
     Company's Foreign Subsidiaries as of the end of the most recent fiscal
     quarter preceding such date.

     "FOREIGN SUBSIDIARY" means any Restricted Subsidiary that is not a Domestic
Subsidiary. Notwithstanding the foregoing, Laurel Technologies Partnership
(d/b/a DRS Laurel Technologies) and MSSC LP and their respective subsidiaries
will not be a Foreign Subsidiary.

     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

     "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(2),
which is required to be placed on all Global Notes issued under this Indenture.

     "GLOBAL NOTES" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes deposited with or on behalf of
and registered in the name of the Depository or its nominee, substantially in
the form of Exhibit A hereto and that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or
2.06(f) hereof.

     "GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantees
or obligations the full faith and credit of the United States is pledged.

     "GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take or pay or to maintain financial statement
conditions or otherwise).

                                       10


     "GUARANTORS" means each of:

              (1) the Company's direct and indirect Domestic Subsidiaries
     existing on the date of this Indenture; and

              (2) any other Subsidiary of the Company that executes a Subsidiary
     Guarantee in accordance with the provisions of this Indenture,

and their respective successors and assigns.

     "HEDGING OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person under:

              (1) interest rate swap agreements (whether from fixed to floating
     or from floating to fixed), interest rate cap agreements and interest rate
     collar agreements;

              (2) other agreements or arrangements designed to manage interest
     rates or interest rate risk; and

              (3) other agreements or arrangements designed to protect such
     Person against fluctuations in currency exchange rates or commodity prices.

     "HOLDER" means a Person in whose name a Note is registered.

     "IAI GLOBAL NOTE" means a Global Note substantially in the form of EXHIBIT
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.

     "IDT MERGER" means the acquisition by the Company of all of the outstanding
stock of Integrated Defense Technologies, Inc. and the merger of Integrated
Defense Technologies, Inc. into a wholly-owned subsidiary of the Company.

     "IMMATERIAL SUBSIDIARY" means, as of any date, any Restricted Subsidiary
whose total assets, as of that date, are less than $100,000 and whose total
revenues for the most recent twelve-month period do not exceed $100,000;
provided that a Restricted Subsidiary will not be considered to be an Immaterial
Subsidiary if it, directly or indirectly, guarantees or otherwise provides
direct credit support for any Indebtedness of the Company.

     "INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person (excluding accrued expenses and trade payables),
whether or not contingent:

              (1) in respect of borrowed money;

              (2) evidenced by bonds, notes, debentures or similar instruments
     or letters of credit (or reimbursement agreements in respect thereof);

              (3) in respect of banker's acceptances;

              (4) representing Capital Lease Obligations or Attributable Debt in
     respect of sale and leaseback transactions;

                                       11


              (5) representing the balance deferred and unpaid of the purchase
     price of any property or services due more than six months after such
     property is acquired or such services are completed; or

              (6) representing the net obligations under any Hedging
     Obligations,

if and to the extent any of the preceding items (other than letters of credit,
Attributable Debt and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" includes all Indebtedness of others secured by
a Lien on any asset of the specified Person (whether or not such Indebtedness is
assumed by the specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any Indebtedness of any other Person.

     "INDENTURE" means this Indenture, as amended or supplemented from time to
time.

     "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a
Global Note through a Participant.

     "INITIAL NOTES" means the first $350,000,000 aggregate principal amount of
Notes issued under this Indenture on the date hereof.

     "INITIAL PURCHASERS" means Bear, Stearns & Co. Inc., Wachovia Capital
Markets LLC and Fleet Securities, Inc.

     "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.

     "INVESTMENTS" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations, other than advances to
customers in the ordinary course of business that are recorded as accounts
receivable), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company will be deemed to
have made an Investment on the date of any such sale or disposition equal to the
Fair Market Value of the Company's Investments in such Subsidiary that were not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof. The acquisition by the Company or any Subsidiary of the
Company of a Person that holds an Investment in a third Person will be deemed to
be an Investment by the Company or such Subsidiary in such third Person in an
amount equal to the Fair Market Value of the Investments held by the acquired
Person in such third Person in an amount determined as provided in the final
paragraph of Section 4.07 hereof. Except as otherwise provided in this
Indenture, the amount of an Investment will be determined at the time the
Investment is made and without giving effect to subsequent changes in value.

     "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on

                                       12


the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.

     "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.

     "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

     "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.

     "NET INCOME" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:

              (1) any gain (but not loss), together with any related provision
     for taxes on such gain (but not loss), realized in connection with: (a) any
     Asset Sale; or (b) the disposition of any securities by such Person or any
     of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
     such Person or any of its Restricted Subsidiaries; and

              (2) any extraordinary gain (but not loss), together with any
     related provision for taxes on such extraordinary gain (but not loss).

     "NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as a result of the
Asset Sale, in each case, after taking into account any available tax credits or
deductions and any tax sharing arrangements, and amounts required to be applied
to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on
the asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.

     "NON-RECOURSE DEBT" means Indebtedness:

              (1) as to which neither the Company nor any of its Restricted
     Subsidiaries (a) provides credit support of any kind (including any
     undertaking, agreement or instrument that would constitute Indebtedness,
     other than the pledge of stock of an Unrestricted Subsidiary), (b) is
     directly or indirectly liable as a Guarantor or otherwise, or (c)
     constitutes the lender;

              (2) no default with respect to which (including any rights that
     the holders of the Indebtedness may have to take enforcement action against
     an Unrestricted Subsidiary) would permit upon notice, lapse of time or both
     any holder of any other Indebtedness (other than the Notes) of the Company
     or any of its Restricted Subsidiaries to declare a default on such other

                                       13


     Indebtedness or cause the payment of the Indebtedness to be accelerated or
     payable prior to its Stated Maturity; and

              (3) as to which the lenders have been notified in writing that
     they will not have any recourse to the stock or assets of the Company or
     any of its Restricted Subsidiaries.

     "NON-U.S. PERSON" means a Person who is not a U.S. Person.

     "NOTES" has the meaning assigned to it in the preamble to this Indenture.
The Initial Notes and the Additional Notes shall be treated as a single class
for all purposes under this Indenture, and unless the context otherwise
requires, all references to the Notes shall include the Initial Notes and any
Additional Notes.

     "OBLIGATIONS" means any principal, interest, penalties, fees, expenses,
indemnifications, reimbursements (including without limitation, reimbursement
for legal fees and expenses), damages and other liabilities payable under the
documentation governing any Indebtedness.

     "OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.

     "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 13.05
hereof.

     "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company or any Subsidiary of
the Company.

     "PARTICIPANT" means, with respect to the Depositary, Euroclear or
Clearstream, a Person who has an account with the Depositary, Euroclear or
Clearstream, respectively (and, with respect to DTC, shall include Euroclear and
Clearstream).

     "PERMITTED BUSINESS" means any of the lines of business conducted by the
Company and its Subsidiaries on the date of this Indenture and any businesses
similar, related, incidental or ancillary thereto or that constitutes a
reasonable extension or expansion thereof.

     "PERMITTED INVESTMENTS" means:

              (1) any Investment in the Company or in a Restricted Subsidiary of
     the Company;

              (2) any Investment in Cash Equivalents;

              (3) any Investment by the Company or any Restricted Subsidiary of
     the Company in a Person, if as a result of such Investment:

                      (a) such Person becomes a Restricted Subsidiary of the
              Company; or

                                       14


                      (b) such Person is merged, consolidated or amalgamated
              with or into, or transfers or conveys substantially all of its
              assets to, or is liquidated into, the Company or a Restricted
              Subsidiary of the Company;

              (4) any Investment made as a result of the receipt of non-cash
     consideration from an Asset Sale that was made pursuant to and in
     compliance with Section 4.10 hereof;

              (5) any acquisition of assets or Capital Stock solely in exchange
     for the issuance of Equity Interests (other than Disqualified Stock) of the
     Company;

              (6) any Investments received in compromise or resolution of (A)
     obligations of trade creditors or customers that were incurred in the
     ordinary course of business of the Company or any of its Restricted
     Subsidiaries, including pursuant to any plan of reorganization or similar
     arrangement upon the bankruptcy or insolvency of any trade creditor or
     customer; or (B) litigation, arbitration or other disputes with Persons who
     are not Affiliates;

              (7) Investments represented by Hedging Obligations;

              (8) loans or advances to employees made in the ordinary course of
     business of the Company or the Restricted Subsidiary of the Company in an
     aggregate principal amount not to exceed $2.0 million at any one time
     outstanding;

              (9) repurchases of the notes;

              (10) receivables owing to the Company or any Restricted Subsidiary
     created in the ordinary course of business;

              (11) payroll, travel and similar advances that are expected at the
     time of such advances ultimately to be treated as expenses for accounting
     purposes;

              (12) Investments in existence on the date of this Indenture; and

              (13) other Investments in any Person having an aggregate Fair
     Market Value (measured on the date each such Investment was made and
     without giving effect to subsequent changes in value), when taken together
     with all other Investments made pursuant to this clause (13) that are at
     the time outstanding not to exceed the greater of (x) $30.0 million and (y)
     3.0% of Consolidated Tangible Assets.

     "PERMITTED JUNIOR SECURITIES" means:

              (1) Equity Interests in the Company or any Guarantor; or

              (2) debt securities that are subordinated to all Senior Debt and
     any debt securities issued in exchange for Senior Debt to substantially the
     same extent as, or to a greater extent than, the notes and the Subsidiary
     Guarantees are subordinated to Senior Debt under this Indenture.

     "PERMITTED LIENS" means:

              (1) Liens on assets of the Company or any Restricted Subsidiary
     securing Senior Debt that was permitted by the terms of this Indenture to
     be incurred;

              (2) Liens in favor of the Company or the Guarantors;

                                       15


              (3) Liens on property of a Person existing at the time such Person
     is merged with or into or consolidated with the Company or any Subsidiary
     of the Company; provided that such Liens were in existence prior to the
     contemplation of such merger or consolidation and do not extend to any
     assets other than those of the Person merged into or consolidated with the
     Company or the Subsidiary;

              (4) Liens on property (including Capital Stock) existing at the
     time of acquisition of the property by the Company or any Subsidiary of the
     Company, provided that such Liens were in existence prior to, such
     acquisition, and not incurred in contemplation of, such acquisition;

              (5) Liens to secure the performance of statutory obligations,
     surety or appeal bonds, performance bonds or other obligations of a like
     nature incurred in the ordinary course of business,

              (6) Liens to secure Indebtedness (including Capital Lease
     Obligations) permitted by Section 4.09(b)(4) covering only the assets
     acquired with or financed by such Indebtedness;

              (7) Liens existing on the date of this Indenture;

              (8) Liens for taxes, assessments or governmental charges or claims
     that are not yet delinquent or that are being contested in good faith by
     appropriate proceedings promptly instituted and diligently concluded;
     provided that any reserve or other appropriate provision as is required in
     conformity with GAAP has been made therefor;

              (9) Liens imposed by law, such as carriers', warehousemen's,
     landlord's and mechanics' Liens, in each case, incurred in the ordinary
     course of business or good faith deposits in connection with bids, tenders,
     contracts or leases to which the Company or any Restricted Subsidiary is a
     party;

              (10) survey exceptions, easements or reservations of, or rights of
     others for, licenses, rights-of-way, sewers, electric lines, telegraph and
     telephone lines and other similar purposes, or zoning or other restrictions
     as to the use of real property that were not incurred in connection with
     Indebtedness and that do not in the aggregate materially adversely affect
     the value of said properties or materially impair their use in the
     operation of the business of such Person;

              (11) Liens created for the benefit of (or to secure) the Notes (or
     the Subsidiary Guarantees);

              (12) Liens to secure any Permitted Refinancing Indebtedness
     permitted to be incurred under this Indenture; provided, however, that:

                      (a) the new Lien shall be limited to all or part of the
              same property and assets that secured or, under the written
              agreements pursuant to which the original Lien arose, could secure
              the original Lien (plus improvements and accessions to, such
              property or proceeds or distributions thereof); and

                      (b) the Indebtedness secured by the new Lien is not
              increased to any amount greater than the sum of (x) the
              outstanding principal amount or, if greater, committed amount, of
              the Permitted Referencing Indebtedness and (y) an amount necessary
              to pay any fees and expenses, including premiums, related to such
              refinancings, refunding, extension, renewal or replacement;

                                       16


              (13) licenses of intellectual property in the ordinary course of
     business;

              (14) Liens arising out of judgments, decrees, orders or awards in
     respect of which the Company shall in good faith be prosecuting on appeal
     or proceeding for review, which appeal or proceeding shall not have been
     finally terminated or if the period within such appeal or proceeding may be
     initiated shall not have expired;

              (15) Liens securing hedging obligations;

              (16) Liens on Capital Stock of an Unrestricted Subsidiary that
     secure Indebtedness or other obligations of such Unrestricted Subsidiary;

              (17) leases, subleases, licenses or sublicenses to third parties
     entered into in the ordinary course of business; and

              (18) Liens incurred in the ordinary course of business of the
     Company or any Subsidiary of the Company with respect to obligations that
     do not exceed $10.0 million at any one time outstanding.

     "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to refund, refinance, replace, defease or discharge
other Indebtedness of the Company or any of its Restricted Subsidiaries (other
than intercompany Indebtedness); PROVIDED that:

              (1) the principal amount (or accreted value, if applicable) of
     such Permitted Refinancing Indebtedness does not exceed the principal
     amount (or accreted value, if applicable) of the Indebtedness extended,
     refinanced, renewed, replaced, defeased or refunded (plus all accrued
     interest on the Indebtedness and the amount of all expenses and premiums
     incurred in connection therewith);

              (2) such Permitted Refinancing Indebtedness has a final maturity
     date later than the final maturity date of, and has a Weighted Average Life
     to Maturity equal to or greater than the Weighted Average Life to Maturity
     of, the Indebtedness being extended, refinanced, renewed, replaced,
     defeased or refunded;

              (3) if the Indebtedness being extended, refinanced, renewed,
     replaced, defeased or refunded is subordinated in right of payment to the
     notes, such Permitted Refinancing Indebtedness has a final maturity date
     later than the final maturity date of, and is subordinated in right of
     payment to, the notes on terms at least as favorable, taken as a whole, to
     the holders of notes as those contained in the documentation governing the
     Indebtedness being extended, refinanced, renewed, replaced, defeased or
     refunded; and

              (4) such Indebtedness is incurred either by the Company or by the
     Restricted Subsidiary who is the obligor on the Indebtedness being
     extended, refinanced, renewed, replaced, defeased or refunded.

     "PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

     "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(1)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.

                                       17


     "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

     "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of October 30, 2003, among the Company, the Guarantors and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements among the Company, the
Guarantors and the other parties thereto, as such agreements may be amended,
modified or supplemented from time to time, relating to rights given by the
Company to the purchasers of Additional Notes to register such Additional Notes
under the Securities Act.

     "REGULATION S" means Regulation S promulgated under the Securities Act.

     "REGULATION S GLOBAL NOTE" means a Global Note substantially in the form of
EXHIBIT A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of and registered in the name of the Depositary
or its nominee, issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 903 of Regulation S.

     "REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.

     "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject and who shall have direct
responsibility for the administration of this Indenture.

     "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private
Placement Legend.

     "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement
Legend.

     "RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.

     "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

     "RULE 144" means Rule 144 promulgated under the Securities Act.

     "RULE 144A" means Rule 144A promulgated under the Securities Act.

     "RULE 903" means Rule 903 promulgated under the Securities Act.

     "RULE 904" means Rule 904 promulgated under the Securities Act.

     "SEC" means the Securities and Exchange Commission.

     "SECURITIES ACT" means the Securities Act of 1933, as amended.

     "SENIOR DEBT" means:

              (1) all Indebtedness of the Company or any Guarantor outstanding
     under Credit Facilities and all Hedging Obligations with respect thereto;

                                       18


              (2) any other Indebtedness of the Company or any Guarantor
     permitted to be incurred under the terms of this Indenture, unless the
     instrument under which such Indebtedness is incurred expressly provides
     that it is on a parity with or subordinated in right of payment to the
     Notes or any Subsidiary Guarantee; and

              (3) all Obligations with respect to the items listed in the
     preceding clauses (1) and (2).

     Notwithstanding anything to the contrary in the foregoing, Senior Debt will
     not include:

              (1) any liability for federal, state, local or other taxes owed or
     owing by the Company;

              (2) any intercompany Indebtedness of the Company or any of its
     Subsidiaries to the Company or any of its Affiliates;

              (3) any trade payables;

              (4) the portion of any Indebtedness that is incurred in violation
     of this Indenture; or

              (5) Indebtedness which is classified as non-recourse in accordance
     with GAAP or any unsecured claim arising in respect thereof by reason of
     the application of section 1111(b)(1) of the Bankruptcy Code.

     "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
this Indenture.

     "STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness as of the date of this Indenture, and will not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.

     "SUBSIDIARY" means, with respect to any specified Person:

              (1) any corporation, association or other business entity of which
     more than 50% of the total voting power of shares of Capital Stock entitled
     (without regard to the occurrence of any contingency and after giving
     effect to any voting agreement or stockholders' agreement that effectively
     transfers voting power) to vote in the election of directors, managers or
     trustees of the corporation, association or other business entity is at the
     time owned or controlled, directly or indirectly, by that Person or one or
     more of the other Subsidiaries of that Person (or a combination thereof);
     and

              (2) any partnership (a) the sole general partner or the managing
     general partner of which is such Person or a Subsidiary of such Person or
     (b) the only general partners of which are that Person or one or more
     Subsidiaries of that Person (or any combination thereof).

     "SUBSIDIARY GUARANTEE" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of this Indenture.

     "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
thereunder, as may be amended from time to time.

                                       19


     "TRUSTEE" means the party named as such in the preamble to this Indenture
until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.

     "UNRESTRICTED GLOBAL NOTE" means a Global Note that does not bear and is
not required to bear the Private Placement Legend.

     "UNRESTRICTED DEFINITIVE NOTE" means a Definitive Note that does not bear
and is not required to bear the Private Placement Legend.

     "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors, but only to the extent that such
Subsidiary:

              (1) has no Indebtedness other than Non-Recourse Debt;

              (2) except as permitted by Section 4.11 hereof, is not party to
     any agreement, contract, arrangement or understanding with the Company or
     any Restricted Subsidiary of the Company unless the terms of any such
     agreement, contract, arrangement or understanding are no less favorable to
     the Company or such Restricted Subsidiary, taken as a whole, than those
     that might be obtained at the time from Persons who are not Affiliates of
     the Company;

              (3) is a Person with respect to which neither the Company nor any
     of its Restricted Subsidiaries has any direct or indirect obligation (a) to
     subscribe for additional Equity Interests or (b) to maintain or preserve
     such Person's financial condition or to cause such Person to achieve any
     specified levels of operating results; and

              (4) has not guaranteed or otherwise directly or indirectly
     provided credit support for any Indebtedness of the Company or any of its
     Restricted Subsidiaries.

     Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary will be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date pursuant to Section 4.09 hereof, the Company will be in
default of such covenant. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation will be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation will only be permitted if (1) such
Indebtedness is permitted under Section 4.09 hereof calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.

     "U.S. PERSON" means a U.S. Person as defined in Rule 902(k) promulgated
under the Securities Act.

     "VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

                                       20


     "WEIGHTED AVERAGE LIFE TO MATURITY means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

              (1) the sum of the products obtained by multiplying (a) the amount
     of each then remaining installment, sinking fund, serial maturity or other
     required payments of principal, including payment at final maturity, in
     respect of the Indebtedness, by (b) the number of years (calculated to the
     nearest one-twelfth) that will elapse between such date and the making of
     such payment; by

              (2) the then outstanding principal amount of such Indebtedness.

Section 1.02  OTHER DEFINITIONS.



                                                                                             Defined in
     Term                                                                                     Section
     ----                                                                                    ----------
                                                                                             
     "AFFILIATE TRANSACTION".............................................................       4.11
     "ASSET SALE OFFER"..................................................................       3.09
     "AUTHENTICATION ORDER"..............................................................       2.02
     "CHANGE OF CONTROL OFFER"...........................................................       4.15
     "CHANGE OF CONTROL PAYMENT".........................................................       4.15
     "CHANGE OF CONTROL PAYMENT DATE"....................................................       4.15
     "COVENANT DEFEASANCE"...............................................................       8.03
     "DTC"...............................................................................       2.03
     "EVENT OF DEFAULT"..................................................................       6.01
     "EXCESS PROCEEDS"...................................................................       4.10
     "INCUR".............................................................................       4.09
     "LEGAL DEFEASANCE"..................................................................       8.02
     "OFFER AMOUNT"......................................................................       3.09
     "OFFER PERIOD"......................................................................       3.09
     "PAYING AGENT"......................................................................       2.03
     "PERMITTED DEBT"....................................................................       4.09
     " PAYMENT BLOCKAGE NOTICE"..........................................................       10.03
     "PAYMENT DEFAULT" ..................................................................       6.01
     "PURCHASE DATE".....................................................................       3.09
     "REDEMPTION DATE" ..................................................................       3.07
     "REGISTRAR".........................................................................       2.03
     "RESTRICTED PAYMENTS"...............................................................       4.07


Section 1.03  INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

     Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

     The following TIA terms used in this Indenture have the following meanings:

     "INDENTURE SECURITIES" means the Notes;

     "INDENTURE SECURITY HOLDER" means a Holder of a Note;

     "INDENTURE TO BE QUALIFIED" means this Indenture;

                                       21


     "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and

     "OBLIGOR" on the Notes and the Subsidiary Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Subsidiary Guarantees, respectively.

     All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.

Section 1.04  RULES OF CONSTRUCTION.

              Unless the context otherwise requires:

              (1) a term has the meaning assigned to it;

              (2) an accounting term not otherwise defined has the meaning
     assigned to it in accordance with GAAP;

              (3) "or" is not exclusive;

              (4) words in the singular include the plural, and in the plural
     include the singular;

              (5) "will" shall be interpreted to express a command;

              (6) provisions apply to successive events and transactions; and

              (7) references to sections of or rules under the Securities Act
     will be deemed to include substitute, replacement of successor sections or
     rules adopted by the SEC from time to time.

                                   ARTICLE 2.
                                    THE NOTES

Section 2.01  FORM AND DATING.

     (a) GENERAL. The Notes and the Trustee's certificate of authentication will
be substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each Note
will be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.

     The terms and provisions contained in the Notes will constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.

     (b) GLOBAL NOTES. Notes issued in global form will be substantially in the
form of Exhibit A attached hereto (including the Global Note Legend thereon and
the "Schedule of Exchanges of Interests in the Global Note" attached thereto).
Notes issued in definitive form will be substantially in the form of Exhibit A
attached hereto (but without the Global Note Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Each
Global Note will represent such of the outstanding Notes as will be specified
therein and each shall provide that it represents the aggregate principal amount
of outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or

                                       22


increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the
aggregate principal amount of outstanding Notes represented thereby will be made
by the Trustee or the Custodian, at the direction of the Trustee, in accordance
with instructions given by the Holder thereof as required by Section 2.06
hereof.

     (c) EUROCLEAR AND CLEARSTREAM PROCEDURES APPLICABLE. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream
Banking" and "Customer Handbook" of Clearstream will be applicable to transfers
of beneficial interests the Regulation S Global Note that are held by
Participants through Euroclear or Clearsteam.

Section 2.02  EXECUTION AND AUTHENTICATION.

     At least one Officer must sign the Notes for the Company by manual or
facsimile signature.

     If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note will nevertheless be valid.

     A Note will not be valid until authenticated by the manual signature of the
Trustee. The signature will be conclusive evidence that the Note has been
authenticated under this Indenture.

     The Trustee will, upon receipt of a written order of the Company signed by
two Officers (an "AUTHENTICATION ORDER"), authenticate Notes for original issue
up to the aggregate principal amount stated in paragraph 4 of the Notes.

     The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03  REGISTRAR AND PAYING AGENT.

     The Company will maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("REGISTRAR") and an office or
agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar
will keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company will notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.

     The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.

     The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.

Section 2.04  PAYING AGENT TO HOLD MONEY IN TRUST.

                                       23


     The Company will require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary) will have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it
will segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee will serve as Paying Agent for
the Notes.

Section 2.05  HOLDER LISTS.

     The Trustee will preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of all Holders
and shall otherwise comply with TIA Section 312(a). If the Trustee is not the
Registrar, the Company will furnish to the Trustee at least seven Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Notes and the
Company shall otherwise comply with TIA Section 312(a).

Section 2.06  TRANSFER AND EXCHANGE.

     (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if:

              (1) the Company delivers to the Trustee notice from the Depositary
     that it is unwilling or unable to continue to act as Depositary or that it
     is no longer a clearing agency registered under the Exchange Act and, in
     either case, a successor Depositary is not appointed by the Company within
     120 days after the date of such notice from the Depositary; or

              (2) the Company in its sole discretion determines that the Global
     Notes (in whole but not in part) should be exchanged for Definitive Notes
     and delivers a written notice to such effect to the Trustee.

              (3) Upon the occurrence of either of the preceding events in (1)
     or (2) above, Definitive Notes shall be issued in such names as the
     Depositary shall instruct the Trustee. Global Notes also may be exchanged
     or replaced, in whole or in part, as provided in Sections 2.07 and 2.10
     hereof. Every Note authenticated and delivered in exchange for, or in lieu
     of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
     Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the
     form of, and shall be, a Global Note. A Global Note may not be exchanged
     for another Note other than as provided in this Section 2.06(a), however,
     beneficial interests in a Global Note may be transferred and exchanged as
     provided in Section 2.06(b), (c) or (f) hereof.

     (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The
transfer and exchange of beneficial interests in the Global Notes will be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in

                                       24


the Restricted Global Notes will be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also will require
compliance with either subparagraph (1) or (2) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:

              (1) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE.
     Beneficial interests in any Restricted Global Note may be transferred to
     Persons who take delivery thereof in the form of a beneficial interest in
     the same Restricted Global Note in accordance with the transfer
     restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER,
     that prior to the expiration of the Restricted Period, transfers of
     beneficial interests in the Regulation S Global Note may not be made to a
     U.S. Person or for the account or benefit of a U.S. Person (other than an
     Initial Purchaser). Beneficial interests in any Unrestricted Global Note
     may be transferred to Persons who take delivery thereof in the form of a
     beneficial interest in an Unrestricted Global Note. No written orders or
     instructions shall be required to be delivered to the Registrar to effect
     the transfers described in this Section 2.06(b)(1).

              (2) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN
     GLOBAL NOTES. In connection with all transfers and exchanges of beneficial
     interests that are not subject to Section 2.06(b)(1) above, the transferor
     of such beneficial interest must deliver to the Registrar either:

                      (A) both:

                              (i)     a written order from a Participant or an
                      Indirect Participant given to the Depositary in accordance
                      with the Applicable Procedures directing the Depositary to
                      credit or cause to be credited a beneficial interest in
                      another Global Note in an amount equal to the beneficial
                      interest to be transferred or exchanged; and

                              (ii)    instructions given in accordance with the
                      Applicable Procedures containing information regarding the
                      Participant account to be credited with such increase; or

                      (B) both:

                              (i)     a written order from a Participant or an
                      Indirect Participant given to the Depositary in accordance
                      with the Applicable Procedures directing the Depositary to
                      cause to be issued a Definitive Note in an amount equal to
                      the beneficial interest to be transferred or exchanged;
                      and

                              (ii)    instructions given by the Depositary to
                      the Registrar containing information regarding the Person
                      in whose name such Definitive Note shall be registered to
                      effect the transfer or exchange referred to in (1) above.
                      Upon consummation of an Exchange Offer by the Company in
                      accordance with Section 2.06(f) hereof, the requirements
                      of this Section 2.06(b)(2) shall be deemed to have been
                      satisfied upon receipt by the Registrar of the
                      instructions contained in the Letter of Transmittal
                      delivered by the Holder of such beneficial interests in
                      the Restricted Global Notes. Upon satisfaction of all of
                      the requirements for transfer or exchange of beneficial
                      interests in Global Notes contained in this Indenture and
                      the Notes or otherwise applicable under the Securities
                      Act, the Trustee shall adjust the principal amount of the
                      relevant Global Note(s) pursuant to Section 2.06(h)
                      hereof.

                                       25


              (3) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL
     NOTE. A beneficial interest in any Restricted Global Note may be
     transferred to a Person who takes delivery thereof in the form of a
     beneficial interest in another Restricted Global Note if the transfer
     complies with the requirements of Section 2.06(b)(2) above and the
     Registrar receives the following:

                      (A) if the transferee will take delivery in the form of a
              beneficial interest in the 144A Global Note, then the transferor
              must deliver a certificate in the form of Exhibit B hereto,
              including the certifications in item (1) thereof;

                      (B) if the transferee will take delivery in the form of a
              beneficial interest in the Regulation S Global Note, then the
              transferor must deliver a certificate in the form of Exhibit B
              hereto, including the certifications in item (2) thereof; and

                      (C) if the transferee will take delivery in the form of a
              beneficial interest in the IAI Global Note, then the transferor
              must deliver a certificate in the form of Exhibit B hereto,
              including the certifications, certificates and Opinion of Counsel
              required by item (3) thereof, if applicable.

              (4) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED
     GLOBAL NOTE FOR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A
     beneficial interest in any Restricted Global Note may be exchanged by any
     holder thereof for a beneficial interest in an Unrestricted Global Note or
     transferred to a Person who takes delivery thereof in the form of a
     beneficial interest in an Unrestricted Global Note if the exchange or
     transfer complies with the requirements of Section 2.06(b)(2) above and:

                      (A) such exchange or transfer is effected pursuant to the
              Exchange Offer in accordance with the Registration Rights
              Agreement and the holder of the beneficial interest to be
              transferred, in the case of an exchange, or the transferee, in the
              case of a transfer, certifies in the applicable Letter of
              Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
              participating in the distribution of the Exchange Notes or (iii) a
              Person who is an affiliate (as defined in Rule 144) of the
              Company;

                      (B) such transfer is effected pursuant to the Shelf
              Registration Statement in accordance with the Registration Rights
              Agreement;

                      (C) such transfer is effected by a Broker-Dealer pursuant
              to the Exchange Offer Registration Statement in accordance with
              the Registration Rights Agreement; or

                      (D) the Registrar receives the following:

                              (i)     if the holder of such beneficial interest
                      in a Restricted Global Note proposes to exchange such
                      beneficial interest for a beneficial interest in an
                      Unrestricted Global Note, a certificate from such holder
                      in the form of Exhibit C hereto, including the
                      certifications in item (1)(a) thereof; or

                              (ii)    if the holder of such beneficial interest
                      in a Restricted Global Note proposes to transfer such
                      beneficial interest to a Person who shall take delivery
                      thereof in the form of a beneficial interest in an
                      Unrestricted Global Note, a certificate from such holder
                      in the form of Exhibit B hereto, including the
                      certifications in item (4) thereof;

                                       26


                      and, in each such case set forth in this subparagraph (D),
                      if the Registrar so requests or if the Applicable
                      Procedures so require, an Opinion of Counsel in form
                      reasonably acceptable to the Registrar to the effect that
                      such exchange or transfer is in compliance with the
                      Securities Act and that the restrictions on transfer
                      contained herein and in the Private Placement Legend are
                      no longer required in order to maintain compliance with
                      the Securities Act.

     If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.

     Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.

     (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES.

              (1) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED
     DEFINITIVE NOTES. If any holder of a beneficial interest in a Restricted
     Global Note proposes to exchange such beneficial interest for a Restricted
     Definitive Note or to transfer such beneficial interest to a Person who
     takes delivery thereof in the form of a Restricted Definitive Note, then,
     upon receipt by the Registrar of the following documentation:

                      (A) if the holder of such beneficial interest in a
              Restricted Global Note proposes to exchange such beneficial
              interest for a Restricted Definitive Note, a certificate from such
              holder in the form of Exhibit C hereto, including the
              certifications in item (2)(a) thereof;

                      (B) if such beneficial interest is being transferred to a
              QIB in accordance with Rule 144A, a certificate to the effect set
              forth in Exhibit B hereto, including the certifications in item
              (1) thereof;

                      (C) if such beneficial interest is being transferred to a
              Non-U.S. Person in an offshore transaction in accordance with Rule
              903 or Rule 904, a certificate to the effect set forth in Exhibit
              B hereto, including the certifications in item (2) thereof;

                      (D) if such beneficial interest is being transferred
              pursuant to an exemption from the registration requirements of the
              Securities Act in accordance with Rule 144, a certificate to the
              effect set forth in Exhibit B hereto, including the certifications
              in item (3)(a) thereof;

                      (E) if such beneficial interest is being transferred to an
              Institutional Accredited Investor in reliance on an exemption from
              the registration requirements of the Securities Act other than
              those listed in subparagraphs (B) through (D) above, a certificate
              to the effect set forth in Exhibit B hereto, including the
              certifications, certificates and Opinion of Counsel required by
              item (3) thereof, if applicable;

                      (F) if such beneficial interest is being transferred to
              the Company or any of its Subsidiaries, a certificate to the
              effect set forth in Exhibit B hereto, including the certifications
              in item (3)(b) thereof; or

                                       27


                      (G) if such beneficial interest is being transferred
              pursuant to an effective registration statement under the
              Securities Act, a certificate to the effect set forth in Exhibit B
              hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.

              (2) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
     UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in a
     Restricted Global Note may exchange such beneficial interest for an
     Unrestricted Definitive Note or may transfer such beneficial interest to a
     Person who takes delivery thereof in the form of an Unrestricted Definitive
     Note only if:

                      (A) such exchange or transfer is effected pursuant to the
              Exchange Offer in accordance with the Registration Rights
              Agreement and the holder of such beneficial interest, in the case
              of an exchange, or the transferee, in the case of a transfer,
              certifies in the applicable Letter of Transmittal that it is not
              (i) a Broker-Dealer, (ii) a Person participating in the
              distribution of the Exchange Notes or (iii) a Person who is an
              affiliate (as defined in Rule 144) of the Company;

                      (B) such transfer is effected pursuant to the Shelf
              Registration Statement in accordance with the Registration Rights
              Agreement;

                      (C) such transfer is effected by a Broker-Dealer pursuant
              to the Exchange Offer Registration Statement in accordance with
              the Registration Rights Agreement; or

                      (D) the Registrar receives the following:

                              (i)     if the holder of such beneficial interest
                      in a Restricted Global Note proposes to exchange such
                      beneficial interest for an Unrestricted Definitive Note, a
                      certificate from such holder in the form of Exhibit C
                      hereto, including the certifications in item (1)(b)
                      thereof; or

                              (ii)    if the holder of such beneficial interest
                      in a Restricted Global Note proposes to transfer such
                      beneficial interest to a Person who shall take delivery
                      thereof in the form of an Unrestricted Definitive Note, a
                      certificate from such holder in the form of Exhibit B
                      hereto, including the certifications in item (4) thereof;

              and, in each such case set forth in this subparagraph (D), if the
              Registrar so requests or if the Applicable Procedures so require,
              an Opinion of Counsel in form reasonably acceptable to the
              Registrar to the effect that such exchange or transfer is in
              compliance with the Securities Act and that the restrictions on
              transfer contained herein and in the

                                       28


              Private Placement Legend are no longer required in order to
              maintain compliance with the Securities Act.

              (3) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
     UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in an
     Unrestricted Global Note proposes to exchange such beneficial interest for
     a Definitive Note or to transfer such beneficial interest to a Person who
     takes delivery thereof in the form of a Definitive Note, then, upon
     satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the
     Trustee will cause the aggregate principal amount of the applicable Global
     Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
     Company will execute and the Trustee will authenticate and deliver to the
     Person designated in the instructions a Definitive Note in the appropriate
     principal amount. Any Definitive Note issued in exchange for a beneficial
     interest pursuant to this Section 2.06(c)(3) will be registered in such
     name or names and in such authorized denomination or denominations as the
     holder of such beneficial interest requests through instructions to the
     Registrar from or through the Depositary and the Participant or Indirect
     Participant. The Trustee will deliver such Definitive Notes to the Persons
     in whose names such Notes are so registered. Any Definitive Note issued in
     exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will
     not bear the Private Placement Legend.

     (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS.

              (1) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
     RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note
     proposes to exchange such Note for a beneficial interest in a Restricted
     Global Note or to transfer such Restricted Definitive Notes to a Person who
     takes delivery thereof in the form of a beneficial interest in a Restricted
     Global Note, then, upon receipt by the Registrar of the following
     documentation:

                      (A) if the Holder of such Restricted Definitive Note
              proposes to exchange such Note for a beneficial interest in a
              Restricted Global Note, a certificate from such Holder in the form
              of Exhibit C hereto, including the certifications in item (2)(b)
              thereof;

                      (B) if such Restricted Definitive Note is being
              transferred to a QIB in accordance with Rule 144A, a certificate
              to the effect set forth in Exhibit B hereto, including the
              certifications in item (1) thereof;

                      (C) if such Restricted Definitive Note is being
              transferred to a Non-U.S. Person in an offshore transaction in
              accordance with Rule 903 or Rule 904, a certificate to the effect
              set forth in Exhibit B hereto, including the certifications in
              item (2) thereof;

                      (D) if such Restricted Definitive Note is being
              transferred pursuant to an exemption from the registration
              requirements of the Securities Act in accordance with Rule 144, a
              certificate to the effect set forth in Exhibit B hereto, including
              the certifications in item (3)(a) thereof;

                      (E) if such Restricted Definitive Note is being
              transferred to an Institutional Accredited Investor in reliance on
              an exemption from the registration requirements of the Securities
              Act other than those listed in subparagraphs (B) through (D)
              above, a certificate to the effect set forth in Exhibit B hereto,
              including the certifications, certificates and Opinion of Counsel
              required by item (3) thereof, if applicable;

                                       29


                      (F) if such Restricted Definitive Note is being
              transferred to the Company or any of its Subsidiaries, a
              certificate to the effect set forth in Exhibit B hereto, including
              the certifications in item (3)(b) thereof; or

                      (G) if such Restricted Definitive Note is being
              transferred pursuant to an effective registration statement under
              the Securities Act, a certificate to the effect set forth in
              Exhibit B hereto, including the certifications in item (3)(c)
              thereof,

              the Trustee will cancel the Restricted Definitive Note, increase
              or cause to be increased the aggregate principal amount of, in the
              case of clause (A) above, the appropriate Restricted Global Note,
              in the case of clause (B) above, the 144A Global Note, in the case
              of clause (C) above, the Regulation S Global Note, and in all
              other cases, the IAI Global Note.

              (2) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
     UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
     exchange such Note for a beneficial interest in an Unrestricted Global Note
     or transfer such Restricted Definitive Note to a Person who takes delivery
     thereof in the form of a beneficial interest in an Unrestricted Global Note
     only if:

                      (A) such exchange or transfer is effected pursuant to the
              Exchange Offer in accordance with the Registration Rights
              Agreement and the Holder, in the case of an exchange, or the
              transferee, in the case of a transfer, certifies in the applicable
              Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
              Person participating in the distribution of the Exchange Notes or
              (iii) a Person who is an affiliate (as defined in Rule 144) of the
              Company;

                      (B) such transfer is effected pursuant to the Shelf
              Registration Statement in accordance with the Registration Rights
              Agreement;

                      (C) such transfer is effected by a Broker-Dealer pursuant
              to the Exchange Offer Registration Statement in accordance with
              the Registration Rights Agreement; or

                      (D) the Registrar receives the following:

                              (i)     if the Holder of such Definitive Notes
                      proposes to exchange such Notes for a beneficial interest
                      in the Unrestricted Global Note, a certificate from such
                      Holder in the form of Exhibit C hereto, including the
                      certifications in item (1)(c) thereof; or

                              (ii)    if the Holder of such Definitive Notes
                      proposes to transfer such Notes to a Person who shall take
                      delivery thereof in the form of a beneficial interest in
                      the Unrestricted Global Note, a certificate from such
                      Holder in the form of Exhibit B hereto, including the
                      certifications in item (4) thereof;

              and, in each such case set forth in this subparagraph (D), if the
              Registrar so requests or if the Applicable Procedures so require,
              an Opinion of Counsel in form reasonably acceptable to the
              Registrar to the effect that such exchange or transfer is in
              compliance with the Securities Act and that the restrictions on
              transfer contained herein and in the Private Placement Legend are
              no longer required in order to maintain compliance with the
              Securities Act.

                                       30


              Upon satisfaction of the conditions of any of the subparagraphs in
     this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and
     increase or cause to be increased the aggregate principal amount of the
     Unrestricted Global Note.

              (3) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
     UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may
     exchange such Note for a beneficial interest in an Unrestricted Global Note
     or transfer such Definitive Notes to a Person who takes delivery thereof in
     the form of a beneficial interest in an Unrestricted Global Note at any
     time. Upon receipt of a request for such an exchange or transfer, the
     Trustee will cancel the applicable Unrestricted Definitive Note and
     increase or cause to be increased the aggregate principal amount of one of
     the Unrestricted Global Notes.

              If any such exchange or transfer from a Definitive Note to a
     beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or
     (3) above at a time when an Unrestricted Global Note has not yet been
     issued, the Company will issue and, upon receipt of an Authentication Order
     in accordance with Section 2.02 hereof, the Trustee will authenticate one
     or more Unrestricted Global Notes in an aggregate principal amount equal to
     the principal amount of Definitive Notes so transferred.

     (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar will register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder must present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
must provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).

              (1) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES.
     Any Restricted Definitive Note may be transferred to and registered in the
     name of Persons who take delivery thereof in the form of a Restricted
     Definitive Note if the Registrar receives the following:

                      (A) if the transfer will be made pursuant to Rule 144A,
              then the transferor must deliver a certificate in the form of
              Exhibit B hereto, including the certifications in item (1)
              thereof;

                      (B) if the transfer will be made pursuant to Rule 903 or
              Rule 904, then the transferor must deliver a certificate in the
              form of Exhibit B hereto, including the certifications in item (2)
              thereof; and

                      (C) if the transfer will be made pursuant to any other
              exemption from the registration requirements of the Securities
              Act, then the transferor must deliver a certificate in the form of
              Exhibit B hereto, including the certifications, certificates and
              Opinion of Counsel required by item (3) thereof, if applicable.

              (2) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
     Any Restricted Definitive Note may be exchanged by the Holder thereof for
     an Unrestricted Definitive Note or transferred to a Person or Persons who
     take delivery thereof in the form of an Unrestricted Definitive Note if:

                                       31


                      (A) such exchange or transfer is effected pursuant to the
              Exchange Offer in accordance with the Registration Rights
              Agreement and the Holder, in the case of an exchange, or the
              transferee, in the case of a transfer, certifies in the applicable
              Letter of Transmittal that it is not (i) a broker-dealer, (ii) a
              Person participating in the distribution of the Exchange Notes or
              (iii) a Person who is an affiliate (as defined in Rule 144) of the
              Company;

                      (B) any such transfer is effected pursuant to the Shelf
              Registration Statement in accordance with the Registration Rights
              Agreement;

                      (C) any such transfer is effected by a Broker-Dealer
              pursuant to the Exchange Offer Registration Statement in
              accordance with the Registration Rights Agreement; or

                      (D) the Registrar receives the following:

                              (i)     if the Holder of such Restricted
                      Definitive Notes proposes to exchange such Notes for an
                      Unrestricted Definitive Note, a certificate from such
                      Holder in the form of Exhibit C hereto, including the
                      certifications in item (1)(d) thereof; or

                              (ii)    if the Holder of such Restricted
                      Definitive Notes proposes to transfer such Notes to a
                      Person who shall take delivery thereof in the form of an
                      Unrestricted Definitive Note, a certificate from such
                      Holder in the form of Exhibit B hereto, including the
                      certifications in item (4) thereof;

              and, in each such case set forth in this subparagraph (D), if the
              Registrar so requests, an Opinion of Counsel in form reasonably
              acceptable to the Registrar to the effect that such exchange or
              transfer is in compliance with the Securities Act and that the
              restrictions on transfer contained herein and in the Private
              Placement Legend are no longer required in order to maintain
              compliance with the Securities Act.

              (3) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE
     NOTES. A Holder of Unrestricted Definitive Notes may transfer such Notes to
     a Person who takes delivery thereof in the form of an Unrestricted
     Definitive Note. Upon receipt of a request to register such a transfer, the
     Registrar shall register the Unrestricted Definitive Notes pursuant to the
     instructions from the Holder thereof.

     (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company will issue and, upon receipt
of an Authentication Order in accordance with Section 2.02 hereof, the Trustee
will authenticate:

              (1) one or more Unrestricted Global Notes in an aggregate
     principal amount equal to the principal amount of the beneficial interests
     in the Restricted Global Notes accepted for exchange in the Exchange Offer

by Persons that certify in the applicable Letters of Transmittal that (A) they
are not Broker-Dealers, (B) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the
Company; and

              (2) Unrestricted Definitive Notes in an aggregate principal amount
     equal to the principal amount of the Restricted Definitive Notes accepted
     for exchange in the Exchange Offer.

                                       32


     Concurrently with the issuance of such Notes, the Trustee will cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company will execute and the Trustee will
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Unrestricted Definitive Notes in the appropriate principal
amount.

     (g) LEGENDS. The following legends will appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.

              (1) PRIVATE PLACEMENT LEGEND.

                      (A) Except as permitted by subparagraph (B) below, each
              Global Note and each Definitive Note (and all Notes issued in
              exchange therefor or substitution thereof) shall bear the legend
              in substantially the following form

"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1) (a) IN THE UNITED STATES TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (c) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) OF THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO DRS TECHNOLOGIES,
INC. THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF DRS TECHNOLOGIES, INC.
SO REQUESTS), (2) TO DRS TECHNOLOGIES, INC. OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."

                      (B) Notwithstanding the foregoing, any Global Note or
              Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2),
              (c)(3), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this

                                       33


              Section 2.06 (and all Notes issued in exchange therefor or
              substitution thereof) will not bear the Private Placement Legend.

              (2) GLOBAL NOTE LEGEND. Each Global Note will bear a legend in
     substantially the following form:

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

     (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note will be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note will be
reduced accordingly and an endorsement will be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note will be increased accordingly and
an endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.

     (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.

              (1) To permit registrations of transfers and exchanges, the
     Company will execute and the Trustee will authenticate Global Notes and
     Definitive Notes upon receipt of an Authentication Order in accordance with
     Section 2.02 or at the Registrar's request.

                                       34


              (2) No service charge will be made to a Holder of a beneficial
     interest in a Global Note or to a Holder of a Definitive Note for any
     registration of transfer or exchange, but the Company may require payment
     of a sum sufficient to cover any transfer tax or similar governmental
     charge payable in connection therewith (other than any such transfer taxes
     or similar governmental charge payable upon exchange or transfer pursuant
     to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).

              (3) The Registrar will not be required to register the transfer of
     or exchange of any Note selected for redemption in whole or in part, except
     the unredeemed portion of any Note being redeemed in part.

              (4) All Global Notes and Definitive Notes issued upon any
     registration of transfer or exchange of Global Notes or Definitive Notes
     will be the valid obligations of the Company, evidencing the same debt, and
     entitled to the same benefits under this Indenture, as the Global Notes or
     Definitive Notes surrendered upon such registration of transfer or
     exchange.

              (5) Neither the Registrar nor the Company will be required:

                      (A) to issue, to register the transfer of or to exchange
              any Notes during a period beginning at the opening of business 15
              days before the day of any selection of Notes for redemption under
              Section 3.02 hereof and ending at the close of business on the day
              of selection;

                      (B) to register the transfer of or to exchange any Note
              selected for redemption in whole or in part, except the unredeemed
              portion of any Note being redeemed in part; or

                      (C) to register the transfer of or to exchange a Note
              between a record date and the next succeeding interest payment
              date.

              (6) Prior to due presentment for the registration of a transfer of
     any Note, the Trustee, any Agent and the Company may deem and treat the
     Person in whose name any Note is registered as the absolute owner of such
     Note for the purpose of receiving payment of principal of and interest on
     such Notes and for all other purposes, and none of the Trustee, any Agent
     or the Company shall be affected by notice to the contrary.

              (7) The Trustee will authenticate Global Notes and Definitive
     Notes in accordance with the provisions of Section 2.02 hereof.

              (8) All certifications, certificates and Opinions of Counsel
     required to be submitted to the Registrar pursuant to this Section 2.06 to
     effect a registration of transfer or exchange may be submitted by
     facsimile.

Section 2.07  REPLACEMENT NOTES.

     If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company will issue and the Trustee, upon receipt of an
Authentication Order, will authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.

                                       35


     Every replacement Note is an additional obligation of the Company and will
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.

Section 2.08  OUTSTANDING NOTES.

     The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.

     If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding.

     If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.

     If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes will
be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09  TREASURY NOTES.

     In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Guarantor, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Guarantor, will be considered as though not outstanding, except that for the
purposes of determining whether the Trustee will be protected in relying on any
such direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee actually knows are so owned will be so disregarded.

Section 2.10  TEMPORARY NOTES.

     Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, will
authenticate temporary Notes. Temporary Notes will be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as may be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company will prepare and the Trustee
will authenticate definitive Notes in exchange for temporary Notes.

     Holders of temporary Notes will be entitled to all of the benefits of this
Indenture.

Section 2.11  CANCELLATION.

     The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent will forward to the Trustee any Notes surrendered
to them for registration of transfer, exchange or payment. The Trustee and no
one else will cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and will dispose of such canceled
Notes (subject to the record retention requirement of the Exchange Act in its
customary manner). Certification of the destruction of all canceled Notes will
be delivered to the Company. The Company may not issue new Notes to replace
Notes that it has paid or that have been delivered to the Trustee for
cancellation.

                                       36


Section 2.12  DEFAULTED INTEREST.

     If the Company defaults in a payment of interest on the Notes, it will pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company will notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company will fix or cause to be fixed each such
special record date and payment date, PROVIDED that no such special record date
may be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) will mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.

                                   ARTICLE 3.
                            REDEMPTION AND PREPAYMENT

Section 3.01  NOTICES TO TRUSTEE.

     If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth:

              (1) the clause of this Indenture pursuant to which the redemption
     shall occur;

              (2) the redemption date;

              (3) the principal amount of Notes to be redeemed;

              (4) the redemption price; and

              (5) applicable cusip numbers.

Section 3.02  SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.

     If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee will select Notes for redemption or
purchase as follows:

              (1) if the Notes are listed on any national securities exchange,
     in compliance with the requirements of the principal national securities
     exchange on which the Notes are listed; or

              (2) if the Notes are not listed on any national securities
     exchange, on a PRO RATA basis, by lot or by such method as the Trustee
     shall deem fair and appropriate.

     In the event of partial redemption or purchase by lot, the particular Notes
to be redeemed or purchased will be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption or purchase date
by the Trustee from the outstanding Notes not previously called for redemption
or purchase.

     The Trustee will promptly notify the Company in writing of the Notes
selected for redemption or purchase and, in the case of any Note selected for
partial redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of Notes selected will be in amounts of $1,000

                                       37


or whole multiples of $1,000; except that if all of the Notes of a Holder are to
be redeemed or purchased, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except
as provided in the preceding sentence, provisions of this Indenture that apply
to Notes called for redemption or purchase also apply to portions of Notes
called for redemption or purchase.

Section 3.03  NOTICE OF REDEMPTION.

     Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company will mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address, except that redemption notices may
be mailed more than 60 days prior to a redemption date if the notice is issued
in connection with a defeasance of the Notes or a satisfaction and discharge of
this Indenture pursuant to Articles 8 or 12 of this Indenture.

     The notice will identify the Notes to be redeemed and will state:

              (1) the redemption date;

              (2) the redemption price;

              (3) if any Note is being redeemed in part, the portion of the
     principal amount of such Note to be redeemed and that, after the redemption
     date upon surrender of such Note, a new Note or Notes in principal amount
     equal to the unredeemed portion will be issued upon cancellation of the
     original Note;

              (4) the name and address of the Paying Agent;

              (5) that Notes called for redemption must be surrendered to the
     Paying Agent to collect the redemption price;

              (6) that, unless the Company defaults in making such redemption
     payment, interest on Notes called for redemption ceases to accrue on and
     after the redemption date;

              (7) the paragraph of the Notes and/or Section of this Indenture
     pursuant to which the Notes called for redemption are being redeemed; and

              (8) that no representation is made as to the correctness or
     accuracy of the CUSIP number, if any, listed in such notice or printed on
     the Notes.

     At the Company's request, the Trustee will give the notice of redemption in
the Company's name and at its expense; PROVIDED, HOWEVER, that the Company has
delivered to the Trustee, at least 30 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

Section 3.04  EFFECT OF NOTICE OF REDEMPTION.

     Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.

                                       38


Section 3.05  DEPOSIT OF REDEMPTION OR PURCHASE PRICE.

     One Business Day prior to the redemption or purchase date, the Company will
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption or purchase price of and accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed or purchased on that date. The Trustee or the
Paying Agent will promptly return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption or purchase price of, and accrued interest and Liquidated
Damages, if any, on, all Notes to be redeemed or purchased.

     If the Company complies with the provisions of the preceding paragraph, on
and after the redemption or purchase date, interest will cease to accrue on the
Notes or the portions of Notes called for redemption or purchase. If a Note is
redeemed or purchased on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption or purchase is
not so paid upon surrender for redemption or purchase because of the failure of
the Company to comply with the preceding paragraph, interest shall be paid on
the unpaid principal, from the redemption or purchase date until such principal
is paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.

Section 3.06  NOTES REDEEMED OR PURCHASED IN PART.

     Upon surrender of a Note that is redeemed or purchased in part, the Company
will issue and, upon receipt of an Authentication Order, the Trustee will
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed or unpurchased portion of the Note
surrendered.

Section 3.07  OPTIONAL REDEMPTION.

     (a) At any time prior to November 1, 2006, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
issued under this Indenture at a redemption price of 106.875% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to, but excluding, the redemption date, with the net cash proceeds of one or
more Equity Offerings; PROVIDED that:

              (1) at least 65% of the aggregate principal amount of Notes
     originally issued under this Indenture (excluding Notes held by the Company
     and its Subsidiaries) remains outstanding immediately after the occurrence
     of such redemption; and

              (2) the redemption occurs within 120 days of the date of the
     closing of such Equity Offering.

     Except pursuant to the preceding paragraph and the Escrow Agreement, the
Notes will not be redeemable at the Company's option prior to November 1, 2008.

On or after November 1, 2008, the Company may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any on the Notes redeemed, to, but
excluding, the applicable redemption date, if redeemed during the twelve-month
period beginning on

                                       39


November 1 of the years indicated below, subject to the rights of Noteholders on
the relevant record date to receive interest on the relevant interest payment
date:



     Year                                                       Percentage
     ----                                                       ----------
                                                                
     2008.......................................................   103.438%
     2009.......................................................   102.292%
     2010.......................................................   101.146%
     2011 and thereafter........................................   100.000%


Unless the Company defaults in the payment of the redemption price, interest
will cease to accrue on the Notes or portions thereof called for redemption on
the applicable redemption date

     (b) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.

Section 3.08  MANDATORY REDEMPTION.

     The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.

Section 3.09  OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.

     In the event that, pursuant to Section 4.10 hereof, the Company is required
to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"),
it will follow the procedures specified below.

     The Asset Sale Offer shall be made to all Holders and all holders of other
Indebtedness that is PARI PASSU with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets. The Asset Sale Offer will remain open for
a period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the "OFFER PERIOD"). No later than three Business Days after the
termination of the Offer Period (the "PURCHASE DATE"), the Company will apply
all Excess Proceeds (the "OFFER AMOUNT") to the purchase of Notes and such other
PARI PASSU Indebtedness (on a PRO RATA basis, if applicable) or, if less than
the Offer Amount has been tendered, all Notes and other Indebtedness tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased will be
made in the same manner as interest payments are made.

     If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, will be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.

     Upon the commencement of an Asset Sale Offer, the Company will send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice will contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The
notice, which will govern the terms of the Asset Sale Offer, will state:

              (1) that the Asset Sale Offer is being made pursuant to this
     Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale
     Offer will remain open;

              (2) the Offer Amount, the purchase price and the Purchase Date;

                                       40


              (3) that any Note not tendered or accepted for payment will
     continue to accrue interest;

              (4) that, unless the Company defaults in making such payment, any
     Note accepted for payment pursuant to the Asset Sale Offer will cease to
     accrue interest after the Purchase Date;

              (5) that Holders electing to have a Note purchased pursuant to an
     Asset Sale Offer may elect to have Notes purchased in integral multiples of
     $1,000 only;

              (6) that Holders electing to have Notes purchased pursuant to any
     Asset Sale Offer will be required to surrender the Note, with the form
     entitled "Option of Holder to Elect Purchase" attached to the Notes
     completed, or transfer by book-entry transfer, to the Company, a
     Depositary, if appointed by the Company, or a Paying Agent at the address
     specified in the notice at least three days before the Purchase Date;

              (7) that Holders will be entitled to withdraw their election if
     the Company, the Depositary or the Paying Agent, as the case may be,
     receives, not later than the expiration of the Offer Period, a telegram,
     telex, facsimile transmission or letter setting forth the name of the
     Holder, the principal amount of the Note the Holder delivered for purchase
     and a statement that such Holder is withdrawing his election to have such
     Note purchased;

              (8) that, if the aggregate principal amount of Notes and other
     PARI PASSU Indebtedness surrendered by holders thereof exceeds the Offer
     Amount, the Company will select the Notes and other PARI PASSU Indebtedness
     to be purchased on a PRO RATA basis based on the principal amount of Notes
     and such other PARI PASSU Indebtedness surrendered (with such adjustments
     as may be deemed appropriate by the Company so that only Notes in
     denominations of $1,000, or integral multiples thereof, will be purchased);
     and

              (9) that Holders whose Notes were purchased only in part will be
     issued new Notes equal in principal amount to the unpurchased portion of
     the Notes surrendered (or transferred by book-entry transfer).

     On or before the Purchase Date, the Company will, to the extent lawful,
accept for payment, on a PRO RATA basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and will
deliver or cause to be delivered to the Trustee the Notes properly accepted
together with an Officers' Certificate stating that such Notes or portions
thereof were accepted for payment by the Company in accordance with the terms of
this Section 3.09. The Company, the Depositary or the Paying Agent, as the case
may be, will promptly (but in any case not later than seven days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Notes tendered by such Holder and accepted by the Company
for purchase, and the Company, will promptly issue a new Note, and the Trustee,
upon written request from the Company will authenticate and mail or deliver (or
cause to be transferred by book entry) such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Asset Sale
Offer on the Purchase Date.

     Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.

                                   ARTICLE 4.
                                    COVENANTS

                                       41


Section 4.01  PAYMENT OF NOTES.

     The Company will pay or cause to be paid the principal of, premium, if any,
and interest and Liquidated Damages, if any, on the Notes on the dates and in
the manner provided in the Notes. Principal, premium, if any, and interest and
Liquidated Damages, if any will be considered paid on the date due if the Paying
Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due. The Company will pay all Liquidated Damages, if
any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement.

     The Company will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.

Section 4.02  MAINTENANCE OF OFFICE OR AGENCY.

     The Company will maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
fails to maintain any such required office or agency or fails to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.

     The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
that no such designation or rescission will in any manner relieve the Company of
its obligation to maintain an office or agency in the Borough of Manhattan, the
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.

     The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03  REPORTS.

     (a) Whether or not required by the SEC's rules and regulations, so long as
any Notes are outstanding, the Company will file with the SEC and provide to the
Trustee, within the time periods specified in the SEC's rules and regulations:

              (1) all quarterly and annual reports that would be required to be
     filed with the SEC on Forms 10-Q and 10-K if the Company were required to
     file such reports; and

              (2) all current reports that would be required to be filed with
     the SEC on Form 8-K if the Company were required to file such reports.

                                       42


All such reports will be prepared in all material respects in accordance with
the rules and regulations applicable to such reports. Each annual report on Form
10-K will include a report on the Company's consolidated financial statements by
the Company's certified independent accountants. In addition, the Company will
file a copy of each of the reports referred to in clauses (1) and (2) above with
the SEC for public availability within the time periods specified in the rules
and regulations applicable to such reports (unless the SEC will not accept such
a filing) and will post the reports on its website within the time periods
specified in this Indenture. Delivery of such reports, information and documents
to the Trustee is for informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).

     (b) If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph will include a presentation, either on the face of the
financial statements or in the footnotes thereto, and in Management's Discussion
and Analysis of Financial Condition and Results of Operations, of the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company.

     (c) If, at any time, the Company is no longer subject to the periodic
reporting requirements of the Exchange Act for any reason, the Company will
nevertheless continue filing the reports specified in the preceding paragraph
with the SEC within the time periods specified above unless the SEC will not
accept such a filing. The Company agrees that it will not take any action for
the purpose of causing the SEC not to accept any such filings. If,
notwithstanding the foregoing, the SEC will not accept the Company's filings for
any reason, the Company will post the reports referred to in Section 4.03(b) on
its website within the time periods that would apply if the Company were
required to file those reports with the SEC.

     (d) In addition, the Company and the Guarantors agree that, for so long as
any Notes remain outstanding, at any time it they are not required to file the
reports required by the preceding paragraphs with the SEC, they will furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.

Section 4.04  COMPLIANCE CERTIFICATE.

     (a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default has occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto).

     (b) So long as any of the Notes are outstanding, the Company will deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.

                                       43


Section 4.05  TAXES.

     The Company will pay, and will cause each of its Subsidiaries to pay, prior
to delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.

Section 4.06  STAY, EXTENSION AND USURY LAWS.

     The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

Section 4.07  RESTRICTED PAYMENTS.

     (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:

              (1) declare or pay any dividend or make any other payment or
     distribution on account of the Company's or any of its Restricted
     Subsidiaries' Equity Interests (including, without limitation, any payment
     in connection with any merger or consolidation involving the Company or any
     of its Restricted Subsidiaries) or to the direct or indirect holders of the
     Company's or any of its Restricted Subsidiaries' Equity Interests in their
     capacity as such (other than dividends or distributions payable in Equity
     Interests (other than Disqualified Stock) of the Company and other than
     dividends or distributions payable to the Company or a Restricted
     Subsidiary of the Company);

              (2) purchase, redeem or otherwise acquire or retire for value
     (including, without limitation, in connection with any merger or
     consolidation involving the Company) any Equity Interests of the Company or
     any direct or indirect parent of the Company;

              (3) make any payment on or with respect to, or purchase, redeem,
     defease or otherwise acquire or retire for value any Indebtedness of the
     Company or any Guarantor that is contractually subordinated to the Notes or
     to any Subsidiary Guarantee (excluding any intercompany Indebtedness
     between or among the Company and any of its Restricted Subsidiaries),
     except a payment of interest or principal at the Stated Maturity thereof;
     or

              (4) make any Restricted Investment (all such payments and other
     actions set forth in these clauses (1) through (4) above being collectively
     referred to as "Restricted Payments"),

              unless, at the time of and after giving effect to such Restricted
     Payment:

              (1) no Default or Event of Default has occurred and is continuing
     or would occur as a consequence of such Restricted Payment;

                                       44


              (2) the Company would, at the time of such Restricted Payment and
     after giving pro forma effect thereto as if such Restricted Payment had
     been made at the beginning of the applicable four-quarter period, have been
     permitted to incur at least $1.00 of additional Indebtedness pursuant to
     the Fixed Charge Coverage Ratio test set forth in the first paragraph of
     Section 4.09 hereof; and

              (3) such Restricted Payment, together with the aggregate amount of
     all other Restricted Payments made by the Company and its Restricted
     Subsidiaries since the date of this Indenture (excluding Restricted
     Payments permitted by clauses (2), (3), (4), (6), (7), (8), (9), (10), (11)
     and (12) of paragraph (b) below) , is less than the sum, without
     duplication, of:

                      (A) 50% of the Consolidated Net Income of the Company for
              the period (taken as one accounting period) from the beginning of
              the quarter during which the initial issue date of the Notes under
              this Indenture occurs to the end of the Company's most recently
              ended fiscal quarter for which internal financial statements are
              available at the time of such Restricted Payment (or, if such
              Consolidated Net Income for such period is a deficit, less 100% of
              such deficit), PLUS

                      (B) 100% of the aggregate net cash proceeds received by
              the Company since the date of this Indenture as a contribution to
              its common equity capital or from the issue or sale of Equity
              Interests of the Company including the payment of the exercise
              price of options and warrants (other than Disqualified Stock) or
              from the issue or sale of convertible or exchangeable Disqualified
              Stock or convertible or exchangeable debt securities of the
              Company that have been converted into or exchanged for such Equity
              Interests (other than Equity Interests (or Disqualified Stock or
              debt securities) sold to a Subsidiary of the Company); PLUS

                      (C) to the extent that any Restricted Investment that was
              made after the date of this Indenture is sold for cash or
              otherwise liquidated or repaid for cash, the greater of (i) the
              cash return of capital with respect to such Restricted Investment
              (less the cost of disposition, if any) and (ii) the initial amount
              of such Restricted Investment; PLUS

                      (D) to the extent that any Unrestricted Subsidiary of the
              Company designated as such after the date of this Indenture is
              redesignated as a Restricted Subsidiary after the date of this
              Indenture, the greater of (i) the Fair Market Value of the
              Company's Investment in such Subsidiary as of the date of such
              redesignation or (ii) such Fair Market Value as of the date on
              which such Subsidiary was originally designated as an Unrestricted
              Subsidiary after the date of this Indenture; PLUS

                      (E) 50% of any dividends received by the Company or a
              Restricted Subsidiary of the Company that is a Guarantor after the
              date of this Indenture from an Unrestricted Subsidiary of the
              Company, to the extent that such dividends were not otherwise
              included in Consolidated Net Income of the Company for such
              period.

     (b) So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions of Section 4.07(a) will not prohibit:

              (1) the payment of any dividend within 60 days after the date of
     declaration of the dividend, if at the date of declaration the dividend
     payment would have complied with the provisions of this Indenture;

                                       45


              (2) the making of any Restricted Payment in exchange for, or out
     of the net cash proceeds of the substantially concurrent sale (other than
     to a Subsidiary of the Company) of, Equity Interests of the Company (other
     than Disqualified Stock) or from the substantially concurrent contribution
     of common equity capital to the Company; provided that the amount of any
     such net cash proceeds that are utilized for any such Restricted Payment
     will be excluded from clause (3)(B) of the preceding paragraph;

              (3) the defeasance, redemption, repurchase or other acquisition of
     Indebtedness of the Company or any Guarantor that is contractually
     subordinated to the notes or to any Subsidiary Guarantee with the net cash
     proceeds from a substantially concurrent incurrence of Permitted
     Refinancing Indebtedness;

              (4) the payment of any dividend (or, in the case of any
     partnership or limited liability company, any similar distribution) by a
     Restricted Subsidiary of the Company to the holders of its Equity Interests
     on a pro rata basis;

              (5) the repurchase, redemption or other acquisition or retirement
     for value of any Equity Interests of the Company or any Restricted
     Subsidiary of the Company held by any current or former officer, director,
     employee or consultant of the Company or any Restricted Subsidiary (or any
     permitted transferees of such persons) of the Company pursuant to any
     equity subscription agreement, stock option agreement, shareholders'
     agreement or similar agreement; provided that the aggregate price paid for
     all such repurchased, redeemed, acquired or retired Equity Interests may
     not exceed $1.5 million in any twelve-month period, provided, that the
     Company may carry forward and make in a subsequent twelve-month period, in
     addition to the amounts permitted for such twelve-month period, the amount
     of such repurchase, redemptions or other acquisitions or retirements for
     value permitted to have been made but not made in any preceding
     twelve-month period up to a maximum of $3.0 million in any twelve-month
     period;

              (6) the repurchase of Equity Interests deemed to occur upon the
     exercise of stock options to the extent such Equity Interests represent a
     portion of the exercise price of those stock options;

              (7) the declaration and payment of regularly scheduled or accrued
     dividends to holders of any class or series of Disqualified Stock of the
     Company or any Restricted Subsidiary of the Company issued on or after the
     date of this Indenture in accordance with the Fixed Charge Coverage test
     described in Section 4.09 hereof;

              (8) make cash payments in lieu of the issuance of fractional
     shares in an aggregate amount not to exceed $2.5 million in any
     twelve-month period;

              (9) the repayment of intercompany debt, the incurrence of which
     was permitted pursuant to Section 4.09 hereof;

              (10) payments made in connection with the IDT Merger;

              (11) satisfaction of change of control obligations on subordinated
     obligations once the Company has fulfilled its obligations relating to a
     Change of Control under this Indenture; and

              (12) other Restricted Payments in an aggregate amount not to
     exceed $20.0 million since the date of this Indenture.

                                       46


     The amount of all Restricted Payments (other than cash) will be the Fair
Market Value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The Fair
Market Value of any assets or securities that are required to be valued by this
Section 4.07 will be determined by the Board of Directors whose resolution with
respect thereto will be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
Fair Market Value exceeds $15.0 million.

Section 4.08  DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.

     (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:

              (1) pay dividends or make any other distributions on its Capital
     Stock to the Company or any of its Restricted Subsidiaries, or with respect
     to any other interest or participation in, or measured by, its profits, or
     pay any indebtedness owed to the Company or any of its Restricted
     Subsidiaries;

              (2) make loans or advances to the Company or any of its Restricted
     Subsidiaries; or

              (3) sell, lease or transfer any of its properties or assets to the
     Company or any of its Restricted Subsidiaries.

     (b) The restrictions in Section 4.08(a) will not apply to encumbrances or
restrictions existing under or by reason of:

              (1) the Credit Agreement and related agreements and any
     amendments, modifications, restatements, renewals, increases, supplements,
     refundings, replacements or refinancings of those agreements; provided that
     the amendments, modifications, restatements, renewals, increases,
     supplements, refundings, replacements or refinancings are not materially
     more restrictive, taken as a whole, with respect to such dividend and other
     payment restrictions than those contained in those agreements as of the
     later of the date thereof or the date of this Indenture;

              (2) agreements governing Existing Indebtedness and Credit
     Facilities as in effect on the date of this Indenture and any amendments,
     modifications, restatements, renewals, increases, supplements, refundings,
     replacements or refinancings of those agreements; provided that the
     amendments, modifications, restatements, renewals, increases, supplements,
     refundings, replacements or refinancings are not materially more
     restrictive, taken as a whole, with respect to such dividend and other
     payment restrictions than those contained in those agreements on the date
     of this Indenture;

              (3) this Indenture, the Notes and the Subsidiary Guarantees;

              (4) applicable law, rule, regulation or order, approval, license,
     permit or similar restriction;

              (5) any instrument governing Indebtedness or Capital Stock of a
     Person acquired by the Company or any of its Restricted Subsidiaries as in
     effect at the time of such acquisition (except to the extent such
     Indebtedness or Capital Stock was incurred in connection with or in

                                       47


     contemplation of such acquisition), which encumbrance or restriction is not
     applicable to any Person, or the properties or assets of any Person, other
     than the Person, or the property or assets of the Person, so acquired;
     provided that, in the case of Indebtedness, such Indebtedness was permitted
     by the terms of this Indenture to be incurred;

              (6) customary non-assignment provisions in contracts, leases and
     licenses entered into in the ordinary course of business;

              (7) purchase money obligations for property acquired in the
     ordinary course of business and Capital Lease Obligations that impose
     restrictions on the property purchased or leased of the nature described in
     clause (3) of Section 4.08(a);

              (8) any agreement for the sale or other disposition of a
     Restricted Subsidiary that restricts distributions by that Restricted
     Subsidiary pending the sale or other disposition;

              (9) Permitted Refinancing Indebtedness; PROVIDED that the
     restrictions contained in the agreements governing such Permitted
     Refinancing Indebtedness are not materially more restrictive, taken as a
     whole, than those contained in the agreements governing the Indebtedness
     being refinanced;

              (10) Liens permitted to be incurred under the provisions of
     Section 4.12 hereof that limit the right of the debtor to dispose of the
     assets subject to such Liens;

              (11) provisions limiting the disposition or distribution of assets
     or property in joint venture agreements, asset sale agreements,
     sale-leaseback agreements, stock sale agreements and other similar
     agreements entered into in the ordinary course of business;

              (12) encumbrances on property that exist at the time the property
     was acquired by the Company or a Restricted Subsidiary; and

              (13) restrictions on cash or other deposits or net worth imposed
     by customers under contracts entered into in the ordinary course of
     business.

Section 4.09  INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.

     (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness or
issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock or preferred stock had
been issued, as the case may be, at the beginning of such four-quarter period.

     (b) The provisions of Section 4.09(a) will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "PERMITTED DEBT"):

                                       48


              (1) the incurrence by the Company and any Guarantor of additional
     Indebtedness and letters of credit under Credit Facilities in an aggregate
     principal amount at any one time outstanding under this clause (1) (with
     letters of credit being deemed to have a principal amount equal to the
     maximum potential liability of the Company and its Restricted Subsidiaries
     thereunder) not to exceed the greater of (x) $425.0 million and (y) the sum
     of (A) $100.0 million and (B) the Borrowing Base as of the date of such
     incurrence, in the case of clauses (x) and (y)(A) LESS the aggregate amount
     of all Net Proceeds of Asset Sales applied by the Company or any of its
     Restricted Subsidiaries since the date of this Indenture to repay any term
     Indebtedness under a Credit Facility or to repay any revolving credit
     Indebtedness under a Credit Facility and effect a corresponding commitment
     reduction thereunder pursuant to Section 4.10 hereof; PROVIDED that the
     guarantee by Laurel Technologies Partnership (dba DRS Laurel Technologies)
     and MSSC LP of additional Indebtedness and letters of credit under Credit
     Facilities shall be permitted by this clause (1) in the amount set forth in
     this Section 4.09(b)(1);

              (2) the incurrence by the Company and its Restricted Subsidiaries
     of the Existing Indebtedness;

              (3) the incurrence by the Company and the Guarantors of
     Indebtedness represented by the Notes and the related Subsidiary Guarantees
     to be issued on the date of this Indenture and the Exchange Notes and the
     related Subsidiary Guarantees to be issued pursuant to the Registration
     Rights Agreement;

              (4) the incurrence by the Company or any of its Restricted
     Subsidiaries of Indebtedness represented by Capital Lease Obligations,
     mortgage financings or purchase money obligations, synthetic leases or the
     Attributable Debt with respect to sale and leaseback transactions, in each
     case, incurred for the purpose of financing all or any part of the purchase
     price or cost of design, construction, installation or improvement of
     property, plant or equipment used in the business of the Company or any of
     its Restricted Subsidiaries, in an aggregate principal amount, including
     all Permitted Refinancing Indebtedness incurred to refund, refinance,
     replace, defease or discharge any Indebtedness incurred pursuant to this
     clause (4), not to exceed the greater of $35.0 million and 5% of
     Consolidated Tangible Assets at any time outstanding;

              (5) the incurrence by the Company or any of its Restricted
     Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
     net proceeds of which are used to refund, refinance, replace, defease or
     discharge Indebtedness (other than intercompany Indebtedness) that was
     permitted by this Indenture to be incurred under Section 4.09(a) or clauses
     (2), (3), (4), (5) or (13) of this Section 4.09(b);

              (6) the incurrence by the Company or any of its Restricted
     Subsidiaries of intercompany Indebtedness between or among the Company and
     any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that:

                      (A) if the Company or any Guarantor is the obligor on such
              Indebtedness and the payee is not the Company or a Guarantor, such
              Indebtedness must be expressly subordinated to the prior payment
              in full in cash of all Obligations then due with respect to the
              Notes, in the case of the Company, or the Subsidiary Guarantee, in
              the case of a Guarantor; and

                      (B) (i) any subsequent issuance or transfer of Equity
              Interests that results in any such Indebtedness being held by a
              Person other than the Company or a Restricted

                                       49


              Subsidiary of the Company and (ii) any sale or other transfer of
              any such Indebtedness to a Person that is not either the Company
              or a Restricted Subsidiary of the Company,

will be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);

              (7) the issuance by any of the Company's Restricted Subsidiaries
     to the Company or to any of its Restricted Subsidiaries of shares of
     preferred stock; PROVIDED, HOWEVER, that:

                      (a) any subsequent issuance or transfer of Equity
     Interests that results in any such preferred stock being held by a Person
     other than the Company or a Restricted Subsidiary of the Company; and

                      (b) any sale or other transfer of any such preferred stock
     to a Person that is not either the Company or a Restricted Subsidiary of
     the Company,

will be deemed, in each case, to constitute an issuance of such preferred stock
by such Restricted Subsidiary that was not permitted by this clause (7);

              (8) the incurrence by the Company or any of its Restricted
     Subsidiaries of Hedging Obligations in the ordinary course of business;

              (9) the guarantee by the Company or any of the Guarantors of
     Indebtedness of the Company or a Restricted Subsidiary of the Company that
     was permitted to be incurred by another provision of this covenant;
     PROVIDED that if the Indebtedness being guaranteed is subordinated to or
     PARI PASSU with the Notes, then the guarantee shall be subordinated to the
     same extent as the Indebtedness guaranteed;

              (10) the incurrence by the Company or any of its Restricted
     Subsidiaries of Indebtedness in respect of workers' compensation claims,
     self-insurance obligations, bankers' acceptances, performance and surety
     bonds, completion guarantees or similar arrangements in the ordinary course
     of business;

              (11) the incurrence by the Company or any of its Restricted
     Subsidiaries of Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument inadvertently
     drawn against insufficient funds, so long as such Indebtedness is covered
     within five Business Days;

              (12) the incurrence by Foreign Subsidiaries of Indebtedness in an
     aggregate principal amount at any time outstanding pursuant to this clause
     (12), including all Permitted Refinancing Indebtedness incurred to refund,
     refinance, defease, renew, extend or replace Indebtedness incurred pursuant
     to this clause (12), not to exceed the greater of (x) $25.0 million and (y)
     the Foreign Borrowing Base as of the date of such incurrence, (in the case
     of (x) and (y), or the equivalent thereof, measured at the time of each
     incurrence, in applicable foreign currency);

              (13) Indebtedness of a Subsidiary incurred and outstanding on or
     prior to the date on which such Subsidiary was acquired by the Company
     (other than Indebtedness incurred in contemplation of, or in connection
     with, the transaction or series of related transactions pursuant to which
     such Subsidiary became a Subsidiary of or was otherwise acquired by the
     Company); provided, however, that for any such Indebtedness outstanding at
     any time under this clause (13), in excess of $20.0 million, on the date
     that such Subsidiary is acquired by the Company, the

                                       50


     Company would have been able to incur $1.00 of additional Indebtedness
     pursuant Section 4.09(a) hereof after giving effect to the incurrence of
     such Indebtedness pursuant to this clause (13);

              (14) Indebtedness arising from agreements of the Company or a
     Restricted Subsidiary providing for indemnification, adjustment of purchase
     price, earn-out or similar obligations, in each case, incurred or assumed
     in connection with the acquisition or disposition of any businesses or
     assets of the Company or any Restricted Subsidiary otherwise permitted in
     accordance with this Indenture; and

              (15) the incurrence by the Company or any Restricted Subsidiary of
     additional Indebtedness in an aggregate principal amount (or accreted
     value, as applicable) at any time outstanding, including all Permitted
     Refinancing Indebtedness incurred to refund, refinance, replace, defease or
     discharge any Indebtedness incurred pursuant to this clause (15), not to
     exceed $35.0 million.

For purposes of determining compliance with this Section 4.09, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (15) above or is
entitled to be incurred pursuant to Section 4.09(a), the Company will be
permitted to classify such item of Indebtedness on the date of its incurrence,
and will only be required to include the amount and type of such Indebtedness in
one of the above clauses, although the Company may divide and classify an item
of Indebtedness in more than one of the types of Indebtedness, or later
reclassify all or a portion of such item of Indebtedness, in any manner that
complies with this Section 4.09. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
this Indenture will initially be deemed to have been incurred on such date in
reliance on the exception provided by clause (1) of the definition of Permitted
Debt. The accrual of interest, the accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock for purposes of this Section 4.09; provided, in each such
case, that the amount thereof is included in Fixed Charges of the Company as
accrued. Notwithstanding any other provision of this Section 4.09, the maximum
amount of Indebtedness that the Company or any Restricted Subsidiary may incur
pursuant to this Section 4.09 shall not be deemed to be exceeded solely as a
result of fluctuations in exchange rates or currency values.

     The amount of any Indebtedness outstanding as of any date will be:

              (1) the accreted value of the Indebtedness, in the case of any
     Indebtedness issued with original issue discount;

              (2) the principal amount of the Indebtedness, in the case of any
     other Indebtedness; and

              (3) in respect of Indebtedness of another person secured by a Lien
     on the assets of the specified person, the lesser of:

                      (A) the Fair Market Value of such an asset at the date of
              determination, and

                      (B) the amount of the Indebtedness of the other Person.

Section 4.10  ASSET SALES.

                                       51


     The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:

              (1) the Company (or the Restricted Subsidiary, as the case may be)
     receives consideration at the time of the Asset Sale at least equal to the
     Fair Market Value of the assets or Equity Interests issued or sold or
     otherwise disposed of; and

              (2) at least 75% of the consideration received in the Asset Sale
     by the Company or such Restricted Subsidiary is in the form of cash or Cash
     Equivalents, PROVIDED that if the aggregate consideration received in the
     Asset Sale is less than $7.5 million, this condition will be satisfied if
     at least 70% of the consideration received in the Asset Sale by the Company
     or such Restricted Subsidiary is in the form of cash or Cash Equivalents.
     For purposes of this provision, each of the following shall be deemed to be
     cash:

                      (A) any liabilities of the Company or any Restricted
              Subsidiary (other than contingent liabilities and liabilities that
              are by their terms subordinated to the Notes or any Subsidiary
              Guarantee) that are assumed by the transferee of any such assets
              and as a result of which the Company or such Restricted Subsidiary
              is released from further liability;

                      (B) any securities, notes or other obligations received by
              the Company or any such Restricted Subsidiary from such transferee
              that are within 90 days, converted by the Company or such
              Restricted Subsidiary into cash or Cash Equivalents, to the extent
              of the cash or Cash Equivalents received in that conversion; and

                      (C) any stock or assets of the kind referred to in clauses
              (2) or (4) of the next paragraph of this Section 4.10.

     Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company (or the applicable Restricted Subsidiary, as the case may be) may
apply those Net Proceeds at its option:

              (1) to repay Senior Debt and, if the Senior Debt repaid is
     revolving credit Indebtedness, to correspondingly reduce commitments with
     respect thereto;

              (2) to acquire all or substantially all of the assets of, or any
     Capital Stock of, another Permitted Business, if, after giving effect to
     any such acquisition of Capital Stock, the Permitted Business is or becomes
     a Restricted Subsidiary of the Company;

              (3) to make a capital expenditure; or

              (4) to acquire other assets that are not classified as current
     assets under GAAP and that are used or useful in a Permitted Business,

or enter into a binding commitment regarding clauses (2), (3) or (4) above,
PROVIDED that such binding commitment shall be treated as a permitted
application of Net Proceeds from the date of such commitment until and only
until the earlier of (x) the date on which such acquisitions or expenditure is
consummated and (y) the 180th day following the expiration of the aforementioned
365 day period. If such acquisition or expenditure is not consummated on or
before such 180th day and the Company or such Restricted Subsidiary shall not
have applied such Net Proceeds pursuant to clause (1)-(4) of this paragraph on
or before such 180th day, such commitment shall be deemed not to have been a
permitted application of Net Proceeds.

                                       52


     Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.

     Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "EXCESS PROCEEDS." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will make
an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is PARI PASSU with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets in accordance with Section 3.09 hereof to
purchase the maximum principal amount of Notes and such other PARI PASSU
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer will be equal to 100% of principal amount plus accrued
and unpaid interest and Liquidated Damages, if any, to, but excluding, the date
of purchase, and will be payable in cash (subject to the right of Holders to
receive interest due on the relevant interest payment date). If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by this Indenture.
If the aggregate principal amount of Notes and such other PARI PASSU
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee will select the Notes and such other PARI PASSU
Indebtedness to be purchased on a PRO RATA basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.

     The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
Sections 3.09 or 4.10 of this Indenture, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under Section 3.09 or this Section 4.10 by virtue of
such compliance.

Section 4.11  TRANSACTIONS WITH AFFILIATES.

     (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (each an "AFFILIATE TRANSACTION"), unless:

              (1) such Affiliate Transaction is on terms that are no less
     favorable to the Company or the relevant Restricted Subsidiary, taken as a
     whole, than those that would have been obtained in a comparable transaction
     by the Company or such Restricted Subsidiary with an unrelated Person; and

              (2) the Company delivers to the Trustee:

                      (A) with respect to any Affiliate Transaction or series of
              related Affiliate Transactions involving aggregate consideration
              in excess of $7.5 million, a resolution of the Board of Directors
              set forth in an Officers' Certificate certifying that such
              Affiliate Transaction complies with clause (1) of this Section
              4.11(a) and that such Affiliate Transaction has been approved by a
              majority of the disinterested members of the Board of Directors;
              and

                                       53


                      (B) with respect to any Affiliate Transaction or series of
              related Affiliate Transactions involving aggregate consideration
              in excess of $15.0 million, an opinion as to the fairness to the
              Company or such Subsidiary of such Affiliate Transaction from a
              financial point of view issued by an accounting, appraisal or
              investment banking firm of national standing.

     (b) The following items will not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of Section 4.11(a):

              (1) any employment agreement, employee benefit plan, officer and
     director indemnification agreement, consulting agreement or any similar
     arrangement entered into by the Company or any of its Restricted
     Subsidiaries in the ordinary course of business;

              (2) transactions (including a merger) between or among the Company
     and/or its Restricted Subsidiaries;

              (3) transactions with a Person (other than an Unrestricted
     Subsidiary of the Company) that is an Affiliate of the Company solely
     because the Company owns, directly or through a Restricted Subsidiary, an
     Equity Interest in such Person;

              (4) payment of reasonable directors' fees;

              (5) any issuance of Equity Interests (other than Disqualified
     Stock) of the Company to Affiliates of the Company and the granting or
     performance of registration rights;

              (6) Restricted Payments that do not violate the provisions of
     Section 4.07 hereof;

              (7) if such Affiliate Transaction is with any Person solely in its
     capacity as a holder of debt or capital stock of the Company or any of the
     Company's Restricted Subsidiaries where such Person is treated no more
     favorably than any other holder of debt or capital stock of the Company or
     any of the Company's Restricted Subsidiaries;

              (8) the existence of or the performance by the Company or any of
     the Company's Restricted Subsidiaries with any of its obligations under the
     terms of any stockholders or similar agreement entered into in connection
     with the IDT Merger;

              (9) transactions effected pursuant to agreements in effect on the
     date of this Indenture and any amendment, modification, or replacement to
     such agreement (so long as the amendment, modification or replacement is
     not disadvantageous to the Holders of the Notes in any respect); and

              (10) loans or advances to employees in the ordinary course of
     business not to exceed $2.0 million in the aggregate at any one time
     outstanding.

Section 4.12  LIENS.

     The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens.

                                       54


Section 4.13  BUSINESS ACTIVITIES.

     The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business other than Permitted Businesses, except
to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.

Section 4.14  CORPORATE EXISTENCE.

     Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect:

              (1) its corporate existence, and the corporate, partnership or
     other existence of each of its Subsidiaries, in accordance with the
     respective organizational documents (as the same may be amended from time
     to time) of the Company or any such Subsidiary; and

              (2) the rights (charter and statutory), licenses and franchises of
     the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall
     not be required to preserve any such right, license or franchise, or the
     corporate, partnership or other existence of any of its Subsidiaries, if at
     least two Officers of the Company, one of which is the Chief Executive
     Officer or the Chief Financial Officer of the Company, shall determine that
     the preservation thereof is no longer desirable in the conduct of the
     business of the Company and its Subsidiaries, taken as a whole, and that
     the loss thereof is not adverse in any material respect to the Holders of
     the Notes.

Section 4.15  OFFER TO REPURCHASE UPON CHANGE OF CONTROL.

     (a) If a Change of Control occurs, the Company will make an offer (a
"CHANGE OF CONTROL OFFER") to each Holder to repurchase all or any part (equal
to $1,000 or an integral multiple of $1,000) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, on the Notes
repurchased, if any, to, but excluding, the date of purchase, subject to the
rights of Noteholders on the relevant record date to receive interest due on the
relevant interest payment date (the "CHANGE OF CONTROL PAYMENT"). Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and stating:

              (1) that the Change of Control Offer is being made pursuant to
     this Section 4.15 and that all Notes tendered will be accepted for payment;

              (2) the purchase price and the purchase date, which shall be no
     earlier than 30 days and no later than 60 days from the date such notice is
     mailed (the "CHANGE OF CONTROL PAYMENT DATE");

              (3) that any Note not tendered will continue to accrue interest;

              (4) that, unless the Company defaults in the payment of the Change
     of Control Payment, all Notes accepted for payment pursuant to the Change
     of Control Offer will cease to accrue interest after the Change of Control
     Payment Date;

              (5) that Holders electing to have any Notes purchased pursuant to
     a Change of Control Offer will be required to surrender the Notes, with the
     form entitled "Option of Holder to Elect Purchase" attached to the Notes
     completed, or transfer by book-entry transfer, to the Paying

                                       55


     Agent at the address specified in the notice prior to the close of business
     on the third Business Day preceding the Change of Control Payment Date;

              (6) that Holders will be entitled to withdraw their election if
     the Paying Agent receives, not later than the close of business on the
     second Business Day preceding the Change of Control Payment Date, a
     telegram, telex, facsimile transmission or letter setting forth the name of
     the Holder, the principal amount of Notes delivered for purchase, and a
     statement that such Holder is withdrawing his election to have the Notes
     purchased; and

              (7) that Holders whose Notes are being purchased only in part will
     be issued new Notes equal in principal amount to the unpurchased portion of
     the Notes surrendered, which unpurchased portion must be equal to $1,000 in
     principal amount or an integral multiple thereof.

     The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change in Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of Sections 3.09 or 4.15 of this Indenture, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under Section 3.09 or this Section 4.15 by virtue
of such compliance.

     (b) On the Change of Control Payment Date, the Company will, to the extent
lawful:

              (1) accept for payment all Notes or portions of Notes properly
     tendered pursuant to the Change of Control Offer;

              (2) deposit with the Paying Agent an amount equal to the Change of
     Control Payment in respect of all Notes or portions of Notes properly
     tendered; and

              (3) deliver or cause to be delivered to the Trustee the Notes so
     accepted together with an Officers' Certificate stating the aggregate
     principal amount of Notes or portions of Notes being purchased by the
     Company.

     The Paying Agent will promptly mail to each Holder of Notes properly
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.

Prior to complying with any of the provisions of this Section 4.15, but in any
event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this Section 4.15. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.

     (c) Notwithstanding anything to the contrary in this Section 4.15, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if (1) a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.15 hereof and purchases all Notes properly tendered and not withdrawn
under the Change of Control Offer or (2) notice of redemption has been given
pursuant to Section 3.07 hereof, unless and until there is a default in payment
of the applicable redemption price.

                                       56


Section 4.16  NO LAYERING OF DEBT.

     The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is contractually subordinate or junior
in right of payment to any Senior Debt of the Company and senior in right of
payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is contractually
subordinate or junior in right of payment to the Senior Debt of such Guarantor
and senior in right of payment to such Guarantor's Subsidiary Guarantee. No such
Indebtedness will be considered to be senior by virtue of being secured on a
first or junior priority basis.

Section 4.17  LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.

     The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; PROVIDED that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if:

              (1) the Company or that Restricted Subsidiary, as applicable,
     could have (a) incurred Indebtedness in an amount equal to the Attributable
     Debt relating to such sale and leaseback transaction under the Fixed Charge
     Coverage Ratio test in Section 4.09(a) hereof and (b) incurred a Lien to
     secure such Indebtedness pursuant to the provisions of Section 4.12 hereof;
     and

              (2) the sale and leaseback transaction is made in compliance with,
     Section 4.10 hereof.

Section 4.18  PAYMENTS FOR CONSENT.

     The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

Section 4.19  ADDITIONAL SUBSIDIARY GUARANTEES.

     If the Company or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary after the date of this Indenture, then that newly
acquired or created Domestic Subsidiary will become a Guarantor and execute a
supplemental indenture and deliver an Opinion of Counsel satisfactory to the
Trustee within 30 Business Days of the date on which it was acquired or created,
provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary
need not become a Guarantor until such time as it ceases to be an Immaterial
Subsidiary. The form of such Subsidiary Guarantee is attached as Exhibit E
hereto.

Section 4.20  DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.

     The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
Fair Market Value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be
deemed to be an Investment made as of the time of the designation and will
reduce the amount available for Restricted Payments under Section 4.07 hereof or
under one or more clauses of the definition of Permitted Investments, as
determined by the Company. That designation will only be permitted if the
Investment

                                       57


would be permitted at that time and if the Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that
redesignation would not cause a Default.

                                   ARTICLE 5.
                                   SUCCESSORS

Section 5.01  MERGER, CONSOLIDATION, OR SALE OF ASSETS.

     The Company may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:

              (1) either:

                      (A) the Company is the surviving corporation; or

                      (B) the Person formed by or surviving any such
              consolidation or merger (if other than the Company) or to which
              such sale, assignment, transfer, conveyance or other disposition
              has been made is a corporation organized or existing under the
              laws of the United States, any state of the United States or the
              District of Columbia;

              (2) the Person formed by or surviving any such consolidation or
     merger (if other than the Company) or the Person to which such sale,
     assignment, transfer, conveyance or other disposition has been made assumes
     all the obligations of the Company under the Notes, this Indenture and the
     Registration Rights Agreement pursuant to agreements reasonably
     satisfactory to the Trustee;

              (3) immediately after such transaction, no Default or Event of
     Default exists; and

              (4) the Company, or the Person formed by or surviving any such
     consolidation or merger (if other than the Company), or to which such sale,
     assignment, transfer, conveyance or other disposition has been made will,
     on the date of such transaction after giving pro forma effect thereto and
     any related financing transactions as if the same had occurred at the
     beginning of the applicable four-quarter period, be permitted to incur at
     least $1.00 of additional Indebtedness pursuant to the Fixed Charge
     Coverage Ratio test set forth in Section 4.09(a) hereof.

     In addition, the Company will not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This Section 5.01 will not apply to:

              (1) a merger of the Company with an Affiliate solely for the
     purpose of reincorporating the Company in another jurisdiction;

              (2) any merger or consolidation, or any sale, transfer,
     assignment, conveyance, lease or other disposition of assets between or
     among the Company and its Restricted Subsidiaries that are Guarantors; or

              (3) the IDT Merger.

Section 5.02  SUCCESSOR CORPORATION SUBSTITUTED.

                                       58


     Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in a transaction that is subject to, and that complies with the
provisions of, Section 5.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; PROVIDED, HOWEVER, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets in a transaction that is subject to, and that complies with
the provisions of, Section 5.01 hereof.

                                   ARTICLE 6.
                              DEFAULTS AND REMEDIES

Section 6.01  EVENTS OF DEFAULT.

     Each of the following is an "EVENT OF DEFAULT":

              (1) default for 30 days in the payment when due of interest on, or
     Liquidated Damages with respect to, the Notes whether or not prohibited by
     the subordination provisions of this Indenture

              (2) default in payment when due of the principal of, or premium,
     if any, on the Notes, whether or not prohibited by the subordination
     provisions of this Indenture;

              (3) failure by the Company or any of its Restricted Subsidiaries
     to comply with the provisions Sections 4.15 or 5.01 hereof;

              (4) failure by the Company or any of its Restricted Subsidiaries
     to comply with Sections 4.07 or 4.09 hereof for 30 days after notice to
     comply with such provisions;

              (5) failure by the Company or any of its Restricted Subsidiaries
     for 60 days after notice to comply with any of the other agreements in this
     Indenture;

              (6) default under any mortgage, indenture or instrument under
     which there may be issued or by which there may be secured or evidenced any
     Indebtedness for money borrowed by the Company or any of its Restricted
     Subsidiaries (or the payment of which is guaranteed by the Company or any
     of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
     exists, or is created after the date of this Indenture, if that default:

                      (A) is caused by a failure to pay principal of, or
              interest or premium, if any, on such Indebtedness prior to the
              expiration of the grace period provided in such Indebtedness on
              the date of such default (a "PAYMENT DEFAULT"); or

                      (B) results in the acceleration of such Indebtedness prior
              to its express maturity,

              and, in each case, the principal amount of any such Indebtedness,
              together with the principal amount of any other such Indebtedness
              under which there has been a Payment

                                       59


              Default or the maturity of which has been so accelerated,
              aggregates $15.0 million or more;

              (7) failure by the Company or any of its Restricted Subsidiaries
     to pay final judgments aggregating in excess of $15.0 million, which
     judgments are not paid, waived, satisfied, discharged or stayed for a
     period of 60 days;

              (8) except as permitted by this Indenture, any Subsidiary
     Guarantee of a Guarantor that is a Significant Subsidiary or a group of
     Guarantors that, taken as a whole, would constitute a Significant
     Subsidiary, shall be held in any judicial proceeding to be unenforceable or
     invalid or shall cease for any reason to be in full force and effect or any
     Guarantor that is a Significant Subsidiary, or any Person acting on behalf
     of any Guarantor that is a Significant Subsidiary, shall deny or disaffirm
     its obligations under its Subsidiary Guarantee;

              (9) the Company or any of its Restricted Subsidiaries that is a
     Significant Subsidiary or any of its Restricted Subsidiaries that is a
     Significant Subsidiary or any group of Restricted Subsidiaries that, taken
     together, would constitute a Significant Subsidiary pursuant to or within
     the meaning of Bankruptcy Law:

                      (A) commences a voluntary case,

                      (B) consents to the entry of an order for relief against
              it in an involuntary case,

                      (C) consents to the appointment of a custodian of it or
              for all or substantially all of its property, or

                      (D) makes a general assignment for the benefit of its
              creditors.

              (10) a court of competent jurisdiction enters an order or decree
     under any Bankruptcy Law that:

                      (A) is for relief against the Company or any of its
              Restricted Subsidiaries that is a Significant Subsidiary or any
              group of Restricted Subsidiaries of the Company that, taken
              together, would constitute a Significant Subsidiary in an
              involuntary case;

                      (B) appoints a custodian of the Company or any of its
              Restricted Subsidiaries that is a Significant Subsidiary or any
              group of Restricted Subsidiaries of the Company that, taken
              together, would constitute a Significant Subsidiary or for all or
              substantially all of the property of the Company or any of its
              Restricted Subsidiaries that is a Significant Subsidiary or any
              group of Restricted Subsidiaries of the Company that, taken
              together, would constitute a Significant Subsidiary; or

                      (C) orders the liquidation of the Company or any of its
              Restricted Subsidiaries that is a Significant Subsidiary or any
              group of Restricted Subsidiaries of the Company that, taken
              together, would constitute a Significant Subsidiary;

              and the order or decree remains unstayed and in effect for 60
              consecutive days; or

              (11) failure by the Company or any of its Subsidiaries to comply
     with any of the terms of the Escrow Agreement that are not cured within
     applicable grace periods; and

                                       60


              (12) the Escrow Agreement or any other security document or any
     Lien purported to be granted thereby on the Escrow Account or the cash or
     Government Securities therein is held in any judicial proceeding to be
     unenforceable or invalid, in whole or in part, or ceases for any reason
     (other than pursuant to a release that is delivered or becomes effective as
     set forth in this Indenture) to be fully enforceable and perfected.

Section 6.02  ACCELERATION.

     In the case of an Event of Default specified in clause (9) or (10) of
Section 6.01 hereof, with respect to the Company any Restricted Subsidiary that
is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately.

     Subject to certain limitations, the Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default if it determines that withholding
Notes is in their interest, except a Default or Event of Default relating to the
payment of principal or interest or Liquidated Damages.

Section 6.03  OTHER REMEDIES.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.

     The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

Section 6.04  WAIVER OF PAST DEFAULTS.

     Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase); PROVIDED,
HOWEVER, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.


Section 6.05  CONTROL BY MAJORITY.

                                       61


     Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be prejudicial to the
rights of other Holders of Notes or that may involve the Trustee in personal
liability.

Section 6.06  LIMITATION ON SUITS.

     A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:

              (1) such Holder has previously given the Trustee notice that an
     Event of Default is continuing;

              (2) Holders of at least 25% in aggregate principal amount of the
     outstanding Notes have requested the Trustee to pursue the remedy;

              (3) such Holders have offered the Trustee reasonable security or
     indemnity satisfactory to it against any loss, liability or expense;

              (4) the Trustee has not complied with such request within 60 days
     after the receipt thereof and the offer of security or indemnity; and

              (5) Holders of a majority in aggregate principal amount of the
     outstanding Notes have not given the Trustee a direction inconsistent with
     such request within such 60-day period.

     A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.

Section 6.07  RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.

     Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08  COLLECTION SUIT BY TRUSTEE.

     If an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
Trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

Section 6.09  TRUSTEE MAY FILE PROOFS OF CLAIM.

     The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor

                                       62


upon the Notes), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute any money or other property payable
or deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10  PRIORITIES.

     If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:

              FIRST:    to the Trustee, its agents and attorneys for amounts due
     under Section 7.07 hereof, including payment of all compensation,
     reasonable expenses and liabilities incurred, and all advances made, by the
     Trustee and the costs and expenses of collection;

              SECOND:   to Holders of Notes for amounts due and unpaid on the
     Notes for principal, premium and Liquidated Damages, if any, and interest,
     ratably, without preference or priority of any kind, according to the
     amounts due and payable on the Notes for principal, premium and Liquidated
     Damages, if any and interest, respectively; and

              THIRD:    to the Company or to such party as a court of competent
     jurisdiction shall direct.

     The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.

Section 6.11  UNDERTAKING FOR COSTS.

     In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.

                                   ARTICLE 7.
                                     TRUSTEE

Section 7.01  DUTIES OF TRUSTEE.

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     (a) If an Event of Default has occurred and is continuing, the Trustee will
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.

     (b) Except during the continuance of an Event of Default:

              (1) the duties of the Trustee will be determined solely by the
     express provisions of this Indenture and the Trustee need perform only
     those duties that are specifically set forth in this Indenture and no
     others, and no implied covenants or obligations shall be read into this
     Indenture against the Trustee; and

              (2) in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture. However,
     in the case of certificates specifically required by any provision herein
     to be furnished to it, the Trustee will examine the certificates and
     opinions to determine whether or not they conform to the requirements of
     this Indenture.

     (c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

              (1) this paragraph does not limit the effect of paragraph (b) of
     this Section 7.01;

              (2) the Trustee will not be liable for any error of judgment made
     in good faith by a Responsible Officer, unless it is proved that the
     Trustee was negligent in ascertaining the pertinent facts; and

              (3) the Trustee will not be liable with respect to any action it
     takes or omits to take in good faith in accordance with a direction
     received by it pursuant to Section 6.05 hereof.

     (d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.

     (e) No provision of this Indenture will require the Trustee to expend or
risk its own funds or incur any liability. The Trustee will be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder has offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.

     (f) The Trustee will not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company. Money held in trust
by the Trustee need not be segregated from other funds except to the extent
required by law.

Section 7.02  RIGHTS OF TRUSTEE.

     (a) The Trustee may conclusively rely upon any document (whether in
original or facsimile form) believed by it to be genuine and to have been signed
or presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.

     (b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be
liable for any action it takes or omits to take in good

                                       64


faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel will be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.

     (c) The Trustee may act through its attorneys and agents and will not be
responsible for the misconduct or negligence of any agent appointed with due
care.

     (d) The Trustee will not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within the rights or powers
conferred upon it by this Indenture.

     (e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company will be sufficient if signed by an
Officer of the Company.

     (f) The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders have offered to the Trustee reasonable security
or indemnity satisfactory to it against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction.

     (g) In no event shall the Trustee be responsible or liable for special,
indirect, or consequential loss or damage of any kind whatsoever (including, but
not limited to, loss of profit) irrespective of whether the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

     (h) The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trustee Office of the Trustee, and such
notice references the Securities and this Indenture.

     (i) The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other Person employed to act hereunder.

     (j) The Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

Section 7.03  INDIVIDUAL RIGHTS OF TRUSTEE.

     The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee (if this Indenture has been qualified under the TIA) or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.

Section 7.04  TRUSTEE'S DISCLAIMER.

                                       65


     The Trustee will not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it will not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it will not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.

Section 7.05  NOTICE OF DEFAULTS.

     If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee will mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium or
Liquidated Damages, if any, or interest on, any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.

Section 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.

     (a) Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee will mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also will comply
with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports
as required by TIA Section 313(c).

     (b) A copy of each report at the time of its mailing to the Holders of
Notes will be mailed by the Trustee to the Company and filed by the Trustee with
the SEC and each stock exchange on which the Notes are listed in accordance with
TIA Section 313(d). The Company will promptly notify the Trustee when the Notes
are listed on any stock exchange.

Section 7.07  COMPENSATION AND INDEMNITY.

     (a) The Company will pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation will not be limited by any law on compensation of a
trustee of an express trust. The Company will reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses will
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.

     (b) The Company and the Guarantors, jointly and severally, will indemnify
the Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company and the Guarantors (including this Section 7.07)
and defending itself against any claim (whether asserted by the Company, the
Guarantors, any Holder or any other Person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the
extent any such loss, liability, claim, damage or expense as shall be determined
to have been caused by its negligence or bad faith. The Trustee will notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company will not relieve the Company or any of the
Guarantors of their obligations hereunder. The Company or such Guarantor will
defend the claim and the Trustee will cooperate in the defense. The Trustee may
have separate counsel and the

                                       66


Company will pay the reasonable fees and expenses of such counsel. Neither the
Company nor any Guarantor need pay for any settlement made without its consent,
which consent will not be unreasonably withheld.

     (c) The obligations of the Company and the Guarantors under this Section
7.07 will survive the satisfaction and discharge of this Indenture.

     (d) To secure the Company's and the Guarantors' payment obligations in this
Section 7.07, the Trustee will have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien will survive the
satisfaction and discharge of this Indenture.

     (e) When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

     (f) The Trustee will comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.

Section 7.08  REPLACEMENT OF TRUSTEE.

     (a) A resignation or removal of the Trustee and appointment of a successor
Trustee will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.

     (b) The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:

              (1) the Trustee fails to comply with Section 7.10 hereof;

              (2) the Trustee is adjudged a bankrupt or an insolvent or an order
     for relief is entered with respect to the Trustee under any Bankruptcy Law;

              (3) a custodian or public officer takes charge of the Trustee or
     its property; or

              (4) the Trustee becomes incapable of acting.

     (c) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company will promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.

     (d) If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

     (e) If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

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     (f) A successor Trustee will deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee will become effective, and the
successor Trustee will have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee will mail a notice of its succession
to Holders. The retiring Trustee will promptly transfer all property held by it
as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof will continue for the
benefit of the retiring Trustee.

Section 7.09  SUCCESSOR TRUSTEE BY MERGER, ETC.

     If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act will be the successor Trustee.

Section 7.10  ELIGIBILITY; DISQUALIFICATION.

     There will at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.

     This Indenture will always have a Trustee who satisfies the requirements of
TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).

Section 7.11  PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

     The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

                                   ARTICLE 8.
                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01  OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.

     The Company may, at its option and at any time, elect to have either
Section 8.02 or 8.03 hereof be applied to all outstanding Notes and the
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article 8.

Section 8.02  LEGAL DEFEASANCE AND DISCHARGE.

     Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each of the Guarantors will,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from their obligations with respect to all
outstanding Notes (including the Subsidiary Guarantees) on the date the
conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
this purpose, Legal Defeasance means that the Company and the Guarantors will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes (including the Subsidiary Guarantees), which will thereafter
be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and
the other Sections of this Indenture

                                       68


referred to in clauses (1) and (2) below, and to have satisfied all their other
obligations under such Notes, the Subsidiary Guarantees and this Indenture (and
the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which will survive until otherwise terminated or discharged hereunder:

              (1) the rights of Holders of outstanding Notes to receive payments
     in respect of the principal of, or interest or premium and Liquidated
     Damages, if any, on such Notes when such payments are due from the trust
     referred to in Section 8.04 hereof;

              (2) the Company's obligations with respect to such Notes under
     Article 2 and Section 4.02 hereof;

              (3) the rights, powers, trusts, duties and immunities of the
     Trustee hereunder and the Company's and the Guarantors' obligations in
     connection therewith; and

              (4) this Article 8.

     Subject to compliance with this Article 8, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.

Section 8.03  COVENANT DEFEASANCE.

     Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each of the Guarantors will,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from each of their obligations under the covenants contained in
Sections 4.04, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18,
4.19 and 4.20 hereof and clause (4) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
hereof are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes will
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes will not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Notes and
Subsidiary Guarantees, the Company and the Guarantors may omit to comply with
and will have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply will not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes and Subsidiary Guarantees will be unaffected thereby.
In addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(5)
hereof will not constitute Events of Default.

Section 8.04  CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.

     In order to exercise either Legal Defeasance or Covenant Defeasance under
either Section 8.02 or 8.03 hereof:

              (1) the Company must irrevocably deposit with the Trustee, in
     trust, for the benefit of the Holders of the Notes, cash in U.S. dollars,
     non-callable Government Securities, or a combination of cash in U.S.
     dollars and non-callable Government Securities, in amounts as will be
     sufficient,

                                       69


     in the opinion of a nationally recognized investment bank, appraisal firm
     or firm of independent public accountants to pay the principal of, or
     interest and premium and Liquidated Damages, if any, on the outstanding
     Notes on the stated date for payment thereof or on the applicable
     redemption date, as the case may be, and the Company must specify whether
     the Notes are being defeased to such stated date for payment or to a
     particular redemption date;

              (2) in the case of an election under Section 8.02 hereof, the
     Company has delivered to the Trustee an Opinion of Counsel confirming that:

                      (A) the Company has received from, or there has been
              published by, the Internal Revenue Service a ruling; or

                      (B) since the date of this Indenture, there has been a
              change in the applicable federal income tax law,

              in either case to the effect that, and based thereon such Opinion
              of Counsel shall confirm that, the Holders of the outstanding
              Notes will not recognize income, gain or loss for federal income
              tax purposes as a result of such Legal Defeasance and will be
              subject to federal income tax on the same amounts, in the same
              manner and at the same times as would have been the case if such
              Legal Defeasance had not occurred;

              (3) in the case of an election under Section 8.03 hereof, the
     Company has delivered to the Trustee an Opinion of Counsel confirming that
     the Holders of the outstanding Notes will not recognize income, gain or
     loss for federal income tax purposes as a result of such Covenant
     Defeasance and will be subject to federal income tax on the same amounts,
     in the same manner and at the same times as would have been the case if
     such Covenant Defeasance had not occurred;

              (4) no Default or Event of Default has occurred and is continuing
     on the date of such deposit (other than a Default or Event of Default
     resulting from the borrowing of funds to be applied to such deposit) and
     the deposit will not result in a breach or violation of, or constitute a
     default under, any other instrument to which the Company or any Guarantor
     is a party or by which the Company or any Guarantor is bound;

              (5) such Legal Defeasance or Covenant Defeasance will not result
     in a breach or violation of, or constitute a default under, any material
     agreement or instrument (other than this Indenture) to which the Company or
     any of its Subsidiaries is a party or by which the Company or any of its
     Subsidiaries is bound;

              (6) the Company must deliver to the Trustee an Officers'
     Certificate stating that the deposit was not made by the Company with the
     intent of preferring the Holders of Notes over the other creditors of the
     Company with the intent of defeating, hindering, delaying or defrauding
     creditors of the Company or others; and

              (7) the Company must deliver to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent provided for or relating to the Legal Defeasance or the Covenant
     Defeasance have been complied with.

Section 8.05  DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.

                                       70


     Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes
will be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium and Liquidated Damages, if
any, and interest, but such money need not be segregated from other funds except
to the extent required by law.

     The Company will pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.

     Notwithstanding anything in this Article 8 to the contrary, the Trustee
will deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(1) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06  REPAYMENT TO COMPANY.

     Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium or Liquidated
Damages, if any, or interest on any Note and remaining unclaimed for two years
after such principal, premium or Liquidated Damages, if any, or interest has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) will be discharged from such trust; and the Holder of such
Note will thereafter be permitted to look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, will
thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which will not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.

Section 8.07  REINSTATEMENT.

     If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Notes and the Subsidiary Guarantees will be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
PROVIDED, HOWEVER, that, if the Company makes any payment of principal of,
premium or Liquidated Damages, if any, or interest on any Note following the
reinstatement of its obligations, the Company will be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.

                                       71


                                   ARTICLE 9.
                        AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01  WITHOUT CONSENT OF HOLDERS OF NOTES.

     Notwithstanding Section 9.02 of this Indenture (but subject in any event to
Section 10.13), without the consent of any Holder of Notes, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
the Subsidiary Guarantees:

              (1) to cure any ambiguity, defect or inconsistency;

              (2) to provide for uncertificated Notes in addition to or in place
     of certificated Notes;

              (3) to provide for the assumption of the Company's or a
     Guarantor's obligations to the Holders of Notes and Subsidiary Guarantees
     in the case of a merger or consolidation or sale of all or substantially
     all of the Company's or such Guarantor's assets, as applicable;

              (4) to make any change that would provide any additional rights or
     benefits to the Holders of Notes or that does not adversely affect the
     legal rights hereunder of any such Holder;

              (5) to comply with requirements of the SEC in order to effect or
     maintain the qualification of this Indenture under the TIA;

              (6) to add additional Guarantees with respect to the Notes or
     release Guarantors from Subsidiary Guarantees as provided or permitted by
     the terms of this Indenture; or

              (7) to conform the text of this Indenture or the Notes to any
     provision of the "Description of Notes" section of the Company's Offering
     Memorandum dated October 16, 2003, relating to the initial offering of the
     Notes, to the extent that such provision in that "Description of Notes" was
     intended to be a verbatim recitation of a provision of this Indenture, the
     Subsidiary Guarantees or the Notes.

     The consent of the Holders of the Notes is not necessary to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of such proposed amendment. After an amendment becomes
effective, the Company is required to mail to each registered Holder of the
Notes a notice briefly describing such amendment. However, the failure to give
such notice to all Holders of the Notes, or any defect therein, will not impair
or affect the validity of the amendment.

     Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee will join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee will not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.

Section 9.02  WITH CONSENT OF HOLDERS OF NOTES.

     Except as provided below in this Section 9.02 and Section 10.13, the
Company and the Trustee may amend or supplement this Indenture (including,
without limitation, Section 3.09, 4.10 and 4.15 hereof), the Subsidiary
Guarantees and the Notes with the consent of the Holders of at least a majority
in

                                       72


principal amount of the Notes (including, without limitation, Additional Notes,
if any) then outstanding voting as a single class (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium or Liquidated Damages, if
any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.

     Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee will
join with the Company and the Guarantors in the execution of such amended or
supplemental indenture unless such amended or supplemental indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but will not be
obligated to, enter into such amended or supplemental Indenture.

     It is not be necessary for the consent of the Holders of Notes under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it is sufficient if such consent approves the substance thereof.

     After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company will mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, will not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture, the Notes, or the Subsidiary Guarantees.
However, without the consent of each Holder affected, an amendment, supplement
or waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):

              (1) reduce the principal amount of Notes whose Holders must
     consent to an amendment, supplement or waiver;

              (2) reduce the principal of or change the fixed maturity of any
     Note or alter the provisions with respect to the redemption of the Notes
     (other than as provided with respect to Sections 3.09, 4.10 or 4.15
     hereof);

              (3) reduce the rate of or change the time for payment of interest,
     including default interest, on any Note;

              (4) waive a Default or Event of Default in the payment of
     principal of, or interest or premium, or Liquidated Damages, if any, on the
     Notes (except a rescission of acceleration of the Notes by the Holders of
     at least a majority in aggregate principal amount of the then outstanding
     Notes and a waiver of the payment default that resulted from such
     acceleration);

              (5) make any Note payable in money other than that stated in the
     Notes;

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              (6) make any change in the provisions of this Indenture relating
     to waivers of past Defaults or the rights of Holders of Notes to receive
     payments of principal of, or interest or premium or Liquidated Damages, if
     any, on the Notes;

              (7) waive a redemption payment with respect to any Note (other
     than a payment required by Sections 3.09, 4.10 or 4.15 hereof);

              (8) release any Guarantor from any of its obligations under its
     Subsidiary Guarantee or this Indenture, except in accordance with the terms
     of this Indenture; or

              (9) make any change covered by (6) in the foregoing amendment and
     waiver provisions.

     In addition, any amendment to, or waiver of, the provisions of this
Indenture relating to subordination that adversely affects the rights of the
Holders of the Notes will require the consent of the Holders of at least 75% in
aggregate principal amount of Notes then outstanding.

Section 9.03  COMPLIANCE WITH TRUST INDENTURE ACT.

     Every amendment or supplement to this Indenture or the Notes will be set
forth in a amended or supplemental indenture that complies with the TIA as then
in effect.

Section 9.04  REVOCATION AND EFFECT OF CONSENTS.

     Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.

Section 9.05 NOTATION ON OR EXCHANGE OF NOTES.

     The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.

     Failure to make the appropriate notation or issue a new Note will not
affect the validity and effect of such amendment, supplement or waiver.

Section 9.06  TRUSTEE TO SIGN AMENDMENTS, ETC.

     The Trustee will sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amended or supplemental indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
will be provided with and (subject to Section 7.01 hereof) will be fully
protected in relying upon, in addition to the documents required by Section
13.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.

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                                   ARTICLE 10.
                                  SUBORDINATION

Section 10.01 AGREEMENT TO SUBORDINATE.

     The Company agrees, and each Holder by accepting a Note agrees, that the
payment of principal, interest and Liquidated Damages, if any, on the Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Article 10, to the prior payment in full of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.

Section 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.

          (1) Upon any distribution to creditors of the Company in a liquidation
     or dissolution of the Company or in a bankruptcy, reorganization,
     insolvency, receivership or similar proceeding relating to the Company or
     its property, in an assignment for the benefit of creditors or any
     marshaling of the Company's assets and liabilities, the holders of Senior
     Debt will be entitled to receive payment in full in cash of all Obligations
     due in respect of Senior Debt (including interest after the commencement of
     any bankruptcy proceeding at the rate specified in the applicable Senior
     Debt, whether or not such interest is an allowable claim) before the
     Holders of Notes will be entitled to receive any payment with respect to
     the Notes (except that Holders of Notes may receive and retain Permitted
     Junior Securities and payments made from either of the trusts created
     pursuant to Sections 8.01 or 11.01 hereof so long as the trust was created
     in accordance with all relevant conditions specified in this Indenture at
     the time it was created.)

Section 10.03 DEFAULT ON DESIGNATED SENIOR DEBT.

     (a) The Company may not make any payment in respect to the Notes (except in
Permitted Junior Securities or from the trusts created pursuant to Section 8.01
hereof so long as the trust was created in accordance with all relevant
conditions specified in this Indenture at the time it was created) if:

              (1) a payment default on Designated Senior Debt occurs (whether at
     maturity, due to acceleration, or otherwise) and is continuing; or

              (2) any other default occurs and is continuing on any series of
     Designated Senior Debt that permits holders of that series of Designated
     Senior Debt to accelerate its maturity and the Trustee receives a notice of
     such default (a "PAYMENT BLOCKAGE NOTICE") from the Company, a
     representative of the holders of any Designated Senior Debt or the
     administrative agent under the Credit Agreement. If the Trustee receives
     any such Payment Blockage Notice, no subsequent Payment Blockage Notice
     will be effective for purposes of this Section unless and until at least
     360 days have elapsed since the delivery of the immediately prior Payment
     Blockage Notice.

     No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default has have been
cured or waived for a period of not less than 90 consecutive days.

     (b) Payments on the Notes may and will be resumed:

              (1) in the case of a payment default, upon the date upon which
     such default is cured or waived; and

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              (2) in the case of a nonpayment default, upon the earlier of the
     date on which such nonpayment default is cured or waived or 179 days after
     the date on which the applicable Payment Blockage Notice is received or the
     date on which the Trustee receives notice from all representatives of all
     applicable Designated Senior Debt rescinding the Payment Blockage Notice
     unless the maturity of any Designated Senior Debt has been accelerated.

     unless this Article 10 otherwise prohibits the payment, distribution or
acquisition at the time of such payment or acquisition.

Section 10.04  ACCELERATION OF NOTES.

     The Company must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default (which notice must be
provided at least five business days prior to the payment of the Notes.)

Section 10.05 WHEN DISTRIBUTION MUST BE PAID OVER.

If the Trustee or any Holder of the Notes receives a payment in respect of the
Notes (except in Permitted Junior Securities or from the trusts created pursuant
to Section 8.01 hereof) in contravention of these subordination provisions set
forth herein prior to payment in full of all Obligations due in respect of
Senior Debt (including without limitation, interest after the commencement of
any bankruptcy proceedings at the rate specified in the applicable Senior Debt,
whether or not such interest is an allowable claim) the Trustee or the Holder,
as the case may be, will hold the payment in trust for the benefit of the
holders of Senior Debt. Upon the proper written request of the holders of Senior
Debt, the Trustee or the Holder, as the case may be, will deliver the amounts in
trust to the holders of Senior Debt (on a pro rata basis based on the aggregate
amount of the Senior Debt) or their proper representative.

     With respect to the holders of Senior Debt, the Trustee undertakes to
perform only those obligations on the part of the Trustee as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Debt will be read into this Indenture against
the Trustee. The Trustee will not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and will not be liable to any such holders if the
Trustee pays over or distributes to or on behalf of Holders or the Company or
any other Person money or assets to which any holders of Senior Debt are then
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.

Section 10.06 NOTICE BY COMPANY.

     The Company will promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article 10, but failure to give such notice
will not affect the subordination of the Notes to the Senior Debt as provided in
this Article 10.

Section 10.07 SUBROGATION.

     After all Senior Debt is paid in full and until the Notes are paid in full,
Holders of Notes will be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.

                                       76


Section 10.08 RELATIVE RIGHTS.

     This Article 10 defines the relative rights of Holders of Notes and holders
of Senior Debt. Nothing in this Indenture will:

              (1) impair, as between the Company and Holders of Notes, the
     obligation of the Company, which is absolute and unconditional, to pay
     principal of, premium and interest and Liquidated Damages, if any, on the
     Notes in accordance with their terms;

              (2) affect the relative rights of Holders of Notes and creditors
     of the Company other than their rights in relation to holders of Senior
     Debt; or

              (3) prevent the Trustee or any Holder of Notes from exercising its
     available remedies upon a Default or Event of Default, subject to the
     rights of holders and owners of Senior Debt to receive distributions and
     payments otherwise payable to Holders of Notes.

     If the Company fails because of this Article 10 to pay principal of,
premium or interest or Liquidated Damages, if any, on a Note on the due date,
the failure is still a Default or Event of Default.

Section 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.

     No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes may be impaired by any act or failure to act
by the Company or any Holder or by the failure of the Company or any Holder to
comply with this Indenture.

Section 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.

     Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.

     Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Notes will be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.

Section 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT.

     Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee will not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless the Trustee has received at its Corporate Trust Office at
least three Business Days prior to the date of such payment written notice of
facts that would cause the payment of any Obligations with respect to the Notes
to violate this Article 10. Only the Company or a Representative may give the
notice. Nothing in this Article 10 will impair the claims of, or payments to,
the Trustee under or pursuant to Section 7.07 hereof.

     The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.

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Section 10.12 AUTHORIZATION TO EFFECT SUBORDINATION.

     Each Holder of Notes, by the Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.

Section 10.13 AMENDMENTS.

     The provisions of this Article 10 may not be amended, modified or waived
without the written consent of the holders of all Senior Debt. In addition, any
amendment to, or waiver of, the provisions of this Article 10 that adversely
affects the rights of the Holders of the Notes will require the consent of the
Holders of at least 75% in aggregate principal amount of Notes then outstanding.

Section 10.14 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.

     The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if the Trustee
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes or perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.

                                   ARTICLE 11.
                              SUBSIDIARY GUARANTEES

Section 11.01 GUARANTEE.

     (a) Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that:

              (1) the principal of, premium and Liquidated Damages, if any, and
     interest on the Notes will be promptly paid in full when due, whether at
     maturity, by acceleration, redemption or otherwise, and interest on the
     overdue principal of and interest on the Notes, if any, if lawful, and all
     other obligations of the Company to the Holders or the Trustee hereunder or
     thereunder will be promptly paid in full or performed, all in accordance
     with the terms hereof and thereof; and

              (2) in case of any extension of time of payment or renewal of any
     Notes or any of such other obligations, that same will be promptly paid in
     full when due or performed in accordance with the terms of the extension or
     renewal, whether at stated maturity, by acceleration or otherwise.

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     Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors will be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.

     (b) The Guarantors hereby agree that their obligations hereunder are
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.

     (c) If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated
in full force and effect.

     (d) Each Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (1) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (2) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) will forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors will have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantee.

Section 11.02 SUBORDINATION OF SUBSIDIARY GUARANTEE.

     The Obligations of each Guarantor under its Subsidiary Guarantee pursuant
to this Article 11 will be junior and subordinated to the Senior Debt of such
Guarantor on the same basis as the Notes are junior and subordinated to Senior
Debt of the Company. For the purposes of the foregoing sentence, the Trustee and
the Holders will have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article 10 hereof.

Section 11.03 LIMITATION ON GUARANTOR LIABILITY.

     Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor will be limited to the maximum amount
that will, after giving effect to such maximum amount and all other contingent
and fixed liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to

                                       79


receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under this
Article 11, result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.

Section 11.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.

     To evidence its Subsidiary Guarantee set forth in Section 11.01 hereof,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form attached as Exhibit E hereto will be endorsed by an
Officer of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture will be executed on behalf of such Guarantor by
one of its Officers.

     Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01 hereof will remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.

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

     The delivery of any Note by the Trustee, after the authentication thereof
hereunder, will constitute due delivery of the Subsidiary Guarantee set forth in
this Indenture on behalf of the Guarantors.

     In the event that the Company or any of its Restricted Subsidiaries creates
or acquires any Domestic Subsidiary after the date of this Indenture, if
required by Section 4.20 hereof, the Company will cause such Domestic Subsidiary
to comply with the provisions of Section 4.20 hereof and this Article 11, to the
extent applicable.

Section 11.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

     Except as otherwise provided in Section 11.05 hereof, no Guarantor may sell
or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person, other than the Company or another Guarantor,
unless:

              (1) immediately after giving effect to such transaction, no
     Default or Event of Default exists; and

              (2) either:

                      (a) subject to Section 11.05 hereof, the Person acquiring
     the property in any such sale or disposition or the Person formed by or
     surviving any such consolidation or merger unconditionally assumes all the
     obligations of that Guarantor, pursuant to a supplemental indenture in form
     and substance reasonably satisfactory to the Trustee, under this Indenture
     and the Subsidiary Guarantee on the terms set forth herein or therein; and

                      (b) the Net Proceeds of such sale or other disposition are
     applied in accordance with the applicable provisions of this Indenture,
     including without limitation, Section 4.10 hereof.

     In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor,

                                       80


such successor Person will succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Subsidiary Guarantees
to be endorsed upon all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued will in all respects have the same legal rank
and benefit under this Indenture as the Subsidiary Guarantees theretofore and
thereafter issued in accordance with the terms of this Indenture as though all
of such Subsidiary Guarantees had been issued at the date of the execution
hereof.

     Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses
(a) and (b) above, nothing contained in this Indenture or in any of the Notes
will prevent any consolidation or merger of a Guarantor with or into the Company
or another Guarantor, or will prevent any sale or conveyance of the property of
a Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.

Section 11.06 RELEASES.

     (a) In the event of any sale or other disposition of all or substantially
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Guarantor, in each case to a Person that is not (either before or after giving
effect to such transactions) the Company or a Restricted Subsidiary of the
Company, then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
will execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.

     (b) Upon designation of any Guarantor as an Unrestricted Subsidiary in
accordance with the terms of this Indenture, such Guarantor will be released and
relieved of any obligations under its Subsidiary Guarantee.

     (c) Upon Legal Defeasance in accordance with Article 8 hereof or
satisfaction and discharge of this Indenture in accordance with Article 11
hereof, each Guarantor will be released and relieved of any obligations under
its Subsidiary Guarantee.

     Any Guarantor not released from its obligations under its Subsidiary
Guarantee as provided in this Section 11.06 will remain liable for the full
amount of principal of and interest on the Notes and for the other obligations
of any Guarantor under this Indenture as provided in this Article 11.

                                   ARTICLE 12.
                           SATISFACTION AND DISCHARGE

Section 12.01 SATISFACTION AND DISCHARGE.

     This Indenture will be discharged and will cease to be of further effect as
to all Notes issued hereunder, when:

              (1) either:

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                      (a) all Notes that have been authenticated, except lost,
     stolen or destroyed Notes that have been replaced or paid and Notes for
     whose payment money has been deposited in trust and thereafter repaid to
     the Company), have been delivered to the Trustee for cancellation; or

                      (b) all Notes that have not been delivered to the Trustee
     for cancellation have become due and payable by reason of the mailing of a
     notice of redemption or otherwise or will become due and payable within one
     year and the Company or any Guarantor has irrevocably deposited or caused
     to be deposited with the Trustee as trust funds in trust solely for the
     benefit of the Holders, cash in U.S. dollars, non-callable Government
     Securities, or a combination of cash in U.S. dollars and non-callable
     Government Securities, in amounts as will be sufficient, without
     consideration of any reinvestment of interest, to pay and discharge the
     entire Indebtedness on the Notes not delivered to the Trustee for
     cancellation for principal, premium and Liquidated Damages, if any, and
     accrued interest to the date of maturity or redemption;

              (2) no Default or Event of Default has occurred and is continuing
     on the date of the deposit (other than a Default or Event of Default
     resulting from the borrowing of funds to be applied to such deposit) and
     the deposit will not result in a breach or violation of, or constitute a
     default under, any other instrument to which the Company or any Guarantor
     is a party or by which the Company or any Guarantor is bound;

              (3) the Company or any Guarantor has paid or caused to be paid all
     sums payable by it under this Indenture; and

              (4) the Company has delivered irrevocable instructions to the
     Trustee under this Indenture to apply the deposited money toward the
     payment of the Notes at maturity or the redemption date, as the case may
     be.

In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.

     Notwithstanding the satisfaction and discharge of this Indenture, if money
has been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the provisions of Sections 12.02 and 8.06 will survive. In
addition, nothing in this Section 12.01 will be deemed to discharge those
provisions of Section 7.07 hereof, that, by their terms, survive the
satisfaction and discharge of this Indenture.

Section 12.02 APPLICATION OF TRUST MONEY.

     Subject to the provisions of Section 8.06 hereof, all money deposited with
the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied
by it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law.

     If the Trustee or Paying Agent is unable to apply any money or Government
Securities in accordance with Section 12.01 hereof by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01 hereof; PROVIDED

                                       82


that if the Company has made any payment of principal of, premium, if any, or
interest on any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or Government Securities held by the Trustee
or Paying Agent.

                                   ARTICLE 13.
                                  MISCELLANEOUS

Section 13.01 TRUST INDENTURE ACT CONTROLS.

     If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section318(c), the imposed duties will control.

Section 13.02 NOTICES.

     Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:

     If to the Company and/or any Guarantor:

     DRS Technologies, Inc.
     5 Sylvan Way
     Parsippany, New Jersey 07054
     Telecopier No.: (973) 898-1500
     Attention: Chief Financial Officer

     With a copy to:
     Skadden, Arps, Slate, Meagher & Flom LLP
     Four Times Square
     New York, New York 10036
     Telecopier No.: (212) 735-2000
     Attention: David J. Goldschmidt, Esq.

     If to the Trustee:
     The Bank of New York
     101 Barclay Street-8 West
     New York, New York 10286
     Telecopier No.: (212) 815-5707
     Attention: Corporate Trust Administration

     The Company, any Guarantor or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.

     All notices and communications (other than those sent to Holders) will be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.

                                       83


     Any notice or communication to a Holder will be mailed by first class mail,
certified or registered, return receipt requested, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication will also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it will not affect
its sufficiency with respect to other Holders.

     If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.

     If the Company mails a notice or communication to Holders, it will mail a
copy to the Trustee and each Agent at the same time.

Section 13.03  COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.

     Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).

Section 13.04  CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

     Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee (except
that the Opinion of Counsel referred to in Section 13.04(2) hereof shall not be
required in connection with the Authentication Order):

              (1) an Officers' Certificate in form and substance reasonably
     satisfactory to the Trustee (which must include the statements set forth in
     Section 13.05 hereof) stating that, in the opinion of the signers, all
     conditions precedent and covenants, if any, provided for in this Indenture
     relating to the proposed action have been satisfied; and

              (2) an Opinion of Counsel in form and substance reasonably
     satisfactory to the Trustee (which must include the statements set forth in
     Section 13.05 hereof) stating that, in the opinion of such counsel, all
     such conditions precedent and covenants have been satisfied.

Section 13.05  STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

     Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA
Section 314(e) and must include:

              (1) a statement that the Person making such certificate or opinion
     has read such covenant or condition;

              (2) a brief statement as to the nature and scope of the
     examination or investigation upon which the statements or opinions
     contained in such certificate or opinion are based;

              (3) a statement that, in the opinion of such Person, he or she has
     made such examination or investigation as is necessary to enable him or her
     to express an informed opinion as to whether or not such covenant or
     condition has been satisfied; and

              (4) a statement as to whether or not, in the opinion of such
     Person, such condition or covenant has been satisfied.

                                       84


Section 13.06 RULES BY TRUSTEE AND AGENTS.

     The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

Section 13.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.

     No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary, as such, will have any liability for any obligations of the
Company or the Guarantors under the Notes, this Indenture, the Subsidiary
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.

Section 13.08 GOVERNING LAW.

     THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

Section 13.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

     This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

Section 13.10 SUCCESSORS.

     All agreements of the Company in this Indenture and the Notes will bind its
successors. All agreements of the Trustee in this Indenture will bind its
successors. All agreements of each Guarantor in this Indenture will bind its
successors, except as otherwise provided in Section 11.06.

Section 13.11 SEVERABILITY.

     In case any provision in this Indenture or in the Notes is invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.

Section 13.12 COUNTERPART ORIGINALS.

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

Section 13.13 TABLE OF CONTENTS, HEADINGS, ETC.

     The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and will in no way
modify or restrict any of the terms or provisions hereof.

                         [Signatures on following page]

                                       85


                                   SIGNATURES

Dated as of October 30, 2003
                                     DRS TECHNOLOGIES, INC.


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





                                     NAI TECHNOLOGIES, INC.
                                     DRS ELECTRONIC SYSTEMS, INC.
                                     DRS SURVEILLANCE SUPPORT SYSTEMS, INC.
                                     DRS TECHNICAL SERVICES, INC.
                                     DRS POWER & CONTROL TECHNOLOGIES, INC.
                                     DRS ELECTRIC POWER TECHNOLOGIES, INC.
                                     DRS POWER TECHNOLOGY, INC.
                                     PARAVANT INC.
                                     DRS TACTICAL SYSTEMS, INC.
                                     DRS TACTICAL SYSTEMS (WEST), INC.
                                     DRS ENGINEERING DEVELOPMENT LABS, INC.
                                     DRS SIGNAL TECHNOLOGIES, INC.
                                     DRS SIGNAL RECORDING TECHNOLOGIES, INC.
                                     DRS SYSTEMS MANAGEMENT CORPORATION
                                     DRS OPTRONICS, INC.
                                     DRS SENSORS & TARGETING SYSTEMS, INC.
                                     DRS NYTECH IMAGING SYSTEMS, INC.
                                     DRS FPA, INC.
                                     DRS INFRARED TECHNOLOGIES, L.P.
                                     DRS UNMANNED TECHNOLOGIES, INC.
                                     DRS DATA & IMAGING SYSTEMS, INC.
                                     DRS TECHNOLOGIES CANADA, INC.
                                     DRS COMMUNICATIONS COMPANY L.L.C.
                                     DRS SYSTEMS, INC.
                                     DRS NEWCO III, INC.
                                     MMC3 CORPORATION
                                     DRS INTERNATIONAL, INC.


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



                                     THE BANK OF NEW YORK


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



                                                                       EXHIBIT A

                                 [Face of Note]

                                                         CUSIP/CINS ____________

                     6 7/8% Senior Subordinated Notes due 2013

No. ___                                                            $____________

                             DRS TECHNOLOGIES, INC.

promises to pay to [________] or registered assigns,

the principal sum of _________________________________________________DOLLARS on
_____________, 20___.

Interest Payment Dates:  ____________ and ____________

Record Dates:  ____________ and ____________

Dated:  _______________, 200_

                                     DRS TECHNOLOGIES, INC.


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


This is one of the Notes referred to
in the within-mentioned Indenture:

THE BANK OF NEW YORK,
 as Trustee


By:
    ------------------------------------
            Authorized Signatory

                                       A-1


                                  Back of Note
                    6 7/8% Senior Subordinated Notes due 2013

[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]

[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]

[INSERT THE UNIT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]

     Capitalized terms used herein have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.

          (1) INTEREST. DRS Technologies, Inc., a Delaware corporation (the
     "COMPANY"), promises to pay interest on the principal amount of this Note
     at 6 7/8% per annum from October 30, 2003 until maturity and shall pay the
     Liquidated Damages, if any, payable pursuant to Section 5 of the
     Registration Rights Agreement referred to below. The Company will pay
     interest and Liquidated Damages, if any, semi-annually in arrears on May 1
     and November 1 of each year, or if any such day is not a Business Day, on
     the next succeeding Business Day (each, an "INTEREST PAYMENT DATE").
     Interest on the Notes will accrue from the most recent date to which
     interest has been paid or, if no interest has been paid, from the date of
     issuance; PROVIDED that if there is no existing Default in the payment of
     interest, and if this Note is authenticated between a record date referred
     to on the face hereof and the next succeeding Interest Payment Date,
     interest shall accrue from such next succeeding Interest Payment Date;
     PROVIDED FURTHER that the first Interest Payment Date shall be May 1, 2004.
     The Company will pay interest (including post-petition interest in any
     proceeding under any Bankruptcy Law) on overdue principal and premium, if
     any, from time to time on demand at a rate that is 1% per annum in excess
     of the rate then in effect; it will pay interest (including post-petition
     interest in any proceeding under any Bankruptcy Law) on overdue
     installments of interest and Liquidated Damages, if any, (without regard to
     any applicable grace periods) from time to time on demand at the same rate
     to the extent lawful. Interest will be computed on the basis of a 360-day
     year comprised of twelve 30-day months.

          (2) METHOD OF PAYMENT. The Company will pay interest on the Notes
     (except defaulted interest) and Liquidated Damages, if any, to the Persons
     who are registered Holders of Notes at the close of business on the April
     15 or October 15 next preceding the Interest Payment Date, even if such
     Notes are canceled after such record date and on or before such Interest
     Payment Date, except as provided in Section 2.12 of the Indenture with
     respect to defaulted interest. The Notes will be payable as to principal,
     premium and Liquidated Damages, if any, and interest at the office or
     agency of the Company maintained for such purpose within or without the
     City and State of New York, or, at the option of the Company, payment of
     interest and Liquidated Damages, if any, may be made by check mailed to the
     Holders at their addresses set forth in the register of Holders; PROVIDED
     that payment by wire transfer of immediately available funds will be
     required with respect to principal of and interest, premium and Liquidated
     Damages, if any, on, all Global Notes and all other Notes the Holders of
     which will have provided wire transfer instructions to the Company or the
     Paying Agent. Such payment will be in such coin or currency of the United
     States of America as at the time of payment is legal tender for payment of
     public and private debts.

          (3) PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
     Trustee under the Indenture, will act as Paying Agent and Registrar. The
     Company may change any Paying

                                      A1-2


     Agent or Registrar without notice to any Holder. The Company or any of its
     Subsidiaries may act in any such capacity.

          (4) INDENTURE. The Company issued the Notes under an Indenture dated
     as of October 30, 2003 (the "INDENTURE") among the Company, the Guarantors
     and the Trustee. The terms of the Notes include those stated in the
     Indenture and those made part of the Indenture by reference to the TIA (15
     U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
     and Holders are referred to the Indenture and such Act for a statement of
     such terms. To the extent any provision of this Note conflicts with the
     express provisions of the Indenture, the provisions of the Indenture shall
     govern and be controlling. The Notes are unsecured obligations of the
     Company.

          (5) OPTIONAL REDEMPTION.

     (a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company will not have the option to redeem the Notes prior to November 1, 2008.
On or after November 1, 2008, the Company may redeem all or part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any on the Notes redeemed, to, but
excluding, the applicable redemption date, if redeemed during the twelve-month
period beginning on November 1 of the years indicated below:



     Year                                                         Percentage
     ----                                                         ----------
                                                                  
     2008....................................................        103.438%
     2009....................................................        102.292%
     2010....................................................        101.146%
     2011 and thereafter.....................................        100.000%


     (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to November 1, 2006, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes at a
redemption price of 106.875% of principal amount thereof; plus accrued and
unpaid interest and Liquidated Damages, if any, to, but excluding, the
redemption date, with the net cash proceeds of one or more Equity Offerings
PROVIDED that at least 65% of the aggregate principal amount of the Notes
originally issued under the Indenture (excluding Notes held by the Company and
its Subsidiaries) remains outstanding immediately after the occurrence of such
redemption and that such redemption occurs within 120 days of the date of the
closing of such Equity Offering.

     Except pursuant to the preceding paragraph and the Escrow Agreement, the
Notes will not be redeemable at the Company's option prior to November 1, 2008.

     Unless the Company defaults in the payment of the redemption price,
interest will cease to accrue on the Notes or portions thereof called for
redemption on the applicable redemption date.

          (6) MANDATORY REDEMPTION.

     The Company will not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.

          (7) REPURCHASE AT THE OPTION OF HOLDER.

               (a) If there is a Change of Control, the Company will be required
     to make an offer (a "CHANGE OF CONTROL OFFER") to repurchase all or any
     part (equal to $1,000 or an integral

                                      A1-3


     multiple thereof) of each Holder's Notes at a purchase price equal to 101%
     of the aggregate principal amount thereof plus accrued and unpaid interest
     and Liquidated Damages thereon, if any, to, but excluding, the date of
     purchase subject to the rights of Noteholders on the relevant record date
     to receive interest due on the relevant interest payment date (the "CHANGE
     OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the
     Company will mail a notice to each Holder setting forth the procedures
     governing the Change of Control Offer as required by the Indenture.

               (b) If the Company or a Restricted Subsidiary of the Company
     consummates any Asset Sales, on which the aggregate amount of Excess
     Proceeds exceeds $15.0 million, the Company will commence an offer to all
     Holders of Notes and all holders of other Indebtedness that is PARI PASSU
     with the Notes containing provisions similar to those set forth in the
     Indenture with respect to offers to purchase or redeem with the proceeds of
     sales of assets (an "ASSET SALE OFFER") pursuant to Section 3.09 of the
     Indenture to purchase the maximum principal amount of Notes and other PARI
     PASSU Indebtedness that may be purchased out of the Excess Proceeds at an
     offer price in cash in an amount equal to 100% of the principal amount
     thereof plus accrued and unpaid interest and Liquidated Damages, if any,
     to, but excluding, the date of purchase, in accordance with the procedures
     set forth in the Indenture. To the extent that the aggregate amount of
     Notes and other PARI PASSU Indebtedness tendered pursuant to an Asset Sale
     Offer is less than the Excess Proceeds, the Company (or such Restricted
     Subsidiary) may use such deficiency for any purpose not otherwise
     prohibited by the Indenture. If the aggregate principal amount of Notes and
     other PARI PASSU Indebtedness surrendered by holders thereof exceeds the
     amount of Excess Proceeds, the Trustee shall select the Notes and other
     PARI PASSU Indebtedness to be purchased on a PRO RATA basis. Holders of
     Notes that are the subject of an offer to purchase will receive an Asset
     Sale Offer from the Company prior to any related purchase date and may
     elect to have such Notes purchased by completing the form entitled "OPTION
     OF HOLDER TO ELECT PURCHASE" attached to the Notes.

          (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
     30 days but not more than 60 days before the redemption date to each Holder
     whose Notes are to be redeemed at its registered address, except that
     redemption notices may be mailed more than 60 days prior to a redemption
     date if the notice is issued in connection with a defeasance of the Notes
     or a satisfaction or discharge of the Indenture. Notes in denominations
     larger than $1,000 may be redeemed in part but only in whole multiples of
     $1,000, unless all of the Notes held by a Holder are to be redeemed. On and
     after the redemption date interest ceases to accrue on Notes or portions
     thereof called for redemption.

          (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
     form without coupons in denominations of $1,000 and integral multiples of
     $1,000. The transfer of Notes may be registered and Notes may be exchanged
     as provided in the Indenture. The Registrar and the Trustee may require a
     Holder, among other things, to furnish appropriate endorsements and
     transfer documents and the Company may require a Holder to pay any taxes
     and fees required by law or permitted by the Indenture. The Company need
     not exchange or register the transfer of any Note or portion of a Note
     selected for redemption, except for the unredeemed portion of any Note
     being redeemed in part. Also, the Company need not exchange or register the
     transfer of any Notes for a period of 15 days before a selection of Notes
     to be redeemed or during the period between a record date and the
     corresponding Interest Payment Date.

          (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be
     treated as its owner for all purposes.

                                      A1-4


          (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
     the Indenture, the Subsidiary Guarantees or the Notes may be amended or
     supplemented with the consent of the Holders of at least a majority in
     principal amount of the then outstanding Notes including, without
     limitation, Additional Notes, if any then outstanding voting as a single
     class, and any existing Default or Event of Default compliance with any
     provision of the Indenture, the Subsidiary Guarantees or the Notes may be
     waived with the consent of the Holders of a majority in principal amount of
     the then outstanding Notes and Additional Notes, if any, voting as a single
     class. Without the consent of any Holder of a Note, the Indenture, the
     Subsidiary Guarantees or the Notes may be amended or supplemented to cure
     any ambiguity, defect or inconsistency, to provide for uncertificated Notes
     in addition to or in place of certificated Notes, to provide for the
     assumption of the Company's or any Guarantor's obligations to Holders of
     Notes and Subsidiary Guarantees in the case of a merger or consolidation or
     sale of all or substantially all of the Company's or such Guarantor's
     assets, as applicable; to make any change that would provide any additional
     rights or benefits to the Holders of the Notes or that does not adversely
     affect the legal rights under the Indenture of any such Holder, to comply
     with the requirements of the SEC in order to effect or maintain the
     qualification of the Indenture under the TIA, to add additional Guarantees
     with respect to the Notes or release Guarantors from Subsidiary Guarantees
     as provided or permitted by the terms of the Indenture; to conform the text
     of the Indenture; or the Notes to any provision of the "Description of
     Notes" section of the Company's Offering Memorandum dated October 16, 2003,
     relating to the initial offering of the Notes, to the extent that such
     provision in that "Description of Notes" was intended to be a verbatim
     recitation of a provision of the Indenture, the Subsidiary Guarantees or
     the Notes.

          (12) DEFAULTS AND REMEDIES. Events of Default include: (i) default for
     30 days in the payment when due of interest or Liquidated Damages with
     respect to the Notes whether or not prohibited by the subordination
     provisions of the Indenture; (ii) default in payment when due of principal
     of or premium, if any, on the Notes, whether or not prohibited by the
     subordination provisions of the Indenture; (iii) failure by the Company to
     comply with Sections 4.15 or 5.01 of the Indenture; (iv) failure by the
     Company or any of its Restricted Subsidiaries to comply with Sections 4.07
     or 4.09 of the Indenture for 30 days after notice to comply with such
     provisions; (v) failure by the Company for 60 days after notice to the
     Company to comply with certain other agreements in the Indenture; (vi)
     default under certain other agreements relating to Indebtedness of the
     Company which default results in the acceleration of such Indebtedness
     prior to its express maturity; (vii) certain final judgments for the
     payment of money aggregating in excess of $15.0 million that remain
     undischarged for a period of 60 days; (viii) certain events of bankruptcy
     or insolvency with respect to the Company or any of its Restricted
     Subsidiaries that is a Significant Subsidiary or any group of Restricted
     Subsidiaries that, when taken together, would constitute a Significant
     Subsidiary; (ix) failure by the Company or any of its Subsidiaries to
     comply with any of the terms of the Escrow Agreement that are not cured
     within applicable grace periods; and (x) the Escrow Agreement or any other
     security document or Lien purported to be granted thereby on the Escrow
     Account or the cash or Government Securities therein is held in any
     judicial proceeding to be unenforceable or invalid, in whole or in part, or
     ceases for any reason (other than pursuant to a release that is delivered
     or becomes effective as set forth in the Indenture) to be fully enforceable
     and perfect. If any Event of Default occurs and is continuing, the Trustee
     or the Holders of at least 25% in principal amount of the then outstanding
     Notes may declare all the Notes to be due and payable. Notwithstanding the
     foregoing, in the case of an Event of Default arising from certain events
     of bankruptcy or insolvency, all outstanding Notes will become due and
     payable without further action or notice. Holders may not enforce the
     Indenture or the Notes except as provided in the Indenture. Subject to
     certain limitations, the Holders of a majority in principal amount of the
     then outstanding Notes may direct the Trustee in its exercise of any trust
     or power. The Trustee may withhold from Holders of the Notes notice of any

                                      A1-5


     continuing Default or Event of Default, except a Default or Event of
     Default relating to the payment of principal or interest, if it determines
     that withholding notice is in their interest. The Holders of a majority in
     aggregate principal amount of the Notes then outstanding by notice to the
     Trustee may on behalf of the Holders of all of the Notes waive any existing
     Default or Event of Default and its consequences under the Indenture except
     a continuing Default or Event of Default in the payment of interest on, or
     the principal of, the Notes. The Company is required to deliver to the
     Trustee annually a statement regarding compliance with the Indenture, and
     the Company is required upon becoming aware of any Default or Event of
     Default, to deliver to the Trustee a statement specifying such Default or
     Event of Default.

          (13) SUBORDINATION. Payment of principal, interest and premium and
     Liquidated Damages, if any, on the Notes is subordinated to the prior
     payment of Senior Debt on the terms provided in the Indenture.

          (14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
     any other capacity, may make loans to, accept deposits from, and perform
     services for the Company or its Affiliates, and may otherwise deal with the
     Company or its Affiliates, as if it were not the Trustee.

          (15) NO RECOURSE AGAINST OTHERS. A director, officer, employee,
     incorporator or stockholder, of the Company or any Subsidiary, as such,
     will not have any liability for any obligations of the Company or the
     Guarantors under the Notes, the Subsidiary Guarantees or the Indenture or
     for any claim based on, in respect of, or by reason of, such obligations or
     their creation. Each Holder by accepting a Note waives and releases all
     such liability. The waiver and release are part of the consideration for
     the issuance of the Notes.

          (16) AUTHENTICATION. This Note will not be valid until authenticated
     by the manual signature of the Trustee or an authenticating agent.

          (17) ABBREVIATIONS. Customary abbreviations may be used in the name of
     a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
     tenants by the entireties), JT TEN (= joint tenants with right of
     survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
     (= Uniform Gifts to Minors Act).

          (18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
     RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
     of Notes under the Indenture, Holders of Restricted Global Notes and
     Restricted Definitive Notes will have all the rights set forth in the
     Registration Rights Agreement dated as of October 30, 2003, among the
     Company, the Guarantors and the other parties named on the signature pages
     thereof or, in the case of Additional Notes, Holders of Restricted Global
     Notes and Restricted Definitive Notes will have the rights set forth in one
     or more registration rights agreements, if any, among the Company, the
     Guarantors and the other parties thereto, relating to rights given by the
     Company and the Guarantors to the purchasers of any Additional Notes
     (collectively, the "REGISTRATION RIGHTS AGREEMENT").

          (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
     Committee on Uniform Security Identification Procedures, the Company has
     caused CUSIP numbers to be printed on the Notes and the Trustee may use
     CUSIP numbers in notices of redemption as a convenience to Holders. No
     representation is made as to the accuracy of such numbers either as printed
     on the Notes or as contained in any notice of redemption and reliance may
     be placed only on the other identification numbers placed thereon.

                                      A1-6


     The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:

DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054
Attention:  Chief Financial Officer

                                      A1-7


                                                                       EXHIBIT A

                                 ASSIGNMENT FORM

     To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:___________________________________
                                               (Insert assignee's legal name)
________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company.  The agent may substitute
another to act for him.

Date: _______________

             Your Signature:
                            ----------------------------------------------------
                    (Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:__________________________

*    Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                       A-8


                                                                       EXHIBIT A

                       OPTION OF HOLDER TO ELECT PURCHASE

     If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:

              Section 4.10                       Section 4.15

     If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:

                                $_______________

Date: _______________

             Your Signature:
                            ----------------------------------------------------
                    (Sign exactly as your name appears on the face of this Note)

                              Tax Identification No.:___________________________


Signature Guarantee*:
                      ---------------------------

*    Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                       A-9


                                                                       EXHIBIT A

             SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

     The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:



                                                                         Principal Amount
                    Amount of decrease in      Amount of increase in    at maturity of this
                     in Principal Amount          Principal Amount     Global Note following     Signature of authorized
                       at maturity of             at maturity of           such decrease          officer of Trustee or
 Date of Exchange     this Global Note           this Global Note          (or Increase)                Custodian
 ----------------   ---------------------      ---------------------   ---------------------     -----------------------
                                                                                     




* THIS SCHEDULE SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.

                                      A-10


                                                                       EXHIBIT A

                                      A2-11


                                                                       EXHIBIT B

                         FORM OF CERTIFICATE OF TRANSFER

DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054

The Bank of New York
101 Barclay Street-8 West
New York, New York 10286

     Re:  6 7/8% Senior Subordinated Notes due 2013

     Reference is hereby made to the Indenture, dated as of October 30, 2003
(the "INDENTURE"), among DRS Technologies, Inc., as issuer (the "COMPANY"), the
Guarantors party thereto and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.

     ___________________, (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "TRANSFER"),
to ___________________________ (the "TRANSFEREE"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:

                                                        [CHECK ALL THAT APPLY]

     1. / /  CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly,
the Transferor hereby further certifies that the beneficial interest or
Definitive Note is being transferred to a Person that the Transferor reasonably
believes is purchasing the beneficial interest or Definitive Note for its own
account, or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A, and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Restricted Definitive Note and
in the Indenture and the Securities Act.

     2. / /  CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO
REGULATION S. The Transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor
hereby further certifies that (i) the Transfer is not being made to a Person in
the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration

                                       B-1


of the Restricted Period, the transfer is not being made to a U.S. Person or for
the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note and/or the Restricted Definitive
Note and in the Indenture and the Securities Act.

     3. / /  CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE
PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR
REGULATION S. The Transfer is being effected in compliance with the transfer
restrictions applicable to beneficial interests in Restricted Global Notes and
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):

             (a)   / / such Transfer is being effected pursuant to and in
     accordance with Rule 144 under the Securities Act;

                                       or

             (b)   / / such Transfer is being effected to the Company or a
     subsidiary thereof;

                                       or

             (c)   / / such Transfer is being effected pursuant to an effective
     registration statement under the Securities Act and in compliance with the
     prospectus delivery requirements of the Securities Act;

                                       or

             (d)   / / such Transfer is being effected to an Institutional
     Accredited Investor and pursuant to an exemption from the registration
     requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903
     or Rule 904, and the Transferor hereby further certifies that it has not
     engaged in any general solicitation within the meaning of Regulation D
     under the Securities Act and the Transfer complies with the transfer
     restrictions applicable to beneficial interests in a Restricted Global Note
     or Restricted Definitive Notes and the requirements of the exemption
     claimed, which certification is supported by (1) a certificate executed by
     the Transferee in the form of Exhibit D to the Indenture and (2) if such
     Transfer is in respect of a principal amount of Notes at the time of
     transfer of less than $250,000, an Opinion of Counsel provided by the
     Transferor or the Transferee (a copy of which the Transferor has attached
     to this certification), to the effect that such Transfer is in compliance
     with the Securities Act. Upon consummation of the proposed transfer in
     accordance with the terms of the Indenture, the transferred beneficial
     interest or Definitive Note will be subject to the restrictions on transfer
     enumerated in the Private Placement Legend printed on the IAI Global Note
     and/or the Restricted Definitive Notes and in the Indenture and the
     Securities Act.

     4. / /  CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.

     (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement

                                       B-2


Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no longer
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Definitive Notes
and in the Indenture.

     (b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.

     (c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.

     This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.


                                     ------------
                                                [Insert Name of Transferor]



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

     Dated:
           -----------------------

                                       B-3


                       ANNEX A TO CERTIFICATE OF TRANSFER

     1.   The Transferor owns and proposes to transfer the following:

                            [CHECK ONE OF (a) OR (b)]

                (a) / / a beneficial interest in the:

                    (i)    / /  144A Global Note (CUSIP _________), or

                    (ii)   / /  Regulation S Global Note (CUSIP _________), or

                    (iii)  / /  IAI Global Note (CUSIP _________); or

                (b) / / a Restricted Definitive Note.

     2.   After the Transfer the Transferee will hold:

                                   [CHECK ONE]

                (a) / / a beneficial interest in the:

                    (i)    / /  144A Global Note (CUSIP _________), or

                    (ii)   / /  Regulation S Global Note (CUSIP _________), or

                    (iii)  / / IAI Global Note (CUSIP _________); or

                    (iv)   / /  Unrestricted Global Note (CUSIP _________); or

                (b) / / a Restricted Definitive Note; or

                (c) / / an Unrestricted Definitive Note,

                in accordance with the terms of the Indenture.

                                       B-4


                                                                       EXHIBIT C

                         FORM OF CERTIFICATE OF EXCHANGE

DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054

The Bank of New York
101 Barclay Street-8 West
New York, New York 10286

     Re:  6 7/8% SENIOR SUBORDINATED NOTES DUE 2013

                              (CUSIP ____________)

     Reference is hereby made to the Indenture, dated as of October 30, 2003
(the "INDENTURE"), among DRS Technologies, Inc., as issuer (the "COMPANY"), the
Guarantors party thereto and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.

     __________________________, (the "OWNER") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "EXCHANGE"). In connection with
the Exchange, the Owner hereby certifies that:

     1.   EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE

     (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest in
an Unrestricted Global Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

     (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.

     (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange
of a Restricted Definitive Note for

                                       C-1


a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.

     (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

     2.   EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES

     (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.

     (b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
/ /144A Global Note, / / Regulation S Global Note, / /IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.

     This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

                                          ------------
                                                  [Insert Name of Transferor]


                                              By:
                                                 -------------------------------

                                       C-2


                                                Name:
                                                Title:

Dated:
      --------------------------

                                       C-3


                                                                       EXHIBIT D

                            FORM OF CERTIFICATE FROM
                   ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054

The Bank of New York
101 Barclay Street-8 West
New York, New York 10286

     Re:  6 7/8% SENIOR SUBORDINATED NOTES DUE 2013

     Reference is hereby made to the Indenture, dated as of October 30, 2003
(the "INDENTURE"), among DRS Technologies, Inc., as issuer (the "COMPANY"), the
guarantors party thereto and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.

     In connection with our proposed purchase of $____________ aggregate
principal amount of:

     (a) / /     a beneficial interest in a Global Note, or

     (b) / /     a Definitive Note,

     we confirm that:

     1.   We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "SECURITIES ACT").

     2.   We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any Person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.

                                       D-1


     3.   We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.

     4.   We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.

     5.   We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.

     You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

                                           [Insert Name of Accredited Investor]


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

Dated:
      ----------------------

                                       D-2


                                                                       EXHIBIT E


                          FORM OF NOTATION OF GUARANTEE

     For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of October 30, 2003 (the "INDENTURE") among
DRS Technologies, Inc., (the "COMPANY"), the Guarantors party thereto and The
Bank of New York, as trustee (the "TRUSTEE"), (a) the due and punctual payment
of the principal of, premium and Liquidated Damages, if any, and interest on,
the Notes, whether at maturity, by acceleration, redemption or otherwise, the
due and punctual payment of interest on overdue principal of and interest on the
Notes, if any, if lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; PROVIDED, HOWEVER, that the Indebtedness evidenced by
this Subsidiary Guarantee shall cease to be so subordinated and subject in right
of payment upon any defeasance of this Note in accordance with the provisions of
the Indenture.

     Capitalized terms used but not defined herein have the meanings given to
them in the Indenture.

                                      [Signature Page Follows]

                                       E-1


                                                                       EXHIBIT E


                                      [NAME OF GUARANTOR(S)]

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

                                       E-1


                                                                       EXHIBIT F


                         FORM OF SUPPLEMENTAL INDENTURE
                    TO BE DELIVERED BY SUBSEQUENT GUARANTORS

     SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as of
________________, 200__, among __________________ (the "GUARANTEEING
SUBSIDIARY"), a subsidiary of DRS Technologies, Inc. (or its permitted
successor), a Delaware corporation (the "COMPANY"), the Company, the other
Guarantors (as defined in the Indenture referred to herein) and The Bank of New
York, as trustee under the Indenture referred to below (the "TRUSTEE").

                               W I T N E S S E T H

     WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "INDENTURE"), dated as of October 30, 2003 providing for the
issuance of 6 7/8% Senior Subordinated Notes due 2003 (the "NOTES");

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

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

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

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

     2.   AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to
provide an unconditional Guarantee on the terms and subject to the conditions
set forth in the Subsidiary Guarantee and in the Indenture including but not
limited to Article 10 thereof.

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

     5.   NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

                                       F-1


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

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

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

                                       F-2


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

     Dated:  _______________, 20___

                                      [GUARANTEEING SUBSIDIARY]

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

                                      DRS TECHNOLOGIES, INC.

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

                                      [EXISTING GUARANTORS]

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

                                      THE BANK OF NEW YORK
                                          as Trustee

                                      By:
                                          --------------------------------------
                                          Authorized Signatory

                                       F-3

EX-10.1

                                                                    Exhibit 10.1

================================================================================


                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

                          dated as of November 4, 2003

                                  by and among

                             DRS TECHNOLOGIES, INC.,
                                  as Borrower,

                         the Lenders referred to herein,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                 as Administrative Agent and Sole Book Manager,

                      BEAR STEARNS CORPORATE LENDING INC.,
                              as Syndication Agent,

                                       and

                              FLEET NATIONAL BANK,
                             as Documentation Agent


================================================================================

           WACHOVIA CAPITAL MARKETS, LLC and BEAR, STEARNS & CO. INC.
                              as Co-Lead Arrangers,



                                TABLE OF CONTENTS

                                                                                                         
ARTICLE I  DEFINITIONS.......................................................................................1
SECTION 1.1      DEFINITIONS.................................................................................1
SECTION 1.2      GENERAL....................................................................................16
SECTION 1.3      OTHER DEFINITIONS AND PROVISIONS...........................................................16

ARTICLE II  REVOLVING CREDIT FACILITY.......................................................................16
SECTION 2.1      REVOLVING CREDIT LOANS.....................................................................16
SECTION 2.2      SWINGLINE LOANS............................................................................17
SECTION 2.3      PROCEDURE FOR ADVANCES OF REVOLVING CREDIT AND SWINGLINE LOANS.............................18
SECTION 2.4      REPAYMENT OF LOANS.........................................................................18
SECTION 2.5      NOTES......................................................................................19
SECTION 2.6      PERMANENT REDUCTION OF THE REVOLVING CREDIT COMMITMENT.....................................20
SECTION 2.7      TERMINATION OF REVOLVING CREDIT FACILITY...................................................20

ARTICLE III  LETTER OF CREDIT FACILITY......................................................................20
SECTION 3.1      L/C COMMITMENT.............................................................................20
SECTION 3.2      PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT................................................21
SECTION 3.3      COMMISSIONS AND OTHER CHARGES..............................................................21
SECTION 3.4      L/C PARTICIPATIONS.........................................................................22
SECTION 3.5      REIMBURSEMENT OBLIGATIONS..................................................................22
SECTION 3.6      OBLIGATIONS ABSOLUTE.......................................................................23
SECTION 3.7      EFFECT OF APPLICATION......................................................................23

ARTICLE IV  TERM LOAN FACILITY..............................................................................24
SECTION 4.1      INITIAL TERM LOANS.........................................................................24
SECTION 4.2      PROCEDURE FOR ADVANCES OF TERM LOANS.......................................................24
SECTION 4.3      REPAYMENT OF TERM LOANS....................................................................24
SECTION 4.4      PREPAYMENTS OF TERM LOANS..................................................................25
SECTION 4.5      TERM NOTES.................................................................................28
SECTION 4.6      OPTIONAL INCREASE IN TERM LOAN COMMITMENT..................................................28

ARTICLE V  GENERAL LOAN PROVISIONS..........................................................................29
SECTION 5.1      INTEREST...................................................................................29
SECTION 5.2      NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS...................................31
SECTION 5.3      FEES.......................................................................................31
SECTION 5.4      MANNER OF PAYMENT..........................................................................32
SECTION 5.5      CREDITING OF PAYMENTS AND PROCEEDS.........................................................33
SECTION 5.6      ADJUSTMENTS................................................................................33
SECTION 5.7      NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF CREDIT; ASSUMPTION BY THE
                 ADMINISTRATIVE AGENT.......................................................................33
SECTION 5.10     CHANGED CIRCUMSTANCES......................................................................34
SECTION 5.11     INDEMNITY..................................................................................36
SECTION 5.12     CAPITAL REQUIREMENTS.......................................................................36
SECTION 5.13     TAXES......................................................................................36
SECTION 5.15     SECURITY...................................................................................38
SECTION 5.16     MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.............................................38



                                        i


                                                                                                         
ARTICLE VI  CLOSING; CONDITIONS OF CLOSING AND BORROWING....................................................38
SECTION 6.1      CLOSING....................................................................................38
SECTION 6.2      CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT ON THE CLOSING DATE.................39
SECTION 6.3      CONDITIONS TO ALL EXTENSIONS OF CREDIT.....................................................43

ARTICLE VII  REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................43
SECTION 7.1      REPRESENTATIONS AND WARRANTIES.............................................................43
SECTION 7.2      SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC............................................49

ARTICLE VIII  FINANCIAL INFORMATION AND NOTICES.............................................................49
SECTION 8.1      FINANCIAL STATEMENTS AND PROJECTIONS.......................................................49
SECTION 8.2      OFFICER'S COMPLIANCE CERTIFICATE...........................................................50
SECTION 8.3      ACCOUNTANTS' CERTIFICATE...................................................................50
SECTION 8.4      OTHER REPORTS..............................................................................50
SECTION 8.5      NOTICE OF LITIGATION AND OTHER MATTERS.....................................................50
SECTION 8.6      EXTENSION OF TIME..........................................................................51
SECTION 8.7      ACCURACY OF INFORMATION....................................................................51

ARTICLE IX  AFFIRMATIVE COVENANTS...........................................................................51
SECTION 9.1      PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS....................................51
SECTION 9.2      MAINTENANCE OF PROPERTY....................................................................52
SECTION 9.3      INSURANCE..................................................................................52
SECTION 9.4      ACCOUNTING METHODS AND FINANCIAL RECORDS...................................................52
SECTION 9.5      PAYMENT AND PERFORMANCE OF OBLIGATIONS.....................................................52
SECTION 9.6      COMPLIANCE WITH LAWS AND APPROVALS.........................................................52
SECTION 9.7      ENVIRONMENTAL LAWS.........................................................................52
SECTION 9.8      COMPLIANCE WITH ERISA......................................................................52
SECTION 9.9      COMPLIANCE WITH AGREEMENTS.................................................................53
SECTION 9.10     INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.....................................53
SECTION 9.11     ADDITIONAL SUBSIDIARIES....................................................................53
SECTION 9.12     USE OF PROCEEDS............................................................................55
SECTION 9.13     CONDUCT OF BUSINESS........................................................................55
SECTION 9.14     ACCOUNT DESIGNATION........................................................................55
SECTION 9.15     DEBT RATING................................................................................55

ARTICLE X  FINANCIAL COVENANTS..............................................................................56
SECTION 10.1     MAXIMUM TOTAL LEVERAGE RATIO...............................................................56
SECTION 10.2     MAXIMUM SENIOR LEVERAGE RATIO..............................................................56
SECTION 10.3     MINIMUM FIXED CHARGE COVERAGE RATIO........................................................56

ARTICLE XI  NEGATIVE COVENANTS..............................................................................56
SECTION 11.1     LIMITATIONS ON DEBT........................................................................56
SECTION 11.2     LIMITATIONS ON LIENS.......................................................................57
SECTION 11.3     LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND ACQUISITIONS...............................58
SECTION 11.4     LIMITATIONS ON MERGERS AND LIQUIDATION.....................................................60
SECTION 11.5     LIMITATIONS ON SALE OF ASSETS..............................................................61
SECTION 11.6     LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS.................................................61
SECTION 11.7     LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL STOCK......................................62
SECTION 11.8     TRANSACTIONS WITH AFFILIATES...............................................................62
SECTION 11.9     CERTAIN ACCOUNTING CHANGES; ORGANIZATIONAL DOCUMENTS.......................................62
SECTION 11.10    AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED DEBT..................................62
SECTION 11.11    AMENDMENTS, CONSENTS AND WAIVERS UNDER THE IDT MERGER DOCUMENTS............................63
SECTION 11.12    RESTRICTIVE AGREEMENTS.....................................................................63



                                       ii


                                                                                                         
SECTION 11.13    NATURE OF BUSINESS.........................................................................63
SECTION 11.14    LIMITATION ON BONDING OBLIGATIONS..........................................................63
SECTION 11.15    IMPAIRMENT OF SECURITY INTERESTS...........................................................63

ARTICLE XII  DEFAULT AND REMEDIES...........................................................................63
SECTION 12.1     EVENTS OF DEFAULT..........................................................................63
SECTION 12.2     REMEDIES...................................................................................65
SECTION 12.3     RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC............................................66

ARTICLE XIII  THE ADMINISTRATIVE AGENT......................................................................67
SECTION 13.1     APPOINTMENT................................................................................67
SECTION 13.2     DELEGATION OF DUTIES.......................................................................67
SECTION 13.3     EXCULPATORY PROVISIONS.....................................................................67
SECTION 13.4     RELIANCE BY THE ADMINISTRATIVE AGENT.......................................................68
SECTION 13.5     NOTICE OF DEFAULT..........................................................................68
SECTION 13.6     NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS.................................68
SECTION 13.7     INDEMNIFICATION............................................................................68
SECTION 13.8     THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY........................................69
SECTION 13.9     RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR ADMINISTRATIVE AGENT....................69
SECTION 13.10    TRUSTEE POWERS.............................................................................69
SECTION 13.11    DOCUMENTATION AGENT AND SYNDICATION AGENT..................................................70

ARTICLE XIV  MISCELLANEOUS..................................................................................70
SECTION 14.1     NOTICES....................................................................................70
SECTION 14.2     EXPENSES; INDEMNITY........................................................................70
SECTION 14.3     SET OFF....................................................................................71
SECTION 14.4     GOVERNING LAW..............................................................................71
SECTION 14.5     JURISDICTION AND VENUE.....................................................................72
SECTION 14.6     WAIVER OF JURY TRIAL.......................................................................72
SECTION 14.7     REVERSAL OF PAYMENTS.......................................................................72
SECTION 14.8     INJUNCTIVE RELIEF; PUNITIVE DAMAGES........................................................72
SECTION 14.9     ACCOUNTING MATTERS.........................................................................73
SECTION 14.10    SUCCESSORS AND ASSIGNS; PARTICIPATIONS.....................................................73
SECTION 14.11    AMENDMENTS, WAIVERS AND CONSENTS...........................................................76
SECTION 14.12    PERFORMANCE OF DUTIES......................................................................76
SECTION 14.13    ALL POWERS COUPLED WITH INTEREST...........................................................77
SECTION 14.14    SURVIVAL OF INDEMNITIES....................................................................77
SECTION 14.15    TITLES AND CAPTIONS........................................................................77
SECTION 14.16    SEVERABILITY OF PROVISIONS.................................................................77
SECTION 14.17    COUNTERPARTS...............................................................................77
SECTION 14.18    TERM OF AGREEMENT..........................................................................78
SECTION 14.19    ADVICE OF COUNSEL..........................................................................78
SECTION 14.20    NO STRICT CONSTRUCTION.....................................................................78
SECTION 14.21    INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT EFFECT OF COVENANTS......................78



                                       iii


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 Reaffirmation Agreement
Exhibit K           -    Form of Pledge Agreement


SCHEDULES

Schedule 1          -    Joinder Documents
Schedule 2          -    Unrestricted Subsidiaries
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(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
Schedule 11.8       -    Transactions with Affiliates

                                       iv


                                                                  EXECUTION COPY


     SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 4th day of
November, 2003, 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, WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as
Administrative Agent for the Lenders, BEAR STEARNS CORPORATE LENDING INC., as
Syndication Agent and FLEET NATIONAL BANK, as Documentation Agent.

                              STATEMENT OF PURPOSE

     Pursuant to the Credit Agreement, dated as of September 28, 2001, as
amended and restated as of November 26, 2002 (the "EXISTING CREDIT AGREEMENT"),
among the Borrower and the lenders party thereto, such existing lenders (the
"EXISTING LENDERS") extended certain credit facilities to the Borrower.

     The Borrower has requested, and, subject to the terms and conditions
hereof, the Administrative Agent, the Syndication Agent, the Documentation Agent
and the Lenders have agreed, to amend and restate the Existing Credit Agreement
as set forth herein.

     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:

     "ADDITIONAL TERM LOAN" has the meaning assigned thereto in Section 4.6.

     "ADDITIONAL TERM LOAN AGREEMENT" has the meaning assigned thereto in
Section 4.6(c).

     "ADDITIONAL TERM LOAN EFFECTIVE DATE" means the date, which shall be a
Business Day, on or before the Term Loan Maturity Date, but no earlier than
thirty (30) days after any Increase Notification Date, on which each of the
Increase Lenders make Additional Term Loans to the Borrower pursuant to Section
4.6.

     "ADMINISTRATIVE AGENT" means Wachovia 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 Four Hundred Eleven Million
Dollars ($411,000,000).

     "AGREEMENT" means this Credit Agreement, as amended, restated, supplemented
or otherwise modified



from time to time.

     "ALL-IN-YIELD" has the meaning assigned thereto in Section 4.6(g).

     "ALTERNATIVE CURRENCY" means (i) the euro, (ii) the Pounds Sterling, (iii)
the Canadian Dollar, (iv) the Japanese Yen, (v) the Thai Baht, (vi) the New
Taiwanese Dollar, (vii) the Australian Dollar and (viii) with the prior written
consent of the Administrative Agent and the Issuing Lender, such consents not to
be unreasonably withheld or delayed, any other lawful currency (other than
Dollars); PROVIDED that in each case of (i) through (vii) above, such currency
is freely transferable and convertible into Dollars in the United States
currency market and freely available to the Issuing Lender in the London
interbank deposit market.

     "ALTERNATIVE CURRENCY AMOUNT" means, with respect to each Alternative
Currency Letter of Credit, the amount of the Alternative Currency in which such
Alternative Currency Letter of Credit is denominated which is equivalent to the
principal amount in Dollars of such Alternative Currency Letter of Credit at the
most favorable spot exchange rate determined by the Issuing Lender to be
available to it at approximately 11:00 a.m. (Charlotte time) two (2) Business
Days before such Alternative Currency Letter of Credit is issued or extended (or
to be issued or extended). When used with respect to any sum expressed in
Dollars, "Alternative Currency Amount" shall mean the amount of the applicable
Alternative Currency into which Dollars are to be exchanged which is equivalent
to the amount so expressed in Dollars at the most favorable spot exchange rate
determined by the Issuing Lender to be available to it at the relevant time.

     "ALTERNATIVE CURRENCY L/C COMMITMENT" means the lesser of (a) Thirty Seven
Million Five Hundred Thousand Dollars ($37,500,000) and (b) the L/C Commitment.

     "ALTERNATIVE CURRENCY 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 Alternative Currency Letters of Credit and (b) the aggregate amount
of drawings under Alternative Currency Letters of Credit which have not then
been reimbursed pursuant to Section 3.5.

     "ALTERNATIVE CURRENCY LETTER OF CREDIT" means any Letter of Credit
denominated in an Alternative Currency and all such Alternative Currency Letters
of Credit collectively as the context requires.

     "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" has 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.

     "ASSET SALE PROCEEDS" has the meaning assigned thereto in Section
4.4(b)(iii).

     "ASSIGNMENT AND ACCEPTANCE" has the meaning assigned thereto in Section
14.10.

     "AUSTRALIAN DOLLAR" means, at any time of determination, the then official
currency of Australia.

     "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.

                                        2


     "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" has 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 the Borrower or any Restricted Subsidiary
thereof to secure the performance of such contractual or other obligations or to
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.

     "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 domestic or international commercial banking business, as applicable, 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. Notwithstanding
the foregoing, with respect to any amount denominated or to be denominated in
the euro, any reference to a "Business Day" shall be construed as a reference to
a day (other than a Saturday or Sunday) on which banks are generally open for
business in New York, New York and prime banks in London generally provide
quotations for deposits denominated in the euro.

     "CALCULATION DATE" has the meaning assigned thereto in Section 5.1(c).

     "CANADIAN DOLLAR" OR "C$" means, at any time of determination, the then
official currency of Canada.

     "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" has the meaning assigned thereto in Section 11.3(b).

     "CHANGE IN CONTROL" has 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" means the collateral security for the Obligations pledged or
granted pursuant to the Security Documents.

                                        3


     "COLLATERAL AGREEMENT" means the collateral agreement dated as of September
28, 2001, entered into 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 prior to the date hereof,
by the Existing Joinder Documents or otherwise, as reaffirmed pursuant to the
Reaffirmation Agreement and as otherwise amended, restated, supplemented or
otherwise modified from time to time hereafter.

     "COMMITMENT" means, as to any Lender, the sum of such Lender's Revolving
Credit Commitment and applicable Term Loan Commitment as set forth in the
Register, 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, the Swingline 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.

     "DESIGNATED ACQUISITION" has the meaning assigned thereto in Section
4.4(b)(i)(B).

     "DISPUTES" has the meaning assigned thereto in Section 14.5(b).

     "DOLLAR AMOUNT" means (a) with respect to each Letter of Credit issued or
extended (or to be issued or extended), in Dollars, the principal amount thereof
and (b) with respect to each Alternative Currency Letter of Credit, the amount
of Dollars which is equivalent to the face amount of such Letter of Credit, at
the most favorable spot exchange rate determined by the Issuing Lender at
approximately 11:00 a.m. (the time of the Issuing Lender's Correspondent) two
(2) Business Days before such Letter of Credit is issued or extended (or to be
issued or extended). When used with respect to any sum expressed in an
Alternative Currency, "Dollar Amount" shall mean the amount of Dollars which is
equivalent to the amount so expressed in such Alternative Currency at the most
favorable spot exchange rate determined by the Issuing Lender to be available to
it at the relevant time.

     "DOLLARS" OR "$" means, unless otherwise qualified, the lawful currency of
the United States.

     "DOMESTIC SUBSIDIARY" means any direct or indirect subsidiary of the
Borrower organized under the laws of

                                        4


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, including, without limitation, any charges resulting from the
acceleration of deferred financing expenses relating to the Existing Credit
Agreement, (v) extraordinary losses and (vi) non-cash minority interest
deductions, LESS (c) interest income and any extraordinary gains, PLUS (d) Pro
Forma EBITDA, PLUS (e) non-recurring charges to the extent that such
non-recurring charges are reasonably satisfactory to the Administrative Agent
and such non-recurring charges do not exceed 5.0% of Consolidated EBITDA
(including Pro Forma EBITDA) for the period for which such charges are to be
added back; PROVIDED that following the closing of the IDT Merger, as of the
fiscal quarters ending on each of the dates set forth below, EBITDA for the four
consecutive fiscal quarter period ending on such date shall be increased to
reflect historical adjusted EBITDA attributable to IDT by the amount set forth
below corresponding to such fiscal quarter end:



                DATE                                AMOUNT
                                             
          December 31, 2003                     $  49,494,000
           March 31, 2004                       $  35,637,000
            June 30, 2004                       $  20,364,000
         September 30, 2004                     $   5,091,000


     "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.

     "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.

     "EMU" means economic and monetary union as contemplated in the Treaty on
European Union.

     "EMU LEGISLATION" means legislative measures of the Council of European
Union for the introduction of, change over to or operation of the euro.

     "EURO" means the single currency to which the Participating Member States
of the European Union have converted.

     "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,

                                        5


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.

     "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, MINUS (b) income and franchise taxes (paid or payable in
cash) and 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)(v))
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)), MINUS
(f) cash payments made in respect of Permitted Acquisitions and PLUS or MINUS
(as applicable) (g) changes in working capital.

     "EXCESS PROCEEDS" has the meaning assigned thereto in Section 4.4(b)(vi).

     "EXISTING CREDIT AGREEMENT" has the meaning assigned thereto in the
Statement of Purpose of this Agreement.

     "EXISTING LENDERS" has the meaning assigned thereto in the Statement of
Purpose of this Agreement.

     "EXISTING JOINDER DOCUMENTS" means each agreement and instrument listed on
SCHEDULE 1 hereto.

     "EXISTING LETTERS OF CREDIT" means those letters of credit issued by
Wachovia 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, and (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

                                        6


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" means a daily rate which
is determined, 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.

     "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 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.

     "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 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.

                                        7


     "HOLD PERIOD" has the meaning assigned thereto in Section 4.4(b)(i)(B).

     "IDT" means Integrated Defense Technologies, Inc., a Delaware corporation.

     "IDT MERGER" means the merger of MMC3 Corporation with and into IDT and the
other transactions contemplated by the IDT Merger Agreement and the other IDT
Merger Documents.

     "IDT MERGER AGREEMENT" means the Agreement and Plan of Merger (together
with the disclosure letter and all exhibits and schedules thereto), dated as of
August 15, 2003, among the Borrower, MMC3 Corporation (a Wholly-Owned Subsidiary
of the Borrower) and IDT, as amended, modified or supplemented from time to
time, subject to the terms and conditions set forth in this Agreement.

     "IDT MERGER DOCUMENTS" means the IDT Merger Agreement and each other
material document, instrument, certificate and agreement executed or delivered
by the Borrower or any Subsidiary thereof in connection with the IDT Merger
Agreement or otherwise referred to therein or contemplated thereby (other than
the Loan Documents and the Senior Subordinated Loan Documents), all as amended,
restated, supplemented or otherwise modified subject to the terms and conditions
set forth in this Agreement.

     "INCREASE LENDERS" has the meaning assigned thereto in Section 4.6(b).

     "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.

     "INITIAL TERM LOANS" means the term loans to be made to the Borrower by the
Lenders pursuant to Section 4.1 and shall not include any of the Additional Term
Loans made to the Borrower pursuant to Section 4.6.

     "INSURANCE AND CONDEMNATION PROCEEDS" has 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" has 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 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.

     "ISP98" means the International Standby Practices (1998 Revision, effective
January 1, 1999), International Chamber of Commerce Publication No. 590.

     "ISSUING LENDER" means with respect to Letters of Credit issued hereunder
or under the Existing Credit Agreement, Wachovia, in its capacity as issuer
thereof, or any successor thereto.

     "ISSUING LENDER'S CORRESPONDENT" means, Wachovia Bank, National
Association, London Branch or any other financial institution designated by the
Issuing Lender to act as its correspondent hereunder with respect to the
issuance and payment of Alternative Currency Letters of Credit.

     "JAPANESE YEN" means, at any time of determination, the then official
currency of Japan.

                                        8


     "JOINDER AGREEMENT" means collectively, each joinder agreement executed in
favor of the Administrative Agent for the ratable benefit of itself and the
Lenders, in form and substance satisfactory to the Administrative Agent.

     "L/C COMMITMENT" means the lesser of (a) Seventy-Five Million Dollars
($75,000,000) 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
applicable 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 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

                                        9


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 prior to the consummation of the IDT Merger, IDT or
any of its Subsidiaries), 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 any 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.

     "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 by (or reasonably anticipated to be payable to) 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, and
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" has the meaning assigned thereto in Section 4.6(b).

     "NEW TAIWANESE DOLLAR" means, at any time of determination, the then
official currency of Taiwan.

     "NOTES" means the collective reference to the Revolving Credit Notes, the
Term Notes and the Swingline Note, and "Note" means any of such Notes.

     "NOTICE OF ACCOUNT DESIGNATION" has the meaning assigned thereto in Section
2.3(b).

     "NOTICE OF BORROWING" has the meaning assigned thereto in Section 2.3(a).

     "NOTICE OF CONVERSION/CONTINUATION" has the meaning assigned thereto in
Section 5.2.

     "NOTICE OF PREPAYMENT" has 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

                                       10


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 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" has the meaning assigned thereto in
Section 8.2.

     "OTHER TAXES" has the meaning assigned thereto in Section 5.13(b).

     "PARTICIPATING MEMBER STATE" means each state so described in any EMU
Legislation.

     "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 CURRENCY" means Dollars or any Alternative Currency, or each
such currency, as the context requires.

     "PERMITTED ESCROW DEPOSIT" means, with respect to any Permitted
Subordinated Debt, the deposit into escrow with the applicable trustee of the
proceeds of such Permitted Subordinated Debt for a period not to exceed the Hold
Period and upon other terms and conditions reasonably acceptable to the
Administrative Agent.

     "PERMITTED ESCROW REDEMPTION" means any release of a Permitted Escrow
Deposit to the holders of such Permitted Subordinated Debt on or prior to the
expiration of the Hold Period solely for the purpose of redeeming in full such
Permitted Subordinated Debt to the extent required as a result of the failure of
the applicable Designated Acquisition to close on or prior to such date.

     "PERMITTED LIEN" means any Lien permitted pursuant to Section 11.2 hereof.

     "PERMITTED SUBORDINATED DEBT" means Subordinated Debt which is permitted
pursuant to Section 11.1(j) hereof.

                                       11


     "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.

     "PLEDGE AGREEMENT" means the collective reference to the pledge agreements
entered into 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 K hereto, as amended, restated,
supplemented or otherwise modified prior to the date hereof, by the Existing
Joinder Documents or otherwise, as reaffirmed pursuant to the Reaffirmation
Agreement and as otherwise amended, restated, supplemented or otherwise modified
from time to time hereafter.

     "POUNDS STERLING" means, at any time of determination, the then official
currency of the United Kingdom of Great Britain and Northern Ireland.

     "PRIME RATE" means, at any time, the rate of interest per annum publicly
announced from time to time by Wachovia 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 Wachovia 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" has the meaning assigned thereto in Section 14.10.

     "REAFFIRMATION AGREEMENT" means the Reaffirmation Agreement, of even date
herewith, among the Borrower, its Domestic Subsidiaries that are Restricted
Subsidiaries and the Administrative Agent (for the ratable benefit of itself and
the Lenders), substantially in the form of EXHIBIT J, as amended, restated,
supplemented or otherwise modified from time to time.

     "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
more than fifty percent (50%) of (a) the Revolving Credit Commitment (or, if the
Revolving Credit Facility has been terminated, any combination of Lenders
holding more than fifty percent (50%) 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 for the account of the Borrower
hereunder in an aggregate principal amount at any time outstanding not to exceed
the amount set forth in the Register, as such Revolving Credit Commitment 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 $175,000,000.

                                       12


     "REVOLVING CREDIT COMMITMENT PERCENTAGE" means, as to any Lender at any
time, the 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 MATURITY DATE" means the earliest of the dates referred
to in Section 2.7.

     "REVOLVING CREDIT NOTES" means the collective reference to the revolving
credit promissory 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 Loans, and any amendments, supplements and modifications
thereto, any substitutions therefor, and any replacements, restatements,
renewals or extensions thereof, in whole or in part; "REVOLVING CREDIT NOTE"
means any of such Revolving Credit Notes.

     "SECURITY DOCUMENTS" means the collective reference to the Subsidiary
Guaranty Agreement, the Collateral Agreement, the Pledge Agreement, the
Reaffirmation 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 prior to
the date hereof, by the Existing Joinder Documents or otherwise, as reaffirmed
pursuant by the Reaffirmation Agreement and as otherwise amended, restated,
supplemented or otherwise modified from time to time hereafter.

     "SENIOR DEBT" means, with respect to the Borrower and its Restricted
Subsidiaries on any date, all Debt of such Persons as of such date MINUS
Subordinated Debt of such Persons as of such date.

     "SENIOR LEVERAGE RATIO" means, as of any date, the ratio of (a) the sum of
(i) Senior Debt outstanding as of such date LESS (ii) the sum of (A) the
outstanding amount of all Performance Based Letters of Credit and (B) so long as
there are no outstanding Revolving Credit Loans, an amount (not to exceed
$100,000,000) equal to the amount of cash and Cash Equivalents of the Borrower
and its Subsidiaries immediately available to repay their obligations, 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.

     "SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture in the form
provided to the Administrative Agent and the Lenders as of the Closing Date,
including such indenture as subsequently qualified under the Trust Indenture Act
of 1939, as amended, pursuant to which notes registered under the Securities Act
of 1933, as amended, will be issued in exchange for the notes issued on or about
the Closing Date, as each may be amended, restated, supplemented or otherwise
modified subject to the terms and conditions set forth in this Agreement.

     "SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated Note
Indenture and all exhibits and schedules thereto, all as amended, restated or
otherwise modified subject to the terms and conditions set forth in this
Agreement.

     "SENIOR SUBORDINATED NOTE ISSUANCE" has the meaning set forth in Section
6.2(g).

     "SENIOR SUBORDINATED NOTES" means the collective reference to the senior
subordinated notes of the Borrower issued pursuant to the Senior Subordinated
Note Indenture in the initial aggregate principal amount of $350,000,000.

     "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

                                       13


liabilities as they mature.

     "SUBORDINATED DEBT" means the collective reference to (a) Permitted
Subordinated Debt, and (b) any other 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 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 and any other Person which, after the Closing
Date, becomes a party to the Subsidiary Guaranty Agreement by executing and
delivering a Joinder Agreement.

     "SUBSIDIARY GUARANTY AGREEMENT" means the unconditional guaranty dated as
of September 28, 2001 entered into 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 prior to the date hereof, by the Existing Joinder Documents
or otherwise, as reaffirmed by the Reaffirmation Agreement and as otherwise
amended, restated, supplemented or otherwise modified from time to time
hereafter.

     "SWINGLINE COMMITMENT" means the lesser of (a) Twenty Million Dollars
($20,000,000) and (b) the Revolving Credit Commitment.

     "SWINGLINE FACILITY" means the swingline facility established pursuant to
Section 2.2.

     "SWINGLINE LENDER" means Wachovia 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 promissory 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 substitutions 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 Wachovia as Administrative Agent in accordance with Section 13.9
and (b) the Revolving Credit Maturity Date.

     "TAXES" has the meaning assigned thereto in Section 5.13(a).

     "TERM LOAN COMMITMENT" means (a) as to any Lender, the obligation of such
Lender to make Initial Term Loans and/or Additional Term Loans, as applicable,
for the account of the Borrower hereunder in an aggregate principal amount not
to exceed the amount set forth in the Register, as such applicable Term Loan
Commitment 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 all such Term Loans. The Term Loan Commitment of all Lenders
on the Closing Date will be $236,000,000.

                                       14


     "TERM LOAN FACILITY" means the term loan facility established pursuant to
Article IV.

     "TERM LOAN MATURITY DATE" means the first to occur of (a) November 4, 2010,
(b) the date of termination pursuant to Section 12.2(a), or (c) the date of
repayment in full of the outstanding Term Loans pursuant to Section 4.4.

     "TERM LOAN PERCENTAGE" means, as to any Lender, as applicable, after the
applicable Term Loans are made, the ratio of (a) the outstanding principal
balance of such Term Loan or Term Loans of such Lender to (b) the aggregate
outstanding principal balance of all such Term Loans of all Lenders.

     "TERM LOANS" means the Initial Term Loans 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 promissory 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
substitutions 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.

     "THAI BAHT" means, at any time of determination, the then official currency
of Thailand.

     "TOTAL LEVERAGE RATIO" means, as of any date, the ratio of (a) the sum of
(i) Debt outstanding as of such date LESS (ii) the sum of (A) the outstanding
amount of all Performance Based Letters of Credit and (B) so long as there are
no outstanding Revolving Credit Loans, an amount (not to exceed $100,000,000)
equal to the amount of cash and Cash Equivalents of the Borrower and its
Subsidiaries immediately available to repay their obligations, 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.

     "TRANSACTION DOCUMENTS" means the collective reference to the Loan
Documents, the Senior Subordinated Note Documents and the IDT Merger Documents.

     "TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as
amended by the Single European Act of 1986 and the Maastricht Treaty (signed
February 7, 1992), as amended from time to time.

     "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

                                       15


modified from time to time.

     "UNITED STATES" means the United States of America.

     "WACHOVIA" means Wachovia Bank, National Association, a national banking
association, and its successors.

     "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.

     SECTION 1.4         EFFECTIVENESS OF EURO PROVISIONS. With respect to any
state (or the currency of such state) that is not a Participating Member State
on the date of this Agreement, the provisions of Sections 5.8(a), 5.8(b) and
5.14 shall become effective in relation to such state (and the currency of such
state) at and from the date on which such state becomes a Participating Member
State.

     SECTION 1.5         CURRENCY EQUIVALENTS.

     (a)    For purposes of Articles II, III and IV, the applicable outstanding
amount of Letters of Credit and L/C Obligations (including, without limitation,
all Alternative Currency Letters of Credit and Alternative Currency L/C
Obligations) shall be deemed to refer to the Dollar Amount thereof.

     (b)    All Loans made under this Agreement, including, without limitation,
Loans made to refund drawings made under Alternative Currency Letters of Credit,
shall be made only in Dollars.

                                   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 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) the principal amount of outstanding Revolving Credit Loans
from any Lender to the Borrower shall not at

                                       16


any time exceed such Lender's Revolving Credit Commitment LESS such Lender's
Revolving Credit Commitment Percentage of outstanding Swingline Loans LESS such
Lender's Revolving Credit Commitment Percentage of all outstanding L/C
Obligations. 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, the aggregate
principal amount of all Swingline Loans then outstanding would exceed the lesser
of (i) the Swingline Commitment or (ii) the Revolving Credit Commitment less the
sum of all outstanding Revolving Credit Loans and L/C Obligations.

     (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 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 Base Rate 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 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);
     PROVIDED that with respect to any Swingline Loan, no Lender shall be
     required to fund more than its Revolving Credit Commitment Percentage of
     such Swingline Loan.

            (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 VI at the time of refunding. 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

                                       17


     Section 12.1(j) or (k) shall have occurred, each Lender will (subject to
     the proviso to the initial sentence of Section 2.1 hereof), on the date the
     applicable Revolving Credit Loans 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 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 $5,000,000 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 Revolving Credit 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) and otherwise in full on the Revolving Credit Maturity Date,
together, in each

                                       18


case, with all accrued but unpaid interest and fees.

     (b)    MANDATORY REPAYMENT OF REVOLVING CREDIT LOANS.

            (i)     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 Revolving Credit Commitment, 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 Amount of such Letters of
     Credit (such cash collateral to be applied in accordance with Section
     12.2(b)).

            (ii)    If at any time (as determined by the Administrative Agent
     pursuant to this Section 2.4(b)(ii)) and for any reason, based upon the
     Dollar Amount of all outstanding Loans and L/C Obligations, (a) the
     outstanding amount of all L/C Obligations exceeds the lesser of (i) the
     Aggregate Commitment LESS the sum of the amount of all outstanding Loans
     and (ii) the L/C Commitment or (b) the outstanding amount of all
     Alternative Currency L/C Obligations exceeds the Alternative Currency L/C
     Commitment, then, in each such case, the Borrower shall, at its option,
     either (A) repay Loans in an amount equal to such excess (to the extent
     such repayment will eliminate such excess) or (B) make 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 such excess
     (such cash collateral to be applied in accordance with Section 12.2(b)).
     The Borrower's compliance with this Section 2.4(b)(ii) shall be tested from
     time to time by the Administrative Agent at its sole discretion, but in any
     event shall be tested on the date on which the Borrower requests the
     Issuing Lender to issue a Letter of Credit under Section 3.2. Each such
     repayment pursuant to this Section 2.4(b)(ii) shall be accompanied by any
     amount required to be paid pursuant to Section 5.11 hereof.

     (c)    OPTIONAL REPAYMENTS. The Borrower may at any time and from time to
time repay the Revolving Credit Loans and Swingline 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's 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), $5,000,000 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 5.11 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 5.11 hereof.

     (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 may, at the election of such
Lender, be evidenced by a separate Revolving Credit Note executed by the
Borrower payable to the order of such Lender.

                                       19


     (b)    SWINGLINE NOTES. The Swingline Loans and the obligation of the
Borrower to repay such Swingline Loans may, at the election of the Swingline
Lender, 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 $5,000,000 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 any required prepayment under Section
4.4(b)(vi) by an amount equal to the amount of such Excess Proceeds as referred
to in such Section 4.4(b)(vi), to the extent a corresponding prepayment was made
pursuant to Section 4.4(b)(vi).

     (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 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 any
reduction of the Revolving Credit Commitment requires the repayment of any LIBOR
Rate Loan, such repayment shall be accompanied by any amount required to be paid
pursuant to Section 5.11 hereof.

     SECTION 2.7         TERMINATION OF REVOLVING CREDIT FACILITY. The Revolving
Credit Facility shall terminate on the earliest of (a) November 4, 2008, (b) the
date of termination by the Borrower pursuant to Section 2.6, or (c) the date of
termination 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 or commercial Letters of
Credit for the account of the Borrower on any Business Day from the Closing Date
through but not including the fifth (5th) Business Day prior to 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, (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 Revolving Credit Commitment or (c) the Alternative Currency L/C
Obligations would exceed the Alternative Currency L/C Commitment. Each Letter of
Credit (other than the Existing Letters of Credit) shall (i) be denominated in a
Permitted Currency (ii) be in a minimum Dollar amount of $100,000 or in a Dollar
amount less than $100,000 if approved in writing by the Administrative Agent in
its sole discretion (or the Alternative Currency

                                       20


Amount thereof with respect to Alternative Currency Letters of Credit), (iii) 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 or a commercial letter of credit issued to purchase
goods in the ordinary course of business, (iv) expire on a date satisfactory to
the Issuing Lender, which date shall be no later than the earlier of (A) two (2)
years after the date of issuance of such Letter of Credit or (B) five (5)
Business Days prior to the Revolving Credit Maturity Date and (v) 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. As of the Closing Date, each of the
Existing Letters of Credit shall constitute, for all purposes of this Agreement
and the other Loan Documents, a Letter of Credit issued and outstanding
hereunder. 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 (which information shall include the Permitted
Currency in which the Letter of Credit shall be denominated). 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 VI 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 (a) three (3) Business Days, with
respect to a Letter of Credit denominated in Dollars, and (b) four (4) Business
Days, with respect to an Alternative Currency Letter of Credit, after its
receipt of the Application therefor and all such other certificates, documents
and other papers and information relating thereto) by issuing the original of
such Letter of Credit to the beneficiary thereof or as otherwise may be agreed
by the Issuing Lender and the Borrower. The Issuing Lender shall 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 (reflected as the Dollar Amount thereof as determined by
the Administrative Agent) 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 (reflected as the
Dollar Amount thereof as determined by the Administrative Agent) multiplied by
0.125% per annum. 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.

     (d)    The commissions, fees, charges, costs and expenses payable pursuant
to this Section 3.3 shall be payable in Dollars.

                                       21


     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 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 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 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 Amount 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; PROVIDED that with respect to any draft
under any Letter of Credit, no Lender shall be required to fund more than its
Revolving Credit Commitment Percentage of such draft or more than any amount
which would cause the sum of aggregate outstanding principal amount of all
Revolving Credit Loans made by such Lender PLUS such Lender's Revolving Credit
Commitment Percentage of all outstanding Swingline Loans PLUS such Lender's
Revolving Credit Commitment Percentage of all outstanding L/C Obligations to
exceed such Lender's Revolving Credit Commitment.

     (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) and subject to the second
parenthetical of the first sentence of this subsection (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.

     (d)    All payments made by any L/C Participant under this Section 3.4
shall be made in Dollars (based upon the Dollar Amount of the applicable
payment); PROVIDED that the Borrower shall be liable for any currency exchange
loss pursuant to the terms of Section 5.10(d).

     SECTION 3.5         REIMBURSEMENT OBLIGATIONS.

     (a)    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, in
Dollars, the Issuing

                                       22


Lender on each date on which the Issuing Lender notifies the Borrower of the
date and Dollar Amount of a draft paid under any Letter of Credit for the Dollar
Amount of (i) such draft so paid and (ii) any amounts referred to in Section
3.3(c) incurred by the Issuing Lender in connection with such payment
(including, without limitation, any and all costs, fees and other expenses
incurred by the Issuing Lender in effecting the payment of any Alternative
Currency Letter of Credit).

     (b)    REIMBURSEMENT OBLIGATION OF THE LENDERS. 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 Loan, in either case funded in Dollars
on such date and bearing interest at the Base Rate plus the Applicable Margin,
in the Dollar Amount of (i) such draft so paid and (ii) any amounts referred to
in Section 3.3(c) incurred by the Issuing Lender in connection with such payment
(including, without limitation, any and all costs, fees and other expenses
incurred by the Issuing Lender in effecting the payment of any Alternative
Currency Letter of Credit), 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, the Swingline Lender
shall make a Swingline Loan, in either case, funded in Dollars and bearing
interest at the Base Rate plus the Applicable Margin, 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 (or as the
case may be, the Swingline 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 VI at the time of funding. 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.

                                       23


                                   ARTICLE IV

                               TERM LOAN FACILITY

     SECTION 4.1         INITIAL TERM LOANS. Subject to the terms and conditions
of this Agreement, each Lender with a Term Loan Commitment severally agrees to
make an Initial Term Loan to the Borrower on the Closing Date. The Initial 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 Initial
Term Loans made on the Closing Date, which aggregate principal amount shall
equal the total Term Loan Commitment as of the Closing Date. Notwithstanding the
foregoing, if the total Term Loan Commitment as of the Closing Date is not drawn
on the Closing Date, the undrawn amount shall automatically be cancelled.

     SECTION 4.2         PROCEDURE FOR ADVANCES OF TERM LOANS. 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 each Lender with
a Term Loan Commitment make the Initial Term Loans as Base Rate Loans on such
date (PROVIDED that the Borrower may request, no later than three (3) Business
Days prior to the Closing Date, that the Lenders make the Initial Term Loans as
LIBOR Rate Loans if the Borrower has delivered to the Administrative Agent a
letter in form and substance satisfactory to the Administrative Agent
indemnifying the Lenders in the manner set forth in Section 5.11 of this
Agreement). The Administrative Agent shall promptly notify the Lenders of such
Notice of Borrowing by telecopier (or by telephone promptly confirmed by
telecopier). Not later than 2:00 p.m. (Charlotte time) on the Closing Date, each
such 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 Initial 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 Initial 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 LOANS.

     (a)    INITIAL TERM LOANS. The Borrower shall repay the aggregate
outstanding principal amount of the Initial Term Loans in consecutive quarterly
installments on the last Business Day of each of December, March, June and
September commencing December 31, 2003 as set forth below, except as the amounts
of individual installments may be adjusted pursuant to Section 4.4 hereof:

                                       24




                                                                      PRINCIPAL                    TERM LOAN
                                                                     INSTALLMENT                  COMMITMENT
             YEAR                      PAYMENT DATE                      ($)                          ($)
- ----------------------------------------------------------------------------------------------------------------------
                                                                                        
                                December 31, 2003                    $    590,000                $ 235,410,000
              1                 March 31, 2004                       $    590,000                $ 234,820,000
                                June 30, 2004                        $    590,000                $ 234,230,000
                                September 30, 2004                   $    590,000                $ 233,640,000
                                December 31, 2004                    $    590,000                $ 233,050,000
              2                 March 31, 2005                       $    590,000                $ 232,460,000
                                June 30, 2005                        $    590,000                $ 231,870,000
                                September 30, 2005                   $    590,000                $ 231,280,000
                                December 31, 2005                    $    590,000                $ 230,690,000
              3                 March 31, 2006                       $    590,000                $ 230,100,000
                                June 30, 2006                        $    590,000                $ 229,510,000
                                September 30, 2006                   $    590,000                $ 228,920,000
                                December 31, 2006                    $    590,000                $ 228,330,000
              4                 March 31, 2007                       $    590,000                $ 227,740,000
                                June 30, 2007                        $    590,000                $ 227,150,000
                                September 30, 2007                   $    590,000                $ 226,560,000
                                December 31, 2007                    $    590,000                $ 225,970,000
              5                 March 31, 2008                       $    590,000                $ 225,380,000
                                June 30, 2008                        $    590,000                $ 224,790,000
                                September 30, 2008                   $    590,000                $ 224,200,000
                                December 31, 2008                    $    590,000                $ 223,610,000
              6                 March 31, 2009                       $    590,000                $ 223,020,000
                                June 30, 2009                        $    590,000                $ 222,430,000
                                September 30, 2009                   $    590,000                $ 221,840,000
                                December 31, 2009                    $ 55,460,000                $ 166,380,000
              7                 March 31, 2010                       $ 55,460,000                $ 110,920,000
                                June 30, 2010                        $ 55,460,000                $  55,460,000
                                September 30, 2010                   $ 55,460,000                            0


If not sooner paid, the Term Loans shall be paid in full, together with accrued
interest thereon, on the Term Loan Maturity Date.

     (b)    ADDITIONAL TERM LOANS. The Borrower shall repay the aggregate
outstanding principal amount of the Additional Term Loans (if any) in
consecutive quarterly installments on the last Business Day of each of March,
June, September and December commencing with the first full calendar quarter
ending after the Additional Term Loan Effective Date, in the following amounts
(which amounts shall be calculated on the Additional Term Loan Effective Date):
(i) as of any fiscal quarter end prior to the fiscal quarter ending December 31,
2009, an amount equal to one-quarter of one percent (0.25%) of the original
principal amount of the Additional Term Loans, and (ii) as of any fiscal quarter
ending on or after December 31, 2009, an amount equal to twenty-five percent
(25%) of the sum of (X) the original amount of the Additional Term Loans LESS
(Y) the aggregate amount of all scheduled amortization payments to be made with
respect to the Additional Term Loans (determined as of the Additional Term Loan
Effective Date) prior to December 31, 2009 as provided in clause (i) of this
Section 4.3(b); PROVIDED that such amounts of individual installments may be
adjusted pursuant to Section 4.4 hereof.

     (c)    NO REBORROWING. Amounts repaid pursuant to this Section 4.3 may not
be reborrowed and will constitute a permanent reduction of the Term Loan
Commitment.

     SECTION 4.4         PREPAYMENTS OF TERM LOANS.

     (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

                                       25


Section 5.11. The Administrative Agent shall promptly give each of the Lenders
notice of any such proposed 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 $5,000,000 or any whole
multiple of $1,000,000 in excess thereof and shall be applied to the outstanding
principal installments of the Term Loans (with respect to any such outstanding
Term Loans, PRO RATA on the basis of the original aggregate funded amount
thereof, among the Initial Term Loans, and, if applicable, the Additional Term
Loans) in inverse order of maturity thereof. Each repayment shall be accompanied
by any amount required to be paid pursuant to Section 5.11 hereof.

     (b)    MANDATORY PREPAYMENT OF TERM LOANS.

            (i)     DEBT PROCEEDS. The Borrower shall make mandatory principal
     prepayments of the Loans in the manner set forth in Section 4.4(b)(vi)
     below in amounts equal to one hundred percent (100%) of the aggregate Net
     Cash Proceeds from any incurrence by the Borrower or any of its Restricted
     Subsidiaries of Debt, excluding:

                    (A)  The Senior Subordinated Notes, solely to the extent
            the proceeds thereof are used on the Closing Date to consummate the
            IDT Merger and costs associated therewith;

                    (B)  Permitted Subordinated Debt, other than the Senior
            Subordinated Notes, solely to the extent the proceeds thereof are
            used within ninety (90) days (such ninety (90) day period, the "HOLD
            PERIOD") after receipt thereof to consummate a proposed acquisition
            and costs associated therewith so long as such proposed acquisition
            (a "DESIGNATED ACQUISITION") (I) constitutes a Permitted Acquisition
            at the time of the closing thereof and (II) is identified in writing
            to the Administrative Agent on or prior to the issuance date of such
            Permitted Subordinated Debt; PROVIDED, that any excess proceeds not
            so used to consummate a Permitted Acquisition or to fund a Permitted
            Escrow Redemption shall be applied as a mandatory prepayment as set
            forth in this Section 4.4(b)(i); and

                    (C)  other Debt permitted pursuant to Section 11.1 (other
            than Debt permitted by Section 11.1(j)).

     Such prepayment shall be made within three (3) Business Days after the date
     of receipt of Net Cash Proceeds of any such transaction. (This provision
     shall not be deemed to permit the incurrence of Debt not otherwise
     permitted pursuant to this Agreement.)

            (ii)    EQUITY PROCEEDS. If at any time the Total Leverage Ratio
     exceeds 3.00 to 1.00, the Borrower shall make mandatory principal
     prepayments of the Loans in the manner set forth in Section 4.4(b)(vi)
     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. (This
     provision shall not be deemed to permit the issuance of equity not
     otherwise permitted pursuant to this Agreement.)

            (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
     Loans in the manner set forth in Section 4.4(b)(vi) 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

                                       26


     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 Borrower
     and its Restricted Subsidiaries shall be applied to make prepayments of the
     Loans pursuant to Section 4.4(b)(vi), such prepayments to be made within
     three (3) Business Days after the Borrower's receipt of such Asset Sale
     Proceeds. (This provision shall not be deemed to permit the disposition of
     assets not otherwise permitted pursuant to this Agreement.)

            (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 Loans in the
     manner set forth in Section 4.4(b)(vi) 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 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 one hundred twenty (120)
     days after the end of any Fiscal Year during the term of this Agreement,
     commencing with the Fiscal Year ending March 31, 2005, for which the Total
     Leverage Ratio exceeds 3.00 to 1.00, the Borrower shall make a mandatory
     principal repayment of the Loans in an amount equal to fifty percent (50%)
     of Excess Cash Flow, if any, for such Fiscal Year.

            (vi)    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 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 (with respect to any such outstanding Term
     Loans, PRO RATA on the basis of the original aggregate funded amount
     thereof among the Initial Term Loans and, if applicable, the Additional
     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, regardless of whether there are
     amounts outstanding under the Revolving Credit Facility, each Lender having
     a Term Loan Commitment shall have the right to refuse its PRO RATA share
     (based on its respective applicable Term Loan Percentage) of any such
     mandatory prepayment (excluding prepayments made pursuant to Section
     4.4(b)(iii)) 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)(vi)(B), and THEN, to the extent of any remaining funds, to the
     Borrower; PROVIDED that, if at the time of such prepayment there are no
     outstanding Revolving Credit Loans, the Borrower may (X) elect to have the
     remaining amount of such mandatory prepayment (if any) applied as an
     optional prepayment of the Term Loans in accordance with Section 4.4(a) or
     (Y) retain such amount. No prepayment or repayment pursuant to this Section
     4.4 shall affect any of the Borrower's obligations under any Hedging
     Agreement.

                                       27


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 5.11 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 may, at the election of such Lender, 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, exercisable on no more than two (2) occasions following the Closing
Date until the Term Loan Maturity Date to incur additional indebtedness under
this Agreement in the form of an increase of the Term Loan Commitment of up to
One Hundred Million ($100,000,000) 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 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 this 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 Initial Term
Loans; (iii) the Borrower shall upon the request of any Lender making an
Additional Term Loan, execute such Term Loan Notes as are necessary to reflect
such Lender's Additional Term Loans; (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 amount of such increase
in the Term Loan Commitment and any Additional Term Loans obtained thereunder
shall not be less than a minimum principal amount of $10,000,000, or any whole
multiple of $5,000,000 in excess thereof; (viii) 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
written agreement acknowledged by the Administrative Agent and each Subsidiary
Guarantor, in form and substance reasonably satisfactory to the Administrative
Agent (an "ADDITIONAL TERM LOAN AGREEMENT"), and (ix) 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

                                       28


reasonable discretion.

     (d)    Upon the execution, delivery, acceptance and recording of the
applicable Additional Term Loan Agreement, from and after the applicable
Additional Term Loan Effective Date, each Increase Lender shall have a Term Loan
Commitment as set forth in the Register and all the rights and obligations of a
Lender with such a Term Loan Commitment hereunder. The Increase Lenders shall
make the Additional Term Loans to the Borrower on the Additional Term Loan
Effective Date in an amount equal to each such Increase Lender's commitment in
respect of Additional Term Loans as agreed upon pursuant to subsection (b)
above.

     (e)    The Administrative Agent shall maintain a copy of each Additional
Term Loan 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 as set forth in the Register. 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 applicable 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 the Initial Term Loans as 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 such Additional Term Loans as determined on the
applicable Additional Term Loan Effective Date. Furthermore, if the
all-in-yield, after giving effect to any offering of the Additional Term Loans
at a discount from par or any fees paid to the Lenders in connection with such
Additional Term Loans (the "ALL-IN-YIELD") with respect to the Additional Term
Loans, exceeds the All-in-Yield with respect to the Initial Term Loans, then the
fees payable by the Borrower with respect to the Initial Term Loans shall be
increased to the extent necessary to cause the All-in-Yield with respect to the
Initial Term Loans to equal to the All-in-Yield with respect to the Additional
Term Loans (the amount of such increase to be determined by the Administrative
Agent as of the Additional Term Loan Effective Date). In addition, an
amortization schedule shall be prepared by the Administrative Agent in
accordance with the terms of Section 4.3(b) to provide for the repayment of the
applicable 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 unless the Borrower has delivered
to the Administrative Agent a letter in form and substance satisfactory to the
Administrative Agent indemnifying the Lenders in the manner set forth in Section
5.11 of this Agreement) 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", and 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.

     (b)    INTEREST PERIODS. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the

                                       29


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 5.11; and

            (v)     there shall be no more than ten (10) Interest Periods in
     effect at any time.

            (c)     APPLICABLE MARGIN. The Applicable Margin provided for in
Section 5.1(a) with respect to any Loans (the "APPLICABLE MARGIN") shall be
based upon the table set forth below and shall be determined and adjusted (i)
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 and (ii)
as provided in Section 4.6(g). 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,
PROVIDED, HOWEVER, that (A) the initial Applicable Margin for the Loans shall
not be less than Pricing Level II (as shown below) until May 4, 2004 and (B) if
the Borrower fails to provide the Officer's Compliance Certificate as required
by Article VIII for the most recently ended fiscal quarter of the Borrower
preceding the applicable Calculation Date, the Applicable Margin for the Loans
from such Calculation Date shall be based on Pricing Level I (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 the
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      TOTAL LEVERAGE                  APPLICABLE      APPLICABLE                            APPLICABLE BASE
  LEVEL           RATIO                     LIBOR MARGIN    LIBOR MARGIN    APPLICABLE BASE RATE     RATE MARGIN     COMMITMENT
                                             (REVOLVER)      (TERM LOAN)     MARGIN (REVOLVER)       (TERM LOAN)         FEE
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
    I       GREATER THAN OR EQUAL TO 4.0        2.50%          2.50%             1.25%                  1.25%           0.50%
            to 1.0
    II      GREATER THAN OR EQUAL TO 3.5        2.25%          2.50%             1.00%                  1.25%           0.50%
            to 1.0  but  LESS
            THAN 4.0 to 1.0
   III      GREATER THAN OR EQUAL TO 3.0        2.00%          2.50%             0.75%                  1.25%           0.50%
            to 1.0  but  LESS
            THAN 3.5 to 1.0
    IV      LESS THAN 3.0 to 1.0                1.75%          2.25%             0.50%                  1.00%           .375%


     (d)    DEFAULT RATE. Subject to Section 12.3, at the discretion of 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

                                       30


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%) plus the rate
then applicable to LIBOR Rate Loans until the end of the applicable Interest
Period and thereafter at a rate equal to two percent (2%) plus 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%) plus 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
Obligations 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 with the quarter ending December 31, 2003; 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
Obligations charged or collected pursuant to the terms of this Agreement or
pursuant to any of the Obligations 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)
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 $5,000,000 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 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 determined by reference to the
pricing grid set forth in Section 5.1(c) 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 December 31, 2003, and on
the Revolving Credit Maturity Date. Such commitment

                                       31


fee shall be promptly distributed by the Administrative Agent to the Lenders PRO
RATA in accordance with the Lenders' respective Revolving Credit Commitment
Percentages. The commitment fee shall be determined by reference to the Total
Leverage Ratio as of the end of the fiscal quarter immediately preceding the
delivery of the applicable Officer's Compliance Certificate and adjusted
quarterly on the Calculation Date for the most recently ended fiscal quarter of
the Borrower, PROVIDED, HOWEVER, that (A) the initial Commitment Fee shall not
be less than that set forth in Pricing Level II as shown in the pricing grid set
forth in Section 5.1(c) until May 4, 2004 and (B) in the event the Borrower
fails to deliver the Officer's Compliance Certificate as required by Article
VIII for the most recently ended fiscal quarter of the Borrower preceding the
applicable Calculation Date, the commitment fee shall be the highest commitment
fee set forth in the above-described pricing grid until the delivery of an
appropriate Officer's Compliance Certificate at which time the Commitment Fee
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.

     (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 September 12, 2003.

     SECTION 5.4    MANNER OF PAYMENT.

     (a)    LOANS AND LETTERS OF CREDIT DENOMINATED IN DOLLARS. Each payment by
the Borrower on account of the principal of or interest on any Loan or Letter of
Credit denominated in Dollars or of any fee, commission or other amounts
(including the Reimbursement Obligation with respect to any Letter of Credit
denominated in Dollars) 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 applicable Term Loan Percentages, as applicable
(except as specified below), in Dollars and 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.

     (b)    ALTERNATIVE CURRENCY LETTERS OF CREDIT. Each payment by the Borrower
on account of any Alternative Currency Letter of Credit (including the
Reimbursement Obligation with respect to any Alternative Currency Letter of
Credit) shall be made in Dollars not later than 1:00 p.m. (the time of the
Issuing Lender's Correspondent) on the date specified for payment under this
Agreement to the Administrative Agent's account with the Issuing Lender's
Correspondent for the account of the Issuing Lender 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. (the time
of the Issuing Lender's Correspondent) 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. (the time of the Issuing Lender's Correspondent) shall
be deemed to have been made on the next succeeding Business Day for all
purposes.

     (c)    TREATMENT OF PAYMENTS. 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 applicable Term Loan Percentage, as applicable (except as specified below),
and shall wire advice of the amount of such credit to each Lender. Except as set
forth in Section 5.4(b), each payment to the 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 5.10, 5.11, 5.12, 5.13 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.

                                       32


     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 Loans, 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), (f) then to the principal amount of the Loans and
Reimbursement Obligation (PRO RATA in accordance with all such amounts due) and
(g) 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)(vi) hereof or pursuant to Sections 5.10, 5.11, 5.12, 5.13 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; 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 applicable 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

                                       33


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 applicable 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 applicable Term Loan Percentage.
Notwithstanding the foregoing, in no event shall any of the amendments, changes
or modifications specifically enumerated in Sections 14.11(a)-(c) be effective
with respect to any Lender directly affected thereby that has not consented
thereto.

     SECTION 5.8         REDENOMINATION UNDER EMU.

     (a)    REDENOMINATION OF LETTERS OF CREDIT. Subject to Section 1.4 hereof,
any Letter of Credit to be denominated in the currency of the applicable
Participating Member State shall be made in the euro.

     (b)    REDENOMINATION OF OBLIGATIONS. Subject to Section 1.4 hereof, any
obligation of any party under this Agreement or any other Loan Document which
has been denominated in the currency of a Participating Member State shall be
redenominated into the euro.

     (c)    FURTHER ASSURANCES. The terms and provisions of this Agreement will
be subject to such reasonable changes of construction as determined by the
Administrative Agent to reflect the implementation of the EMU in any
Participating Member State or any market conventions relating to the fixing
and/or calculation of interest being changed or replaced and to reflect market
practice at that time, and subject thereto, to put the Administrative Agent, the
Lenders and the Borrower in the same position, so far as possible, that they
would have been if such implementation had not occurred. In connection
therewith, the Borrower agrees, at the request of the Administrative Agent, at
the time of or at any time following the implementation of the EMU in any
Participating Member State or any market conventions relating to the fixing
and/or calculation of interest being changed or replaced, to enter into an
agreement amending this Agreement in such manner as the Administrative Agent
shall reasonably request.

     SECTION 5.9         REGULATORY LIMITATION . In the event, as a result of
increases in the value of any Alternative Currency against the Dollar or for any
other reason, the obligation of the Issuing Lender to issue Alternative Currency
Letters of Credit (taking into account the Dollar Amount of the Obligations and
all other indebtedness required to be aggregated under 12 U.S.C.A. Section 84,
as amended, the regulations promulgated thereunder and any other Applicable Law)
is determined by the Issuing Lender to exceed its then applicable legal lending
limit under 12 U.S.C.A. Section 84, as amended, and the regulations promulgated
thereunder, or any other Applicable Law, the amount of additional Alternative
Currency Letters of Credit the Issuing Lender shall be obligated to issue
hereunder shall immediately be reduced to the maximum amount which the Issuing
Lender may legally issue (as determined by the Issuing Lender) and, to the
extent necessary under such laws and regulations (as determined by the Issuing
Lender, with respect to the applicability of such laws and regulations to
itself), the Borrower shall reduce, or cause to be reduced, complying to the
extent practicable with the remaining provisions hereof, the Obligations
outstanding hereunder by an amount sufficient to comply with such maximum
amounts.

     SECTION 5.10        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 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

                                       34


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 to 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 5.11 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 5.13(e)) subject any of
     the Lenders (or any of their respective Lending Offices) to any tax, duty
     or other charge with respect to any Loan, 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 Loan, L/C Obligation or any other amounts 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 5.10(c)(i) to the extent that such
     amounts are duplicative of any amounts paid by the Borrower pursuant to
     Section 5.13; 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 Loan;

     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 Loans 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, or the applicable Lender (with a
     copy to 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 5.10(c); PROVIDED, that the
     Administrative Agent shall incur no liability whatsoever

                                       35


     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 applicable 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.

     (d)    EXCHANGE INDEMNIFICATION AND INCREASED COSTS. The Borrower shall,
upon demand from the Issuing Lender or L/C Participant, pay to the Issuing
Lender or L/C Participant, the amount of (i) any loss or cost or increased cost
incurred by the Issuing Lender or L/C Participant, (ii) any reduction in any
amount payable to or in the effective return on the capital to the Issuing
Lender or L/C Participant, (iii) any interest or any other return foregone by
the Issuing Lender as a result of the introduction of, change over to or
operation of the euro and (iv) any currency exchange loss, in each case that the
Issuing Lender or L/C Participant sustains as a result of the Borrower's or any
L/C Participant's repayment in Dollars of any Alternative Currency Letter of
Credit. A certificate of the Issuing Lender or L/C Participant setting forth in
reasonable detail the basis for determining such additional amount or amounts
necessary to compensate the Issuing Lender or such L/C Participant shall be
conclusively presumed to be correct save for manifest error.

     SECTION 5.11        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 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
applicable 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 5.12        CAPITAL REQUIREMENTS. If either (a) the introduction
of, or any change in, or any change 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 5.13   TAXES.

     (a)    PAYMENTS FREE AND CLEAR. Except as otherwise provided in Section
5.13(e), any and all payments by the Borrower hereunder or under the Loans or in
respect of 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

                                       36


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 Loan or in respect of any Letter of Credit to any
Lender or the Administrative Agent, (A) except as otherwise provided in Section
5.13(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 5.13) 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 relevant taxing authority or other Governmental
Authority in the manner provided in Section 5.13(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 5.13(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
5.13) 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 organized under
the laws of any jurisdiction other than the United States or any state thereof
(a "FOREIGN 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 Foreign 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 Foreign 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 Foreign 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 Foreign Lender
notifies the Borrower and the 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 this Section 5.13 or Section 5.10(c), (i) if such
Foreign Lender or the Administrative Agent fails to comply with the requirements
of this Section 5.13(e), other than to the extent (i) that such failure is due
to a change in law occurring after the date on which such Foreign Lender or

                                       37


the Administrative Agent became a party to this Agreement or (ii) that such
additional amounts are the result of such Foreign 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 5.13 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 5.14        ROUNDING AND OTHER CONSEQUENTIAL CHANGES. Subject to
Section 1.4 hereof, without prejudice and in addition to any method of
conversion or rounding prescribed by any EMU Legislation and without prejudice
to the respective obligations of the Borrower to the Administrative Agent and
the Lenders and the Administrative Agent and the Lenders to the Borrower under
or pursuant to this Agreement, except as expressly provided in this Agreement,
each provision of this Agreement, including, without limitation, the right to
combine currencies to effect a set-off, shall be subject to such reasonable
changes of interpretation as the Administrative Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of or change
over to the euro in Participating Member States.

     SECTION 5.15        SECURITY. The Obligations of the Borrower and the
Subsidiary Guaranteed Obligations shall be secured as provided in the Security
Documents.

     SECTION 5.16        MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.

     (a)    If any Lender requests compensation under Section 5.10(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 5.13,
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
5.10(c) or 5.13, 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 5.10(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 5.13,
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, requiresuch 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
(other than any indemnification rights pursuant to Sections 5.10, 5.12, 5.13 or
14.2 for the period prior to such assignment) 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 amounts (including, without
limitation, any amounts then payable to such Lender under Section 5.10(c) or
Section 5.13 hereof)) and (iii) in the case of any such assignment resulting
from a claim for compensation under Section 5.10(c) or payments required to be
made pursuant to Section 5.13, 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

                                       38


Lobdell & Hickman, L.L.P. at 10:00 a.m. on November 4, 2003, 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
ON THE CLOSING DATE . The obligation of the Lenders to close this Agreement and
to make the Loans or issue or participate in the Letters of Credit, if any, to
be made or issued on the Closing Date 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, and the Security Documents, together with
any other applicable Loan Documents, shall have been duly authorized, executed
and delivered to the Administrative Agent by the Administrative Agent, on behalf
of itself and certain other Lenders, the Borrower and its Subsidiaries party
thereto, and the other parties thereto, shall be in full force and effect and no
Default or Event of Default shall exist, 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 contained in this Agreement and the
     other Loan Documents are true, correct and complete; that the Borrower and
     its Subsidiaries are 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 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 and other credit extensions 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
     (including, without limitation, the enforceability of the Senior
     Subordinated Notes).

            (v)     TAX FORMS. The Administrative Agent shall have received
     copies of the United States Internal Revenue Service forms required by
     Section 5.13(e) hereof.

     (c)    COLLATERAL.

                                       39


            (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
     pursuant to the Collateral Agreement or any Pledge Agreement together with
     an endorsement for each such promissory note duly executed in blank by the
     holder thereof.

            (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, to the extent requested by the Administrative Agent,
     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.

     (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 the Transaction 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 (a) the Transaction Documents or the
     consummation of the transactions contemplated thereby, 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 or (b) the IDT Merger, which prohibits or imposes materially
     adverse conditions upon, or makes it economically unfeasible 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 unaudited pro forma Consolidated financial statements for (A) the
     three-month period ended June 30, 2003, for the Borrower and its
     Subsidiaries and (B) the six-month period ended June 30, 2003 for IDT and
     its Subsidiaries, all in substance satisfactory to the Administrative Agent
     and in the form of Form 10-Q filed by the Borrower and IDT, respectively,
     with the Securities and Exchange Commission.

            (ii)    CLOSING BALANCE SHEET AND INCOME STATEMENT. The
     Administrative Agent shall have received a consolidating PRO FORMA closing
     balance sheet and income statement of the Borrower and its Subsidiaries,
     for the period ended June 30, 2003 after giving effect to the transactions
     contemplated by the Transaction Documents. Such PRO FORMA closing balance
     sheet and income statement (A) shall be in form

                                       40


     and substance satisfactory to the Administrative Agent and prepared in
     accordance with GAAP and (B) shall not be materially different from the
     projections previously delivered to the Administrative Agent.

            (iii)   NO MATERIAL ADVERSE CHANGE. There shall have occurred no
     material adverse change in the business, properties, prospects, operations
     or condition (financial or otherwise) of (A) the Borrower and its
     Subsidiaries, taken as a whole since March 31, 2003, or (B) IDT and its
     Subsidiaries, taken as a whole since December 31, 2002.

            (iv)    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) after giving effect to the transactions
     contemplated by the Transaction Documents, the Borrower and its Restricted
     Subsidiaries taken as a whole are Solvent, (B) after giving effect to the
     transactions contemplated by the Transaction Documents, the payables of the
     Borrower and its Restricted Subsidiaries are not past due beyond customary
     trade terms, (C) attached thereto are calculations evidencing compliance
     with the covenants contained in Article X hereof determined on a PRO FORMA
     basis, as of the Closing Date and after giving effect to the transactions
     contemplated by the Transaction Documents and the initial Extensions of
     Credit under the Loan Documents, (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).

            (v)     FINANCIAL PROJECTIONS. The Administrative Agent shall have
     received management approved seven (7) year projected financial statements
     of the Borrower and its Subsidiaries.

            (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)    IDT MERGER.

            (i)     IDT MERGER DOCUMENTS. The Administrative Agent shall have
     received the IDT Merger Documents and such IDT Merger Documents shall be in
     form and substance reasonably satisfactory to the Administrative Agent and
     the Syndication Agent (including, but not limited to, a total purchase
     price not to exceed $575 million and a cash purchase price not to exceed
     $463 million).

            (ii)    CONDITIONS TO THE IDT MERGER. All conditions to the IDT
     Merger shall be satisfied or waived (any such waiver to be with the consent
     of the Administrative Agent and the Syndication Agent, not to be
     unreasonably withheld) on or before the Closing Date such that the IDT
     Merger shall occur contemporaneously with the initial funding under this
     Agreement on the Closing Date.

            (iii)   GOVERNMENTAL AND THIRD PARTY APPROVALS. The Administrative
     Agent shall have received evidence satisfactory thereto that all
     governmental, shareholder and third party consents and approvals necessary
     in connection with the IDT Merger (including, without limitation, approvals
     required under the Hart Scott Rodino Antitrust Improvements Act of 1976, as
     amended), shall have been obtained and remain in effect.

            (iv)    TAX, ACCOUNTING, CORPORATE AND CAPITAL STRUCTURE. The
     Administrative Agent shall be satisfied that the proposed tax and
     accounting treatment of the IDT Merger and the proposed corporate and
     capital structure of the Borrower and its Subsidiaries (including IDT and
     its Subsidiaries, if any) after giving effect to the transactions
     contemplated by the Transaction Documents, (A) does not differ materially
     from the treatment and structure previously disclosed in writing by the
     Borrower to the Administrative Agent or (B) is otherwise reasonably
     satisfactory to the Administrative Agent.

                                       41


            (v)     JOINDER OF IDT AND ITS SUBSIDIARIES. The Administrative
     Agent shall have received (A) a duly executed joinder agreement in form and
     substance reasonably satisfactory to the Administrative Agent joining IDT
     and each Domestic Subsidiary of IDT (to the extent such 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 each
     Subsidiary of IDT, (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 such Restricted Subsidiary, as
     applicable, in IDT or such Subsidiary of IDT, and (E) any other documents
     and certificates as may be reasonably requested by the Administrative
     Agent.

            (vi)    OTHER DOCUMENTS. The Administrative Agent shall have
     received copies of all other documents, certificates and instruments
     reasonably requested thereby, with respect to the transactions contemplated
     by the IDT Merger, and each such document, certificate and instrument shall
     be in form and substance reasonably satisfactory to the Administrative
     Agent.

     (g)    SENIOR SUBORDINATED NOTES.

            (i)     SENIOR SUBORDINATED NOTE DOCUMENTS. The Administrative Agent
     shall have received the Senior Subordinated Note Documents and such Senior
     Subordinated Note Documents shall be in form and substance reasonably
     satisfactory to the Administrative Agent and the Syndication Agent.

            (ii)    SENIOR SUBORDINATED NOTE ISSUANCE. The Borrower shall have
     received, on or prior to the Closing Date, net cash proceeds from the
     issuance of the Senior Subordinated Notes in an aggregate amount of
     $350,000,000 (collectively, the "SENIOR SUBORDINATED NOTE ISSUANCE"), such
     Senior Subordinated Note Issuance to be on terms and conditions reasonably
     satisfactory to the Administrative Agent.

            (iii)   OTHER DOCUMENTS. The Administrative Agent shall have
     received copies of all other documents, certificates and instruments
     reasonably requested thereby, with respect to the transactions contemplated
     by the Senior Subordinated Note Documents, and each such document,
     certificate and instrument shall be in form and substance reasonably
     satisfactory to the Administrative Agent.

     (h)    REPAYMENT OF CERTAIN AMOUNTS OUTSTANDING UNDER EXISTING CREDIT
AGREEMENT. On the Closing Date, (i) all outstanding loans under the Existing
Credit Agreement (the "EXISTING LOANS") made by any Existing Lender which is not
a Lender hereunder shall be repaid in full and the commitments and other
obligations and rights (except as expressly set forth in the Existing Credit
Agreement) of such Existing Lender shall be terminated, (ii) all outstanding
Existing Loans not being repaid under clause (i) above shall be deemed Revolving
Credit Loans or Term Loans, as applicable, hereunder and the Administrative
Agent shall make such transfers of funds as are necessary in order that the
outstanding balance of such Revolving Credit Loans or Term Loans, as applicable,
together with any Revolving Credit Loans and any Term Loans funded on the
Closing Date, are in accordance with the Revolving Credit Commitment Percentages
or Term Loan Percentages, as applicable, of the Lenders hereunder, (iii) there
shall have been paid in cash in full all accrued but unpaid interest due on the
Existing Loans to the Closing Date, (iv) there shall have been paid in cash in
full all accrued but unpaid fees under the Existing Credit Agreement due to the
Closing Date and all other amounts, costs and expenses then owing to any of the
Existing Lenders and/or Wachovia, as administrative agent under the Existing
Credit Agreement, (v) all outstanding Letters of Credit under the Existing
Credit Agreement shall be Letters of Credit hereunder and (vi) all outstanding
promissory notes issued by the Borrower to the Existing Lenders under the
Existing Credit Agreement shall be promptly returned to the Administrative Agent
which shall forward such notes to the Borrower for cancellation.

     (i)    OTHER EXISTING DEBT. All Debt except (i) Debt of the Borrower under
the Existing Credit Agreement permitted pursuant to Section 6.2(h) above, and
(ii) other existing Debt of the Borrower not exceeding $8,000,000 in the
aggregate, shall have been repaid in connection with the closing of transactions
contemplated by the Transaction Documents and all Liens securing such other
existing Debt shall have been terminated.

                                       42


     (j)    TRANSACTION DOCUMENTS. The transactions described in the Transaction
Documents, including, without limitation, the Borrower's issuance of at least
$112,000,000 of certain preferred and common equity securities, shall have been
consummated in accordance with all requirements of Applicable Law for an
aggregate consideration not exceeding $809,600,000 and no material provision of
the any of the Transaction Documents (other than the Loan Documents, which may
be amended, waived or modified only as provided in Section 14.11) shall have
been amended, waived or otherwise modified without the prior written consent of
the Administrative Agent (which consent shall not be unreasonably withheld or
delayed).

     (k)    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)    OTHER DOCUMENTS. All opinions, certificates and other
     instruments and all proceedings in connection with the transactions
     contemplated by this Agreement shall be in form and substance reasonably
     satisfactory 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, the IDT Merger or the Senior Subordinated Note Issuance.

     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), or convert or continue any Loan and/or the Issuing
Lender to issue or extend any Letter of Credit are subject to the satisfaction
or waiver in accordance with Section 14.11 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 and in the other Loan Documents 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)    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.

     (c)    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.

     (d)    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 Subsidiaries (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or

                                       43


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, in
the case of the Borrower, the Extensions of Credit hereunder, and the
transactions contemplated hereby. 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 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,

                                       44


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 in conformity with GAAP 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. The Borrower does not intend to treat the Loans and/or Letters of Credit
as being a "reportable transaction" (within the meaning of Treasury Regulation
Section 1.6011-4). In the event that the Borrower determines to take any action
inconsistent with such intention, it will promptly notify the Administrative
Agent thereof. If the Borrower so notifies the Administrative Agent, the
Borrower acknowledges that one or more of the Lenders may treat its Loans and/or
Letters of Credit as part of a transaction that is subject to Treasury
Regulation Section 1.6011-4 or Section 301.6112-1, and the Administrative Agent
and such Lender or Lenders, as applicable, may file such forms or maintain such
lists and other records as they may determine is required by such Treasury
Regulations.

     (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 applications,
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 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 the Borrower and its
     Restricted Subsidiaries in violation of, or in a manner or

                                       45


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
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 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

                                       46


     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 in violation of, or for any other 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. Each Material Contract of the Borrower and each
Restricted Subsidiary in effect as of the Closing Date 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
except as could not reasonably be expected to have a Material Adverse Effect.
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. Neither the Borrower nor any of its Restricted
Subsidiaries is, 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 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 those
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, 2003, there has been no
material adverse change in the properties, business, operations, prospects, or
condition (financial or otherwise) of the Borrower and its Restricted
Subsidiaries, taken as a whole. Since December 31, 2002 there has been no
material adverse change in the properties, business, operations, or condition
(financial or otherwise) of IDT and its Subsidiaries, taken as a whole and no
event has occurred or condition arisen that could reasonably be expected to have
a Material Adverse Effect.

                                       47


     (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
referred to in 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 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 IDT 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" (or by a term with substantially
equivalent meaning) 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

                                       48


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, or pursuant to, this Agreement or any
of the other 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 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 Extensions of Credit 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 Ratings Services, a division of The McGraw Hill Companies,
Inc., (b) Moody's Investors Service, Inc. and (c) the Administrative Agent at
the Administrative Agent's Office at the address set forth in Section 14.1 and
to each Lender at the respective address as set forth in Section 14.1, or at
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 of the first three (3)
fiscal quarters 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 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.

                                       49


     (c)    ANNUAL BUSINESS PLAN AND FINANCIAL PROJECTIONS. As soon as
practicable and in any event within ninety (90) days following the beginning of
each Fiscal Year, a business plan of the Borrower and its Restricted
Subsidiaries for the ensuing twenty (20) 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 twenty (20) 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 a Responsible Officer 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.

     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.

     (b)    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 $5,000,000
that may be assessed against or threatened in writing against the Borrower or
any Restricted Subsidiary thereof;

                                       50


     (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;

     (g)    any event which makes any of the representations set forth in
Section 7.1 or in any other Loan Document inaccurate in any respect;

     (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;

     (i)    the designation of any Subsidiary as a "Restricted Subsidiary" under
any Permitted Subordinated Debt, or the joinder of any Subsidiary as a guarantor
of any Permitted Subordinated Debt; and

     (j)    any intention by the Borrower to treat any of the Extensions of
Credit and related transactions as being a "reportable transaction" (within the
meaning of Treasury Regulation Section 1.6011-4) (and the Borrower shall
deliver, in conjunction with such notification, a duly completed copy of IRS
Form 8886 or any successor form).

     SECTION 8.6         EXTENSION OF TIME. Notwithstanding anything in this
Agreement to the contrary, the Administrative Agent may, in its sole discretion,
extend the delivery deadline applicable to any notice, certificate or other
information required to be delivered under this Article VIII for a period of
time not to exceed five (5) Business Days.

     SECTION 8.7         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.

                                       51


     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.

     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 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

                                       52


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 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 its Affiliates shall permit any
authorized representative(s) designated by the Administrative Agent and/or any
of the Lenders to visit, to conduct a field audit or to otherwise inspect any of
the Borrower's, its Restricted Subsidiaries' and/or its 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). Each of the Administrative Agent and the Lenders agrees 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 its 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 its Affiliates,
to keep proper books and records and accounts in accordance with GAAP and
Applicable Law.

     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 to the Administrative Agent 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 such
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

                                       53


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) are or become 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

            (ii)    any individual Unrestricted Subsidiary provides a guarantee
     of any Permitted Subordinated Debt; or

            (iii)   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 clauses (i) and (ii), such Unrestricted Subsidiary shall be
redesignated as a Restricted Subsidiary and in the case of clause (iii), 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) are not the obligors 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)    any such individual Subsidiary is not a guarantor of any
     Permitted Subordinated Debt; and

                                       54


            (iii)   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.

     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 fifteen (15) Business Days following receipt by the
Administrative Agent of such written notice.

     (e)    Notwithstanding anything to the contrary contained herein, in the
event that any Subsidiary shall guaranty the payment or performance of the
Senior Subordinated Notes, the Borrower shall cause such Subsidiary to
immediately execute a joinder agreement in respect of the Subsidiary Guaranty
Agreement and the Security Documents described in Section 9.11(a) and to deliver
all of the other instruments, documents, certificates and opinions required
pursuant to Section 9.11(a).

     SECTION 9.12   USE OF PROCEEDS. The Borrower shall use the proceeds of the
Extensions of Credit (a) to finance the IDT Merger (including the refinancing of
certain existing Debt of IDT) (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 IDT Merger
and the other transactions contemplated hereby.

     SECTION 9.13   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 9.14   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 IDT Merger
Agreement.

     SECTION 9.15   DEBT RATING. Maintain an up to date debt rating with
both Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., and Moody's Investors Service, Inc. 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 9.16   POST CLOSING COVENANTS

     (a)    DEPOSIT ACCOUNTS AND INTELLECTUAL PROPERTY.  Prior to January 4,
2004, as such date may be extended by the Administrative Agent in its sole
discretion, deliver such additional (i) deposit account control agreements
pursuant to the Collateral Agreement, (ii) curative intellectual property
filings, in each case as previously identified to the Borrower in writing by the
Administrative Agent, and (iii) such additional documents, instruments, and
agreements as are reasonably requested by the Administrative Agent to confirm
any Security Documents governed by the laws of a jurisdiction other than the
United States.

     (b)    FOREIGN SECURITY DOCUMENTS.  Prior to January 4, 2004, as such date
may be extended by the Administrative Agent in its sole discretion, deliver a
duly executed copy of a foreign pledge agreement or a supplement to any existing
foreign pledge agreement with respect to the capital stock or other ownership
interest of any first tier Foreign Subsidiary that is a Restricted Subsidiary
together with the delivery of any certificates or other documents necessary to
perfect the security interest created under such foreign pledge agreement
(including, without limitation, an opinion of local counsel of to such Foreign
Subsidiaries with respect to the each foreign pledge agreement or supplement to
any existing foreign pledge agreement and such other matters as the
Administrative Agent may reasonably request.

                                       55


                                    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:

     SECTION 10.1   MAXIMUM TOTAL LEVERAGE RATIO: As of any fiscal quarter end
during any period set forth below, permit the Total Leverage Ratio to be greater
than the corresponding ratio set forth below:



                     Period                                       Ratio
                                                            
      Closing Date through December 31, 2004                   4.50 to 1.00
     January 1, 2005 through December 31, 2005                 4.25 to 1.00
                    Thereafter                                 4.00 to 1.00


     SECTION 10.2   MAXIMUM SENIOR LEVERAGE RATIO: As of the end of any fiscal
quarter during any period set forth below, permit the Senior Leverage Ratio to
be greater than the corresponding ratio set forth below:



                    Period                                        Ratio
                                                            
      Closing Date through December 31, 2004                   3.25 to 1.00
     January 1, 2005 through December 31, 2005                 3.00 to 1.00
                    Thereafter                                 2.75 to 1.00


     SECTION 10.3   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 such date MINUS (ii) Capital
Expenditures for such period to (b) Fixed Charges for the period of four (4)
consecutive fiscal quarters ending on such date to be less than 1.25 to 1.00.

                                   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:

     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 or an affiliate of 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
$50,000,000 on any date of determination;

     (e)    purchase money Debt of the Borrower and its Restricted Subsidiaries
in an aggregate amount not

                                       56


to exceed $25,000,000 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
$25,000,000 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 (e) and subsection (j) or (k) of this Section 11.1
(PROVIDED that any Guaranty Obligation with respect to subsection (j) or (k) is
subordinated at least to the same extent as the obligation guaranteed);

     (j)    Subordinated Debt of the Borrower and certain of its Restricted
Subsidiaries:

                    (i)    under the Senior Subordinated Notes;

                    (ii)   consisting of high-yield notes or convertible notes
            issued on terms and conditions (including subordination provisions)
            reasonably satisfactory to the Administrative Agent and consistent
            with then-current market terms and conditions of such tenor of
            Subordinated Debt, PROVIDED that (A) no Default or Event of Default
            exists and is continuing or would be caused by the issuance thereof,
            (B) the Administrative Agent shall have received satisfactory
            written evidence that the Borrower would be in compliance with all
            covenants in this Agreement on a PRO FORMA basis after giving effect
            to the issuance thereof, (C) the maturity date of such Subordinated
            Debt is at least six (6) months after the Term Loan Maturity Date,
            and (D) the Net Cash Proceeds of such Subordinated Debt are applied
            to repay outstanding Obligations to the extent required pursuant to
            Section 4.4(b)(i) and Section 4.4(b)(vi); and

                    (iii)  in connection with refinancings of Subordinated Debt
            permitted pursuant to Section 11.1(j)(i) and (ii); PROVIDED that,
            (A) no Default or Event of Default exists and is continuing or would
            be caused thereby, (B) the proceeds of the refinancing of the Senior
            Subordinated Notes are used solely to issue replacement notes, (C)
            the terms and conditions of the replacement notes and the documents
            evidencing such refinancing shall be in form and substance
            reasonably satisfactory to the Administrative Agent, (D) the
            maturity date of the replacement notes shall be no earlier than the
            Subordinated Debt being refinanced and in any event shall be at
            least six (6) months after the Term Loan Maturity Date and (E) the
            principal amount of the replacement notes shall not exceed the
            principal amount of the Subordinated Debt being refinanced, unless
            the Net Cash Proceeds of any such excess are applied to repay
            outstanding Obligations to the extent required pursuant to Section
            4.4(b)(i) and Section 4.4(b)(vi).

     (k)    Unsecured Debt of DRS Technologies Canada Company in an aggregate
amount not to exceed $25,000,000 (US Dollars) on any date of determination; and

     (l)    Debt consisting of existing letters of credit issued prior to the
date hereof issued for the account of IDT in an aggregate face amount not to
exceed $12,000,000;

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.

     SECTION 11.2   LIMITATIONS ON LIENS. Create, incur, assume or suffer to
exist any Lien on or with respect

                                       57


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;

     (h)    any Lien existing on any property or asset 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 such 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 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;

     (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 or other Debt), in each case in the ordinary course of business;
and

     (j)    Liens on the proceeds of any Permitted Subordinated Debt (and the
escrow account, if any, in which such proceeds are held) for the benefit of the
holders thereof; PROVIDED that (i) the Administrative Agent shall have approved
the terms and conditions of such Lien, (ii) such proceeds are held in an escrow
account by the trustee with respect to such Permitted Subordinated Debt, (iii)
such Lien is terminated and released upon the earlier to occur of the expiration
of the Hold Period and the consummation of the applicable Designated
Acquisition, (iv) such Lien does not extend to any other assets or property of
the Borrower or any Subsidiary thereof and (v) no Default or Event of Default
shall have occurred and be continuing at the time of issuance of such Permitted
Subordinated Debt.

     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

                                       58


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)    (i) investments in Restricted Subsidiaries existing on the Closing
Date, (ii) investments 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; and (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");

     (c)    the IDT Merger; PROVIDED that the IDT Merger shall be subject to the
conditions set forth in Section 11.4(d);

     (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) maintenance of at least $30,000,000 of
     availability under the Revolving Credit Facility both before and after
     giving effect to the proposed acquisition; and (C) a PRO FORMA 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,

                                       59


     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
     9.11 to be delivered at the time required pursuant to Section 9.11
     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 Administrative Agent;

            (vii)   the aggregate amount of Permitted Acquisition Consideration
     (A) for any such acquisition (or series of related acquisitions) shall not
     exceed $100,000,000 payable in cash, Cash Equivalents or Debt and (B) for
     such acquisition, together with all other acquisitions consummated in the
     twelve-month period ending on the date of such acquisition shall not exceed
     $150,000,000 in the aggregate, regardless of the form of such Permitted
     Acquisition Consideration; PROVIDED that any Permitted Acquisition
     Consideration paid with respect to any acquisition consummated on or prior
     to the Closing Date shall not count toward such $150,000,000 limit;

            (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; and

            (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 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 $50,000,000;
PROVIDED that the original amount of any such investment shall be deemed reduced
by any permanent return of principal or equity thereon up to but not exceeding
the original amount of such investment;

     (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 $25,000,000; 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 (or suffer any liquidation or dissolution) except:

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     (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);

     (c)    any Wholly-Owned Subsidiary of the Borrower may wind-up into the
Borrower or any other Wholly-Owned Restricted Subsidiary of the Borrower; and

     (d)    the IDT Merger; PROVIDED, that prior to or upon the consummation
thereof:

            (i)     each of the conditions to the consummation of the IDT Merger
     shall have been satisfied or waived (with the consent of the Administrative
     Agent, such consent not to be unreasonably withheld);

            (ii)    no Default or Event of Default shall have occurred and be
     continuing or would be in existence after giving effect to the consummation
     of the IDT Merger;

            (iii)   the Administrative Agent shall be satisfied that no material
     adverse change has occurred in the business, properties, prospects,
     operations or condition (financial or otherwise) of (A) the Borrower and
     its Subsidiaries, taken as a whole, or (B) IDT and its Subsidiaries, taken
     as a whole; and

            (iv)    the representations and warranties contained in Article VII
     and in the other Loan Documents shall be true and correct on and as of the
     date of consummation of the IDT Merger and after giving effect to the IDT
     Merger, in each case with the same effect as if made on and as of such
     date.

     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) or Section 11.6(b);

     (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; and

     (e)    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
(e) in the aggregate shall not exceed $50,000,000 in a Fiscal Year; PROVIDED,
that such fair market value shall be determined without regard to any earnout or
other contingent payments based on the financial performance or other results of
the assets sold and (ii) the Borrower or applicable Restricted Subsidiary
complies with the provisions of Section 4.4(b).

     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

                                       61


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 make dividends or distributions to any
other Restricted Subsidiary or to the Borrower;

     (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
its Affiliates; and

     (d)    the Borrower and its Subsidiaries may pay the cash consideration
payable in the IDT Merger (including any payments in respect of appraisal
rights).

     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 Sections 11.3, 11.6 and 11.7 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 (i) fully disclosed to and approved
in writing by (A) the Administrative Agent; PROVIDED, that the aggregate of all
such transactions approved by the Administrative Agent does not exceed
$5,000,000, or (B) the Required Lenders, if the aggregate of all such
transactions exceeds $5,000,000, prior to the consummation thereof and (ii) 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.

     SECTION 11.10  AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED
DEBT.

     (a)    Amend or modify (or permit the modification or amendment of) any of
the terms or provisions of any Subordinated Debt (including, without limitation,
any Permitted Subordinated Debt) including, without limitation, any amendment or
modification to (i) increase the interest rate applicable thereto, (ii) change
any date upon which payments of principal or interest on any Subordinated Debt
or other obligations thereunder are due to an earlier date, (iii) add or make
more restrictive any event of default or any covenant with respect to any
Subordinated Debt or any other obligations thereunder (other than proportional
amendments to the covenants thereunder corresponding to and made in connection
with an amendment to the covenants set forth herein), (iv) change any redemption
or prepayment provision of any Subordinated Debt or any other payment
obligations thereunder to an earlier date or add any additional events requiring
such redemption, payment or prepayment, (v) alter the subordination provisions
with respect to obligations under any Subordinated Debt, (vi) other than as
permitted pursuant to Section 11.2(j), grant or suffer any holder of any
Subordinated Debt to acquire any Lien or security interest in any assets of the
Borrower or any Subsidiary thereof or any other assets securing the Obligations,
or (vii) change or amend any other term of any Subordinated Debt or any other
obligations thereunder if such change or

                                       62


amendment would result in a Default or Event of Default under this Agreement or
the other Loan Documents; and

     (b)    Cancel, forgive, make any payment or prepayment on, or redeem or
acquire for value (including, without limitation, (i) by way of depositing with
any trustee with respect thereto money or securities before due for the purpose
of paying when due or (ii) at the maturity thereof except a Permitted Escrow
Deposit during the applicable Hold Period) any Subordinated Debt, other than (A)
refinancing of the Senior Subordinated Notes to the extent permitted by Section
11.1(j), (B) regularly scheduled payments of accrued interest on any Permitted
Subordinated Debt, to the extent such payments are permitted under the
subordination provisions applicable to such Permitted Subordinated Debt and (C)
a Permitted Escrow Redemption.

     (c)    Deliver any "payment blockage notice" (or substantially equivalent
notice) under any instruments and documents, now or in the future, relating to
any Subordinated Debt without the prior written consent of the Administrative
Agent and the Required Lenders.

     SECTION 11.11  AMENDMENTS, CONSENTS AND WAIVERS UNDER THE IDT MERGER
DOCUMENTS. Materially amend, modify, waive (or permit the material amendment,
modification of or waiver of) any of the terms or provisions of any of the IDT
Merger Documents 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 (i) contains any negative pledge on assets
or any covenants more restrictive than the provisions of Articles IX, X, or XI
hereof, or (ii) 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 (excluding, solely for the purposes of
this Section 11.12(a), any Permitted Subordinated Debt so long as such
Subordinated Debt does not restrict, limit or otherwise encumber the ability of
the Borrower or any Restricted Subsidiary to incur Liens in favor of the
Administrative Agent or any Lender).

     (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
$20,000,000 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 for the ratable benefit
of itself and the Lenders 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 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).

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     (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, 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 or any of its Restricted
Subsidiaries 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 counterparty 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 Loans
or any Reimbursement Obligation) the aggregate outstanding amount of which Debt
is in excess of $25,000,000 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 Loans or any Reimbursement Obligation) the aggregate
outstanding amount of which Debt is in excess of $25,000,000 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).

     (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 (including,
without limitation, the IDT Merger Agreement), 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. (i) 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, (ii) there shall have occurred under any
indenture or other instrument evidencing any Debt in excess of $25,000,000 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 or (iii) any "Change of Control"
under and/or as defined in any Permitted Subordinated Debt, including, without
limitation, the Senior Subordinated Notes, the Senior Subordinated Note
Documents or any document executed in connection therewith (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

                                       64


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) be generally unable to, or 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 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 $10,000,000 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 its 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 $5,000,000, 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 such 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:

                                       65


     (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 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 amount of such Letters
of Credit (which such cash collateral shall be deposited in the applicable
Permitted Currency in which each Letter of Credit is denominated). 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.

     SECTION 12.4   JUDGMENT CURRENCY.

     (a)    The obligation of the Borrower to make payments of any amounts
payable hereunder or pursuant to any other Loan Document in the currency
specified for such payment shall not be discharged or satisfied by any tender,
or any recovery pursuant to any judgment, which is expressed in or converted
into any other currency, except to the extent that such tender or recovery shall
result in the actual receipt by each of the Administrative Agent and Lenders of
the full amount of the particular Permitted Currency expressed to be payable
pursuant to the applicable Loan Document. The Administrative Agent shall, using
all amounts obtained or received from the Borrower pursuant to any such tender
or recovery in payment of principal of and interest on the Obligations, promptly
purchase the applicable currency at the most favorable spot exchange rate
determined by the Administrative Agent to be available to it. The obligation of
the Borrower to make payments in the applicable currency shall be enforceable as
an alternative or additional cause of action solely for the purpose of
recovering in the applicable currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the currency

                                       66


expressed to be payable pursuant to the applicable Loan Document.

     (b)    Without limiting Section 12.4(a), the Borrower shall indemnify and
hold harmless the Administrative Agent, the Lenders and the Issuing Lender, as
applicable, against any loss incurred by the Administrative Agent, any Lender or
the Issuing Lender as a result of any payment or recovery described in Section
12.4(a) and as a result of any variation having occurred in rates of exchange
between the date of any such amount becoming due under this Agreement or any
other Loan Document and the date of actual payment thereof. The foregoing
indemnity shall constitute a separate and independent obligation of the Borrower
and shall continue in full force and effect notwithstanding any such payment or
recovery.

                                  ARTICLE XIII

                            THE ADMINISTRATIVE AGENT

     SECTION 13.1   APPOINTMENT. Each of the Lenders hereby irrevocably
designates and appoints Wachovia as Administrative Agent of such Lender under
this Agreement and the other Loan Documents for the term hereof and each such
Lender irrevocably authorizes Wachovia, 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, 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.

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     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 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 applicable Term Loan Percentages,

                                       68


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 Loans 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 Loans, 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 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 and (so long as no Default or Event of Default has
occurred and is continuing) 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
            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

                                       69


            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 AGENT AND SYNDICATION AGENT. Other than as
expressly provided herein, 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
                                              Donald Hardman, Treasurer
                                   Telephone No.: (973) 898-6021
                                   Telecopy No.: (973) 898-0952

     If to Wachovia as             Wachovia Bank, National Association
      Administrative Agent:        Charlotte Plaza, CP-8
                                   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 in the Register

     (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.

     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

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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 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.

     (a)    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 (i) the
Lenders shall have made any demand under this Agreement or any of the other Loan
Documents or (ii) 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.

     (b)    Any amount to be set off pursuant to Section 14.3(a) shall be
denominated in Dollars and any amount denominated in an Alternative Currency
shall be in an amount equal to the Dollar Amount of such amount at the most
favorable spot exchange rate determined by the Administrative Agent to be
available to it; provided that if at the time of any such determination no such
spot exchange rate can reasonably be determined, the Administrative Agent may
use any reasonable method as it deems applicable to determine such rate, any
such determination to be conclusive absent manifest error.

     (c)    Each Lender and any assignee or participant of such Lender in
accordance with Section 14.10 are hereby authorized by the Borrower to combine
currencies, as deemed necessary by such Person, in order to effect any set-off
pursuant to Section 14.3(a).

     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

                                       71


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.

     (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, any dispute, claim or controversy arising out of, connected with
or relating to this Agreement or any other Loan Document ("DISPUTES") 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   WAIVER OF JURY TRIAL.

     (a)    JURY TRIAL. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER
HEREBY IRREVOCABLY WAIVE 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.

     (b)    PRESERVATION OF CERTAIN REMEDIES. 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

                                       72


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.

     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 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 (and any
attempted such assignment or transfer without such consent shall be null and
void).

     (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 with respect to the Term Loan
     Facility (or otherwise agreed by the Administrative Agent and, so long as
     no Default or Event of Default has occurred and is continuing, consented to
     by the Borrower, which consent by the Borrower will not be unreasonably
     withheld or delayed), 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 5.13(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;

                                       73


            (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 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; and PROVIDED FURTHER
     that, in any case of contemporaneous assignments by a Lender (including a
     group of affiliated Lenders that are funds managed by the same investment
     advisor) to a single assignee or more than one fund managed by the same
     investment advisor (which funds are not then Lenders hereunder), only a
     single $2,500 fee shall be payable for all such contemporaneous
     assignments.

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 hereunder
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement. Notwithstanding the
foregoing, in the case of an assignment to a Purchasing Lender, which is,
immediately prior to such assignment, an Affiliate of the assigning Lender, such
assignment shall be effective between such Lender and its Affiliate immediately
without compliance with the conditions for assignment under this Section
14.10(b), but shall not be effective with respect to the Borrower, the
Administrative Agent, the Issuing Lender, the Swingline Lender or any Lender,
and the Borrower, the Administrative Agent, the Issuing Lender, the Swingline
Lender and each Lender shall be entitled to deal solely with such assigning
Lender under any such assignment, in each case, until the conditions for
assignment under this Section 14.10(b) have been complied with.

     (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 Additional Term Loan Agreement 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 entries in the Register
applicable to any Lender shall be available for inspection by the Borrower or
such 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 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;

                                       74


            (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;

            (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 or interest on any Loan or any
     fee or Reimbursement Obligation or, except as expressly contemplated hereby
     or thereby, release substantially all of the Collateral or release any
     Subsidiary Guarantor (except as expressly contemplated hereby); 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 5.10,

                                       75


Section 5.11, Section 5.12, Section 5.13 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 5.10, Section
5.11, Section 5.12, and Section 5.13 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 5.13(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), (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) or (iv) related
to the "tax treatment" or "tax structure" (in each case within the meaning of
Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are provided to the Administrative Agent or such Lender relating to such tax
treatment or tax structure.. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation 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, or grant 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 or grant 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 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 requisite Lenders
specified below (or by the Administrative Agent with the consent of such
requisite Lenders) and delivered to the Administrative Agent and, in the case of
an amendment, signed by the Borrower.

            (a)     any consent, waiver or amendment purporting to: (i) increase
     the Revolving Credit Commitment of any Lender (ii) reduce the rate of, or
     forgive any, interest payable on any Revolving Credit Loans or
     Reimbursement Obligation, or any fees, (iii) reduce or forgive the
     principal amount of any Revolving Credit Loans or Reimbursement Obligation,
     (iv) extend the originally scheduled time or times of payment of the
     principal of any Revolving Credit Loans 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 thereto, (v)
     permit any subordination of the principal or interest on, or any Lien
     securing, any Revolving Credit Loans or Reimbursement Obligation, (vi)
     waive any of the conditions contained in Section 6.3 or (vii) extend the
     time of the obligation of the Lenders that have a Revolving Credit
     Commitment to make or issue or participate in Letters of Credit or
     Swingline Loans (including, without limitation, any consent, waiver or
     amendment under Section 3.1 to permit the expiry date of Letters of Credit
     to extend beyond a date which is five (5) days prior to the Revolving
     Credit Maturity Date), shall, in each case, require the written consent of
     each Lender having a Revolving Credit Commitment, which

                                       76


     such Lender is directly affected thereby;

            (b)     any consent, waiver or amendment purporting to: (i) increase
     the Term Loan Commitment of any Lender (except as otherwise provided in
     Section 4.6), (ii) reduce the rate of, or forgive any, interest payable on
     any Term Loan or any fees, (iii) reduce or forgive the principal amount of
     any Term Loan, (iv) 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,
     or (v) permit any subordination of the principal or interest on, or any
     Lien securing any Term Loan, shall, in each case, require the written
     consent of each Lender that has a Term Loan Commitment or has made Term
     Loans, which such Lender is directly affected thereby;

            (c)     any consent, waiver or amendment purporting to: (i) release
     any material portion of the Collateral or release any Security 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, (ii) amend the definition or percentage of Required Lenders or (iii)
     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, shall, in each case, require the written consent of each Lender;
     and

            (d)     all other amendments, waivers or consents not set forth in
     paragraphs (a) (b) and (c) above, shall require the written consent of the
     Required Lenders.

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  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 14.14  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 XIV and any other
provision of this Agreement (including, without limitation, Sections 5.10, 5.11,
5.12, 9.7, 12.4 and 14.2) 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 14.15  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.

     SECTION 14.16  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 14.17  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

                                       77


one and the same agreement.

     SECTION 14.18  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 Lenders' 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 14.19  ADVICE OF COUNSEL. Each of the parties represents to each
other party hereto that it has discussed this Agreement with its counsel.

     SECTION 14.20  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 14.21  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)    This Agreement constitutes an amendment and restatement of the
Existing Credit Agreement, as amended, effective from and after the Closing
Date. The execution and delivery of this Agreement shall not constitute a
novation of any Debt or other obligations owing to the Lenders or the
Administrative Agent under the Existing Credit Agreement based on facts or
events occurring or existing prior to the execution and delivery of this
Agreement. On the Closing Date, the credit facilities described in the Existing
Credit Agreement, as amended, shall be amended, supplemented, modified and
restated in their entirety by the facilities described herein, and all loans and
other obligations of the Borrower outstanding as of such date under the Existing
Credit Agreement, as amended, shall be deemed to be loans and obligations
outstanding under the corresponding facilities described herein, without any
further action by any Person, except that the Administrative Agent shall make
such transfers of funds as are necessary in order that the outstanding balance
of such Loans, together with any Loans funded on the Closing Date, reflect the
Commitments of the Lenders hereunder.

     (c)    The Borrower expressly acknowledges and agrees that each covenant
contained in Articles IX, X and 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.

     SECTION 14.22  CONTINUITY OF CONTRACT. The parties hereto agree that the
occurrence or non-occurrence of EMU, any event or events associated with EMU
and/or the introduction of the euro in all or any part of the European Union (a)
will not result in the discharge, cancellation, rescission or termination in
whole or in part of this Agreement or any other Loan Document, (b) will not give
any party the right to cancel, rescind, terminate or vary this Agreement or any
other Loan Document and (c) will not give rise to an Event of Default, in each
case other than as specifically provided in this Agreement.

                           [Signature pages to follow]

                                       78


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


                           [Signature Pages Continue]



                                   WACHOVIA BANK, NATIONAL ASSOCIATION, as
                                   Administrative Agent,
                                   on behalf of itself and the Lenders


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


                           [Signature Pages Continue]



                                   BEAR STEARNS CORPORATE LENDING INC., as
                                   Syndication Agent and Lender


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


                           [Signature Pages Continue]



                                   FLEET NATIONAL BANK, as Documentation Agent
                                   and Lender


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


                           [Signature Pages Continue]



                                   ALLIED IRISH BANKS, P.L.C., as Lender


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


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


                           [Signature Pages Continue]



                                   BNP PARIBAS, as Lender


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


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


                           [Signature Pages Continue]



                                   BANK OF AMERICA, N.A., as Lender


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


                           [Signature Pages Continue]



                                   THE BANK OF NEW YORK, as Lender


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


                           [Signature Pages Continue]



                                   BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as
                                   Lender


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


                           [Signature Pages Continue]



                                   CREDIT INDUSTRIEL ET COMMERCIAL, as Lender


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


                           [Signature Pages Continue]



                                   CIT LENDING SERVICES CORPORATION, as Lender


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


                           [Signature Pages Continue]



                                   CREDIT LYONNAIS NEW YORK BRANCH, as Lender


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


                           [Signature Pages Continue]



                                   MANUFACTURERS AND TRADERS TRUST COMPANY,
                                   as Lender


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


                           [Signature Pages Continue]



                                   NATIONAL CITY BANK, as Lender


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


                           [Signature Pages Continue]



                                   CITIZENS BANK OF PENNSYLVANIA, as Lender


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


                           [Signature Pages Continue]



                                   RZB FINANCE, LLC, as Lender


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


                           [Signature Pages Continue]



                                   BANCO ESPIRITO SANTO, S.A., NASSAU BRANCH, as
                                   Lender


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


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


                           [Signature Pages Continue]



                                   FIRST COMMONWEALTH BANK, as Lender


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


                           [Signature Pages Continue]



Acknowledged and Agreed by the Subsidiary Guarantors:


[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  Subsidiary 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
                              DRS SURVEILLANCE SUPPORT SYSTEMS, INC.
                              DRS SYSTEMS MANAGEMENT CORPORATION
                              NAI TECHNOLOGIES, INC.
                              DRS POWER & CONTROL TECHNOLOGIES, INC.,
                               as Subsidiary Guarantors

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

                              LAUREL TECHNOLOGIES PARTNERSHIP,
                              as Subsidiary Guarantor
[CORPORATE SEAL]                          By:  Sunburst Management Corporation,
                                          a General Partner


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

                           [Signature Pages Continue]

[CORPORATE SEAL]         DRS UNMANNED TECHNOLOGIES, INC.,
                              as Subsidiary Guarantor

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


[CORPORATE SEAL]         DRS OPTRONICS, INC.
                              DRS SENSORS & TARGETING SYSTEMS, INC.



                              DRS NYTECH IMAGING SYSTEMS, INC.,
                               as Subsidiary Guarantors

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


[CORPORATE SEAL]              DRS DATA & IMAGING SYSTEMS, INC.,
                               as Subsidiary Guarantor

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


[CORPORATE SEAL]         DRS SYSTEMS, INC., as Subsidiary Guarantor

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


[CORPORATE SEAL]              DRS ELECTRIC POWER TECHNOLOGIES, INC.,
                                as Subsidiary Guarantor

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


                           [Signature Pages Continue]



[CORPORATE SEAL]         DRS POWER TECHNOLOGY, INC.,
                              as Subsidiary Guarantor

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


[CORPORATE SEAL]         PARAVANT, INC.
                              DRS TACTICAL SYSTEMS, INC.
                              DRS TACTICAL SYSTEMS (WEST), INC.
                              DRS ENGINEERING DEVELOPMENT LABS, INC.
                              DRS SIGNAL TECHNOLOGIES, INC.
                              DRS SIGNAL RECORDING TECHNOLOGIES, INC.,
                                as Subsidiary Guarantors

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

EX-10.2

                                                                    Exhibit 10.2

                                                                  EXECUTION COPY


                          REGISTRATION RIGHTS AGREEMENT

                          DATED AS OF OCTOBER 30, 2003
                                  BY AND AMONG

                             DRS TECHNOLOGIES, INC.

               EACH OF THE GUARANTORS LISTED ON SCHEDULE I HERETO

                                       AND

                            BEAR, STEARNS & CO. INC.

                          WACHOVIA CAPITAL MARKETS, LLC

                             FLEET SECURITIES, INC.



     This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of October 30, 2003, by and among DRS Technologies, Inc., a Delaware
corporation (the "COMPANY"), each of the Guarantors listed on Schedule I hereto
(the "GUARANTORS"), and Bear, Stearns & Co. Inc., Wachovia Capital Markets, LLC
and Fleet Securities, Inc. (each an "INITIAL PURCHASER" and, collectively, the
"INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's
$350,000,000 6 7/8% Senior Subordinated Notes due 2013 (the "NOTES") pursuant to
the Purchase Agreement (as defined below).

     This Agreement is made pursuant to the Purchase Agreement, dated October
16, 2003, (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 8 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them the Indenture, dated October 30, 2003,
among the Company, the Guarantors and The Bank of New York, as Trustee, relating
to the Notes and the Exchange Notes (the "INDENTURE").

     The parties hereby agree as follows:

SECTION 1.     DEFINITIONS

     As used in this Agreement, the following capitalized terms shall have the
following meanings:

     ACT: The Securities Act of 1933, as amended.

     AFFILIATE: As defined in Rule 144 of the Act.

     BROKER-DEALER: Any broker or dealer registered under the Exchange Act.

     CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.

     CLOSING DATE: The date hereof.

     COMMISSION: The Securities and Exchange Commission.

     CONDITION FOR RELEASE: The consummation of the Company's acquisition of
Integrated Defense Technologies, Inc.

     CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Exchange Notes
to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the period required pursuant to Section
3(b) hereof and (c) the delivery by the Company to the Registrar under the
Indenture of Exchange Notes in the same aggregate principal amount as the
aggregate principal amount of Notes properly tendered and not subsequently
withdrawn by Holders thereof pursuant to the Exchange Offer.

     CONSUMMATION DEADLINE: As defined in Section 3(a) hereof.



     EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.

     EFFECTIVENESS TARGET DATE: As defined in Section 5 hereof.

     EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.

     EXCHANGE NOTES: The Company's 6 7/8% Senior Subordinated Notes due 2013 and
the related subsidiary guarantees to be issued pursuant to the Indenture: (i) in
the Exchange Offer or (ii) as contemplated by Section 4 hereof.

     EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of Notes
that are properly tendered and not subsequently withdrawn by such Holders in
connection with such exchange and issuance.

     EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.

     EXEMPT RESALES: The transactions in which the Initial Purchasers propose to
sell the Notes to certain "qualified institutional buyers," as such term is
defined in Rule 144A under the Act and pursuant to Regulation S under the Act.

     FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.

     HOLDERS: As defined in Section 2 hereof.

     PROSPECTUS: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.

     RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.

     REGISTRATION DEFAULT: As defined in Section 5 hereof.

     REGISTRATION STATEMENT: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.

     REGULATION S: Regulation S promulgated under the Act.

     RULE 144: Rule 144 promulgated under the Act.

     SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.

     SUSPENSION NOTICE: As defined in Section 6(d) hereof.

                                        2


     TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.

     TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of
(i) the date on which such Note is exchanged by a Person other than a
Broker-Dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a Broker-Dealer in the Exchange Offer of a Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such Broker-Dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement; or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Act.

SECTION 2.     HOLDERS

     A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.

SECTION 3.     REGISTERED EXCHANGE OFFER

     (a)  Unless the Exchange Offer shall not be permitted by applicable law or
Commission policy, the Company and the Guarantors shall (i) use reasonable best
efforts to file the Exchange Offer Registration Statement with the Commission on
or prior to 90 days (unless such date is not a Business Day, then the next
succeeding Business Day) after the Condition for Release has been met (such 90th
day being the "FILING DEADLINE"), (ii) use reasonable best efforts to cause such
Exchange Offer Registration Statement to declared effective by the Commission on
or prior to 180 days (unless such date is not a Business Day, then the next
succeeding Business Day) after the Condition for Release has been met (such
180th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be reasonably necessary in order to cause it to be
declared effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all reasonably necessary filings, if any, in connection with the
registration and qualification of the Exchange Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, PROVIDED that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service of process or
taxation in any jurisdiction where it is not then so subject and (iv) (A) the
Company and the Guarantors will commence the Exchange Offer; and (B) use all
commercially reasonable efforts to issue on or prior to 30 business days, or
longer, if required by the federal securities laws (such 30th or later day being
the "CONSUMMATION DEADLINE"), after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, exchange
Exchange Notes for all Notes properly tendered and not subsequently withdrawn
prior thereto in the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Exchange Notes to be offered
in exchange for the Notes that are Transfer Restricted Securities and (ii)
resales of Exchange Notes by Broker-Dealers that tendered into the Exchange
Offer Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Notes acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.

                                        3


     (b)  The Company and the Guarantors shall use all their respective
reasonable best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open, for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no
event shall such period be less than 20 business days. The Company and the
Guarantors shall cause the Exchange Offer to comply with all applicable federal
and state securities laws. No securities other than the Exchange Notes shall be
included in the Exchange Offer Registration Statement.

     (c)  The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Notes acquired directly from
the Company or any Affiliate of the Company), may exchange such Transfer
Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the SHEARMAN & STERLING no-action letter (available
July 2, 1993).

     Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to use
their respective reasonable best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by and subject to the provisions of Section 6(a) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, as soon as reasonably possible upon request, and in no event
later than one day after such request, at any time during such period.

SECTION 4.     SHELF REGISTRATION

     (a)  SHELF REGISTRATION. If (i) the Company and the Guarantors are not (A)
required to file the Exchange Offer Registration Statement or (B) permitted to
Consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) if any Holder of Transfer Restricted
Securities shall notify the Company within 20 business days following the
Consummation Deadline that (A) such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder;

                                        4


or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the
Company or any of its Affiliates, then the Company and the Guarantors will file
a Shelf Registration Statement (as defined below) to cover resales of the Notes
by Holders of the Notes who satisfy certain conditions relating to the provision
of information in connection with the Shelf Registration Statement. If obligated
to file a Shelf Registration Statement, the Company and the Guarantors shall use
commercially reasonable efforts to:

   (x) file, on or prior to 30 days after the earlier of (i) the date on which
the Company determines that the Exchange Offer Registration Statement cannot be
filed as a result of clause (a)(i) above and (ii) the date on which the Company
receives the notice specified in clause (a)(ii) above, (such earlier date, the
"FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under
the Act (which may be an amendment to the Exchange Offer Registration Statement
(the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted
Securities, the Holders of which shall have provided the information required by
Section 4(b) hereof; and

   (y) cause such Shelf Registration Statement to be declared effective by the
Commission on or prior to 90 days after the obligation arises for the Shelf
Registration Statement (such 90th day the "EFFECTIVENESS DEADLINE").

     If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company and the Guarantors are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; PROVIDED that, in such event, the Company and
the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).

     To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their reasonable best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i) hereof) following the Closing Date, or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Shelf Registration Statement have been sold pursuant thereto.

     (b)  PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or Item 508 of Regulation S-K, as applicable,
of the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information in the required times. Each selling

                                        5


Holder agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.

SECTION 5.     LIQUIDATED DAMAGES

     If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline (the "EFFECTIVENESS TARGET
DATE"), (iii) the Company and the Guarantors fail to Consummate the Exchange
Offer within 30 business days following the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, unless extended as
required by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but thereafter ceases to be effective
or usable in connection with resales of Transfer Restricted Securities during
the period specified herein (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby
jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to a per annum
rate of .25% on the principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional per annum rate of .25% with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of 1.00% per annum on the principal amount of Notes
constituting Transfer Restricted Securities; PROVIDED that the Company and the
Guarantors shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.

     All accrued liquidated damages shall be paid to the Holders of Transfer
Restricted Securities, in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. Notwithstanding the fact that any securities for which
liquidated damages are due cease to be Transfer Restricted Securities, all
obligations of the Company and the Guarantors to pay liquidated damages with
respect to securities shall survive until such time as such obligations with
respect to such securities shall have been satisfied in full.

     A Registration Default referred to in the first paragraph of this Section 5
hereof shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if such Registration Default
has occurred solely as a result of material events, with respect to the Company
that would need to be described in such Registration Statement or the related
prospectus and the Company has provided written notice to the Initial Purchasers
that such an event has occurred and that a Registration Default would have
occurred but for the provisions of this section; PROVIDED, HOWEVER, that in any
case if such Registration Default occurs for a continuous period in excess of 60
days, Liquidated

                                        6


Damages shall be payable in accordance with the above paragraph from the day
such Registration Default originally occurred.

SECTION 6.     REGISTRATION PROCEDURES

     (a)  EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange
Offer, the Company and the Guarantors shall, subject to the provisions of the
third paragraph of Section 5 above, (x) comply with all applicable provisions of
Section 6(c) below, (y) use their respective reasonable best efforts to effect
such exchange and to permit the resale of Exchange Notes by Broker-Dealers that
tendered in the Exchange Offer Notes that such Broker-Dealer acquired for its
own account as a result of its market making activities or other trading
activities (other than Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:

          (i)    If, following the date hereof there has been announced a change
     in Commission policy with respect to exchange offers such as the Exchange
     Offer, that in the reasonable opinion of counsel to the Company raises a
     substantial question as to whether the Exchange Offer is permitted by
     applicable federal law, or the Company and the Guarantors are not (A)
     required to file the Exchange Offer Registration Statement, (B) permitted
     to Consummate the Exchange Offer because the Exchange Offer is not
     permitted by applicable law or Commission policy or (C) obligated to file
     the Shelf Registration Statement, the Company and the Guarantors hereby
     agree to seek a no-action letter or other favorable decision from the
     Commission allowing the Company and the Guarantors to Consummate an
     Exchange Offer for such Transfer Restricted Securities. The Company and the
     Guarantors hereby agree to pursue the issuance of such a decision to the
     Commission staff level. In connection with the foregoing, the Company and
     the Guarantors hereby agree to take all such other actions as may be
     requested by the Commission or otherwise required in connection with the
     issuance of such decision, including without limitation (A) participating
     in telephonic conferences with the Commission, (B) delivering to the
     Commission staff an analysis prepared by counsel to the Company setting
     forth the legal bases, if any, upon which such counsel has concluded that
     such an Exchange Offer should be permitted and (C) diligently pursuing a
     resolution (which need not be favorable) by the Commission staff;

          (ii)   As a condition to its participation in the Exchange Offer, each
     Holder of Transfer Restricted Securities (including, without limitation,
     any Holder who is a Broker Dealer) shall furnish, upon the request of the
     Company, prior to the Consummation of the Exchange Offer, a written
     representation to the Company and the Guarantors (which may be contained in
     the letter of transmittal contemplated by the Exchange Offer Registration
     Statement) to the effect that (A) it is not an Affiliate of the Company,
     (B) it is not engaged in, and does not intend to engage in, and has no
     arrangement or understanding with any person to participate in, a
     distribution of the Exchange Notes to be issued in the Exchange Offer and
     (C) it is acquiring the Exchange Notes in its ordinary course of business.
     As a condition to its participation in the Exchange Offer each Holder using
     the Exchange Offer to participate in a distribution of the Exchange Notes
     shall acknowledge and agree that, if the resales are of Exchange Notes
     obtained by such Holder in exchange for Notes acquired directly from the
     Company or an Affiliate thereof, it (1) could not, under Commission policy
     as in effect on the date of this Agreement, rely on the position of the
     Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May
     13, 1988) and MORGAN STANLEY AND CO., INC. (available June 5, 1991), as
     interpreted in the Commission's letter

                                        7


     to SHEARMAN & STERLING dated July 2, 1993, and similar no-action letters
     (including, if applicable, any no-action letter obtained pursuant to clause
     (i) above), and (2) must comply with the registration and prospectus
     delivery requirements of the Act in connection with a secondary resale
     transaction and that such a secondary resale transaction must be covered by
     an effective registration statement containing the selling security holder
     information required by Item 507 or Item 508, as applicable, of Regulation
     S-K; and

          (iii)  Prior to effectiveness of the Exchange Offer Registration
     Statement, the Company and the Guarantors shall provide a supplemental
     letter to the Commission (A) stating that the Company and the Guarantors
     are registering the Exchange Offer in reliance on the position of the
     Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May
     13, 1988) and MORGAN STANLEY AND CO., INC. (available June 5, 1991) as
     interpreted in the Commission's letter to SHEARMAN & STERLING dated July 2,
     1993, and, if applicable, any no-action letter obtained pursuant to clause
     (i) above, (B) including a representation that neither the Company nor any
     Guarantor has entered into any arrangement or understanding with any Person
     to distribute the Exchange Notes to be received in the Exchange Offer and
     that, to the best of the Company's and each Guarantor's information and
     belief, each Holder participating in the Exchange Offer is acquiring the
     Exchange Notes in its ordinary course of business and has no arrangement or
     understanding with any Person to participate in the distribution of the
     Exchange Notes received in the Exchange Offer and (C) any other undertaking
     or representation required by the Commission as set forth in any no-action
     letter obtained pursuant to clause (i) above, if applicable.

     (b)  SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall, subject to the
provisions of the third paragraph of Section 5 above:

          (i)    comply with all the provisions of Section 6(c) below and use
     their respective reasonable best efforts to effect such registration to
     permit the sale of the Transfer Restricted Securities being sold in
     accordance with the intended method or methods of distribution thereof (as
     indicated in the information furnished to the Company pursuant to Section
     4(b) hereof), and pursuant thereto the Company and the Guarantors will
     prepare and file with the Commission a Registration Statement relating to
     the registration on any appropriate form under the Act, which form shall be
     available for the sale of the Transfer Restricted Securities in accordance
     with the intended method or methods of distribution thereof within the time
     periods and otherwise in accordance with the provisions hereof; and

          (ii)   issue, upon the request of any Holder or purchaser of the Notes
     covered by any Shelf Registration Statement contemplated by this Agreement,
     Exchange Notes having an aggregate principal amount equal to the aggregate
     principal amount of Notes sold pursuant to the Shelf Registration Statement
     and surrendered to the Company for cancellation; the Company shall register
     Exchange Notes on the Shelf Registration Statement for this purpose and
     issue the Exchange Notes to the purchasers of securities subject to the
     Shelf Registration Statement in the names as such purchasers shall
     designate.

     (c)  GENERAL PROVISIONS. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall, subject to the provisions of the third paragraph of Section 5
above:

                                        8


          (i)    use their respective reasonable best efforts to keep such
     Registration Statement continuously effective and provide all requisite
     financial statements for the period specified in Section 3 or Section 4 of
     this Agreement, as applicable. Upon the occurrence of any event that would
     cause any such Registration Statement or the Prospectus contained therein
     (A) to contain an untrue statement of material fact or omit to state any
     material fact necessary to make the statements therein not misleading or
     (B) not to be effective and usable for resale of Transfer Restricted
     Securities during the period required by this Agreement, the Company and
     the Guarantors shall file promptly an appropriate amendment to such
     Registration Statement curing such defect, and, if Commission review is
     required, use their respective reasonable best efforts to cause such
     amendment to be declared effective as soon as practicable;

          (ii)   prepare and file with the Commission such amendments and
     post-effective amendments to the applicable Registration Statement as may
     be reasonably necessary to keep such Registration Statement effective for
     the applicable period set forth in Section 3 or Section 4 hereof, as the
     case may be; cause the Prospectus to be supplemented by any required
     Prospectus supplement, and as so supplemented to be filed pursuant to Rule
     424 under the Act, and to comply fully with Rules 424, 430A and 462, as
     applicable, under the Act in a timely manner; and comply with the
     provisions of the Act with respect to the disposition of all securities
     covered by such Registration Statement during the applicable period in
     accordance with the intended method or methods of distribution by the
     sellers thereof set forth in such Registration Statement or supplement to
     the Prospectus;

          (iii)  advise each Holder promptly and, if requested by such Holder,
     confirm such advice in writing, (A) when the Prospectus or any Prospectus
     supplement or post-effective amendment has been filed, and, with respect to
     any applicable Registration Statement or any post-effective amendment
     thereto, when the same has become effective, (B) of any request by the
     Commission for amendments to the Registration Statement or amendments or
     supplements to the Prospectus or for additional information relating
     thereto, (C) of the issuance by the Commission of any stop order suspending
     the effectiveness of the Registration Statement under the Act or of the
     suspension by any state securities commission of the qualification of the
     Transfer Restricted Securities for offering or sale in any jurisdiction, or
     the initiation of any proceeding for any of the preceding purposes, (D) of
     the existence of any fact or the happening of any event that makes any
     statement of a material fact made in the Registration Statement, the
     Prospectus, any amendment or supplement thereto or any document
     incorporated by reference therein untrue, or that requires the making of
     any additions to or changes in the Registration Statement in order to make
     the statements therein not misleading, or that requires the making of any
     additions to or changes in the Prospectus in order to make the statements
     therein, in the light of the circumstances under which they were made, not
     misleading. If at any time the Commission shall issue any stop order
     suspending the effectiveness of the Registration Statement, or any state
     securities commission or other regulatory authority shall issue an order
     suspending the qualification or exemption from qualification of the
     Transfer Restricted Securities under state securities or Blue Sky laws, the
     Company and the Guarantors shall use their respective reasonable best
     efforts to obtain the withdrawal or lifting of such order at the earliest
     possible time;

          (iv)   subject to Section 6(c)(i), if any fact or event contemplated
     by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
     supplement or post-effective amendment to the

                                        9


     Registration Statement or related Prospectus or any document incorporated
     therein by reference or file any other required document so that, as
     thereafter delivered to the purchasers of Transfer Restricted Securities,
     the Prospectus will not contain an untrue statement of a material fact or
     omit to state any material fact necessary to make the statements therein,
     in the light of the circumstances under which they were made, not
     misleading;

          (v)    furnish to each Initial Purchaser and each Holder named in the
     Shelf Registration Statement in connection with such exchange or sale, if
     any, before filing with the Commission, copies of any Registration
     Statement or any Prospectus included therein or any amendments or
     supplements to any such Registration Statement or Prospectus, which
     documents will be subject to the review and comment of such Persons in
     connection with such sale, if any, for a period of at least three business
     days, and the Company will not file any such Registration Statement or
     Prospectus or any amendment or supplement to any such Registration
     Statement or Prospectus to which such Persons shall reasonably object
     within three business days after the receipt thereof. A Holder shall be
     deemed to have reasonably objected to such filing if such Registration
     Statement, amendment, Prospectus or supplement, as applicable, as proposed
     to be filed, contains an untrue statement of a material fact or omit to
     state any material fact necessary to make the statements therein not
     misleading or fails to comply with the applicable requirements of the Act;

          (vi)   make available, at reasonable times, for inspection by each
     Holder and any attorney or accountant retained by such Holders, all
     financial and other records, pertinent corporate documents of the Company
     and the Guarantors and cause the Company's and the Guarantors' officers,
     directors and employees to supply all information reasonably requested by
     any such Holder, attorney or accountant in connection with such
     Registration Statement or any post-effective amendment thereto subsequent
     to the filing thereof and prior to its effectiveness;

          (vii)  if requested by any Holders in connection with such exchange or
     sale, promptly include in any Registration Statement or Prospectus,
     pursuant to a supplement or post-effective amendment if necessary, such
     information as such Holders may reasonably request to have included
     therein, including, without limitation, information relating to the "Plan
     of Distribution" of the Transfer Restricted Securities; and make all
     required filings of such Prospectus supplement or post-effective amendment
     as soon as practicable after the Company is notified of the matters to be
     included in such Prospectus supplement or post-effective amendment;

          (viii) furnish to each Holder, upon such Holder's request, in
     connection with such exchange or sale, without charge, at least one copy of
     the Registration Statement, as first filed with the Commission, and of each
     amendment thereto, including all documents incorporated by reference
     therein and all exhibits (including exhibits incorporated therein by
     reference);

          (ix)   deliver to each Holder, without charge, as many copies of the
     Prospectus (including each preliminary prospectus) and any amendment or
     supplement thereto as such Persons reasonably may request; the Company and
     the Guarantors hereby consent to the use (in accordance with law) of the
     Prospectus and any amendment or supplement thereto by each selling Holder
     in connection with the offering and the sale of the Transfer Restricted
     Securities covered by the Prospectus or any amendment or supplement
     thereto;

                                       10


          (x)    upon the request of any Holder, enter into such agreements
     (including underwriting agreements) and make such representations and
     warranties and take all such other actions in connection therewith in order
     to expedite or facilitate the disposition of the Transfer Restricted
     Securities pursuant to any Shelf Registration Statement contemplated by
     this Agreement as may be reasonably requested by any Holder in connection
     with any sale or resale pursuant to any Shelf Registration Statement. In
     such connection, the Company and the Guarantors shall:

                 (A)  upon request of any Holder, furnish (or in the case of
          paragraphs (2) and (3), use its reasonable best efforts to cause to be
          furnished) to each Holder upon the effectiveness of the Shelf
          Registration Statement, as the case may be:

                      (1) a certificate, dated such date, signed on behalf of
                 the Company and each Guarantor by (x) the President or any Vice
                 President and (y) a principal financial or accounting officer
                 of the Company and such Guarantor, confirming, as of the date
                 thereof, the matters set forth in Sections 8(a), 8(b), 8(c) and
                 8(d) of the Purchase Agreement and such other similar matters
                 as such Holders may reasonably request;

                      (2) an opinion, dated the date of effectiveness of the
                 Shelf Registration Statement, as the case may be, of counsel
                 for the Company and the Guarantors covering matters similar to
                 those set forth in paragraph (h) of Section 8 of the Purchase
                 Agreement and such other matters as such Holder may reasonably
                 request, and in any event including a statement to the effect
                 that such counsel has participated in conferences with officers
                 and other representatives of the Company and the Guarantors,
                 representatives of the independent public accountants for the
                 Company and the Guarantors and have considered the matters
                 required to be stated therein and the statements contained
                 therein, although such counsel has not independently verified
                 the accuracy, completeness or fairness of such statements; and
                 that such counsel advises that, on the basis of the foregoing
                 (relying as to materiality to the extent such counsel deems
                 appropriate upon the statements of officers and other
                 representatives of the Company and the Guarantor(s) and without
                 independent check or verification), no facts came to such
                 counsel's attention that caused such counsel to believe that
                 the Shelf Registration Statement, at the time such Shelf
                 Registration Statement or any post-effective amendment thereto
                 became effective contained an untrue statement of a material
                 fact or omitted to state a material fact necessary in order to
                 make the statements therein, in the light of the circumstances
                 under which they were made, not misleading. Without limiting
                 the foregoing, such counsel may state further that such counsel
                 assumes no responsibility for, and has not independently
                 verified, the accuracy, completeness or fairness of the
                 financial statements, notes and schedules and other financial
                 data included in any Registration Statement contemplated by
                 this Agreement or the related Prospectus; and

                      (3) a customary comfort letter, dated the date of
                 effectiveness of the Shelf Registration Statement, as the case
                 may be, from the Company's independent accountants, in the
                 customary form and covering matters of the type

                                       11


                 customarily covered in comfort letters to underwriters in
                 connection with underwritten offerings, and affirming the
                 matters set forth in the comfort letters and agreed upon
                 procedures letters, as applicable, delivered pursuant to
                 Sections (8)(j), 8(k), 8(l) and 8(m) of the Purchase Agreement;
                 and

                 (B)  deliver such other documents and certificates as may be
          reasonably requested by the selling Holders to evidence compliance
          with the matters covered in clause (A) above and with any customary
          conditions contained in the any agreement entered into by the Company
          and the Guarantors pursuant to this clause (xi);

          (xi)   prior to any public offering of Transfer Restricted Securities,
     cooperate with the selling Holders and their counsel in connection with the
     registration and qualification of the Transfer Restricted Securities under
     the securities or Blue Sky laws of such jurisdictions as the selling
     Holders may request and do any and all other acts or things necessary or
     advisable to enable the disposition in such jurisdictions of the Transfer
     Restricted Securities covered by the applicable Registration Statement;
     PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be
     required to register or qualify as a foreign corporation where it is not
     now so qualified or to take any action that would subject it to the service
     of process in suits or to taxation, other than as to matters and
     transactions relating to the Registration Statement, in any jurisdiction
     where it is not now so subject;

          (xii)  in connection with any sale of Transfer Restricted Securities
     that will result in such securities no longer being Transfer Restricted
     Securities, cooperate with the Holders to facilitate the timely preparation
     and delivery of certificates representing Transfer Restricted Securities to
     be sold and not bearing any restrictive legends; and to register such
     Transfer Restricted Securities in such denominations and such names as the
     selling Holders may reasonably request at least two business days prior to
     such sale of Transfer Restricted Securities;

          (xiii) use their respective reasonable best efforts to cause the
     disposition of the Transfer Restricted Securities covered by the
     Registration Statement to be registered with or approved by such other
     governmental agencies or authorities as may be reasonably necessary to
     enable the seller or sellers thereof to consummate the disposition of such
     Transfer Restricted Securities, subject to the proviso contained in clause
     (xii) above;

          (xiv)  provide a CUSIP number for all Transfer Restricted Securities
     not later than the effective date of a Registration Statement covering such
     Transfer Restricted Securities and provide the Trustee under the Indenture
     with printed certificates for the Transfer Restricted Securities which are
     in a form eligible for deposit with the Depository Trust Company;

          (xv)   otherwise use their respective reasonable best efforts to
     comply with all applicable rules and regulations of the Commission, and
     make generally available to its security holders with regard to any
     applicable Registration Statement, as soon as practicable, a consolidated
     earnings statement meeting the requirements of Rule 158 under the Act
     (which need not be audited) covering a twelve-month period beginning after
     the effective date of the Registration Statement (as such term is defined
     in paragraph (c) of Rule 158 under the Act);

                                       12


          (xvi)  cause the Indenture to be qualified under the TIA not later
     than the effective date of the first Registration Statement required by
     this Agreement and, in connection therewith, cooperate with the Trustee and
     the Holders to effect such changes to the Indenture as may be reasonably
     required for such Indenture to be so qualified in accordance with the terms
     of the TIA; and execute and use its best efforts to cause the Trustee to
     execute, all documents that may be required to effect such changes and all
     other forms and documents required to be filed with the Commission to
     enable such Indenture to be so qualified in a timely manner; and

          (xvii) provide promptly to each Holder, upon request, each document
     filed with the Commission pursuant to the requirements of Section 13 or
     Section 15(d) of the Exchange Act.

     (d)  RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or Section 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.

SECTION 7.     REGISTRATION EXPENSES

     (a)  All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and the Guarantors; (v) all application and filing
fees in connection with listing the Exchange Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).

     The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.

                                       13


     (b)  In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), regardless of whether a
Registration Statement becomes effective, the Company and the Guarantors will
reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Notes into in the Exchange Offer and/or selling or
reselling Notes or Exchange Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins LLP, unless another firm shall
be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.

SECTION 8.     INDEMNIFICATION

     (a)  The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments and expenses whatsoever (including
without limitation, any legal or other expenses incurred in connection with
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Exchange Notes or registered Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by an untrue statement or
omission or alleged untrue statement or omission that is based upon information
relating to any of the Holders furnished in writing to the Company by or on
behalf any of the Holders.

     (b)  Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors, officers, partners, employees, representatives and
agents, and each person, if any, who controls (within the meaning of Section 15
of the Act or Section 20 of the Exchange Act) the Company, or the Guarantors to
the same extent as the foregoing indemnity from the Company and the Guarantors
set forth in section (a) above, but only with reference to information relating
to such Holder furnished in writing to the Company by or on behalf of such
Holder expressly for use in any Registration Statement, preliminary prospectus
or Prospectus (or any amendment or supplement thereto.) In no event shall any
Holder, its directors, officers or any Person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities or Exchange Notes pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.

     (c)  In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or Section 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the

                                       14


"INDEMNIFYING PERSON") in writing of the commencement thereof (but the failure
so to notify an indemnifying party shall not relieve it from any liability which
it may have under this Section 8 except to the extent that it has been
prejudiced in any material respect by such failure or from any liability which
it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties. In any such case, the indemnifying party shall not, in connection with
any one action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all indemnified parties and all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.

     (d)  To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) above is not permitted

                                       15


by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Guarantors, on the one hand, and of the Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by the Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and judgments
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.

     The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.

SECTION 9.     RULE 144A AND RULE 144

     The Company and each Guarantor agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.

                                       16


SECTION 10.    MISCELLANEOUS

     (a)  REMEDIES. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.

     (b)  NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.

     (c)  AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.

     (d)  THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.

     (e)  NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

          (i)    if to a Holder, at the address set forth on the records of the
     Registrar under the Indenture, with a copy to the Registrar under the
     Indenture; and

                                       17


          (ii)   if to the Company or the Guarantors:


                         DRS Technologies, Inc.
                         5 Sylvan Way
                         Parsippany, New Jersey 07054
                         Telecopier No.: (973) 898-4730
                         Attention: Nina Laserson Dunn

                         With a copy to:

                         Skadden, Arps, Slate, Meagher & Flom LLP
                         4 Times Square
                         New York, New York 10036
                         Telecopier No.: (212) 735-2000
                         Attention: David J. Goldschmidt

     All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.

     Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

     (f)  SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; PROVIDED, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.

     (g)  COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

     (h)  HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

     (i)  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

                                       18


     (j)  SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

     (k)  ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

                                       19


     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

                                  DRS TECHNOLOGIES, INC.


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


                                  NAI TECHNOLOGIES, INC.
                                  DRS ELECTRONIC SYSTEMS, INC.
                                  DRS SURVEILLANCE SUPPORT SYSTEMS, INC.
                                  DRS TECHNICAL SERVICES, INC.
                                  DRS POWER & CONTROL TECHNOLOGIES, INC.
                                  DRS ELECTRIC POWER TECHNOLOGIES, INC.
                                  DRS POWER TECHNOLOGY, INC.
                                  PARAVANT INC.
                                  DRS TACTICAL SYSTEMS, INC.
                                  DRS TACTICAL SYSTEMS (WEST), INC.
                                  DRS ENGINEERING DEVELOPMENT LABS, INC.
                                  DRS SIGNAL TECHNOLOGIES, INC.
                                  DRS SIGNAL RECORDING TECHNOLOGIES, INC.
                                  DRS SYSTEMS MANAGEMENT CORPORATION
                                  DRS OPTRONICS, INC.
                                  DRS SENSORS & TARGETING SYSTEMS, INC.
                                  DRS NYTECH IMAGING SYSTEMS, INC.
                                  DRS FPA, INC.
                                  DRS INFRARED TECHNOLOGIES, L.P.
                                  DRS UNMANNED TECHNOLOGIES, INC.
                                  DRS DATA & IMAGING SYSTEMS, INC.
                                  DRS TECHNOLOGIES CANADA, INC.
                                  DRS COMMUNICATIONS COMPANY L.L.C.
                                  DRS SYSTEMS, INC.
                                  DRS NEWCO III, INC.
                                  MMC3 CORPORATION
                                  DRS INTERNATIONAL, INC.

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

                                       20


BEAR, STEARNS & CO. INC.
WACHOVIA CAPITAL MARKETS, LLC
FLEET SECURITIES, INC.

By: BEAR, STEARNS & CO. INC.


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

                                       21


                                                                      SCHEDULE I

                                   GUARANTORS


     NAI Technologies, Inc.
     DRS Electronic Systems, Inc.
     DRS Surveillance Support Systems, Inc.
     DRS Technical Services, Inc.
     DRS Power & Control Technologies, Inc.
     DRS Electric Power Technologies, Inc.
     DRS Power Technology, Inc.
     Paravant Inc.
     DRS Tactical Systems, Inc.
     DRS Tactical Systems (West), Inc.
     DRS Engineering Development Labs, Inc.
     DRS Signal Technologies, Inc.
     DRS Signal Recording Technologies, Inc.
     DRS Systems Management Corporation
     DRS Optronics, Inc.
     DRS Sensors & Targeting Systems, Inc.
     DRS Nytech Imaging Systems, Inc.
     DRS FPA, Inc.
     DRS Infrared Technologies, L.P.
     DRS Unmanned Technologies, Inc.
     DRS Data & Imaging Systems, Inc.
     DRS Technologies Canada, Inc.
     DRS Communications Company L.L.C.
     DRS Systems, Inc.
     DRS Newco III, Inc.
     MMC3 Corporation
     DRS International, Inc.

EX-31.1

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Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Mark S. Newman, Chief Executive Officer of DRS Technologies, Inc. (the "registrant"), certify that:

1.

I have reviewed this quarterly report on Form 10-Q of DRS Technologies, Inc.;



2.

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



3.

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



4.

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



(a)

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



(b)

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



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

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



(a)

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



(b)

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

Date: November 14, 2003
/s/  MARK S. NEWMAN Mark S. Newman
Chief Executive Officer

32

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CHIEF EXECUTIVE OFFICER CERTIFICATION

EX-31. 2

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Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Richard A. Schneider, Chief Financial Officer of DRS Technologies, Inc. (the "registrant"), certify that:

1.

I have reviewed this quarterly report on Form 10-Q of DRS Technologies, Inc.;



2.

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



3.

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



4.

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



(a)

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



(b)

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



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

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



(a)

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



(b)

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

Date: November 14, 2003
/s/  RICHARD A. SCHNEIDER Richard A. Schneider
Chief Financial Officer

33

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CHIEF FINANCIAL OFFICER CERTIFICATION

EX-32.1

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Exhibit 32.1

Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Quarterly Report on Form 10-Q of DRS Technologies, Inc. for the quarter ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark S. Newman, Chief Executive Officer of DRS Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of DRS Technologies, Inc.

Date: November 14, 2003
By:
/s/  MARK S. NEWMAN Mark S. Newman
Chief Executive Officer

34

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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-32.2

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Exhibit 32.2

Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Quarterly Report on Form 10-Q of DRS Technologies, Inc. for the quarter ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard A. Schneider, Chief Financial Officer of DRS Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of DRS Technologies, Inc.

Date: November 14, 2003
By:
/s/  RICHARD A. SCHNEIDER Richard A. Schneider
Chief Financial Officer

35

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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002