10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2002

Commission file number 000-07438

ACTERNA CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	04-2258582
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

12410 Milestone Center Drive
Germantown, Maryland 20876
(Address of principal executive offices)(Zip code)

Registrant’s telephone number, including area code:   (800) 543-1550

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

At November 8, 2002 there were 192,247,507 shares of common stock of the registrant outstanding.

PART I. Financial Information

Item 1.  Financial Statements

ACTERNA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

			Three Months Ended September 30,						Six Months Ended September 30,
			2002			2001			2002			2001
			(In thousands, except per share data)
Net sales			$	163,941		$	298,895		$	334,286		$	637,814
Cost of sales				95,374			135,460			181,809			283,063
Gross profit				68,567			163,435			152,477			354,751
Selling, general and administrative expense				70,555			113,681			151,673			238,528
Product development expense				27,132			40,033			57,746			81,240
Impairment of goodwill and other assets				388,396			17,918			388,396			17,918
Restructuring expense				19,215			7,045			25,371			7,045
Amortization of intangibles				259			10,599			522			22,151
Total operating expenses				505,557			189,276			623,708			366,882
Operating loss				(436,990	)		(25,841	)		(471,231	)		(12,131	)
Interest expense				(19,257	)		(24,698	)		(41,554	)		(50,976	)
Interest income				136			893			208			1,377
Other income (expense), net				89			(3,445	)		(1,387	)		(5,273	)
Loss from continuing operations before income taxes and extraordinary item				(456,022	)		(53,091	)		(513,964	)		(67,003	)
Provision for (benefit from) income taxes				(49,342	)		84,008			(66,261	)		79,119
Loss from continuing operations before extraordinary item				(406,680	)		(137,099	)		(447,703	)		(146,122	)
Discontinued operations:
	Loss from discontinued operations, net of tax			(2,625	)		(10,422	)		(1,513	)		(7,550	)
	Gain on sale of discontinued operations, net of tax expense of $50,405			74,902			—			74,902			—
Net loss before extraordinary item				(334,403	)		(147,521	)		(374,314	)		(153,672	)
Extraordinary item, gain on early extinguishment of debt, net of tax expense of $27,852				50,082			—			50,082			—
Net loss			$	(284,321	)	$	(147,521	)	$	(324,232	)	$	(153,672	)
Net income (loss) per common share:
	Basic and diluted
		Continuing operations	$	(2.12	)	$	(0.71	)	$	(2.33	)	$	(0.76	)
		Discontinued operations		0.38			(0.06	)		0.38			(0.04	)
		Extraordinary item		0.26			—			0.26			—
			$	(1.48)		$	(0.77	)	$	(1.69	)	$	(0.80	)
Weighted average number of common shares:
	Basic and diluted			192,248			191,889			192,248			191,538

See notes to unaudited consolidated financial statements.

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ACTERNA CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

				September 30, 2002			March 31, 2002
				(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	32,041		$	42,739
	Accounts receivable, net of allowance of $6,912 and $7,136, respectively				98,910			119,246
	Inventories, net:
		Raw materials			30,494			37,604
		Work in process			30,671			35,885
		Finished goods			31,265			35,250
			Total inventories		92,430			108,739
		Deferred income taxes			21,650			18,878
		Income tax receivable			9,517			77,479
		Other current assets			35,429			30,254
		Current assets of discontinued operations held for sale			—			15,430
			Total current assets		289,977			412,765
Property, plant and equipment, net					110,670			118,213
Goodwill, net					33,332			408,922
Intangible assets, net					1,306			1,828
Deferred debt issuance costs, net					18,427			26,582
Other non-current assets					17,156			19,979
Long-term assets of discontinued operations held for sale					—			26,267
			Total assets	$	470,868		$	1,014,556
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
	Notes payable			$	1,886		$	2,523
	Current portion of long-term debt				18,768			28,937
	Accounts payable				51,127			68,262
	Accrued expenses:
			Compensation and benefits		29,308			36,752
			Deferred revenue		40,359			49,231
			Warranty		17,669			16,907
			Interest		6,168			10,700
			Restructuring		19,338			14,185
			Other		27,593			31,657
			Taxes other than income taxes		6,491			8,079
	Accrued income taxes				41,382			31,262
	Current liabilities of discontinued operations held for sale				3,077			10,644
			Total current liabilities		263,166			309,139
Long-term debt					796,305			979,187
Long-term notes payable - related party					80,319			76,875
Deferred income taxes					19,565			17,581
Other long-term liabilities					65,313			68,549
Commitments and contingencies
Total stockholders’ deficit:
	Common stock				1,922			1,922
	Additional paid-in capital				778,318			786,537
	Accumulated deficit				(1,494,871	)		(1,170,639	)
	Unearned compensation				(37,806	)		(53,925	)
	Accumulated other comprehensive loss				(1,363	)		(670	)
			Total stockholders’ deficit		(753,800	)		(436,775	)
Total Liabilities and Stockholders’ deficit				$	470,868		$	1,014,556

See notes to unaudited consolidated financial statements.

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ACTERNA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

			Six Months Ended September 30,
			2002			2001
			(In thousands)
Operating activities:
	Net loss		$	(324,232	)	$	(153,672	)
	Adjustments for non-cash items included in net loss:
		Impairment of goodwill and other assets		388,492			17,918
		Gain on disposal of property and equipment		(644	)		—
		Gain on sale of Airshow, net		(74,902	)		—
		Gain on sale of Wireless Instruments business		(127	)		—
		Gain on extinguishment of debt, net		(50,082	)		—
		Benefit from income taxes		(67,802	)		—
		Bad debt expense		437			479
		Depreciation expense		14,765			17,758
		Amortization of intangibles		606			22,151
		Amortization of unearned compensation		7,900			12,067
		Amortization of deferred debt issuance costs		2,453			2,662
		Non-cash interest expense		5,857			—
		Loss from discontinued operations		—			10,039
		Change in deferred income taxes		(1,300	)		71,141
	Change in operating assets and liabilities			69,643			6,620
	Net cash flows provided by (used in) operating activities			(28,936	)		7,163
Investing activities:
	Proceeds from the sale of businesses			162,585			800
	Proceeds from sale of property and equipment			2,033			—
	Businesses acquired in purchase transaction, net of cash acquired			—			(1,495	)
	Purchases of property and equipment			(18,775	)		(24,750	)
	Other			—			(2,201	)
	Net cash flows provided by (used in) investing activities			145,843			(27,646	)
Financing activities:
	Borrowings under revolving facility and term loan			17,967			7,140
	Early extinguishment of debt, including $1,617 transaction costs			(153,000	)		—
	Repayment of capital lease obligations			(378	)		(64	)
	Proceeds from capital lease financing			5,812			—
	Proceeds from issuance of common stock, net of expenses			—			1,759
	Net cash flows provided by (used in) financing activities			(129,599	)		8,835
Effect of exchange rate on cash and cash equivalents				1,994			42
Decrease in cash and cash equivalents				(10,698	)		(11,606	)
Cash and cash equivalents at beginning of period				42,739			63,054
Cash and cash equivalents at end of period			$	32,041		$	51,448
Change in operating assets and liabilities:
Decrease in trade accounts receivable			$	24,077		$	25,003
Decrease (increase) in inventories				17,936			(31,002	)
Decrease in other assets				66,446			49,982
Increase (decrease) in accounts payable				(17,504	)		3,586
Decrease in accrued expenses, taxes and other				(21,312	)		(40,949	)
Change in operating assets and liabilities			$	69,643		$	6,620

See notes to unaudited consolidated financial statements.

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ACTERNA CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A.	FORMATION, BACKGROUND AND RECENT DEVELOPMENTS
	Acterna Corporation (the “Company”), was formed in 1959 and is a global communications equipment company focused on network technology solutions.  The Company’s operations are conducted by wholly owned subsidiaries located principally in the United States of America and Europe with other operations, primarily sales offices, located in Asia and Latin America.  The Company’s continuing operations are managed in three business segments: communications test, industrial computing and communications, and da Vinci. The Company also had another segment, Airshow, which was sold on August 9, 2002. (See Note H. Discontinued Operations)
	The communications test business develops, manufactures and markets instruments, systems, software and services used to test, deploy, manage and optimize communications networks, equipment and services.  The Company offers products that test and manage the performance of equipment found in modern, converged networks, including optical transmission systems for data communications, voice services, wireless voice and data services, cable services and video delivery.
	The industrial computing and communications segment (Itronix) provides computer products to the ruggedized personal computer market.
	Da Vinci provides digital color enhancement systems used in the production of television commercials and programming.  Their products are sold to post-production and video production professionals and producers of content for standard and high-definition television markets.
	On August 9, 2002, the Company consummated the sale of its Airshow, Inc. business (“Airshow”) to Rockwell Collins, Inc., for $156.9 million in cash, net of fees and expenses of $3.1 million.  The Company recorded a pre-tax gain on this transaction of $125.3 million, which reflects the proceeds received by the Company in excess of $28.5 million net assets disposed and also reflects a $3.1 million liability recorded by the Company related to a pending purchase price adjustment claim by Rockwell Collins (See Note P. Contingencies).  The Company used $153 million of the net proceeds to repay a portion of its outstanding debt, including (i) repayment of $128.0 million of Senior Secured Credit Facility term loan borrowings and (ii) transaction costs of $1.6 million and for other corporate purposes. Concurrently with the consummation of the sale of Airshow, the Company retired $106.3 million in principal amount of its 9.75 percent Senior Subordinated Notes due 2008 for cash consideration of $220 for each $1000 principal amount of notes tendered, and all accrued interest due thereon. (See Note I. — Related Party Transaction. The Company has accounted for this business as a discontinued operation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”  (See Note H. Discontinued Operations).
	During the second quarter of fiscal 2003, the Company recorded an impairment charge totaling $388.4 million related to the impairment of goodwill and certain other assets (See Note F. Impairment Charges).
	The Company operates on a fiscal year ending March 31 in the calendar year indicated (e.g., references to fiscal 2003 are references to the Company’s fiscal year which began April 1, 2002 and will end March 31, 2003).  Unless the context otherwise requires, the “Company” or “Acterna” refers to Acterna Corporation and its subsidiaries.
B.	LIQUIDITY
	The global economic downturn has continued to impact the Company’s communications test segment and its other businesses.   As a result, the Company continues to experience diminished product demand, excess manufacturing capacity and erosion of average selling prices.  The downturn in the communications test segment results from, among

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other things, a significant decrease in network expansion activity and capital spending generally by the Company’s telecommunications customers.

In response to the continuing decline in product demand, the Company continues to implement cost reduction programs aimed at aligning its ongoing operating costs with its expected revenues and enabling the Company to remain compliant with the liquidity and earnings covenants under the Senior Secured Credit Facility. Given the severity of current market conditions and the progressive nature of the EBITDA covenants in the Senior Secured Credit Facility, the Company cannot provide any assurance that these cost reduction programs will actually align the Company’s operating expenses and revenues and enable the Company to continue to comply with such covenants.  In order to remain in compliance, the Company is required to, among other things, maintain minimum liquidity and achieve certain EBITDA results.  For the upcoming quarters and into fiscal year 2004, the Company cannot provide any assurance that it will be able to comply with these or other covenant requirements.  (See Note J. Debt)  In the event the Company does not meet the covenants, a capital restructuring may be required. There can be no assurance that the Company would be able to complete such a capital restructuring.

As of September 30, 2002, the Company had liquidity of approximately $94 million, which includes cash and cash equivalents of $32 million and available credit under its Revolving Credit Facility of $62 million.

The Company’s cash requirements for debt service and ongoing operations are substantial.  In connection with the sale of Airshow, the Company’s lenders agreed to modify the EBITDA covenants in the Senior Secured Credit Facility.  (See Note J. Debt).  These amendments became effective on August 7, 2002. Pursuant to these amendments, among other things the failure of the Company to pay at least $100 million outstanding under the Senior Secured Credit Facility on or prior to June 30, 2003, would cause the debt covenants to become more restrictive as of that date. The Company plans to continue to work with its senior lenders to amend its covenant requirements, as necessary.  However, the Company cannot provide any assurance that it will be in compliance with its debt covenants and, if it is not, that it will be able to reach agreement with its lenders to waive or modify such covenants. Notwithstanding current forecasts of revenues and results of operations, assuming timely completion and execution of the cost reduction programs, the Company believes that based on its increasing and significant debt repayment obligations during 2003 and 2004, the Company’s debt may need to be further renegotiated, extended or refinanced.  In addition, the Company may need to raise additional capital to meet its needs, to develop new products and to enhance existing products in response to competitive pressures, and to acquire complementary products, businesses or technologies.  There can be no assurance that, in the event the Company is required to extend, refinance or repay its debt, new or additional sources of financing will be available or will be available on terms acceptable to the Company.  Inability to further modify the debt covenants, as necessary, could result in an event of default and cause the lenders to require immediate repayment of all debt under the Senior Secured Credit Facility and limit or cancel the availability of borrowings under the Company’s Revolving Credit Facility.  In such event, the inability to repay the Company’s debt obligations or source alternative financing would have a material negative impact on the business, financial position and results of operations of the Company and could result in a capital restructuring of the Company.  There can be no assurance that the Company would be able to complete such a capital restructuring.

The Company’s future operating performance and ability to repay, extend or refinance the Senior Secured Credit Facility (including the Revolving Credit Facility) or any new borrowings, and to service and repay or refinance the 12% Convertible Notes due 2007 and the 9.75% Senior Subordinated Notes due 2008, will be subject to future economic, financial and business conditions and other factors, including demand for communications test equipment, many of which are beyond the Company’s control.

These and other risks associated with the Company’s business are described in the Company’s Securities and Exchange Commission reports, including the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2002 (the “2002 Form 10-K/A”).

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C.	CONSOLIDATED FINANCIAL STATEMENTS
	The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted in accordance with the rules and regulations of the SEC.  These statements should be read in conjunction with the Company’s 2002 Form 10-K/A.  The balance sheet amounts at March 31, 2002, in this report were extracted from the Company’s audited 2002 consolidated financial statements included in the 2002 Form 10-K/A.  Certain prior period amounts have been reclassified to conform to the current year financial statement presentation. The assets and liabilities from the Airshow business have been segregated and are shown as assets and liabilities of discontinued operations at March 31, 2002. The information contained in the unaudited Consolidated Financial Statements reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated.  All such adjustments are of a normal recurring nature with the exception of those entries resulting from discontinued operations, asset impairment and early extinguishment of debt. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect both the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities, as of the date of the financial statements.  Such estimates in these financial statements include allowances for doubtful accounts receivable, net realizable value of inventories, warranty accruals, pension obligations, impairment charges and tax valuation allowances.  Actual results could differ from those estimates.  The results of operations for the six months ended September 30, 2002 are not necessarily indicative of the results of the entire fiscal year.
D.	DIVESTITURES
	On August 9, 2002, the Company consummated the sale of its Airshow business to Rockwell Collins, Inc., for $156.9 million in cash, net of fees and expenses of $3.1 million.  The Company recorded a pre-tax gain on this transaction of $125.3 million, which reflects the proceeds received by the Company in excess of net assets disposed and also reflects a $3.1 million liability recorded by the Company related to a pending purchase price adjustment claim by Rockwell Collins (See Note P. Contingencies).  As a result of this gain, the Company recorded a $50.4 million tax expense.  The Company used $153 million of the net proceeds to repay a portion of its outstanding debt and for other corporate purposes.  (See Note J. Debt).  The Company has accounted for this business as a discontinued operation in accordance with SFAS No. 144. (See Note H. Discontinued Operations).
	In addition, on September 5, 2002, the Company completed the disposition of its Wireless Instruments business for $5.7 million of net cash proceeds and recorded the resulting gain of $127,000.  The Wireless Instruments business does not qualify as a component of an entity in accordance with SFAS 144 and accordingly, the operating results of this business are included in continuing operations of the communications test business segment for all periods presented through the date of disposition.
E.	RECENT ACCOUNTING PRONOUNCEMENTS
	In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations”.  SFAS No. 143 addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  This statement is effective for fiscal years beginning after June 15, 2002.  The Company does not expect the application of SFAS No. 143 to have a material impact on its financial position or results of operations.

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	In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, which rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt”. This statement amended APB Opinion No. 30, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect.  As a result, the criteria set forth by the amended APB Opinion No. 30 will now be used to classify those gains and losses.  SFAS No. 145 also amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions.  Lastly, SFAS No. 145 amended other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions.  The provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002, with early adoption encouraged.  Upon adoption of the provisions of SFAS No. 145 the Company will reclassify the extraordinary items reported during fiscal 2001 and fiscal 2003 into continuing operations.
	In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”.  SFAS No. 146 addresses accounting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.”  This statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption encouraged.  The Company is currently assessing the impact of SFAS 146 on its financial position and results of operations.
F.	IMPAIRMENT CHARGES
	During the second quarter of fiscal 2003, as a result of the continued declining financial performance and reduced expectations for future earnings within the communications test segment, the Company decided to discontinue the on-going implementation of its global enterprise planning (ERP) software system.  The Company also decided to discontinue the implementation of other, less significant projects.  As a result of these decisions, the Company wrote off $14.2 million of assets, including $13.6 million of capitalized internal-use software costs. These assets were previously included in the machinery and equipment classification of property and equipment.  The $14.2 million charge is included in the impairment charge in the Company’s unaudited Statements of Operations.
	The Company also recorded an impairment charge of $374.2 million related to the impairment of goodwill within the communications test segment (See Note G. Acquired Intangible Assets and Goodwill).

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G.	ACQUIRED INTANGIBLE ASSETS AND GOODWILL
	The acquired intangible assets as of September 30, 2002 and March 31, 2002 are as follows (in thousands):

			September 30, 2002			March 31, 2002
			(In thousands)
Amortized intangible assets:
		Gross carrying amount	$	8,688		$	8,758
		Accumulated amortization		(7,382	)		(6,930	)
Total			$	1,306		$	1,828
Aggregate amortization expense:
	For the six months ended September 30, 2002		$	522
Estimated amortization expense:
		For the year ended March 31, 2003	$	823
		For the year ended March 31, 2004	$	823
		For the year ended March 31, 2005	$	182

Intangible assets are amortized over a weighted average life of 8 years.  Net intangible assets of Airshow shown in discontinued operations were  $625,000 at March 31, 2002.  The sale of Airshow business was consummated on August 9, 2002.

The changes in the carrying amount of goodwill during the six months ended September 30, 2002, are as follows (in thousands):

	Reporting Units
	Communications Test			Itronix		da Vinci		Total
Balance as of March 31, 2002	$	376,171		$	31,645	$	1,106	$	408,922
Goodwill adjustments		(2,020	)		553		28		(1,439	)
Goodwill impairment charges		(374,151	)		—		—		(374,151	)
Balance as of September 30, 2002	$	—		$	32,198	$	1,134	$	33,332

The goodwill adjustments in the Itronix and da Vinci reporting units resulted from currency translation adjustments.  The goodwill adjustments in the communications test segment resulted from a reduction related to the sale of the Wireless Instruments business (See Note D. Divestitures) offset by currency translation adjustments.  In addition, the Company recorded a $374.2 million goodwill impairment charge, as described below.

During the quarter ended September 30, 2002, the market conditions within the communications test business experienced further declines.  The Company observed a more pronounced deterioration in customer bookings as well as further reductions in customer spending on telecommunication products. 

As a result of the increasingly severe market conditions, the Company revised and reduced its long term financial forecast.  Based on this revision of the long-term outlook, the Company, assisted by independent valuation consultants, completed an assessment of the carrying amount of goodwill in the communications test segment, as required by SFAS No. 142, ”Goodwill and Other Intangible Assets”. The results of the impairment analysis, which were derived by utilizing, among other methods, a discounted cash flow analysis and an analysis of other market

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	comparables, indicated that the carrying amount of goodwill within the communications test segment exceeded its estimated fair value.  Accordingly, the Company recorded an impairment charge of $374.2 million.  This charge was recorded within the communications test segment and has been included in the impairment charge in the unaudited Statements of Operations.
H.	DISCONTINUED OPERATIONS
	On August 9, 2002, the Company consummated the sale of its Airshow business to Rockwell Collins, Inc., for $156.9 million in cash, net of fees and expenses of $3.1 million.  The Company recorded a pre-tax gain on this transaction of $125.3 million, which reflects the net proceeds received in excess of $28.5 million net assets disposed and also reflects a $3.1 million liability recorded by the Company related to a pending purchase price adjustment claim by Rockwell Collins. (See Note P Contingencies). The Company used $153 million of the net proceeds of the sale to repay a portion of its outstanding debt and for other corporate purposes.  (See Note D Divestitures and Note J Debt).  The Company has accounted for this business as a discontinued operation in accordance with SFAS No. 144, and accordingly, the results of operations of this business have been segregated from continuing operations and reported within loss from discontinued operations, net of tax in the Company’s unaudited Consolidated Statements of Operations for all periods presented.  Additionally, the assets and liabilities of the Airshow business are reflected within the assets and liabilities of discontinued operations in the accompanying unaudited Condensed Consolidated Balance Sheets.  The unaudited Statements of Cash Flows have not been restated for discontinued operations.  Airshow revenue for the three months and six months ended September 30, 2002, was $5.2 million and $20.6 million, respectively.  Airshow revenue for the three and six months ended September 30, 2001, was $15.9 million and $33.6 million, respectively.  Airshow pre-tax loss for the three months and six months ended September 30, 2002, was $4.8 million and $3.1 million, respectively.  Airshow pre-tax profit for the three months and six months ended September 30, 2001, was $1.1 million and  $4 million, respectively.
	In May 2000, the Board of Directors approved a plan to divest the industrial computing and communications segment, which consisted of its ICS Advent and Itronix Corporation subsidiaries.  In October 2001, the Company divested ICS Advent, but did not divest Itronix, which required the Company to make certain reclassifications to its Statement of Operations for the three month period ended June 30, 2001.  Management had previously expected that proceeds on disposal of both businesses comprising the segment would exceed net assets, including operating losses incurred subsequent to May 2000, and accordingly these operating losses were deferred.
	The net operating losses for ICS Advent and Itronix were initially reported as discontinued operations for the three months ended June 30, 2001.  As a result of the reclassification, the net loss for ICS Advent and Itronix for the three months ended June 30, 2001, was reclassified into continuing operations and an offset by an equal net income amount was included as discontinued operations.  Therefore, the net loss in total for the Company as previously reported for this period did not change. The charge reported as discontinued operations for the three month period ended September 30, 2001 includes net operating losses previously deferred for ICS Advent and Itronix. The Statement of Cash Flows for the three months ended June 30, 2001 was not reclassified as this statement was not previously presented on a discontinued basis.  The operating results for ICS Advent and Itronix during the three months ended September 30, 2001, were initially reported within continuing operations. As such, no adjustments were necessary.
I.	RELATED PARTY TRANSACTION
	On June 24, 2002, Acterna LLC, along with CD&R VI (Barbados), Ltd. (“CD&R Barbados”), commenced cash tender offers, as amended, for up to $155 million, on a combined basis, in principal amount of its outstanding 9.75 percent Senior Subordinated Notes due 2008.  The tender offers provided for cash consideration of $220 in exchange for each $1000 principal amount of notes tendered, and all accrued interest due thereon.  These

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	combined tender offers expired on August 12, 2002, and resulted in the purchase and retirement of notes having an aggregate principal amount of $106 million by Acterna LLC and the purchase of notes having an aggregate principal amount of $43 million obtained by CD&R Barbados.  In connection with these combined tender offers, Acterna LLC granted CD&R Barbados the right (which CD&R Barbados agreed to exercise only at the request of the administration agent under the Senior Secured Credit Facility) to invest all future cash interest received, on an after tax basis, with respect to all the Senior Subordinated Notes now held by CD&R Barbados in new senior secured convertible notes of Acterna LLC.    The new notes that will be issued upon such reinvestment will have terms substantially similar to the 12% Senior Secured Convertible Notes due 2007 issued to Clayton, Dubilier & Rice Fund VI Limited Partnership (“CD&R Fund VI”) in January 2002, except that the interest rate and conversion rate applicable to any series of new notes will be determined at the time of issuance.  CD&R Barbados is a Barbados company, all of the capital stock of which is owned by CD&R Fund VI.
J.	DEBT
	On August 9, 2002,the Company consummated the sale of its Airshow business and received net proceeds of approximately $156.9 million.  The Company used $153 million of these proceeds to repay a portion of its outstanding debt, including (i) repayment of $128.0 million of Senior Secured Credit Facility term loan borrowings and (ii) transaction costs of $1.6 million and for other corporate purposes. Concurrently with the consummation of the sale of Airshow, the Company retired $106.3 million in principal amount of its 9.75 percent Senior Subordinated Notes due 2008 for cash consideration of $220 for each $1000 principal amount of notes tendered, and all accrued interest due thereon. (See Note I-Related Party Transaction).  The retirement of the Senior Subordinated Notes was made in connection with the June 24, 2002, cash tender offers, as amended.  (See Note I Related Party Transaction).  As a result of the retirement of the Senior Subordinated Notes and term loan borrowings, the Company recorded a pre-tax gain of approximately $77.9 million, net of approximately $6 million for the write-off of debt issuance costs.  The $50.1 million net gain is shown as an extraordinary item, net of tax expense of $27.9 million, for the three and six month periods ended September 30, 2002.  At September 30, 2002, the Company had approximately $897 million of outstanding debt, broken out as follows:

	September 30, 2002		March 31, 2002
	(In thousands)
Senior secured credit facility	$	612,911	$	710,683
Senior subordinated notes		168,715		275,000
Senior secured convertible notes		80,319		76,875
Capital leases and other debt		33,447		22,441
Other notes payable		1,886		2,523
Total debt		897,278		1,087,522
Less current portion		20,654		31,460
Long-term debt	$	876,624	$	1,056,062

11

The following table lists the future payments for debt obligations for each of the twelve-month periods ended September 30:  (In thousands)

Debt Obligations	2003		2004		2005		2006		2007		Thereafter		Total
Senior secured credit facility	$	8,657	$	37,557	$	53,609	$	254,536	$	258,552		—	$	612,911
Senior secured convertible notes		—		—		—		—		—		80,319		80,319
Senior subordinated notes		—		—		—		—		—		168,715		168,715
Other notes payable		1,886		—		—		—		—		—		1,886
Capital leases and other debt		10,111		4,758		4,306		3,225		3,288		7,759		33,447
Total	$	20,654	$	42,315	$	57,915	$	257,761	$	261,840	$	256,793	$	897,278

	Note: Operating leases and purchase obligations have not changed significantly from March 31, 2002; therefore, the Company has not updated information on the future payments for those obligations.
	During July 2002, the Company reached an agreement with its lenders regarding amendments to its Senior Secured Credit Facility.  Under the amendments, which became effective on August 7, 2002, the lenders, among other things, approved the sale of the Company’s Airshow business to Rockwell Collins and agreed to certain changes to financial covenants in the Revolving Credit Facility. As part of this agreement, the minimum liquidity requirement of $25 million at the end of each quarter will remain the same; however, the minimum EBITDA covenants (as defined in the Senior Secured Credit Facility) have been modified as follows: negative $40 million for the two quarters ended September 2002; negative $17 million for the three quarters ended December 2002; and $0 for the four quarters ended March 2003. Additionally, if the Company repays at least $100 million of term debt on or prior to June 30, 2003, minimum EBITDA covenants for the following four quarters will be modified as follows: $20 million for June 2003; $30 million for September 2003; $40 million for December 2003; and $50 million for March 2004.  If the Company does not repay at least $100 million of term debt prior to June 2003, the Company would then be subject, until 2007, to more restrictive financial covenants regarding its interest coverage ratio, defined as the ratio of the Company’s EBITDA to its interest expense, and its leverage ratio, defined as the ratio of the Company’s total indebtedness to its EBITDA.  During this period, if the Company does not repay at least $100 million as described above, the Company’s interest coverage ratio would not be permitted to exceed 2 to 1 and its leverage ratio would not be permitted to exceed 4.5 to 1.
	In addition, the lenders permitted the Company to use up to $24 million to purchase a portion of its 9.75 percent Senior Subordinated Notes due 2008 pursuant to the combined tender offers.  (See Note I.  Related Party Transaction).  As of September 30, 2002, the Company was in compliance with its financial covenants; however, given the current market conditions and the progressive nature of the required EBITDA covenants, the Company may also be required to obtain further amendments to the Senior Secured Credit Facility in the future in order to continue to comply with its financial covenant requirements.  The Company cannot provide any assurance that it will be able to reach agreement with its lenders with respect to such amendments on reasonable terms.  (See Note B. Liquidity)
K.	RESTRUCTURING
	The Company continues to implement cost reduction programs aimed at aligning its ongoing operating costs with its expected revenues. During the first quarter of fiscal 2003, the Company announced restructuring actions primarily related to the reduction of the workforce and recorded restructuring charges of $6.2 million as a result of these actions.  The Company also announced restructuring actions during the second quarter of fiscal 2003, resulting in total charges of $19.2 million,  associated with the reduction of approximately 500 additional workers and facility closure costs.  Based on current estimates of its revenues and operating profitability and losses, the

12

Company anticipates that it will need to achieve additional and significant cost reductions to remain in compliance with its financial covenant requirements under its Senior Secured Credit Facility.

The following table summarizes the restructuring expenses and payments incurred during the first two quarters of fiscal 2003 (in thousands):

	Balance March 31, 2002		Expense		Paid			Balance June 30, 2002		Expense		Paid			Balance September 30, 2002
Workforce	$	13,388		5,656		(9,475	)		9,569		15,575		(9,420	)	$	15,724
Facilities		371							371		3,599		(371	)		3,599
Other		426		500		(500	)		426		41		(452	)		15
	$	14,185		6,156		(9,975	)		10,366		19,215		(10,243	)	$	19,338

L.	INCOME TAXES
	A tax benefit from continuing operations of $66.3 million was recorded during the first six months of fiscal 2003.  Although a full valuation allowance remains on the U.S. and certain foreign deferred tax assets generated in prior years, the Company anticipates using the $125.3 million pre-tax gain on the sale of Airshow (See Note D Divestitures), along with the $77.9 million pretax gain from repayment of debt (see Note J. Debt), to offset the taxable losses from operations.
M.	COMPREHENSIVE LOSS
	Comprehensive loss consisted of the following:

	Three Months Ended September 30,						Six Months Ended September 30,
	2002			2001			2002			2001
	(In thousands)
Net loss	$	(284,321	)	$	(147,521	)	$	(324,232	)	$	(153,672	)
Foreign currency translation and other adjustments		(5,171	)		(2,315	)		1,118			(3,265	)
Comprehensive loss	$	(289,492	)	$	(149,836	)	$	(323,114	)	$	(156,937	)

13

N.	LOSS PER SHARE
	Loss per share is calculated as follows:

		Three Months Ended September 30,						Six Months Ended September 30,
		2002			2001			2002			2001
		(In thousands, except per share data)
Net loss from continuing operations		$	(406,680	)	$	(137,099	)	$	(447,703	)	$	(146,122	)
Discontinued operations:
Loss from discontinued operations, net of tax			(2,625	)		(10,422	)		(1,513	)		(7,550	)
Gain on sale of discontinued operations, net of tax			74,902			—			74,902			—
Extraordinary item, net of tax			50,082			—			50,082			—
Net loss		$	(284,321	)	$	(147,521	)	$	(324,232	)	$	(153,672	)
Basic and diluted:
Common shares outstanding, beginning of period			192,248			191,450			192,248			190,953
Weighted average common shares issued during the period			—			439			—			585
Weighted average common shares outstanding, end of period			—			—			—			—
			192,248			191,889			192,248			191,538
Net income (loss):
	Continuing operations	$	(2.12	)	$	(0.71	)	$	(2.33	)	$	(0.76	)
	Discontinued operations		0.38			(0.06	)		0.38			(0.04	)
	Extraordinary item		0.26			—			0.26			—
Net loss per common share		$	(1.48	)	$	(0.77	)	$	(1.69	)	$	(0.80	)

Stock options were excluded from the diluted loss per share calculation due to their anti-dilutive effect.

14

O.	SEGMENT INFORMATION
	As of September 30, 2002, the Company had three reportable segments:  communications test, industrial computing and communications, and da Vinci.  Net sales, earnings before interest, taxes and amortization (“EBITA”) and total assets for the three and six months ended September 30, 2002 and 2001 for each of these segments are shown below:

			Three Months Ended September 30,						Six Months Ended September 30,
			2002			2001			2002			2001
			(in thousands)
Communications test segment
Sales			$	125,404		$	243,875		$	261,616		$	520,458
		EBITA		(26,622	)		14,306			(51,496	)		49,230
		Total assets		338,264			1,045,484			338,264			1,045,484
Industrial computing and communications segment
	Sales			32,700			47,796			60,855			102,145
	EBITA			186			(1,167	)		256			(1,719	)
	Total assets			86,782			102,572			86,782			102,572
Da Vinci
	Sales			5,837			7,224			11,815			15,211
	EBITA			1,736			1,838			3,734			3,867
	Total assets			5,586			11,102			5,586			11,102
Discontinued operations
	Total assets			—			44,442			—			44,442
Corporate
	Loss before interest and taxes			(1,199	)		(2,971	)		(2,587	)		(4,681	)
	Total assets			40,236			63,517			40,236			63,517
Total Company
	Sales			163,941			298,895			334,286			637,814
	EBITA			(25,899	)		12,006			(50,093	)		46,697
	Total assets		$	470,868		$	1,267,117		$	470,868		$	1,267,117
The following are excluded from the calculation of EBITA:
Amortization of unearned compensation			$	(2,984	)	$	(5,245	)	$	(7,707	)	$	(11,787	)
Amortization of intangibles				(259	)		(10,599	)		(522	)		(22,151	)
Impairment of goodwill and other assets				(388,396	)		(17,918	)		(388,396	)		(17,918	)
WWG restructuring and other charges				—			(485	)		—			(485	)
One-time and other special charges				—			—			—			(4,715	)
Restructuring charges				(19,215	)		(7,045	)		(25,372	)		(7,045	)
Other charges				(148	)		0			(528	)		—
	Total excluded items			(411,002	)		(41,292	)		(422,525	)		(64,101	)
Other (income) expense				(89	)		3,445			1,387			5,273
Operating loss			$	(436,990	)	$	(25,841	)	$	(471,231	)	$	(12,131	)

15

P.	CONTINGENCIES
	On August 9, 2002, the Company consummated the sale of its Airshow, Inc. business (“Airshow”) to Rockwell Collins, Inc. (the “buyer”), for $156.9 million in cash, net of fees and expenses of $3.1 million.
	Subsequent to the sale, and pursuant to the terms of the definitive stock purchase agreement between the Company and the buyer, the buyer has submitted a request for a purchase price adjustment in its favor of approximately $3.1 million.  The Company has recorded a $3.1 million liability related to this claim, which is included in the balance sheet as of September 30, 2002 and was included in the pre-tax gain on this transaction of $125.3 million.  The Company is currently investigating this claim to determine its accuracy and intends to defend its position, if necessary.   In the event an amount less than $3.1 million becomes due to the buyer as a result of this claim, the Company would reverse any remaining liability and record an additional gain on the sale of discontinued operations in the period that such event should occur.
Q.	SUBSEQUENT EVENT
	During October 2002, in response to the continued industry downturn and the new capital spending reductions recently reported by several key customers, the Company announced plans to further reduce its workforce by approximately 350 positions, or 10 percent of its employment base.  These reductions are designed to size the Company to the lower level of revenue resulting from the Company’s customers’ continued capital spending reductions.
R.	SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ACTERNA CORPORATION,  ACTERNA LLC AND NON-GUARANTOR SUBSIDIARIES
	In connection with the Company’s recapitalization and related transactions, Acterna LLC became the primary obligor with respect to substantially all of the indebtedness of Acterna Corporation, including the 9.75 percent Senior Subordinated Notes due 2008 (the “Senior Subordinated Notes”).
	Acterna Corporation has fully and unconditionally guaranteed the Senior Subordinated Notes.  Acterna Corporation, however, is a holding company with no independent operations and no significant assets other than its membership interest in Acterna LLC.  Certain other subsidiaries of the Company are not guarantors of the Senior Subordinated Notes.  The condensed consolidated financial statements presented herein include the statements of operations, balance sheets, and statements of cash flows without additional disclosure as the Company has determined that the additional disclosure is not material to investors.

16

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For The Six Months Ended September 30, 2002
(Unaudited)

	Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination		Total Consolidated
	(in thousands)
Net sales				$	106,021		$	228,265				$	334,286
Cost of sales					59,703			122,106			—		181,809
Gross profit		—			46,318			106,159			—		152,477
Selling, general, and administrative expense					69,705			81,968			—		151,673
Product development expense					24,432			33,314			—		57,746
Impairment of goodwill and other assets					30,134			358,262			—		388,396
Restructuring expense					15,376			9,995					25,371
Amortization of intangibles								522					522
Total operating expense		—			139,647			484,061			—		623,708
Operating loss		—			(93,329	)		(377,902	)		—		(471,231	)
Interest expense, net					(35,668	)		(5,678	)		—		(41,346	)
Intercompany interest income (expense)					7,916			(7,916	)		—		—
Intercompany royalty income (expense)					(717	)		717					—
Other expense, net					820			(2,207	)		—		(1,387	)
Loss from continuing operations before income taxes and extraordinary item		—			(120,978	)		(392,986	)		—		(513,964	)
Benefit from income taxes					(60,781	)		(5,480	)				(66,261	)
Loss from continuing operations before extraordinary items		—			(60,197	)		(387,506	)		—		(447,703	)
Equity Loss		(324,232	)		(389,019	)					713,251		—
Discontinued Operations:
Loss from discontinued operations, net								(1,513	)		—		(1,513	)
Gain from sale of discontinued operations, net					74,902								74,902
Net loss before extraordinary items		(324,232	)		(374,314	)		(389,019	)		713,251		(374,314	)
Extraordinary item, net					50,082								50,082
Net loss	$	(324,232	)	$	(324,232	)	$	(389,019	)	$	713,251	$	(324,232	)

17

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For The Six Months Ended September 30, 2001
(Unaudited)

	Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination		Total Consolidated
	(in thousands)
Net sales	$	—		$	164,823		$	472,991		$	—	$	637,814
Cost of sales					69,089			213,974					283,063
Gross profit		0			95,734			259,017			0		354,751
Selling, general, and administrative expense					114,277			124,251					238,528
Product development expense					24,990			56,250					81,240
Impairment of assets held for sale								17,918					17,918
Restructuring expense					5,928			1,117					7,045
Amortization of intangibles					253			21,898					22,151
Total operating expense		0			145,448			221,434			0		366,882
Operating loss		0			(49,714	)		37,583			0		(12,131	)
Interest expense					(44,634	)		(6,342	)				(50,976	)
Interest income					249			1,128					1,377
Other expense, net					(213	)		(5,060	)				(5,273	)
Income (loss) from continuing operations before income taxes		0			(94,312	)		27,309			0		(67,003	)
Provision for income taxes					53,431			25,688					79,119
Income (loss) from continuing operations		0			(147,743	)		1,621			0		(146,122	)
Loss from discontinued operations								(7,550	)				(7,550	)
Equity loss		(153,671	)		(5,928	)					159,599		0
Net loss	$	(153,671	)	$	(153,671	)	$	(5,929	)	$	159,599	$	(153,672	)

18

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2002
(Unaudited)

			Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination		Total Consolidated
			(in thousands)
ASSETS
Current assets
	Cash and cash equivalents		$	—		$	8,645		$	23,396		$	—	$	32,041
	Accounts receivable, net						18,770			80,140					98,910
	Inventory, net						17,543			74,887					92,430
	Other current assets						34,786			31,810					66,596
Total current assets				—			79,744			210,233			—		289,977
Property, plant, and equipment, net							28,142			82,528					110,670
Investments in and advances to (from) consolidated subsidiaries				(753,800	)		85,843			(572,559	)		1,240,516		—
Goodwill, net										33,332					33,332
Intangible assets, net										1,306					1,306
Deferred debt issuance costs, net							18,427								18,427
Other assets, net							8,673			8,483					17,156
Total Assets			$	(753,800	)	$	220,829		$	(236,677	)	$	1,240,516	$	470,868
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current Liabilities
	Notes payable and current portion of long-term debt		$	—		$	15,882		$	4,772		$	—	$	20,654
	Accounts payable						18,025			33,102					51,127
	Accrued expenses						54,836			92,090					146,926
	Acccrued income taxes						41,382			—					41,382
	Current liabilities of discontinued operations held for sale						3,077			0					3,077
		Total current liabilities		—			133,202			129,964			—		263,166
Long-term debt and notes payable							772,848			103,776			—		876,624
Deferred income taxes							6,959			12,606			—		19,565
Other long-term liabilities				—			25,294			40,019			—		65,313
Stockholders’ deficit:
	Common stock			1,922											1,922
	Additional paid-in-capital			778,318											778,318
	Accumulated deficit			(1,494,871	)										(1,494,871	)
	Unearned compensation			(37,806	)										(37,806	)
	Other comprehensive income (loss)			(1,363	)										(1,363	)
	Parent Stockholders’ Deficit			—			(717,474	)		(523,042	)		1,240,516		—
		Total stockholders’ deficit		(753,800	)		(717,474	)		(523,042	)		1,240,516		(753,800	)
	Total Liabilities and Stockholders’ Deficit		$	(753,800	)	$	220,829		$	(236,677	)	$	1,240,516	$	470,868

19

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2002
(Unaudited)

			Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination		Total Consolidated
			(in thousands)
ASSETS
Current assets
	Cash and cash equivalents		$	—		$	14,969		$	27,770		$	—	$	42,739
	Accounts receivable, net						38,875			80,371					119,246
	Inventories						23,623			85,116					108,739
	Other current assets						91,233			35,378					126,611
	Current assets of discontinued operations held for sale									15,430					15,430
		Total current assets		0			168,700			244,065			0		412,765
Property, plant, and equipment, net							31,255			86,958					118,213
Investments in and advances to consolidated subsidiaries				(436,775	)		(234,866	)		(593,530	)		1,265,171		0
Goodwill, net							16,908			392,014					408,922
Intangible assets, net										1,828					1,828
Deferred income taxes							(9,284	)		9,284					0
Other assets, net							40,574			5,987					46,561
Long-term assets of discontinued operations held for sale										26,267					26,267
Total Assets			$	(436,775	)	$	13,287		$	172,873		$	1,265,171	$	1,014,556
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
	Notes payable and current portion of long-term debt		$	—		$	23,000		$	8,460		$	—	$	31,460
	Accounts payable						27,547			40,715					68,262
	Accrued expenses						87,349			111,424					198,773
	Current liabilities of discontinued operations held for sale									10,644					10,644
		Total current liabilities		0			137,896			171,243			0		309,139
Long-term debt							953,200			102,862					1,056,062
Deferred income taxes							15,739			1,842					17,581
Other long-term liabilities							11,386			57,163					68,549
Stockholders’ deficit
	Common stock			1,922											1,922
	Additional paid-in-capital			786,537											786,537
	Accumulated deficit			(1,170,639	)										(1,170,639	)
	Unearned compensation			(53,925	)										(53,925	)
	Other comprehensive income (loss)			(670	)										(670	)
	Parent Stockholders’ deficit			—			(1,104,934	)		(160,237	)		1,265,171		—
		Total stockholders’ deficit		(436,775	)		(1,104,934	)		(160,237	)		1,265,171		(436,775	)
Total Liabilities and Stockholders’ Deficit			$	(436,775	)	$	13,287		$	172,873		$	1,265,171	$	1,014,556

20

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For The Six Months Ended September 30, 2002
(Unaudited)

																Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination			Total Consolidated
																(in thousands)
Operating activities:
									Net loss							$	(324,232	)	$	(324,232	)	$	(389,019	)	$	713,251		$	(324,232	)
									Adjustments for non-cash items included in net loss:
															Impairment of goodwill and other assets					30,134			358,358						388,492
															Gain on disposal of property and equipment					—			(644	)					(644	)
															Gain on sale of Airshow, net					(74,902	)		—						(74,902	)
															Gain on sale of Wireless Instruments business					(820	)		693						(127	)
															Gain on extinguishment of debt, net					(50,082	)		—						(50,082	)
														Benefit from income taxes						(67,802	)		—						(67,802	)
														Bad debt expense						0			437						437
													Depreciation expense							6,046			8,719						14,765
													Amortization of intangibles							—			606						606
													Amortization of unearned compensation							3,259			4,641						7,900
												Amortization of deferred debt issuance costs								2,453			—						2,453
												Non-cash interest expense								5,857			—						5,857
											Change in deferred income taxes									(1,300	)		—						(1,300	)
										Effect of changes in intercompany							324,232			363,875			25,144			(713,251	)		—
									Change in operating assets and liabilities											71,012			(1,369	)					69,643
								Net cash flows provided by (used in) operating activities									—			(36,502	)		7,566			—			(28,936	)
Investing activities:
								Proceeds from the sale of businesses												156,870			5,715						162,585
							Proceeds from sale of property and equipment													—			2,033						2,033
						Purchases of property and equipment														(15,682	)		(3,093	)					(18,775	)
	Net cash flows provided by (used in) investing activities																—			141,188			4,655			—			145,843
Financing activities:
						Borrowings under revolving facility and term loan														17,967			—						17,967
					Early extinguishment of debt, including $1,617 transaction costs															(134,679	)		(18,321	)					(153,000	)
				Repayment of capital lease obligations																(110	)		(268	)					(378	)
			Proceeds from capital lease financing																	5,812			—						5,812
		Net cash flows provided by (used in) financing activities															—			(111,010	)		(18,589	)		—			(129,599	)
Effect of exchange rate on cash and cash equivalents																				—			1,994						1,994
Decrease in cash and cash equivalents																	—			(6,324	)		(4,374	)		—			(10,698	)
Cash and cash equivalents at beginning of period																				14,969			27,770						42,739
Cash and cash equivalents at end of period																$	—		$	8,645		$	23,396		$	—		$	32,041

21

ACTERNA CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For The Six Months Ended September 30, 2001
(Unaudited)

			Acterna Corp			Acterna LLC			Non- Guarantor Subsidiaries			Elimination			Total Consolidated
			(in thousands)
Operating activities:
	Net loss		$	(153,671	)	$	(153,671	)	$	(5,929	)	$	159,599		$	(153,672	)
	Adjustments for non-cash items included in net loss:
		Impairment of goodwill and other assets								17,918						17,918
		Bad debt expense					0			479						479
		Depreciation expense					13,418			4,340						17,758
		Amortization of intangibles					252			21,899						22,151
		Amortization of unearned compensation					6,159			5,908						12,067
		Amortization of deferred debt issuance costs					2,662									2,662
		Loss from discontinued operations								10,039						10,039
		Deferred tax provision					71,141									71,141
	Effect of changes in intercompany			153,671			108,536			(102,608	)		(159,599	)		—
	Change in operating assets and liabilities						(14,058	)		20,678						6,620
	Net cash flows provided by (used in) operating activities		$	—		$	34,439		$	(27,276	)	$	—		$	7,163
Investing activities:
	Proceeds from sale of business									800						800
	Businesses acquired in purchase transaction, net of cash acquired and non-cash issuance of common stock									(1,495	)					(1,495	)
	Purchases of property and equipment						(21,502	)		(3,248	)					(24,750	)
	Other									(2,201	)					(2,201	)
Net cash flows used in investing activities				0			(21,502	)		(6,144	)		0			(27,646	)
Financing activities:
	Borrowings under revolving facility and term loan						(18,000	)		25,140						7,140
	Proceeds from capital lease financing									(64	)					(64	)
	Proceeds from issuance of common stock, net of expenses						1,759									1,759
Net cash flows provided by financing activities				0			(16,241	)		25,076			0			8,835
Effect of exchange rate on cash and cash equivalents							434			(392	)					42
Increase (decrease) in cash and cash equivalents				0			(2,870	)		(8,736	)		0			(11,606	)
Cash and cash equivalents at beginning of period							22,179			40,875						63,054
Cash and cash equivalents at end of period			$	—		$	19,309		$	32,139		$	—		$	51,448

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

This Form 10-Q contains forward-looking statements that involve risks and uncertainties.  The Company’s actual results may differ significantly from the results discussed in the forward-looking statements.  Factors that might cause such a difference include, but are not limited to, product demand and market acceptance risks, the effect of economic conditions, the effect of competitive products and pricing, product development, commercialization and technological difficulties, capacity and supply constraints or difficulties, availability of capital resources, general business and economic conditions, the effect of headcount reductions and their corresponding impact on the Company’s operations, the effect of the Company’s accounting policies, the possible need to restructure the Company’s outstanding capital, and other risks detailed in the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2002 and below.

Critical Accounting Policies, Commitments and Certain Other Matters

In the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2002, the Company’s most critical accounting policies and estimates were identified as those relating to revenue recognition, loss provisions on accounts receivable and inventory, long-lived assets, intangible assets and goodwill, income taxes, pension plans and warranty reserves.  The Company considered the disclosure requirements of Financial Release 60 (“FR-60”) regarding critical accounting policies and concluded that there were no material changes during the quarter ended September 30, 2002 that would warrant further disclosure.  The Company has also considered the disclosure requirements of Financial Release-61 regarding liquidity and capital resources, certain trading activities and related party and certain other disclosures, and accordingly, has provided the necessary disclosure within this Form 10-Q, including those on related party transactions (See Related Party Transaction) and those related to the Company’s liquidity (See Liquidity and Capital Resources).

OVERVIEW

The Company’s continuing operations are managed in three business segments: communications test, industrial computing and communications and da Vinci.  The Company also had another segment, Airshow, which was sold on August 9, 2002. Airshow’s results are shown as discontinued operations and are therefore excluded from results of continuing operations for all periods presented.

The global economic downturn has continued to exacerbate the severe negative downturn in the Company’s communications test segment as well as its other businesses.  As a result, the Company continues to experience diminished product demand, excess manufacturing capacity and erosion of average selling prices.  In the second quarter of the current fiscal year, the Company’s bookings increased to approximately $189.1 million from approximately $158.0 million in the first quarter and from approximately $172.4 million in the second quarter of the previous fiscal year (excluding bookings related to ICS Advent). The increase in current year bookings is due primarily to a large, competitively priced order from Sears in the Company’s Itronix business and was partially offset by continued declines in its other businesses.  The Company cannot predict the duration of the current economic downturn or the severity of the continued declines in the Company’s communication test and other businesses.

During the second quarter of fiscal 2003, as a result of the continued declining financial performance and reduced expectations for future earnings within the communications test segment, the Company decided to discontinue the on-going implementation of its global enterprise planning (ERP) software system.  The Company also decided to discontinue the implementation of other, less significant projects.  As a result of these decisions, the Company wrote off $14.2 million of assets, including $13.6 million  of capitalized internal-use software costs. These assets were previously included in the machinery and equipment classification of property and equipment.  The $14.2 million charge is included in the impairment charge the Company’s unaudited Statements of Operations.

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The Company also recorded an impairment charge of $374.2 million related to the impairment of goodwill within the communications test segment (See Note G. Acquired Intangible Assets and Goodwill).

The Company continues to implement cost reduction programs aimed at aligning its ongoing operating costs with its expected revenues. During the first quarter of fiscal 2003, the Company announced restructuring actions primarily related to the reduction of the workforce and recorded restructuring charges of $6.2 million as a result of these actions.  The Company also announced restructuring actions during the second quarter of fiscal 2003, resulting in total charges of $19.2 million.  The $19.2 million of charges are associated with the reduction of approximately 500 additional workers and facilities closure costs. 

During the three months ended September 30, 2002, the Company paid approximately $10.2 million in severance and other related costs.  At September 30, 2002, the Company has a remaining liability of approximately $19.3 million for total restructuring actions taken; the Company anticipates that this amount will be paid primarily during the remainder of fiscal 2003.  (See Note K Restructuring.)

At September 30, 2002, the Company’s headcount was approximately 3,590, reduced from approximately 5,900 at September 30, 2001 (including the headcount of the Airshow business and excluding the headcount for ICS Advent). During October 2002, in response to the continued industry downturn and the new capital spending reductions recently reported by several key customers, the Company announced plans to further reduce its workforce by approximately 350 positions, or 10 percent of its employment base.  These reductions are designed to size the Company to the lower level of revenue resulting from the Company’s customers’ continued capital spending reductions.  The Company expects to realize $40 million in annualized savings and to take a restructuring charge of approximately $20 million related to these actions and the restructuring announced on September 4, 2002.  The Company expects to record $15 million of this charge in the third quarter and the remainder in the fourth quarter of this fiscal year.

Given the severity of current market conditions, however, the Company cannot make any assurance that these cost reduction programs will align the Company’s operating expenses and revenues or be sufficient to avoid operating losses.  The Company intends to implement further cost reduction programs in the future, if necessary. Given the severity of current market conditions and the progressive nature of the EBITDA covenants in the Senior Secured Credit Facility, the Company cannot provide any assurance that additional cost reduction programs will actually align the Company’s operating expenses and revenues and enable the Company to comply with such covenants or be sufficient to avoid operating losses. In order to remain in compliance, the Company is required to, among other things, maintain minimum liquidity and achieve certain EBITDA results.  For the upcoming quarters and into fiscal year 2004, the Company cannot provide any assurance that it will be able to comply with these or other covenant requirements.   (See Note J. Debt)  In the event the Company does not meet the covenants, a capital restructuring may be required.  There can be no assurance that the Company would be able to complete such a capital restructuring.  (See Liquidity and Capital Resources).

The Company previously reported the industrial computing and communications segment as discontinued operations. This segment was comprised of two subsidiaries: ICS Advent and Itronix Corporation.  In October 2001, the Company divested ICS Advent but did not divest Itronix, which required the Company to make certain reclassifications to its Statement of Operations for the three months ended June 30, 2001.  The Statement of Operations was reclassified to include the results of operations of ICS Advent and Itronix in continuing operations. 

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RELATED PARTY TRANSACTION

On June 24, 2002, Acterna LLC, along with CD&R VI (Barbados), Ltd., (“CD&R Barbados”) commenced cash tender offers, as amended, for up to $155 million, on a combined basis, in principal amount of its outstanding 9.75 percent Senior Subordinated Notes due 2008.    The tender offers provided for cash consideration of $220 in exchange for each $1000 principal amount of notes tendered, and all accrued interest due thereon.  The combined tender offers expired on August 12, 2002, and resulted in the purchase and retirement of notes having an aggregate principal value of $106 million by Acterna LLC and the purchase of notes having an aggregate principal value of $43 million by CD&R Barbados.  In connection with these combined tender offers, Acterna LLC granted CD&R Barbados the right (which CD&R Barbados agreed to exercise only at the request of the administration agent under Acterna LLC’s credit facility) to invest all future cash interest received, on an after tax basis, of all the Senior Subordinated Notes now held by CD&R Barbados in new senior secured convertible notes of Acterna LLC.  The new notes that will be issued upon such reinvestment will have terms substantially similar to the 12% Senior Secured Convertible Notes due 2007, issued to Clayton, Dubilier & Rice VI Limited Partnership (“CD&R Fund VI”) in January 2002 except that the interest rate and conversion rate applicable to any series of new notes will be determined at the time of issuance.  CD&R Barbados is a Barbados company, all of the capital stock of which is owned by CD&R Fund VI.

RESULTS OF OPERATIONS

For the Three Months Ended September 30, 2002, as Compared to Three Months Ended September 30, 2001 on a Consolidated Basis from Continuing Operations.

Net sales.     For the three months ended September 30, 2002, consolidated net sales decreased $135.0 million or 45.2% to $163.9 million as compared to $298.9 million for the three months ended September 30, 2001.  The decrease is primarily attributable to reduced demand for the Company’s communications tests products and to a lesser extent, due to the sale of ICS Advent during October 2001. Excluding the impact of ICS Advent, sales decreased $121.1 million or 42.5% to $163.9 million for the three months ended September 30, 2002, as compared to $285.0 million for the three months ended September 30, 2001.

Gross profit.     Consolidated gross profit decreased $95.0 million to $68.6 million or 41.8% of consolidated net sales for the three months ended September 30, 2002, as compared to $163.4 million or 54.7% of consolidated net sales for the three months ended September 30, 2001.  The reduction in gross profit was primarily due to the reduction in net sales and the impact of decreased gross profit as a percentage of net sales.  The reduction in gross profit as a percentage of net sales is due to pricing pressures and a relative increase in the lower margin Itronix product sales, as compared to the higher margin communications test products.  The gross margin percentage was also impacted by a $14.5 million inventory charge, resulting from $9.5 million of increased inventory reserves and $5.0 million of additional purchase commitment reserves, which were recorded during the quarter ended September 30, 2002.

Operating expenses.     Operating expenses consist of selling, general and administrative expense; product development expense; impairment charges; restructuring expense; and amortization of intangibles.  Total operating expenses were $505.6 million or 308.3% of consolidated net sales for the three months ended September 30, 2002, as compared to $189.3 million or 63.3% of consolidated net sales for the three months ended September 30, 2001.  Excluding the impact of $19.2 million of restructuring charges, $388.4 million of asset impairment charges, and $0.3 million amortization of intangibles, total operating expenses were $97.7 million or 59.6% of consolidated net sales for the three months ended September 30, 2002.  For the three months ended September 30, 2001 operating expenses, excluding $17.9 million impairment charges, $7.0 million restructuring expense and $10.6 million amortization of intangibles were $153.8 million or 51.4% of consolidated net sales.  The decrease in operating expenses during the current quarter is a result of restructuring efforts to reduce employee and other expenses as described above.  As a percentage of sales, operating expenses have increased slightly as the decrease in costs is more than offset by the decrease in net sales.

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Included in both cost of sales ($0.3 million and $0.4 million) and operating expenses ($2.7 million and $5.1 million) for the three months ended September 30, 2002 and 2001, respectively, is the amortization of unearned compensation which relates to the issuance of non-qualified stock options to employees and non-employee directors at a grant price lower than fair market value (defined as the closing price of the Company’s stock on the open market at the date of issuance). 

Selling, general and administrative expense was $70.6 million or 43.1% of consolidated sales for the three months ended September 30, 2002, as compared to $113.7 million or 38.0% of consolidated net sales for the three months ended September 30, 2001. The decrease in these expenses is a result of the Company’s restructuring efforts to reduce operating costs of the business and, to a lesser extent, a result of the sale of ICS Advent.  The increase in selling general and administrative expenses as a percentage of sales is due to the decline of sales as mentioned above.

Product development expense was $27.1 million or 16.5% of consolidated net sales for the three months ended September 30, 2002, as compared to $40.0 million or 13.4% of consolidated sales for the same period a year ago.  The increase in product development expense as a percentage of sales is due primarily to the decrease in revenues, particularly within the communications test segment and reflects the Company’s continued efforts toward innovation and new product development.

The Company recorded an impairment charge of $388.4 million during the three months ended September 30, 2002.  As a result of increasingly severe market conditions, the Company revised and reduced its long term financial forecast.  Based on this revision of the long-term outlook, the Company, assisted by independent valuation consultants, completed an assessment of the carrying value of goodwill in the communications test segment, as required by SFAS No. 142, “Goodwill and Other Intangible Assets”.  The results of the impairment analysis, which were derived by utilizing, among other methods, a discounted cashflow analysis and an analysis of other market comparables, indicated that the carrying amount of goodwill within the communications test segment exceeded its estimated fair value. Accordingly, the Company recorded an impairment charge of $374.2 million on a before and after tax basis.  This charge was recorded within the communications test segment and has been included in the impairment charge in the unaudited Statements of Operations.  (See Note F-Impairment Charges and Note G-Acquired Intangible Assets and Goodwill).  The Company also decided to discontinue the on-going implementation of its global enterprise planning (ERP) software system.  The Company also decided to discontinue the implementation of other, less significant projects.  As a result of these decisions, the Company wrote off $14.2 million of assets, including $13.6 million of capitalized internal-use software costs. These assets were previously included in the machinery and equipment classification of property and equipment.  The $14.2 million charge is included in the impairment charge in the Company’s unaudited Statements of Operations.

During the second quarter of fiscal 2003, the Company incurred a charge of $19.2 million related to the additional restructuring of the business.  (See Note K Restructuring).  This charge is primarily related to severance and facilities closure costs. 

Amortization of intangibles was $0.3 million for the three months ended September 30, 2002, as compared to $10.6 million for the amortization of intangibles in the same period a year ago. The decrease was primarily attributable to the impairment and resulting write-down of the Company’s intangible assets during the fourth quarter of fiscal 2002.

Interest.     Interest expense, net of interest income, was $19.1 million for the three months ended September 30, 2002, as compared to $23.8 million for the same period a year ago.  The decrease in interest expense was attributable to lower interest rates on borrowings and a lower average debt balance resulting from the repayment of debt during the second quarter of fiscal 2003.

Taxes.     During the second quarter of fiscal 2003 the Company recorded tax benefits from continuing operations and discontinued operations of $49.3 million and $2.2 million,

26

respectively.  The Company also recorded an income tax expense of $50.4 million related to a $125.3 million gain on the sale of its Airshow business and an expense of $27.9 million related to a $77.9 million gain on the repayment of debt.  The Company anticipates using the taxable gain resulting from these events to offset the taxable losses from operations.  As a result, a tax benefit was recognized on operating losses incurred during the quarter.

For the Six Months Ended September 30, 2002, as Compared to Six Months Ended September 30, 2001 on a Consolidated Basis from Continuing Operations.

Net sales.     For the six months ended September 30, 2002, consolidated net sales decreased $303.5 million or 47.6% to $334.3 million as compared to $637.8 million for the six months ended September 30, 2001.  The decrease is primarily attributable to reduced demand for the Company’s communications tests products and to a lesser extent, due to the sale of ICS Advent during October 2001.  Excluding the impact of ICS Advent, sales decreased $271.8 million or 44.8% to $334.3 million for the six months ended September 30, 2002, as compared to $606.1 million for the six months ended September 30, 2001.

Gross profit.     Consolidated gross profit decreased $202.3 million to $152.5 million or 45.6% of consolidated net sales for the six months ended September 30, 2002, as compared to $354.8 million or 55.6% of consolidated net sales for the six months ended September 30, 2001. The reduction in gross profit was primarily due to the reduction in net sales and the impact of decreased gross profit as a percentage of net sales. The reduction in gross profit as a percentage of net sales is due to pricing pressures and a relative increase in the lower margin Itronix product sales, as compared to the higher margin communications test products.  The gross margin percentage was also impacted by a $17.8 million inventory charge, resulting from $12.3 million of increased inventory reserves and $5.5 million of additional purchase commitment reserves, which were recorded during the six months ended September 30, 2002.

Operating expenses.     Operating expenses consist of selling, general and administrative expense; product development expense; impairment charges; restructuring expense; and amortization of intangibles.  Total operating expenses were $623.7 million or 186.6% of consolidated net sales for the six months ended September 30, 2002, as compared to $366.9 million or 57.5% of consolidated net sales for the six months ended September 30, 2001.  Excluding the impact of $25.4 million of restructuring charges, $388.4 million of asset impairment charges, and $0.5 million amortization of intangibles, total operating expenses were $209.4 million or 62.6% of consolidated net sales for the six months ended September 30, 2002. For the six months ended September 30, 2001 operating expenses, excluding $17.9 million of impairment charges, a $7.0 million restructuring expense and $22.2 million amortization of intangibles were $319.8 million or 50.1% of consolidated net sales.  The decrease in operating expenses during the second quarter is a result of restructuring efforts to reduce employee and other expenses as described above.  As a percentage of sales, operating expenses have increased as the decrease in costs is more than offset by the decrease in net sales.

Included in both cost of sales ($0.6 million and $0.8 million) and operating expenses ($7.1 million and $11.3 million) for the six months ending September 30, 2002 and 2001, respectively, is the amortization of unearned compensation which relates to the issuance of non-qualified stock options to employees and non-employee directors at a grant price lower than fair market value (defined as the closing price of the Company’s stock on the open market at the date of issuance). 

Selling, general and administrative expense was $151.7 million or 45.4% of consolidated sales for the six months ended September 30, 2002, as compared to $238.5 million or 37.4% of consolidated net sales for the six months ended September 30, 2001. The decrease in these expenses is a result of the Company’s restructuring efforts to reduce operating costs of the business and, to a lesser extent, a result of the sale of ICS Advent.  The increase in selling general and administrative expenses as a percentage of sales is due to the decline of sales as mentioned above.

27

Product development expense was $57.7 million or 17.3% of consolidated net sales for the six months ended September 30, 2002, as compared to $81.2 million or 12.7% of consolidated sales for the same period a year ago.  The increase in product development expense as a percentage of sales is due primarily to the decrease in revenues, particularly within the communications test segment and reflects the Company’s continued commitment to innovation and new product development.

The Company recorded an impairment charge of $388.4 million during the six months ended September 30, 2002.  (See discussion in Management Discussion and Analysis - Results of Operations for Three Months Ended September 30, 2002) 

During the six months ended September 30, 2002, the Company incurred charges of $25.4 million related to the additional restructuring of the business.  (See Note K Restructuring).  These charges are primarily related to severance, facilities closures and other related costs. 

Amortization of intangibles was $0.5 million for the six months ended September 30, 2002, as compared to $22.2 million for the same period a year ago. The decrease was primarily attributable to the impairment and resulting write-down of the Company’s intangible assets during the fourth quarter of fiscal 2002.

Interest.     Interest expense, net of interest income, was $41.3 million for the six months ended September 30, 2002, as compared to $49.6 million for the same period a year ago.  The decrease in interest expense was attributable to lower interest rates on borrowings and a lower average debt balance resulting from a repayment of debt with the Airshow proceeds during the six months ended September 30, 2002.

Taxes.     During the six months ended September 30, 2002, the Company recorded tax benefits from continuing operations and discontinued operations of $66.3 million and $1.5 million, respectively.  The Company also recorded an income tax expense of $50.4 million related to a $125.3 million gain on the sale of its Airshow business and an expense of $27.9 million related to a $77.9 million net gain on the repayment of debt.  The Company anticipates using the taxable gain resulting from these events to offset the taxable losses from operations. 

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Segment Disclosure

The Company measures the performance of its subsidiaries by their respective new orders received (“bookings”), net sales and earnings before interest, taxes and amortization (“EBITA”), which excludes non-recurring and one-time charges. Included in each segment’s EBITA is an allocation of corporate expenses.  The information below includes bookings, net sales and EBITA for the three segments the Company operates (including bookings net sales and EBITA of ICS Advent).  The Airshow business was sold on August 9, 2002, and is excluded from these results as the company classified this business as a discontinued operation.

		Three Months Ended September 30,						Six Months Ended September 30,
SEGMENT		2002			2001			2002			2001
		(In thousands)
Communications test segment:
	Bookings	$	111,538		$	153,730		$	230,986		$	366,457
	Net sales		125,404			243,875			261,616			520,458
	EBITA		(26,622	)		14,306			(51,496	)		49,230
Industrial computing and communications segment:
	Bookings	$	72,512		$	28,194		$	105,095		$	68,152
	Net sales		32,700			47,796			60,855			102,145
	EBITA		186			(1,167	)		256			(1,719	)
da Vinci:
	Bookings	$	5,079		$	4,923		$	11,021		$	14,326
	Net sales		5,837			7,224			11,815			15,211
	EBITA		1,736			1,838			3,734			3,867

Three and Six Months Ended September 30, 2002, Compared to Three and Six Months Ended September 30, 2001 – Communications Test Products

Bookings for communications test products decreased $42.2 million or 27.4% to $111.5 million for the three months ended September 30, 2002, as compared to $153.7 million for the same period a year ago.  For the six months ended September 30, 2002, bookings for communications test products decreased to $231.0 million as compared to $366.5 million for the same period a year ago.  The decrease is a result of the global economic slowdown and capital spending cutbacks in the communications industry within the last year.

Net sales of communications test products decreased $118.5 million or 48.6% to $125.4 million for the three months ended September 30, 2002, as compared to $243.9 million for the same period a year ago.  For the six months ended September 30, 2002 , net sales of communications test products were $261.6 million as compared to $520.5 million for the six months ended September 30, 2001. The decreased sales occurred within all product areas of the communications test businesses, with the most significant decline for optical transport products. 

EBITA for the communications test products decreased $40.9 million to a loss of $26.6 million for the three months ended September 30, 2002, as compared to income of $14.3 million for the same period a year ago.  For the six months ended September 30, 2002, EBITA decreased by $100.7 million to a loss of $51.5 million as compared to income of $49.2 million for the same period a year ago.  The decrease primarily results from the significant decrease in sales and erosion in gross profit margins, which were partially offset by restructuring and other cost reduction strategies implemented within the last year.

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Three and Six Months Ended September 30, 2002, Compared to Three and Six Months Ended September 30, 2001 - Industrial Computing and Communications Products

Bookings for industrial computing and communications products increased $44.3 million to $72.5 million for the three months ended September 30, 2002, as compared to $28.2 million for the same period a year ago.  For the six months ended September 30, 2002, bookings for this segment increased $36.9 million to $105.1 million, as compared to $68.2 million in the six months ended September 30, 2001.  Excluding the impact of ICS Advent, bookings for the Itronix business increased $58.8 million to $72.5 million for the three months ended September 30, 2002, as compared to $13.8 million for the same period a year ago.  For the six months ended September 30, 2002, bookings for the Itronix business increased $61.7 million to $105.1 million from $43.4 million for the same period a year ago.  Increased bookings in the Itronix business are due to a competitively priced large order from Sears for its GO BOOK durable notebook product during the second quarter of fiscal 2003.

Net sales of industrial computing and communications products decreased $15.1 million to $32.7 million for the three months ended September 30, 2002, as compared to $47.8 million for the same period a year ago.  For the six months ended September 30, 2002 sales within this segment decreased $41.3 million to $60.9 million as compared to $102.1 million for the same period a year ago.  The decrease in sales is due to the sale of ICS Advent and to a lesser extent, a decline in sales from the Itronix business.  Excluding ICS Advent, sales of Itronix decreased $1.2 million to $32.7 million for the second quarter of fiscal 2003, as compared to $33.9 million the same period a year ago.  For the six months ended September 30, 2002, sales of the Itronix business decreased $9.6 million to $60.9 million, as compared to $70.4 million for the same period a year ago.  The decrease in sales from Itronix is due to the introduction of GO BOOK during the first quarter of fiscal 2002 and due to the fulfillment of a robust backlog resulting from strong bookings during the fourth quarter of fiscal 2001. 

EBITA for the industrial computing and communications segment was $0.2 million for the three months ended September 30, 2002, as compared to a loss of $1.2 million for the same period a year ago.  For the six months ended September 30, 2002 EBITA was $0.3 million as compared to the loss of $1.7 million for the same period a year ago.  Excluding ICS Advent, EBITA decreased by $0.8 million to $0.2 million for the quarter ended September 30, 2002, as compared to $1.0 million for the same period a year ago.  For the six months ended September 30, 2002, EBITA for the Itronix business decreased by $3.0 million to $0.3 million, as compared to $3.2 million for the same period a year ago.  The decrease in EBITA from the Itronix business is due to decreased sales and reduced gross margins as a result of competitive pricing and was partially offset by restructuring and other cost reduction strategies.

Three and Six Months Ended September 30, 2002, Compared to Three and Six Months Ended September 30, 2001 – da Vinci

Bookings for da Vinci products increased $0.2 million or 3.2% to $5.1 million for the three months ended September 30, 2002, as compared to $4.9 million for the same period a year ago.  For the six months ended September 30, 2002 bookings for this segment decreased $3.3 million to $11.0 million from $14.3 million for the same period a year ago.  The decrease is primarily related to industry cutbacks of advertising budgets, which indirectly drives capital expenditures within post production video houses. This decrease was most pronounced in the second half of fiscal 2002.

Net sales of the da Vinci business decreased $1.4 million or 19.2% to $5.8 million for the three months ended September 30, 2002, as compared to $7.2 million for the same period a year ago.  For the six months ended September 30, 2002 sales within this segment decreased $3.4 million to $11.8 million as compared to $15.2 million for the same period a year ago.  The decreased sales are due to both the industry cutbacks as discussed above, and from a robust backlog as of March 31, 2001, which benefited sales during the six-month period ended September 30, 2001.

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EBITA for the da Vinci business of $1.7 million for the three months ended September 30, 2002 is consistent with the $1.8 million EBITA during the same period a year ago. For the six months ended September 30, 2002 EBITA was $3.7 million as compared to $3.9  million for the same period a year ago. The constant EBITA on a reduced level of sales reflects successful implementation of cost reduction actions taken to align the business costs with the reduced sales.

LIQUIDITY AND CAPITAL RESOURCES

General.   The Company’s liquidity needs arise primarily from debt service on the substantial indebtedness incurred in connection with the acquisition of Wavetek Wandel Goltermann, Inc., in May 2000 and the acquisition of Superior Electronics Group, Inc. (d/b/a Cheetah Technologies) in August 2000,  the recent and substantial operating losses recorded, and from the funding of working capital and capital expenditures.  As of September 30, 2002, the Company had $897 million   of indebtedness, primarily consisting of $168.7 million principal amount of Senior Subordinated Notes, $612.9 million in borrowings under the Company’s Senior Secured Credit Facility and $115.7 million under other debt obligations.

On August 9, 2002, upon the consummation of the sale of its Airshow business, the Company used $153 million of the net proceeds to repay a portion of its outstanding debt and for other corporate purposes.  The following table lists the future remaining payments for debt obligations for each of the twelve-month periods ended September 30 (in thousands):

Debt Obligations	2003		2004		2005		2006		2007		Thereafter		Total
Senior secured credit facility	$	8,657	$	37,557	$	53,609	$	254,536	$	258,552		—	$	612,911
Senior secured convertible notes		—		—		—		—		—		80,319		80,319
Senior subordinated notes		—		—		—		—		—		168,715		168,715
Other notes payable		1,886		—		—		—		—		—		1,886
Capital leases and other debt		10,111		4,758		4,306		3,225		3,228		7,759		33,447
Total	$	20,654	$	42,315	$	57,915	$	257,761	$	261,840	$	256,793	$	897,278

Note:     Operating leases and purchase obligations have not changed significantly from March 31, 2002; therefore, the Company has not updated information on the future payments for those obligations.

The Company has recorded significant losses from operations and seen a substantial reduction in revenues and operations as a result of the economic downturn and, in particular, the downturn within the telecommunications sector and related industries. Consequently, the Company has implemented extensive cost reduction plans to align its cost structures and its revenues. These cost reduction plans are designed to align the cost base of the Company with the reduced forecast revenues and to enable the Company to remain compliant with, among other covenants, the liquidity and EBITDA covenants required under the Senior Secured Credit Facility during the remainder of fiscal 2003 and 2004. Continued compliance with these covenant requirements during fiscal 2003 and 2004 is dependent upon the timely execution of the cost cutting plans identified and being implemented. The Company’s cash requirements for debt service, including repayment of debt, and on-going operations are substantial. Debt repayment obligations are significant and increase through 2007.

During July 2002, the Company’s lenders agreed to modify its EBITDA and certain other covenants, which became effective on August 7, 2002. Pursuant to these amendments, among other things the failure of the Company to pay at least $100 million outstanding under the Senior Secured Credit Facility on or prior to June 30, 2003, would cause the debt covenants to become more

31

restrictive as of that date.    The Company plans to continue to work with its senior lenders to amend its covenant requirements as necessary. However, for the upcoming quarters and into fiscal year 2004, the Company cannot provide any assurance that it will be in compliance with its debt covenants and, if it is not, that it will be able to reach agreement with its lenders to waive or modify such covenants.  Notwithstanding current forecasts of revenues and results of operations, assuming timely completion and execution of the cost reduction programs, the Company believes that, based on its increasing and significant debt repayment obligations during 2003 and 2004 the Company’s debt may need to be further renegotiated, extended or refinanced.  In addition, the Company may need to raise additional capital to meet its needs, to develop new products, businesses or technologies.  There can be no assurance that in the event the Company is required to extend, refinance or repay its debt, new or additional sources of financing will be available or will be available on terms acceptable to the Company.  Inability to further modify the debt covenants as necessary, could result in an event of default and cause the lenders to require immediate payment of all debt under the Revolving Credit Facility.  In such event, inability to repay the Company’s debt obligations or source alternative financing would have material negative impact on the business, financial position and results of operations of the Company and could result in a capital restructuring of the Company. There can be no assurance that the Company would be able to complete such a capital restructuring.

The Company’s future operating performance and ability to repay, extend or refinance the Senior Secured Credit Facility (including the Revolving Credit Facility) or any new borrowings, and to service and repay or refinance its 12 percent Convertible Notes due 2007 and its 9.75 percent Senior Subordinated Notes due 2008, will be subject to future economic, financial and business conditions and other factors, including demand for communications test equipment, many of which are beyond the Company’s control.

Cash Flows.     The Company’s cash and cash equivalents decreased $10.7 million during the six months ended September 30, 2002.

Working Capital.   For the six months ended September 30, 2002, the Company’s working capital decreased as its operating assets and liabilities provided $69.6 million of cash.  Accounts receivable decreased, creating a source of cash of $24.1 million, primarily due to the decrease in sales. Inventory levels decreased, creating a source of cash of $17.9 million, including non cash inventory charges of $12.3 million. Accounts payable decreased, creating a use of cash of $17.5 million, primarily as a result of the Company paying accounts payable outstanding at March 31, 2002.  Other current liabilities decreased, creating a use of cash of $21.3 million related primarily to restructuring payments and other assets decreased creating a source of cash of $66.4 million, primarily due to collection of the income tax refund received during the first quarter of fiscal 2003.

Investing activities.  The Company’s net investing activities provided $145.8 million of cash during the six-months ended September 30, 2002, due primarily to net proceeds of approximately $163 million from the sale of its Airshow and Wireless Instruments businesses, offset by capital expenditures of $18.8 million. 

Financing Activities.   The Company’s financing activities used $129.6 million of cash during the six-months ended September 30, 2002, due primarily to repayment of approximately $153.0 million of outstanding debt with the proceeds from the sale of Airshow, offset by additional borrowings of cash under the Company’s revolving and other credit facilities.

Future Financing Sources.   As of September 30, 2002, the Company had $88.0 million of borrowings and $24.6 million of letters of credit outstanding under its revolving credit facility and $62.4 million of additional availability under the Revolving Credit Facility. 

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New Pronouncements

In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”.  SFAS No. 143 addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  This statement is effective for fiscal years beginning after June 15, 2002.  The Company does not expect the application of SFAS No. 143 to have a material impact on its financial position or results of operations. 

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”), which rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt”. This statement amends APB Opinion No. 30, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect.  As a result, the criteria set forth by the amended APB Opinion No. 30 will now be used to classify those gains and losses.  SFAS No. 145 also amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions.  In addition, SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions.  The provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002, with early adoption encouraged.  Upon adoption of the provisions of SFAS No.145, the Company will reclassify the extraordinary items reported during fiscal 2001 and fiscal 2003 into continuing operations. 

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”.  SFAS No. 146 addresses accounting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity”.  This statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption encouraged.  The Company is currently assessing the impact of SFAS 146 on its financial position.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company sells its products into over 60 countries and has a direct presence in 28 countries.  The Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations, and market risk related to changes in interest rates and foreign currency exchange rates.  The Company believes the political and economic risks related to its foreign operations are mitigated due to the stability of the countries in which its facilities are located. The Company’s principal currency exposures against the U.S. dollar are in the Euro and in Canadian currency.  The Company does use foreign currency forward exchange contracts to mitigate fluctuations in currency.  The Company’s market risk exposure to currency rate fluctuations is not material.  The Company does not hold derivatives for trading purposes.

The Company uses derivative financial instruments consisting primarily of interest rate hedge agreements to manage exposures to interest rate changes.  The Company’s objective in managing its exposure to changes in interest rates (on its variable rate debt) is to limit the impact of such changes on earnings and cash flow and to lower its overall borrowing costs.  

At September 30, 2002, the Company had $612.9 million of variable rate debt outstanding, which represents approximately 69% of the Company’s total outstanding debt. 

At September 30, 2002, the Company does not have any interest rate swap or cap agreements outstanding.  The Company had an interest rate swap contract, which expired during the second quarter of fiscal 2003.  The swap contract that expired had fixed interest rates higher than the three-month LIBOR quoted by its financial institutions. The Company therefore recognized an increase in interest expense (calculated as the difference

33

between the interest rate in the swap contracts and the three-month LIBOR rate) for the first six months of fiscal 2003 of $2.5 million.

The Company has significant debt and resulting debt service obligations. A substantial portion of the debt is subject to variable rate interest expense. The weighted average interest rate for the six months ended September 30, 2002, was approximately 7%.  Interest rates are at historically low rates and an increase in interest rates in the future could have a material impact on the results of operations and financial position of the Company.  An increase of 100 basis points in interest rates would increase interest expense by approximately $6.1 million on an annual basis.

Item 4.   Controls and Procedures

(a)     Evaluation of Disclosure Controls and Procedures.  The Company’s principal executive officer and principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of this Quarterly Report on Form 10Q, have concluded that the Company’s disclosure controls and procedures are adequate and effective for the purposes set forth in the definition in the Exchange Act rules.
(b)     Changes in Internal Controls.  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of their evaluation.

34

PART II.  Other Information

Item 1.    Legal Proceedings

The Company is a party to several pending legal proceedings and claims. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company believes that the final outcome should not have a material adverse effect on the Company’s operations or financial position.

Item 2.    Changes in Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Submission of Matters to a Vote

The Annual Meeting of the Stockholders was held on September 4, 2002 in New York, New York.  At such meeting 179,763,895 shares were entitled to vote.  The table below discloses the vote with respect to each proposal:

PROPOSAL I

To elect three directors to serve for a term ending upon the 2005 Annual Meeting of Stockholders and one director to serve for a term ending upon the 2003 Annual Meeting of Stockholders:

Nominees:  Ned C. Lautenbach, Marvin L. Mann and John R. Peeler for election to the class of directors whose terms expire in 2005, and Donald J. Gogel for election to the class of directors whose terms expire in 2003. 

Number of Shares/Votes

Nominee	Term Expiring		For		Withheld
Ned C. Lautenbach		2005		179,175,427		588,468
Marvin L. Mann		2005		179,371,378		392,517
John R. Peeler		2005		179,184,306		579,589
Donald J. Gogel		2003		179,464,003		299,892

PROPOSAL II

To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent accountants for the current fiscal year.

For:	179,504,100	99.86	%
Against:	202,902	0.11	%
Abstain:	56,893	0.03	%

Item 5. Other Information

None

35

Item 6.  Exhibits and Reports on Form 8-K.

    (a)         Exhibits

             The exhibit numbers in the following list correspond to the numbers assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K:

4.13	Investment Agreement, dated as of August 5, 2002, among Acterna Corporation, Acterna LLC and CD&R VI (Barbados), Ltd.
4.14	Form of Note Issuable under Investment Agreement, dated as of August 5, 2002, among Acterna Corporation, Acterna LLC and CD&R VI (Barbados), Ltd.
4.15	Form of Warrant Issuable under Investment Agreement, dated as of August 5, 2002, among Acterna Corporation, Acterna LLC and CD&R VI (Barbados), Ltd.
4.16	First Amendment, dated as of August 5, 2002, among Acterna Corporation, Acterna LLC and Clayton, Dubilier & Rice Fund VI Limited Partnership, to the Investment Agreement, dated as of December 27, 2001, among Acterna Corporation, Acterna LLC and Clayton, Dubilier & Rice Fund VI Limited Partnership.
4.17	Amendment No. 3, dated as of August 5, 2002, among Acterna Corporation (“Acterna”), Clayton, Dubilier & Rice Fund V Limited Partnership (“Fund V”) and Clayton, Dubilier & Rice Fund VI Limited Partnership (“Fund VI”), to the Registration Rights Agreement, dated as of May 21, 1998, among Acterna, Fund V, Fund VI, and certain other parties thereto.
10.25	Third Credit Agreement Amendment, dated as of August 7, 2002, among Acterna Corporation (“Acterna”), Acterna LLC, certain subsidiaries of Acterna LLC, JPMorgan Chase Bank (as successor by merger to the Morgan Guaranty Trust Company of New York (“Morgan Guaranty”)) as administrative agent, and certain of the lenders under the Credit Agreement, dated May 23, 2000, among Acterna LLC, Wavetek Wandel Goltermann GmbH and Acterna Subworld Holdings GmbH, the lenders named therein, Morgan Guaranty as administrative agent, Morgan Guaranty as German Term Loan Servicing Bank, Credit Suisse First Boston as syndication agent and The Chase Manhattan Bank and Bankers Trust Company as co-documentation agents.
10.26	Guarantee and Collateral Agreement, dated as of August 7, 2002, made by Acterna Corporation and Acterna LLC and certain subsidiaries of Acterna LLC in favor of CD&R VI (Barbados), Ltd. and certain other parties.
10.27	Assumption Agreement to the Intercreditor Agreement, dated as of August 7, 2002, between CD&R VI (Barbados), Ltd., JPMorgan Chase Bank as administrative agent, Clayton, Dubilier & Rice Fund VI Limited Partnership and Acterna LLC.
(b)          Reports on Form 8-K
1.	The Company filed a Current Report on Form 8-K dated July 12, 2002, relating to the Company’s press release announcing the approval by the Company’s lender group of an amendment to the Company’s senior secured credit facility.
2.	The Company filed a Current Report on Form 8-K dated July 23, 2002, relating to the extension of cash tender offers for up to $155 million of the outstanding 9.75 percent Senior Subordinated Notes Due 2008 of Acterna LLC.
3.	The Company filed a Current Report on Form 8-K dated July 31, 2002, relating to the Company’s press release regarding first quarter results.
4.	The Company filed a Current Report on Form 8-K dated August 6, 2002, relating to the second extension of cash tender offers for up to $155 million of the outstanding 9.75 percent Senior Subordinated Notes Due 2008 of Acterna LLC.
5.	The Company filed a Current Report on Form 8-K dated August 9, 2002, relating to the closing on August 9, 2002, of the sale of the Company’s Airshow business to Rockwell Collins, Inc.
6.	The Company filed a Current Report on Form 8-K dated August 9, 2002, relating to the closing on August 9, 2002, of the sale of the Company’s Airshow business to Rockwell Collins, Inc., and attaching pro forma financial information as required pursuant to Article 11 of Regulation S-X in connection therewith.
7.	The Company filed a Current Report on Form 8-K dated August 14, 2002, relating to certifications of the Company’s Chief Executive Officer and the Company’s Corporate Vice President and Chief Financial Officer.

36

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.

	ACTERNA CORPORATION
Date  November 14, 2002	/s/ NED C. LAUTENBACH
	Ned C. Lautenbach Chairman and CEO
Date  November 14, 2002	/s/ JOHN D. RATLIFF
	John D. Ratliff Corporate Vice President and Chief Financial Officer; Principal Accounting Officer

37

CERTIFICATIONS

          I, Ned C. Lautenbach, certify that:

          1.          I have reviewed this quarterly report on Form 10-Q of Acterna Corporation;

          2.          Based on my knowledge, this quarterly 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 quarterly report;

          3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

          4.          The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a)          designed such disclosure controls and procedures 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 quarterly report is being prepared;

          b)          evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

          c)          presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

          5.          The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

          a)          all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

          b)          any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

          6.          The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  November 14, 2002

/s/ NED C. LAUTENBACH

Ned C. Lautenbach
Chairman and Chief Executive Officer

38

CERTIFICATIONS

          I, John D. Ratliff, certify that:

          1.          I have reviewed this quarterly report on Form 10-Q of Acterna Corporation;

          2.          Based on my knowledge, this quarterly 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 quarterly report;

          3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

          4.          The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a)          designed such disclosure controls and procedures 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 quarterly report is being prepared;

          b)          evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

          c)          presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

          5.          The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

          a)          all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

          b)          any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

          6.          The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  November 14, 2002

/s/ JOHN D. RATLIFF

John D. Ratliff
Corporate Vice President and Chief Financial Officer

39

EX-4.13

                                                                    Exhibit 4.13

________________________________________________________________________________


                               ACTERNA CORPORATION
                                   ACTERNA LLC
                            CD&R VI (BARBADOS), LTD.


                              INVESTMENT AGREEMENT


               Senior Secured Convertible Notes Due 2007, Series 2
                                 Of Acterna LLC



                           Dated as of August 5, 2002

________________________________________________________________________________






                                                                  EXECUTION COPY

                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
                                    Article I
        Grant of the Right; Authorization, Issuance, Purchase and Sale of
                               Notes and Warrants

1.1    Grant and Acceptance..................................................  2
1.2    Authorization of the Notes............................................  2
1.3    Authorization of Warrants.............................................  3
1.4    Sale and Purchase of Notes............................................  3

                                   Article II
                                  The Closings

2.1    Date, Time and Location of Closings...................................  3
2.2    Delivery of Initial Notes and Purchase Price..........................  4

                                   Article III
          Representations and Warranties of the Parent and the Company

3.1    Corporate Existence; Compliance with Law..............................  4
3.2    Corporate Power; Authorization; Enforceable Obligations...............  5
3.3    Capitalization........................................................  5
3.4    Financial Condition...................................................  6
3.5    Absence of Changes....................................................  6
3.6    No Legal Bar..........................................................  7
3.7    No Material Litigation................................................  7
3.8    No Default............................................................  7
3.9    Ownership of Property; Liens..........................................  7
3.10   Intellectual Property.................................................  7
3.11   No Burdensome Restrictions............................................  8
3.12   Taxes.................................................................  8
3.13   Federal Reserve Regulations...........................................  8
3.14   ERISA.................................................................  8
3.15   Investment Company Act; Other Regulations.............................  9
3.16   [Intentionally Omitted.]..............................................  9
3.17   Environmental Matters.................................................  9
3.18   Note Security Documents............................................... 11
3.19   Disclosure............................................................ 11
3.20   Solvency.............................................................. 11
3.21   Senior Indebtedness................................................... 11


                                        i



                                                                           
                                   Article IV
                 Representations and Warranties of the Investor

4.1    Experience............................................................ 12
4.2    Investment Intent..................................................... 12
4.3    Notes, Warrants and Common Stock Not Registered....................... 12

                                    Article V
                           Conditions to Each Closing

5.1    Conditions to Obligations of Each Party............................... 13
5.2    Conditions to Obligations of the Investor............................. 13

                                   Article VI
                      The Convertible Notes; General Terms

6.1    Interest Accrual...................................................... 15
6.2    Payments.............................................................. 15
6.3    Conversion............................................................ 16
6.4    Optional Redemption................................................... 25
6.5    Mandatory Offer to Repurchase Upon Change of Control.................. 26
6.6    Mandatory Offer to Repurchase CD&R Barbados Notes Upon Disposition
       of Assets............................................................. 29
6.7    Issuance of Warrants Upon Early Redemption or Repurchase.............. 33
6.8    Register of Holders................................................... 34
6.9    Exchange of Notes Upon Transfer....................................... 34
6.10   Mutilated, Destroyed, Lost and Stolen Notes........................... 35

                                   Article VII
                      Affirmative Covenants of the Company

7.1    Financial Statements.................................................. 35
7.2    Certificates; Other Information....................................... 36
7.3    Payment of Obligations................................................ 37
7.4    Conduct of Business and Maintenance of Existence...................... 37
7.5    Maintenance of Property; Insurance.................................... 38
7.6    Inspection of Property; Books and Records; Discussions................ 38
7.7    Notices............................................................... 38
7.8    Environmental Laws.................................................... 40
7.9    Additional Collateral................................................. 41
7.10   Liens................................................................. 43
7.11   Note Guarantors....................................................... 43



                                       ii



                                                                           
                                  Article VIII
                        Negative Covenants of the Company

8.1    Limitation on Indebtedness............................................ 45
8.2    Limitation on Restricted Payments..................................... 49
8.3    Limitation on Restrictions on Distributions from Restricted
       Subsidiaries.......................................................... 53
8.4    Limitation on Sales of Assets and Subsidiary Stock.................... 54
8.5    Limitation on Transactions with Affiliates............................ 58
8.6    Limitation on Liens................................................... 59
8.7    Limitation on Optional Payments and Modifications of Debt
       Instruments and other Material Agreements............................. 60
8.8    Limitation on Negative Pledge Clauses................................. 61

                                   Article IX
                                Successor Company

9.1    When the Company May Merge, etc....................................... 61
9.2    Successor Company Substituted......................................... 63

                                    Article X
                                Events of Default

10.1   Events of Default..................................................... 63
10.2   Acceleration of Maturity; Rescission and Annulment.................... 66
10.3   Unconditional Right of Holders to Receive Principal, Premium
       and Interest.......................................................... 67
10.4   Restoration of Rights and Remedies.................................... 67
10.5   Rights and Remedies Cumulative........................................ 67
10.6   Delay or Omission Not Waiver.......................................... 67
10.7   Waiver of Past Defaults............................................... 68
10.8   Waiver of Stay, Extension or Usury Laws............................... 68

                                   Article XI
                                   Termination

11.1   Termination........................................................... 68
11.2   Effect of Termination................................................. 68



                                      iii



                                                                         
                                   Article XII
                                   Definitions

                                  Article XIII
                                  Miscellaneous

13.1   Notices............................................................. 105
13.2   Governing Law, etc.................................................. 107
13.3   Jurisdiction; Waiver of Jury Trial; Waiver of Punitive Damages...... 107
13.4   Binding Effect...................................................... 107
13.5   Assignment.......................................................... 108
13.6   No Third-Party Beneficiaries........................................ 108
13.7   Amendment; Waivers, etc............................................. 108
13.8   Survival of Representations and Warranties.......................... 110
13.9   Payment of Expenses and Taxes....................................... 110
13.10  Judgment Currency................................................... 112
13.11  Entire Agreement.................................................... 112
13.12  Severability........................................................ 112
13.13  Headings............................................................ 113
13.14  Rules of Construction............................................... 113
13.15  Schedules........................................................... 113
13.16  Counterparts........................................................ 114
13.17  Limitation on Certain Transactions.................................. 114



Schedule 3.2(a):  Consents, Authorizations, Notices and Filings
Schedule 3.3:     Capitalization

Annex A:      Terms of Note Guarantees of Transferred Notes

Exhibit A:    Form of Note
Exhibit B:    Form of Warrant
Exhibit C:    Form of Amendment No. 3 to the Registration Rights Agreement
Exhibit D:    Form of Guarantee and Collateral Agreement

                                       iv



                                                                  EXECUTION COPY

                              INVESTMENT AGREEMENT

     INVESTMENT AGREEMENT, dated as of August 5, 2002, among Acterna
Corporation, a Delaware corporation (together with its successors and assigns,
the "Parent"), Acterna LLC, a Delaware limited liability company wholly owned
and controlled by the Parent (together with its successors and assigns, the
"Company"), and CD&R VI (Barbados), Ltd., a company organized under the laws of
Barbados (together with its successors and assigns, the "Investor"). Capitalized
terms used in this Agreement and not otherwise defined are defined in Article
XII.

                                    Recitals

     WHEREAS, on January 15, 2002 the Company issued and sold to Clayton,
Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited
partnership ("Fund VI"), $75 million in aggregate principal amount of 12% Senior
Secured Convertible Notes due December 31, 2007 of the Company;

     WHEREAS, the Investor currently holds $50.2 million aggregate principal
amount of Senior Subordinated Notes (the "Current CD&R Barbados Senior
Subordinated Notes");

     WHEREAS, pursuant to the terms of the Offers to Purchase, dated June 24,
2002 (as the same may be amended or supplemented from time to time, the "Offers
to Purchase"), the Company and the Investor offered to purchase for cash, on a
combined basis, up to $155 million in aggregate principal amount of outstanding
Senior Subordinated Notes;

     WHEREAS, pursuant to the terms of the Offers to Purchase, the Investor may
purchase for cash up to $46 million principal amount of additional outstanding
Senior Subordinated Notes (the "Additional CD&R Barbados Senior Subordinated
Notes" and, together with the Current CD&R Barbados Senior Subordinated Notes,
the "CD&R Barbados-Owned Senior Subordinated Notes");

     WHEREAS, the Senior Subordinated Note Indenture requires the Company to pay
interest on the Senior Subordinated Notes semi-annually on May 15 and November
15 of each year (each, a "Senior Subordinated Note Interest Payment Date");

     WHEREAS, in connection with the Offers to Purchase, the Company and the
other parties to the Credit Agreement have entered into the Third Credit
Agreement Amendment;

     WHEREAS, as a condition to the effectiveness of such Third Credit Agreement
Amendment, the Administrative Agent required that the Investor obtain from the
Company the right to invest an amount equal to the amount of future cash
interest



received, on an after-tax basis, on all CD&R Barbados-Owned Senior Subordinated
Notes in the Senior Secured Convertible Notes, Series 2 due December 31, 2007 of
the Company (the "Initial Notes");

     WHEREAS, the Investor desires to obtain from the Company the right to
invest in the Initial Notes an amount equal to future cash interest received, on
an after-tax basis, on all CD&R Barbados-Owned Senior Subordinated Notes;

     WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, the Initial Notes from time to
time in accordance with the terms hereof, at the election of the Investor and in
an amount equal to future cash interest received, on an after-tax basis, on all
CD&R Barbados-Owned Senior Subordinated Notes;

     WHEREAS, the Parent, the Company and the Investor have agreed that the
Notes will be secured, on and subject to the terms of (a) a Guarantee and
Collateral Agreement, in the form of Exhibit D hereto (the "Guarantee and
Collateral Agreement"), by the Parent, the Company and certain Subsidiaries of
the Company for the benefit of the Investor, and (b) an Intercreditor Agreement,
dated as of December 27, 2001 (the "Intercreditor Agreement"), among the Bank
Agent, Fund VI and the Investor, and consented to by the Parent, the Company and
certain Subsidiaries of the Company; and

     WHEREAS, the Parent, the Company and the Investor desire to enter into this
Agreement to govern the terms of the CD&R Barbados Investment;

     NOW, THEREFORE, in consideration of the mutual premises, covenants,
representations and warranties made in this Agreement and of the mutual benefits
to be derived from this Agreement, the parties hereto agree as follows:

                                    Article I
                  Grant of the Right; Authorization, Issuance,
                     Purchase and Sale of Notes and Warrants

     1.1 Grant and Acceptance. The Company hereby grants to the Investor the
right to invest in Initial Notes an amount equal to the Net Cash Interest Amount
in respect of any cash interest paid by the Company and received by the Investor
in respect of interest owing by the Company to the Investor on any Senior
Subordinated Note Interest Payment Date for so long as the Investor owns any
Senior Subordinated Notes (with respect to each such Senior Subordinated Note
Interest Payment Date, an "Investment Right"), and the Investor hereby accepts
such Investment Right.

     1.2 Authorization of the Notes. The Company has authorized the issuance and
sale of the Notes on the terms set forth in this Agreement, to be designated as
Series 2-A through Series 2-K, with the Notes issued following the first
exercise by the Investor of

                                        2



its Investment Right to be designated as Series 2-A and the Notes issued
following each exercise by the Investor of its Investment Right thereafter to be
designated with the following letter of the alphabet through and including the
letter "K". Any additional Notes issued pursuant to Section 6.2(a)(ii) shall
have the same designation as the Notes with respect to which such additional
notes were issued. The Notes shall be in the form of Exhibit A hereto, with such
changes therefrom, if any, as may be approved by the Company and the Investor.

     1.3 Authorization of Warrants. The Parent has authorized the issuance, upon
the redemption or repurchase of the Notes prior to the Maturity Date, of
warrants (each, a "Warrant") to purchase a number of newly-issued shares of
Common Stock equal to the number of shares of Common Stock into which the Notes
were convertible immediately prior to such redemption or repurchase, at the
exercise price per share equal to the Conversion Price, to be in the form of
Exhibit B hereto, with such changes therefrom, if any, as may be approved by the
Parent and the Holder of the Notes so redeemed or repurchased.

     1.4 Sale and Purchase of Notes. An Investment Right with respect to any
Senior Subordinated Note Interest Payment Date may be exercised by the Investor
during the period commencing on the twentieth (20/th/) Business Day prior to,
and ending on the fifth (5/th/) Business Day following, each Senior Subordinated
Note Interest Payment Date occurring after the date hereof (each, an "Exercise
Period"), by written notice to the Company and the Appraiser, which notice shall
state (a) that the Investor has elected to exercise such Investment Right and
(b) the amount equal to the Net Cash Interest Amount being invested in Initial
Notes pursuant to such notice (an "Election Notice"). Following receipt of such
Election Notice, and subject to the terms and conditions of this Agreement, at
each Closing the Company will issue and sell to the Investor, and the Investor
will purchase from the Company, Initial Notes for a purchase price and in an
aggregate Principal Amount equal to the Net Cash Interest Amount with respect to
such Senior Subordinated Note Interest Payment Date (the "Purchase Price"). The
Investor agrees that the Investment Right will be exercised if, and only to the
extent required by, the terms of the Third Credit Agreement Amendment or any
agreement contemplated thereby.

                                   Article II
                                  The Closings

     2.1 Date, Time and Location of Closings. Each purchase and sale of the
Initial Notes shall take place at the offices of Debevoise & Plimpton, 919 Third
Avenue, New York, New York 10022, at 10:00 a.m., New York City time, at a
closing (each, a "Closing") to be held on (a) if the Investment Right is
exercised with respect to a Senior Subordinated Note Interest Payment Date
falling on November 15 of any year, the later to occur of (i) the fifth (5/th/)
Business Day after the final determination of the Conversion

                                        3



Rate and the Interest Rate in accordance with this Agreement, and (ii) the date
on which the interest in respect of which the Investment Right is being
exercised is actually received by the Investor, and (b) if the Investment Right
is exercised with respect to a Senior Subordinated Note Interest Payment Date
falling on May 15 of any year, the later to occur of (i) the fifth (5) Business
Day after receipt by the Company of the Election Notice, and (ii) the date on
which the interest in respect of which the Investment Right is being exercised
is actually received by the Investor, or, in each of case (a) and (b), on such
other Business Day thereafter as may be agreed upon by the Parent, the Company
and the Investor (such Business Day, with respect to a particular Closing, the
"Closing Date").

     2.2 Delivery of Initial Notes and Purchase Price. At each Closing, (a) the
Company will deliver the Initial Notes to the Investor in the form of a single
promissory note (or such greater number of promissory notes in denominations of
at least $1,000 and integral multiples thereof as the Investor may request), in
the form of Exhibit A hereto, with such changes therefrom, if any, as may be
approved by the Company and the Investor, dated the Closing Date and registered
in the name of the Investor (or its nominee), and (b) the Investor shall deliver
the Purchase Price to the Company by wire transfer of immediately available
funds to an account previously designated in writing by the Company.

                                  Article III
          Representations and Warranties of the Parent and the Company

     The Parent and the Company hereby represent and warrant as follows:

     3.1 Corporate Existence; Compliance with Law. Each of the Parent, the
Company and the Subsidiaries of the Company (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate or other organizational power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
except to the extent that the failure to have such legal right would not be
reasonably expected to have a Material Adverse Effect, (c) is duly qualified as
a foreign entity and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not be reasonably expected to have
a Material Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

                                        4



     3.2  Corporate Power; Authorization; Enforceable Obligations.

          (a)  Each of the Parent, the Company and the Subsidiaries of the
Company (i) has the corporate or other organizational power and authority, and
the legal right, to make, deliver and perform under this Agreement and the other
Transaction Agreements to which it is a party and (ii) has taken all necessary
corporate or other organizational action to authorize the execution, delivery
and performance of this Agreement and the other Transaction Agreements to which
it is a party. No consent or authorization of, filing with, notice to or other
similar act by or in respect of, any Governmental Authority or any other Person
is required to be obtained or made by or on behalf of the Parent, the Company or
any Subsidiary in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or the other Transaction Agreements, except for (w) consents, authorizations,
notices and filings described in Schedule 3.2(a), all of which have been
obtained or made, (x) filings to perfect the Liens created by the Note Security
Documents, (y) filings pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. (S) 3737 et seq.), in respect of accounts of the Parent, the
Company or any Subsidiary of the Company, the obligor in respect of which is the
United States of America or any department, agency or instrumentality thereof,
and (z) consents, authorizations, notices and filings which the failure to
obtain or make would not reasonably be expected to have a Material Adverse
Effect.

          (b) This Agreement has been, and each of the other Transaction
Agreements and any other agreement to be entered into pursuant hereto will be,
duly executed and delivered on behalf of the Parent, the Company or any
Subsidiary of the Company, as appropriate. This Agreement constitutes, and each
of the other Transaction Agreements and any other agreement to be entered into
pursuant to this Agreement will, upon their execution and delivery, constitute,
a legal, valid and binding obligation of the Parent, the Company or any
Subsidiary of the Company, as appropriate, enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws relating to or affecting
creditors' rights generally and by general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

     3.3 Capitalization. Schedule 3.3 sets forth a complete and correct
description of the shares of capital stock of, or other securities or
instruments convertible into or exchangeable for any capital stock of or other
equity interest in, the Parent and the Company that are authorized, or issued
and outstanding as of the date set forth in such Schedule. Except as set forth
in Schedule 3.3, (a) there are no preemptive or similar rights on the part of
any holders of any class of securities of the Parent or the Company, (b) no
subscriptions, options, warrants, conversion or other rights, agreements,
commitments, arrangements or understandings of any kind obligating any Person,

                                        5



contingently or otherwise, to issue or sell, or cause to be issued or sold, any
shares of capital stock of any class of the Parent or the Company, or any
securities or other instruments convertible into or exchangeable for any such
shares, are outstanding and (c) no authorization for any of the foregoing has
been given. There are no outstanding contractual or other rights or obligations
to or of any Person to repurchase, redeem or otherwise acquire any outstanding
shares or other equity interests in the Parent or the Company.

     3.4 Financial Condition. The audited consolidated balance sheets of the
Parent and its Subsidiaries as at March 31 of the two most recent fiscal years,
and the related consolidated statements of income and of cash flows for the
fiscal years ended on such dates, as filed by the Parent with the United States
Securities and Exchange Commission (and reported on by and accompanied by an
unqualified report from the Parent's independent public accountant), present
fairly, in all material respects, the consolidated financial condition of the
Parent and its Subsidiaries as at such respective dates, and the consolidated
results of its operations and its consolidated cash flows for the respective
fiscal years then ended. The unaudited consolidated balance sheet of the Parent
and its Subsidiaries for the most recent quarterly reporting period, and the
related unaudited consolidated statements of income and cash flows for the
interim quarterly fiscal period ended on such date, as filed by the Parent with
the United States Securities and Exchange Commission, on the basis disclosed in
the footnotes to such financial statements, present fairly, in all material
respects, the consolidated financial condition of the Parent and its
Subsidiaries as at such date, and the consolidated results of its operations and
its consolidated cash flows for the interim quarterly fiscal period then ended
(subject to the omission of certain footnotes and normal year-end audit and
other adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the Chief
Financial Officer of the Parent, and disclosed in any such schedules and notes,
and except that such unaudited financial statements do not contain certain
footnotes). All material Guarantee Obligations, material contingent liabilities
and liabilities for taxes, or all material long-term leases or unusual forward
or long-term commitments, including, without limitation, any interest rate or
foreign currency swap or exchange transaction or other obligation in respect of
derivatives, which according to GAAP must be reflected in such financial
statements or the notes thereto, are so reflected.

     3.5 Absence of Changes. Since the date of the most recent report filed by
Parent with the United States Securities and Exchange Commission on Form 10-Q or
Form 10-K, there has been no development or event relating to or affecting the
Parent, the Company or any Subsidiary of the Company which has had or would
reasonably be expected to have a Material Adverse Effect (after giving effect to
the Transactions).

                                        6



     3.6  No Legal Bar. The execution, delivery and performance of this
Agreement and the other Transaction Agreements by the Parent, the Company and
the Subsidiaries of the Company, as appropriate, and the use of the proceeds of
the CD&R Barbados Investment by the Company, (a) will not violate any
Requirement of Law or any Contractual Obligation applicable to or binding upon
the Parent, the Company and any Subsidiary of the Company or any of their
respective properties or assets in any respect that would reasonably be expected
to have a Material Adverse Effect and (b) will not result in the creation or
imposition of any Lien on any of the properties or assets of the Parent, the
Company or the Subsidiaries of the Company pursuant to any Requirement of Law or
Contractual Obligation, except for the Liens (i) arising under the Security
Documents (as defined in the Credit Agreement) or the Note Security Documents or
(ii) that are Permitted Liens and are permitted under the Credit Agreement
(after giving effect to the Third Credit Agreement Amendment).

     3.7  No Material Litigation. No litigation by, investigation by, or
proceeding of or before any arbitrator or any Governmental Authority is pending
or, to the knowledge of the Parent, the Company or any Subsidiary of the
Company, threatened by or against the Parent, the Company or any Subsidiary of
the Company (or any of their respective properties or revenues, after giving
effect to the CD&R Barbados Investment) which would reasonably be expected to
have a Material Adverse Effect.

     3.8  No Default. Neither the Parent, the Company nor any Subsidiary of the
Company is in default under or with respect to any Contractual Obligation which
would reasonably be expected to have a Material Adverse Effect. No Bank Default
Event or Senior Subordinated Default Event has occurred and is continuing.

     3.9  Ownership of Property; Liens. Each of the Parent, the Company and the
Subsidiaries of the Company has good record and marketable title in fee simple
to, or a valid leasehold interest in, all of its material real property, and
good title to, or a valid leasehold interest in, all of its other material
property, and none of such property is subject to any Lien, except for Liens (a)
arising under the Security Documents (as defined in the Credit Agreement) or the
Note Security Documents or (b) that are Permitted Liens and are permitted under
the Credit Agreement (after giving effect to the Third Credit Agreement
Amendment).

     3.10 Intellectual Property. Each of the Parent, the Company and the
Subsidiaries of the Company owns, or is licensed (or otherwise has the legal
right) to use, all United States trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business substantially
as currently conducted, except for those United States trademarks, tradenames,
copyrights, technology, know-how and processes, the failure to own or license
(or otherwise have the legal right to use) which would not reasonably be
expected to have a Material Adverse Effect (the "Intellectual Property"). No
claim has been asserted and is pending by any Person

                                        7



challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does the Parent, the Company
or any Subsidiary of the Company know of any valid basis for any such claim and
to the knowledge of each of the Parent, the Company and the Subsidiaries of the
Company, the use of the Intellectual Property by the Parent, the Company and the
Subsidiaries of the Company does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.

     3.11 No Burdensome Restrictions. No Requirement of Law applicable to or
Contractual Obligation of any of the Parent, the Company and the Subsidiaries of
the Company would reasonably be expected to have a Material Adverse Effect.

     3.12 Taxes. Each of the Parent, the Company and its Subsidiaries has filed
or caused to be filed all United States federal income tax returns and all other
material tax returns which, to the knowledge of the Company, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect
or (ii) taxes, fees or other charges the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Parent, the Company or its Subsidiaries, as the case may be); no
tax Lien has been filed, and, to the knowledge of the Company, no claim is being
asserted, with respect to any such tax, fee or other charge.

     3.13 Federal Reserve Regulations. Neither the Parent, the Company nor any
Subsidiary of the Company will, directly or indirectly, use any of the proceeds
of the CD&R Barbados Investment for the purpose, whether immediate, incidental
or ultimate, of buying "margin stock" or of maintaining, reducing or retiring
any indebtedness originally incurred to purchase a stock that is currently
"margin stock", or otherwise take or permit to be taken any action which would
involve a violation of any regulation of the Board of Governors of the Federal
Reserve System. No indebtedness being reduced or retired out of the proceeds of
the CD&R Barbados Investment was incurred for the purpose of purchasing or
carrying any "margin stock" and neither the Parent, the Company nor any
Subsidiary owns or has any intention of acquiring any "margin stock".

     3.14 ERISA. During the respective five year periods prior to the date
hereof and, solely for the purposes of Section 5.2(a)(ii), each Closing Date,
with respect to any Plan (or, with respect to (e) or (h) below, as of the date
such representation is made or, solely for the purposes of Section 5.2(a)(ii),
each Closing Date), none of the following events or conditions, either
individually or in the aggregate, has resulted or is reasonably

                                        8



likely to result in a liability to the Parent, the Company or any Subsidiary of
the Company which would be reasonably expected to have a Material Adverse
Effect: (a) a Reportable Event; (b) an "accumulated funding deficiency" (within
the meaning of Section 412 of the Code or Section 302 of ERISA); (c) any
material noncompliance with the applicable provisions of ERISA or the Code; (d)
a termination of a Single Employer Plan (other than a standard termination
pursuant to Section 4041(b) of ERISA); (e) a Lien in favor of the PBGC or a
Plan; (f) under-funding with respect to any Single Employer Plan; (g) a complete
or partial withdrawal from any Multiemployer Plan by the Parent, the Company,
any Subsidiary of the Company or any Commonly Controlled Entity; (h) any
liability of the Parent, the Company, any Subsidiary of the Company or any
Commonly Controlled Entity under ERISA if the Parent, the Company, any
Subsidiary of the Company or any Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the annual valuation date most
closely preceding the date on which this representation is made or, solely for
the purposes of Section 5.2(a)(ii), each Closing Date; (i) the Reorganization or
Insolvency of any Multiemployer Plan; and (j) an event or condition with respect
to which the Parent, the Company, any Subsidiary of the Company or any Commonly
Controlled Entity has incurred or could incur any liability in respect of a
Former Plan.

     3.15 Investment Company Act; Other Regulations. Neither the Parent, the
Company nor any Subsidiary of the Company is an "investment company", or a
company "controlled" by an "investment company" required to register as such
under the Investment Company Act of 1940, as amended, within the meaning of such
act. Neither the Parent, the Company nor any Subsidiary is subject to regulation
under any Federal or State statute or regulation (other than Regulation X of the
Board of Governors of the Federal Reserve System) which limits its ability to
incur Indebtedness.

     3.16 [Intentionally Omitted.]

     3.17 Environmental Matters. Other than exceptions to any of the following
that would not, individually or in the aggregate, reasonably be expected to
result in the payment of a Material Environmental Amount:

          (a)  the facilities and properties owned, leased or operated by each
of the Parent, the Company and the Subsidiaries of the Company (the
"Properties") do not contain any Materials of Environmental Concern in amounts
or concentrations which (i) constitute a violation of, or (ii) would reasonably
be expected to give rise to liability on the part of any of the Parent, the
Company and the Subsidiaries of the Company under, any applicable Environmental
Law.

          (b)  the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all material
respects, with all applicable Environmental Laws, and there is no contamination
at, under or about

                                        9



the Properties or violation of any applicable Environmental Law with respect to
the Properties or the business operated by the Parent, the Company and the
Subsidiaries of the Company (the "Business") which would materially interfere
with the continued operation of the Properties.

          (c) neither the Parent, the Company nor any of the Subsidiaries of the
Company has received any written notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with applicable Environmental Laws with regard to any of the
Properties or the Business, nor does any of the Parent, the Company or the
Subsidiaries of the Company have knowledge or reason to believe that any such
notice will be received or is being threatened.

          (d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, in violation of, or in a manner or to a
location which would reasonably be expected to give rise to liability on the
part of any of the Parent, the Company and the Subsidiaries of the Company
under, any applicable Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Properties, in violation of, or in a manner that would reasonably be
expected to give rise to liability on the part of the Parent, the Company and
the Subsidiaries of the Company under, any applicable Environmental Law.

          (e) no judicial proceeding or governmental or administrative action is
pending or, to the knowledge of any of the Parent, the Company and the
Subsidiaries of the Company, threatened, under any applicable Environmental Law
to which any of the Parent, the Company and the Subsidiaries of the Company is
or will be named as a party with respect to the Properties or the Business, nor
are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any applicable Environmental Law with respect to the
Properties or the Business.

          (f) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of any of the Parent, the Company and the Subsidiaries of the
Company in connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that would reasonably be
expected to give rise to liability on the part of any of the Parent, the Company
and the Subsidiaries of the Company under applicable Environmental Laws.

          (g) none of the Parent, the Company and the Subsidiaries of the
Company has assumed or retained, by contract or, to its knowledge, operation of
law, any known or suspected liabilities of any kind, fixed or contingent, as a
result of any violation

                                       10



or breach of applicable Environmental Law or with respect to any contamination
by any Materials of Environmental Concern.

     3.18 Note Security Documents. Upon execution and delivery thereof by the
parties thereto, the Note Security Documents will be effective to create (to the
extent described therein) in favor of and for the benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral
described therein, (a) except as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing and (b) subject to the terms of
the Intercreditor Agreement. When the actions specified in Schedule 7 to the
Guarantee and Collateral Agreement have been duly taken, the security interests
granted pursuant thereto shall constitute (to the extent described therein) a
perfected third priority lien on, and security interest in, all right, title and
interest of each pledgor party thereto in the Collateral described therein with
respect to such pledgor. Neither the Bank Agent nor the Lenders (as defined in
the Credit Agreement) have any security interests in or Liens on any assets of
the Note Financing Parties securing Bank Indebtedness other than the security
interests and Liens created pursuant to the Credit Documents (as defined in the
Credit Agreement as in effect on the date hereof), and no Bank Indebtedness
benefits from any Guarantee of any Subsidiary of the Company that has not
provided a Guarantee under the Guarantee and Collateral Agreement.

     3.19 Disclosure. The factual statements contained in the financial
statements referred to in Section 3.4, the Note Financing Documents (including
the schedules thereto, but excluding any statements by the Investor) and any
other certificates or documents furnished by or on behalf of the Company or any
of its Subsidiaries to the Investor in connection with this Agreement, taken as
a whole, do not, and will not as of the Closing Date, to the best knowledge of
the Company, contain any material misstatement of fact or omit to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances in which the same were made, not materially
misleading in their presentation of the Transactions or the other transactions
contemplated hereby or by the other Transaction Agreements or of the Company and
its Subsidiaries taken as a whole; all except as otherwise qualified herein or
therein, and such knowledge qualification being given only with respect to
factual statements made by Persons other than the Company or any of its
Subsidiaries.

     3.20 Solvency. Each of the Parent, the Company and the Subsidiaries of the
Company is Solvent.

     3.21 Senior Indebtedness. The monetary obligations of the Company under
this Agreement and the Notes constitute "Senior Indebtedness" under and as
defined in the Senior Subordinated Note Indenture. The Guarantee Obligation
being made by the

                                       11



Parent pursuant to the Guarantee and Collateral Agreement constitutes "Parent
Senior Indebtedness" under and as defined in the Senior Subordinated Note
Indenture.

                                   Article IV
                 Representations and Warranties of the Investor

     The Investor hereby represents and warrants as follows:

     4.1  Experience. The Investor (a) acknowledges that the CD&R Barbados
Investment is by its nature one of high risk, (b) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the CD&R Barbados Investment, (c) has been furnished with
and has had access to such information as the Investor considers necessary to
make a determination as to the advisability of the CD&R Barbados Investment,
together with such additional information as is necessary to verify the accuracy
of the information supplied and (d) financially can afford to bear the economic
risk of holding the Notes and, if issued, the Warrants, for an indefinite period
and can afford to suffer the complete loss of each Purchase Price.

     4.2  Investment Intent. The Investor will be acquiring the Notes and, if
issued, the Warrants, as well as the Common Stock issuable upon conversion of
the Notes and the exercise of the Warrants, for investment, for its own account,
and not with a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act.

     4.3  Notes, Warrants and Common Stock Not Registered.

          (a)  The Investor acknowledges and understands that the offering of
the Notes and the Warrants issuable upon the early redemption or repurchase of
the Notes pursuant to this Agreement and the Transaction Agreements has not been
and will not be registered under the Securities Act or qualified under any state
securities laws.

          (b)  The Investor acknowledges and understands that (i) the Notes must
be held until the earlier of their maturity, conversion, redemption or
repurchase, unless, prior to any such maturity, conversion, redemption or
repurchase, the Notes are registered under the Securities Act and qualified
under any applicable state securities laws or an exemption from such
registration and such qualification is available, (ii) the Warrants, if issued,
must be held until the earlier of their exercise or expiration, unless such
Warrants are, prior to such exercise or expiration, registered under the
Securities Act and qualified under any applicable state securities laws or an
exemption from such registration and such qualification is available and (iii)
the shares of Common Stock issuable upon the conversion or exercise, as
appropriate, of the Notes and Warrants must be held indefinitely unless such
shares of Common Stock are registered under the Securities Act

                                       12



and qualified under any applicable state securities laws or an exemption from
such registration and such qualification is available.

          (c) The Investor has been advised or is aware of the provisions of (i)
Rule 144 promulgated under the Securities Act, which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions and (ii) Regulation S, promulgated under the Securities Act,
which permits limited resale of securities outside of the United States, and
that such Rule 144 and Regulation S may not become available for resale of the
Notes and Warrants.

                                   Article V
                           Conditions to Each Closing

     5.1  Conditions to Obligations of Each Party. The obligations of the
Parent, the Company and the Investor to consummate the transactions contemplated
by this Agreement and the other Transaction Agreements at each Closing shall be
subject to the satisfaction, or waiver by each such party, on or prior to the
Closing Date of the following conditions:

          (a) No Injunction etc. Consummation of the transactions contemplated
by such Closing shall not have been restrained, enjoined or otherwise prohibited
or made illegal by any Requirement of Law, and no such Requirement of Law that
would have such an effect shall have been promulgated, entered, issued or
determined by any court or other Governmental Authority to be applicable to such
transactions. No action or proceeding shall be pending on the Closing Date
before any court or other Governmental Authority to restrain, enjoin or
otherwise prevent the consummation of such transactions, or to recover any
material damages or obtain other material relief as a result of such
transactions, or that otherwise relates to the application of any such
Requirement of Law.

          (b) Government Approvals and Consents. All Consents of all
Governmental Authorities required to be made or obtained by any of the Parent,
the Company, the Investor and their respective Affiliates, including all
Consents to be obtained by the Company pursuant to the Credit Agreement, in
connection with the consummation of the transactions contemplated at such
Closing, shall have been made or obtained.

     5.2  Conditions to Obligations of the Investor. The obligations of the
Investor to consummate the transactions contemplated by this Agreement and the
other Transaction Agreements at each Closing shall be subject to the
satisfaction, or waiver by the Investor, on or prior to the Closing Date of the
following conditions:

                                       13



          (a)  Representations and Warranties. The representations and
warranties of each Note Financing Party contained in Article III or any other
provision of this Agreement, or in any other Transaction Agreement, (i) shall be
true and correct in all material respects at and as of the date hereof (in the
case of this Agreement and the Guarantee and Collateral Agreement, giving effect
to the delivery of disclosure schedules in accordance with Sections 5.2(j) and
13.15) as if such schedules, had formed a part of each such respective
Transaction Agreement on the date hereof) and (ii) shall be true and correct in
all material respects at and as of each Closing as though made at and as of such
date (except to the extent such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall be
true and correct in all material respects, on and as of such earlier date).

          (b) Performance of Agreements. Each Note Financing Party shall have in
all material respects duly performed and complied with all agreements, covenants
and conditions required by this Agreement or any other Transaction Agreement to
be performed or complied with by it prior to or on the Closing Date.

          (c) Third Credit Agreement Amendment. The Third Credit Agreement
Amendment shall be effective and in full force and effect.

          (d) Amendment No. 3 to Registration Rights Agreement. The Parent and
the Investor shall have entered into Amendment No. 3 to the Registration Rights
Agreement, which amendment shall be in the form of Exhibit C hereto, with such
changes therefrom, if any, as are satisfactory to the Investor.

          (e) Guarantee and Collateral Agreement. Each Note Financing Party and
the Investor shall have entered into the Guarantee and Collateral Agreement,
which agreement shall be in the form of Exhibit D hereto, with such changes
therefrom, if any, as are satisfactory to the Investor.

          (f) Actions to Perfect Liens. The Investor shall have received
evidence in form and substance reasonably satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation, the
filing of duly executed financing statements on Form UCC-1, necessary or, in the
reasonable opinion of the Investor, reasonably desirable to perfect the Liens
created by the Note Security Documents shall have been completed.

          (g) Lien Searches. The Investor shall have received the results of a
recent search by a Person satisfactory to the Investor, of the Uniform
Commercial Code, judgment and tax lien filings which may have been filed with
respect to personal property of the Parent, the Company and any Domestic
Subsidiary (including any Foreign Subsidiary Holdco) that is a Credit Party, and
the results of such search shall be reasonably satisfactory to the Investor.

                                       14



          (h)  No Default. No Bank Default Event, no Senior Subordinated Default
Event, no Fund VI Default Event and no Default or Event of Default hereunder
shall have occurred and be continuing as of the Closing Date.

          (i)  Officer's Certificate. Each of the Parent and the Company shall
have delivered to the Investor a certificate, dated the Closing Date and signed
by an officer of the Parent or the Company, as appropriate, in form and
substance reasonably satisfactory to the Investor, to the effect set forth above
in Sections 5.2(a), 5.2(b), and 5.2(h).

          (j)  Disclosure Schedules. The Parent and the Company shall have
delivered to the Investor each of the Schedules to this Agreement and the
Guarantee and Collateral Agreement as required hereby and thereby, in form and
substance reasonably satisfactory to the Investor.

          (k)  Corporate and Other Proceedings. All corporate and other
proceedings of the Parent, the Company and the Subsidiaries of the Company in
connection with the transactions contemplated by this Agreement and the other
Transaction Agreements, and all documents and instruments incident thereto,
shall be satisfactory in form and substance to the Investor and its counsel, and
the Investor and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.

                                   Article VI
                      The Convertible Notes; General Terms

     6.1  Interest Accrual. Interest on each Note shall be computed on the basis
of a three hundred sixty (360) day year of twelve (12) thirty (30) day months,
and shall accrue on the unpaid principal amount of such Note from time to time
outstanding from and including the date thereof at the Specified Interest Rate
(the "Interest Rate"), in arrears, semi-annually on each March 31st and
September 30th (each, an "Interest Payment Date") of each year (commencing on
the later of March 31, 2003 and the Interest Payment Date next succeeding the
date of issuance of such Note) until the Principal Amount of such Note shall
have become due and payable. Any overdue installment of interest or payment of
any Principal Amount (the due date of such installment or payment to be
determined without giving effect to any grace period) shall be payable upon
demand and shall bear interest at a rate per annum equal to the lesser of (a)
the highest rate allowed by applicable law and (b) the Interest Rate plus two
percent (2%).

     6.2  Payments.

          (a)  Interest Payments. The Company shall pay the accrued and unpaid
interest on the Notes on each Interest Payment Date, without any presentment of
the

                                       15



Notes by the Holders thereof and without any notation of such payment being made
thereon. With respect to each Note, payments of accrued and unpaid interest
(each, an "Interest Payment") shall be made by the Company to the Holder of such
Note either (i) in cash or (ii), at the option of the Company, by the issuance
of an additional Note (A) in the form Exhibit A hereto, with such changes
therefrom, if any, as may be approved by the Company and the Holder, (B)
registered in the name of such Holder, (C) bearing interest from the relevant
Interest Payment Date at the Interest Rate equal to the Interest Rate applicable
to such Note, (D) having a face value equal to the amount of the Interest
Payment applicable to such Note, and (E) having the Conversion Rate equal to the
Conversion Rate applicable to such Note. In the event that an Interest Payment
is made by the Company through the issuance of an additional Note as provided in
the previous sentence, such Interest Payment shall be deemed paid in full and
shall not constitute an overdue installment of interest.

          (b) Payment of Principal Upon Maturity. With respect to each Note, on
the Maturity Date, the Principal Amount of such Note shall become due and
payable and shall be paid by the Company, together with any accrued and unpaid
interest on such Note, to the Holder thereof in cash.

          (c) Mechanism for Payments in Cash. Any cash payment required to be
made by the Company under this Article VI shall be made by wire transfer of
immediately available funds to an account designated in writing by the Holder to
whom such payment is due.

          (d) Payment on Business Day Only. If any payment due on, or with
respect to, any Note shall fall due on a day other than a Business Day, then
such payment shall be made on the next succeeding Business Day following the day
on which such payment shall have so fallen due, without including the additional
days elapsed in the computation of the interest payable on such succeeding
Business Day.

     6.3  Conversion.

          (a) Subject to and upon compliance with the provisions of this Section
6.3, at the option of the Holder thereof, any Note may be converted into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock at the Conversion Rate, determined as
hereinafter provided, in effect at the time of conversion. Such conversion right
shall commence on the initial issuance date of each Note and expire at the close
of business on the Maturity Date. In case a Note or portion thereof is called
for redemption at the election of the Company or the Holder thereof exercises
his right to require the Company to repurchase the Note following a Change of
Control, such conversion right in respect of the Note, or portion thereof so
called, shall expire at the close of business on the Business Day prior to the
Redemption Date or the Change of Control Payment Date, as the case may be,
unless the

                                       16



Company defaults in making the payment due upon redemption or repurchase, as the
case may be. The rate at which shares of Common Stock shall be delivered upon
conversion of any particular Note (the "Conversion Rate") shall be the Specified
Conversion Rate for such Note. The Conversion Rate shall be adjusted in certain
instances as provided in this Section 6.3. (For the purposes of this Agreement,
an "increase" or "decrease" in the Conversion Rate means that the number of
shares of Common stock issuable upon conversion of each $1,000 of Principal
Amount of the Notes shall be increased or decreased, as appropriate.)

          (b)  Mechanics of Conversion.

          (i)  No fractional shares of Common Stock shall be issued upon
     conversion of any Note. In lieu of any fractional shares of Common Stock
     (or other property) to which a Holder would otherwise be entitled upon
     conversion of any Note (or specified portion thereof), the Company shall
     pay such Holder cash equal to such fraction multiplied by the Current
     Market Price per share of Common Stock on the day of conversion.

          (ii) Before any Holder of a Note shall be entitled to convert such
     Note into Common Stock, such Holder shall surrender such Note, duly
     endorsed in blank, to the Company at the principal executive office of the
     Company (or any transfer agent designated by the Company), accompanied by
     written notice to the Company (a copy of which shall also be delivered to
     the Parent) stating therein (A) that such Holder elects to convert all or
     a specified percentage (based on the Principal Amount and any accrued but
     unpaid interest thereon) of such Note into shares of Common Stock in
     accordance with this Agreement and (B) the name or names of the Person or
     Persons which such Holder wishes the certificate or certificates evidencing
     the Common Stock to be issued. The Company's or Parent's delivery to the
     Holder (or its designee in the notice of conversion) of the number of
     shares of Common Stock (and cash in lieu of fractions thereof) into which a
     Note is convertible will be deemed to satisfy the Company's obligation to
     pay the Principal Amount of (and accrued but unpaid interest on) the Note.
     The Parent and the Company shall, as soon as practicable thereafter, (x)
     issue and deliver to such Holder (or to his nominee or nominees) a
     certificate or certificates representing the number of shares of Common
     Stock to which such Holder shall be entitled as aforesaid, (y) deliver to
     such Holder (or to his nominee or nominees) cash in lieu of any fractional
     share and (z), if less than the full Principal Amount (and accrued but
     unpaid interest) evidenced by such surrendered Note is being converted, a
     new Note, duly executed and delivered by the Company, with a Principal
     Amount equal to the Principal Amount of the Note surrendered for
     conversion, plus any accrued but unpaid interest thereon, minus the portion
     of such Principal Amount (and accrued but unpaid interest) converted to
     shares Common Stock. A Note may be converted in part, but only if the

                                       17



     principal amount of such Note to be converted is any integral multiple of
     $1,000 and the principal amount of such Note to remain outstanding after
     such conversion is equal to $1,000 or any integral multiple of $1,000 in
     excess thereof.

          (iii) Any conversion made under this Agreement shall be deemed to have
     been made immediately prior to the close of business on the date of
     surrender of the Note to be converted, and at such time the rights of the
     Holders of such Notes shall cease, and the Person or Persons entitled to
     receive the Common Stock issuable upon such conversion shall be treated for
     all purposes by the Parent as the record holder or holders of such Common
     Stock as of such date.

          (c)   Anti-Dilution Adjustments.  The Conversion Rate shall be subject
to adjustments from time to time as follows:

          (i)   In case the Parent shall pay or make a dividend or other
     distribution on shares of any class of capital stock payable in shares of
     Common Stock, the Conversion Rate in effect at the opening of business on
     the day following the date fixed for the determination of shareholders
     entitled to receive such dividend or other distribution shall be increased
     by dividing such Conversion Rate by a fraction of which (x) the numerator
     shall be the number of shares of Common Stock outstanding at the close of
     business on the date fixed for such determination and (y) the denominator
     shall be the sum of such number of shares and the total number of shares
     constituting such dividend or other distribution, such increase to become
     effective immediately after the opening of business on the day following
     the date fixed for such determination. If, after any such date fixed for
     determination, any dividend or distribution is not in fact paid, the
     Conversion Rate shall be immediately readjusted, effective as of the date
     the Board of Directors determines not to pay such dividend or distribution,
     to the Conversion Rate that would have been in effect if such determination
     date had not been fixed. For the purposes of this Section 6.3(c)(i), the
     number of shares of Common Stock at any time outstanding shall not include
     shares held in the treasury of the Parent but shall include shares issuable
     in respect of scrip certificates issued in lieu of fractions of shares of
     Common Stock.

          (ii)  In case the Parent shall issue rights, options or warrants to
     all or substantially all holders of its Common Stock or to any other Person
     (whether or not other holders of its Common Stock receive any such rights,
     options or warrants) entitling them to subscribe for or purchase shares of
     Common Stock, or securities convertible into shares of Common Stock, at a
     price per share (such price per share, the "New Price Per Share") less than
     the Current Market Price per share of the Common Stock on the date fixed
     for the determination of stockholders entitled to receive such rights,
     options or warrants or, in the case of any other issuance (an "Issuance"),
     on the date of such Issuance (other than any

                                       18



     rights, options or warrants that by their terms will also be issued to any
     Holder upon conversion of a Note into shares of Common Stock without any
     action required by the Parent or any other Person), the Conversion Rate in
     effect at the opening of business on the day following the date fixed for
     such determination or the date of such Issuance, as the case may be, shall
     be increased by dividing such Conversion Rate by a fraction of which (x)
     the numerator shall be the number of shares of Common Stock outstanding at
     the close of business on the date fixed for such determination or
     immediately prior to such Issuance, as the case may be, plus the number of
     shares of Common Stock which the aggregate of the offering price of the
     total number of shares of Common Stock so offered for subscription or
     purchase would purchase at such Current Market Price and (y) the
     denominator shall be the number of shares of Common Stock outstanding at
     the close of business on the date fixed for such determination or
     immediately prior to such Issuance, as the case may be, plus the number of
     shares of Common Stock so offered for subscription or purchase, such
     increase to become effective immediately after the opening of business on
     the day following the date fixed for such determination or of such
     Issuance, as the case may be. If, after any such date fixed for
     determination or any Issuance, any such rights, options or warrants are not
     in fact issued, or are not exercised, prior to the expiration thereof, the
     Conversion Rate shall be immediately readjusted, effective as of the date
     such rights, options or warrants expire, or the date the Board of Directors
     of the Parent determines not to issue such rights, options or warrants, to
     the Conversion Rate that would have been in effect if the unexercised
     rights, options or warrants had never been granted or such determination
     date had not been fixed, as the case may be. For the purposes of this
     Section 6.3(c)(ii), the number of shares of Common Stock at any time
     outstanding shall not include shares held in the treasury of the Company
     but shall include shares issuable in respect of scrip certificates issued
     in lieu of fractions of shares of Common Stock.

          (iii) In case outstanding shares of Common Stock shall be subdivided
     into a greater number of shares of Common Stock, the Conversion Rate in
     effect at the opening of business on the day following the day upon which
     such subdivision becomes effective shall be proportionately increased, and,
     conversely, in case outstanding shares of Common Stock shall be combined
     into a smaller number of shares of Common Stock, the Conversion Rate in
     effect at the opening of business on the day following the day upon which
     such subdivision or combination becomes effective shall be proportionately
     reduced, such increase or reduction, as the case may be, to become
     effective immediately after the opening of business on the day following
     the day upon which such subdivision or combination becomes effective.

          (iv)  In case the Parent shall, by dividend or otherwise, distribute
     to all or substantially all holders of its Common Stock evidences of its
     indebtedness,

                                       19



     shares of any class of capital stock or other property (including cash or
     assets or securities, but excluding (A) any rights, options or warrants
     referred to in Section 6.3(c)(ii) and any other rights, options or warrants
     that by their terms will also be issued to any Holder upon conversion of a
     Note into shares of Common Stock without any action required by the Parent
     or any other Person, (B) any dividend or distribution referred to in
     Section 6.3(c)(i) and (C) mergers or consolidations to which Section 6.3(i)
     applies), the Conversion Rate shall be adjusted so that the same shall
     equal the rate determined by dividing the Conversion Rate in effect
     immediately prior to the close of business on the date fixed for the
     determination of stockholders entitled to receive such distribution by a
     fraction of which (x) the numerator shall be the Current Market Price per
     share of the Common Stock on the date fixed for such determination less the
     then fair market value (as determined by the Board of Directors of the
     Parent) of the portion of the assets, shares or evidences of indebtedness
     so distributed applicable to one share of Common Stock and (y) the
     denominator shall be such Current Market Price per share of the Common
     Stock, such adjustment to become effective immediately prior to the opening
     of business on the day following the date fixed for the determination of
     stockholders entitled to receive such distribution. If after any such date
     fixed for determination, any such distribution is not in fact made, the
     Conversion Rate shall be immediately readjusted, effective as of the date
     the Board of Directors of the Parent determines not to make such
     distribution, to the Conversion Rate that would have been in effect if such
     determination date had not been fixed.

          (v)  The reclassification of Common Stock into securities other than
     Common Stock (other than any reclassification upon a consolidation or
     merger to which Section 6.3(i) applies) shall be deemed to involve (A) a
     distribution of such securities other than Common Stock to all holders of
     Common Stock (and the effective date of such reclassification shall be
     deemed to be "the date fixed for the determination of stockholders entitled
     to receive such distribution" and "the date fixed for such determination"
     within the meaning of Section 6.3(c)(iv)), and (B) a subdivision or
     combination, as the case may be, of the number of shares of Common Stock
     outstanding immediately prior to such reclassification into the number of
     shares of Common Stock outstanding immediately thereafter (and the
     effective date of such reclassification shall be deemed to be "the day upon
     which such subdivision becomes effective" or "the day upon which such
     combination becomes effective," as the case may be, and "the day upon which
     such subdivision or combination becomes effective" within the meaning of
     Section 6.3(c)(iii).

          (vi) In the case the Parent shall issue or sell any shares of New
     Common Stock (other than pursuant to securities referred to in Section
     6.3(c)(ii)) for consideration per share (such price per share, the "New
     Issue Price") less than

                                       20



     the Current Market Price per share of Common Stock, then and in such event,
     the Conversion Rate shall be increased by dividing such Conversion Rate by
     a fraction of which (x) the numerator shall be the number of shares of
     Common Stock outstanding immediately prior to such issuance or sale plus
     the number of shares of Common Stock which the aggregate of the purchase
     price of the total number of shares of Common Stock so issued or sold would
     purchase at such Current Market Price and (y) the denominator shall be the
     number of shares of Common Stock outstanding immediately prior to such
     issuance or sale plus the number of shares of Common Stock so issued or
     sold, such increase to become effective immediately after the consummation
     of such issuance or sale.

          (vii)  For purposes of this Agreement, the term "`ex' date," when used
     with respect to any issuance or distribution, means the first date on which
     the Common Stock trades the regular way in the applicable securities market
     or on the applicable securities exchange without the right to receive such
     issuance or distribution.

          (viii) The Parent may make such increases in the Conversion Rate, for
     the remaining term of the Notes or any shorter term, in addition to those
     required by paragraphs (i), (ii), (iii), (iv), (v), and (vi) of this
     Section 6.3(c), as it considers to be advisable in order to avoid or
     diminish any income tax to any holders of shares of Common Stock resulting
     from any dividend or distribution of stock or issuance of rights or
     warrants to purchase or subscribe for stock or from any event treated as
     such for income tax purposes. The Parent shall have the power to resolve
     any ambiguity or correct any error in this paragraph (viii) and its actions
     in so doing shall, absent manifest error, be final and conclusive.

          (ix)   Notwithstanding the provisions of Section 6.3(c)(iv), in the
     event that the then fair market value (as so determined) of the portion of
     the shares of capital stock, evidences of indebtedness, cash or other
     assets, including securities so distributed applicable to one share of
     Common Stock is equal to or greater than the Current Market Price per share
     of the Common Stock, then, in lieu of the adjustments provided for by
     Section 6.3(c)(iv), as the case may be, adequate provision shall be made so
     that each Holder shall have the right to receive upon conversion of a Note
     (or any portion thereof) the amount of shares of capital stock, evidences
     of indebtedness, cash or other assets, including securities, such Holder
     would have received had such Holder converted such Note (or portion
     thereof) immediately prior to the date fixed for such determination.

     Notwithstanding the foregoing, the issuance of Notes or Warrants pursuant
to this Agreement shall not cause any anti-dilution adjustments to be made to
any other Notes or Warrants previously issued pursuant to this Agreement.

                                       21



          (d)   Notice of Adjustments of Conversion Rate. Whenever the
Conversion Rate is adjusted as herein provided the Parent shall compute the
adjusted Conversion Rate in accordance with Section 6.3(c) and shall prepare a
certificate signed by a Responsible Officer setting forth the adjusted
Conversion Rate and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall promptly be provided to the
Holder.

          (e)   Notice of Certain Corporate Action.  In case:

          (i)   the Parent shall declare a dividend (or any other distribution)
     on its Common Stock; or

          (ii)  the Parent shall authorize the granting to all or substantially
     all of the holders of its Common Stock of, or otherwise authorize the
     issuance to any other Person, rights, options or warrants to subscribe for
     or purchase any shares of capital stock of any class or of any other
     rights; or

          (iii) the Parent shall subdivide the outstanding shares of Common
     Stock into a greater number of shares; or

          (iv)  the Parent shall distribute, by dividend or otherwise, to all or
     substantially all of the holders of Common Stock evidences of its
     indebtedness, shares of any class of capital stock or other property
     (including, without limitation, cash, assets or securities), subject to the
     exceptions set forth on Section 6.3(c)(iv); or

          (v)   of any reclassification of the Common Stock, or of any
     consolidation, merger or share exchange to which the Parent is a party and
     for which approval of any stockholders of the Parent is required, or of the
     conveyance, sale, transfer or lease of all or substantially all of the
     assets of the Parent; or

          (vi)  of the voluntary or involuntary dissolution, liquidation or
     winding up of the Parent;

then the Parent shall provide to all Holders, at least twenty (20) days (or ten
(10) days in any case specified in clause (i) or (ii) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights, options or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled

                                       22



to exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up. Neither the
failure to give such notice or the notice referred to in the next sentence nor
any defect therein shall affect the legality or validity of the proceedings
described in clauses (i) through (vi) of this Section 6.3(e). The Parent shall
provide to all Holders notice of any tender offer by the Company or any of its
Subsidiaries for all or any portion of the Common Stock at or about the time
that such notice of tender offer is provided to the public generally.

          (f)   Company to Reserve Common Stock. The Parent shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock (including treasury stock), for the purpose of
effecting the conversion of Notes, the full number of shares of Common Stock
then issuable upon the conversion of all then outstanding Notes.

          (g)   Taxes on Conversions. Except as provided in the next sentence,
the Parent will pay any and all taxes and duties that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Notes
pursuant hereto. The Parent shall not, however, be required to pay any tax or
duty which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the Note or Notes to be converted, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Parent the
amount of any such tax or duty, or has established to the satisfaction of the
Parent that such tax or duty has been paid.

          (h)   Covenants as to Common Stock and Distribution in Respect
Thereof.

          (i)   The Parent agrees that all shares of Common Stock that may be
     delivered upon conversion of Notes, upon such delivery, will have been duly
     authorized and validly issued and will be fully paid and nonassessable and,
     except as provided in Section 6.3(g), the Parent will pay all taxes, liens
     and charges with respect to the issue thereof.

          (ii)  The Parent will not pay any dividend or make any distribution on
     shares of Common Stock held in the treasury of the Parent.

          (iii) The Parent will not issue any rights, options or warrants in
     respect of shares of Common Stock held in the treasury of the Parent.

          (i)   Provision in Case of Consolidation, Merger or Sale of Assets. In
case of any consolidation or merger of the Parent with or into any other Person
or any merger of another Person with or into the Parent (in either case, other
than a merger

                                       23



which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Parent) or any
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Parent, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to each Holder an agreement providing that the Holder of each Note then
outstanding shall have the right thereafter, during the period such Note shall
be convertible as specified in this Section 6.3, to convert such Note only into
the kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease by a holder of the
number of shares of Common Stock of the Parent into which such Note might have
been converted immediately prior to such consolidation, merger, conveyance,
sale, transfer or lease, assuming such holder of Common Stock (x) is not (A) a
Person with which the Parent consolidated or merged with or into or which merged
into or with the Parent or to which such conveyance, sale, transfer or lease was
made, as the case may be (a "Constituent Person"), or (B) an Affiliate of a
Constituent Person and (y) failed to exercise his or her rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer or lease (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer, or lease is not the
same for each share of Common Stock held immediately prior to such
consolidation, merger, conveyance, sale, transfer or lease by others than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this Section 6.3(i) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, sale, transfer
or lease by the holders of each Non-electing Share shall be deemed to be the
kind and amount so receivable per share by a plurality of the Non-electing
Shares). Such agreement shall provide for adjustments which, for events
subsequent to the effective date of such agreement, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
6.3. The above provisions of this Section 6.3(i) shall similarly apply to
successive consolidations, mergers, conveyances, sales, transfers or leases.

          (j)   Rights Issued in Respect of Common Stock. Rights, options or
warrants distributed by the Parent to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase shares of the Parent's capital
stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events (each, a "Trigger
Event"):

          (i)   are deemed to be transferred with such shares of Common Stock,

          (ii)  are not exercisable, and

          (iii) are also issued in respect of future issuances of Common Stock

                                       24



shall not be deemed distributed for purposes of this Section 6.3 until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Conversion Rate under this
Section 6.3, (A) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(B) in the case of any such rights or warrants all of which shall have expired
without exercise by any holder thereof, the Conversion Rate shall be readjusted
as if such issuance had not occurred.

          (k)  Conversion Rights Subject to Stockholder Vote. If, pursuant to
any Requirement of Law or rule or regulation of any securities exchange or
national securities quotation service, the stockholders of the Parent are
required to approve the issuance of shares of Common Stock issuable upon
conversion of the Notes under this Agreement, no Note may be converted until
such issuance upon conversion has been so approved at the next annual meeting of
the Parent's stockholders following the Closing Date or otherwise. At any time
prior to such approval, upon the written request of Holders of Notes holding, at
any time, eighty percent (80%) of the aggregate Principal Amount of the Notes
outstanding at such time, the Parent, at its own expense and as soon as
practicable following such request, shall seek the written consent or approval
of its stockholders to such issuance upon conversion of the Notes, prepare and
file with the SEC an information statement relating to such stockholder approval
and take all other actions as are necessary or advisable under any Requirement
of Law or otherwise in respect of the issuance of Common Stock upon conversion
of the Notes.

     6.4  Optional Redemption.

          (a)  The Company may, at its option, redeem (each, an "Optional
Redemption") the Notes at any time, in whole or in part, without penalty or
premium, in a minimum aggregate Principal Amount of $1,000,000 (or, if the
aggregate outstanding principal amount of the Notes is less than $1,000,000 at
such time, then such Principal Amount) and in integral multiples of $1,000,000,
in each case for a redemption price equal to the aggregate Principal Amount of
the Notes so redeemed, together with accrued but unpaid interest on such
Principal Amount to the date of redemption (the "Redemption Date"), without
penalty or premium.

          (b)  If the Company undertakes an Optional Redemption in accordance
with this Section 6.4, notice (a "Redemption Notice") shall be given by the
Company, at its own expense, to each Holder of Notes to be redeemed. The
Redemption Notice shall

                                       25



be sent by first class mail, postage prepaid, to such Holder's address appearing
in the Note Register, by the Company not less than thirty (30) nor more than
sixty (60) days prior to the expected Redemption Date. The Redemption Notice
shall state:

          (i)   the expected Redemption Date;

          (ii)  that such redemption is an Optional Redemption made pursuant to
     this Section 6.4;

          (iii) the Principal Amount of each Note to be redeemed plus the amount
     of the interest to be paid on each such Note, accrued to the Redemption
     Date (the Principal Amount plus accrued but unpaid interest thereon, the
     "Redemption Price");

          (iv)  the place where or manner in which the Notes to be redeemed are
     to be surrendered to the Company for payment; and

          (c)   In the case of any partial Optional Redemption, selection of the
Notes for redemption will be made not more than sixty (60) days prior to the
Redemption Date by the Company on a pro rata basis, by lot or by such other
method as the Company in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in Principal Amount or less will be
redeemed in part.

          (d)   If a Redemption Notice has been given in accordance with this
Section 6.4, such Notes (or the portions thereof to be redeemed) shall, on the
Redemption Date, become due and payable at the Redemption Price and from and
after such date (unless the Company defaults in the payment of the Redemption
Price) such Notes (or the portions thereof to be redeemed) shall cease to bear
interest. Upon surrender of such Notes for redemption in accordance with such
Redemption Notice, such Notes (or the portions thereof to be redeemed) shall be
paid by the Company at the Redemption Price. If any Note (or portion thereof)
called for redemption shall not be so paid upon surrender thereof for
redemption, such Note shall, until paid, bear interest from the Redemption Date
at the Interest Rate.

          (e)   If any Note is duly surrendered by its Holder for redemption
only in part, following the consummation of such redemption, the Company shall
execute and deliver to such Holder, without service charge, a new Note or Notes,
of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
Principal Amount of the Note so surrendered.

     6.5  Mandatory Offer to Repurchase Upon Change of Control.

          (a)   In the event of the obtaining of actual knowledge of a Change of
Control Notice Event, the Company will, within three (3) Business Days after the

                                       26



occurrence of such event, give notice of such Change of Control Notice Event to
each Holder of Notes. Each such notice shall (i) be dated the date of the
sending of such notice; (ii) refer to this Section 6.5; and (iii) specify, in
reasonable detail, the nature and date of the Change of Control Notice Event.

          (b)   In the event of a Change of Control, the Company will, within
three (3) Business Days after the occurrence of such event (or, in the case of
any Change of Control the consummation or finalization of which would involve
any action of the Company, at least thirty (30) days prior to such Change of
Control), give notice of such Change of Control to each Holder of Notes. Such
notice shall contain an irrevocable separate offer by the Company to each Holder
of Notes to repurchase all, but not less than all, of the Notes held by such
Holder, in each case for a purchase price equal to the aggregate Principal
Amount of Notes so repurchased, together with accrued but unpaid interest on
such Principal Amount to the date of repurchase, without penalty or premium.
Such payment shall occur on a date (the "Change of Control Payment Date")
specified in such notice that is not less than thirty (30) days and not more
than forty-five (45) days after the date of such notice. Each such notice shall:

          (i)   be dated the date of the sending of such notice;

          (ii)  specify, in reasonable detail, the nature and date of the Change
     of Control;

          (iii) specify the Change of Control Payment Date;

          (iv)  specify the Principal Amount of each Note outstanding;

          (v)   specify the interest that will be due on each Note offered to be
     repurchased, accrued to the Change of Control Payment Date;

          (vi)  certify that the conditions of this Section 6.5 have been
     fulfilled; and

          (vii) state that a failure to respond to the notice shall be deemed to
     be an acceptance of such offer.

If the Company shall not have received a written response to such notice from
any Holder of Notes within ten (10) days after the date of posting of such
notice to such Holder of Notes, then the Company shall immediately send a second
notice to each such Holder of Notes.

          (c)   In the event that the Company makes a repurchase offer to the
Holders of the Notes in accordance with subsection (b) of this Section 6.5, but
at the time such offer is made the terms of any Bank Indebtedness restrict or
prohibit such

                                       27



repurchase of Notes, then prior to the mailing of a notice to Holders in
accordance with subsection (b) of this Section 6.5, but in any event not later
than thirty (30) days following the date of any Change of Control (unless the
Company has exercised its right to redeem all the Notes under Section 6.4 or has
repurchased all the Notes under Section 6.6), the Company shall (i) repay in
full all such Bank Indebtedness (if otherwise permitted hereby) or (ii) if no
other action is required by the terms of such Bank Indebtedness, offer to repay
in full all such Bank Indebtedness and repay the Bank Indebtedness of each
holder thereof who has accepted such offer or (iii) obtain the requisite consent
under the agreements governing such Bank Indebtedness to permit the repurchase
of Notes as provided for in this Section 6.5.

          (d)  To accept such repurchase offer, a Holder of Notes shall either
(i) cause a notice of such acceptance to be delivered to the Company not later
than thirty (30) days after the date of receipt by such Holder of the written
offer of such repurchase or (ii) unless such Holder subsequently delivers a
written notice of rejection to the Company, fail to respond to such written
offer of repurchase within such period of thirty (30) days. To reject such offer
such Holder of Notes shall deliver a written notice of rejection of such offer.
If accepted, such offered repurchase shall be due and payable on the Change of
Control Payment Date.

          (e)  The obligation of the Company to purchase Notes pursuant to the
offers required by Section 6.5(b) and accepted in accordance with Section 6.5(d)
is subject to the occurrence of the Change of Control in respect of which such
offers and acceptances shall have been made. In the event that such Change of
Control does not occur prior to the Change of Control Payment Date in respect
thereof, such purchase shall be deferred until and shall be made on the date on
which such Change of Control occurs or, if the Company determines that efforts
to effect such Change of Control have ceased or have been abandoned, then such
offer, acceptances and obligation to purchase shall be deemed to have been
rescinded. The Company shall keep each Holder of Notes reasonably and timely
informed of (i) any such deferral of the date of purchase; (ii) the date on
which such Change of Control and the purchase are expected to occur; and (iii)
any determination by the Company that efforts to effect such Change of Control
have ceased or been abandoned.

          (f)  The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 6.5. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 6.5, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 6.5 by virtue
thereof.

                                       28



     6.6  Mandatory Offer to Repurchase CD&R Barbados Notes Upon Disposition of
Assets.

          (a)  For purposes of this Section 6.6(a), the term "Mandatory 6.6(a)
Repurchase Event" shall mean:

          (i)  any sale, transfer or other disposition by the Company or any of
     its Subsidiaries of any real or personal, tangible or intangible, property
     of the Company or such Subsidiary (including, without limitation, any
     Capital Stock of a Subsidiary of the Company) to any Person (other than to
     the Company or any of its Restricted Subsidiaries) that is either (x) not
     permitted under the Credit Agreement as in effect on the Closing Date
     (giving effect to the Third Credit Agreement Amendment) but has been
     consented to by the requisite lenders under the Credit Agreement, or (y) is
     permitted under, but is subject to any mandatory prepayment requirement of,
     the Credit Agreement, or

          (ii) the recovery by the Company or any of its Subsidiaries of amounts
     owing to it under property insurance policies if the Company and its
     Subsidiaries have not commenced replacement of the property on account of
     which such amounts were paid within one year of the later of the date of
     the casualty to, or condemnation of, such property or the receipt of such
     Net Proceeds.

If, on any date during the Adjustment Period, the Company or any of its
Subsidiaries shall receive Net Proceeds from any Mandatory 6.6(a) Repurchase
Event, the Company shall give notice thereof to the Investor and any other
member of the CD&R Group that is a Holder. Such notice shall contain an
irrevocable separate offer by the Company to repurchase each such Holder's CD&R
Barbados Notes on the applicable Mandatory Repurchase Date (subject to prorating
as described in Section 6.6(d)), for a purchase price equal to the Principal
Amount of Notes so repurchased (plus accrued and unpaid interest on the
Principal Amount thereof so repurchased to the date of repurchase). The
aggregate purchase price to be so applied to repurchase CD&R Barbados Notes
(excluding accrued and unpaid interest) shall be equal to (x) the aggregate
amount of such Net Proceeds not previously applied to permanently prepay Bank
Indebtedness under the Credit Agreement minus (y) the aggregate amount of such
Net Proceeds required to be applied to repurchase Fund VI Notes pursuant to
Section 6.6(a) of the Fund VI Investment Agreement minus (z) the Reinvested
Amount related thereto; provided, however, that in no event shall the aggregate
amount of all Reinvested Amounts subtracted from such Net Proceeds received in
connection with asset dispositions described in clause (i) of the definition of
"Mandatory 6.6(a) Repurchase Event" exceed $10,000,000 in any fiscal year of the
Company.

          (b)  For purposes of this Section 6.6(b), the term "Mandatory 6.6(b)
Repurchase Event" shall mean:

                                       29



          (i)  the sale, transfer or other disposition by the Company or any of
     its Subsidiaries of any real or personal, tangible or intangible, property
     of the Company or such Subsidiary (including, without limitation, any
     Capital Stock of a Subsidiary of the Company) to any Person (other than to
     the Company or any of its Restricted Subsidiaries) that is either (x) not
     permitted under the Credit Agreement (as in effect prior to giving effect
     to the Second Credit Agreement Amendment) but has been consented to by the
     requisite lenders under the Credit Agreement, or (y) is permitted under,
     but is subject to any mandatory prepayment requirement of, the Credit
     Agreement, or

          (ii) the recovery by the Company or any of its Subsidiaries of amounts
     owing to it under property insurance policies if the Company and its
     Subsidiaries have not commenced replacement of the property on account of
     which such amounts were paid within one year of the later of the date of
     the casualty to, or condemnation of, such property or the receipt of such
     Net Proceeds.

If, on any date other than during the Adjustment Period, the Company or any of
its Subsidiaries shall receive Net Proceeds from any Mandatory 6.6(b) Repurchase
Event, the Company shall give notice thereof to the Investor and any other
member of the CD&R Group that is a Holder. Such notice shall contain an
irrevocable separate offer by the Company to repurchase each such Holder's CD&R
Barbados Notes on the applicable Mandatory Repurchase Date (subject to prorating
as described in Section 6.6(d)), for a purchase price equal to the Principal
Amount of Notes so repurchased (plus accrued and unpaid interest on the
Principal Amount thereof so repurchased to the date of repurchase). The
aggregate purchase price to be so applied to repurchase CD&R Barbados Notes
(excluding accrued and unpaid interest) shall be equal to (x) the aggregate
amount of such Net Proceeds not previously applied to permanently prepay Bank
Indebtedness under the Credit Agreement minus (y) the aggregate amount of such
Net Proceeds required to be applied to repurchase Fund VI Notes pursuant to
Section 6.6(a) of the Fund VI Investment Agreement minus (z) the Reinvested
Amount related thereto; provided that, notwithstanding the foregoing, any such
repurchase of CD&R Barbados Notes shall only be required upon any such sale,
transfer, other disposition or recovery (A) described in subsections 14.5(h),
(j) or (k) of the Credit Agreement (as in effect prior to giving effect to the
Second Credit Agreement Amendment), to the extent the Net Proceeds received
therefrom, when aggregated with the Net Proceeds received from all such sales,
transfers, other dispositions or recoveries in the immediately preceding
twelve-month period and minus all applicable Reinvested Amounts relating to all
such Net Proceeds, exceed $5,000,000 or (B) described in subsection 14.5(f) of
the Credit Agreement (as in effect prior to giving effect to the Second Credit
Agreement Amendment), to the extent the Net Proceeds received from any one such
sale and minus the applicable Reinvested Amounts relating to such Net Proceeds
exceeds $5,000,000 or to the extent that Net Proceeds received therefrom, when
aggregated with the Net Proceeds received from all

                                       30



such sales and minus all applicable Reinvested Amounts relating to all such Net
Proceeds, exceed $10,000,000.

          (c)  Any notice of the Company's offer to repurchase CD&R Barbados
Notes given pursuant to this Section 6.6 shall be given as promptly as
practicable (and in any event, within three (3) Business Days) following the
date of receipt of any such Net Proceeds (except that if any such Net Proceeds
are eligible to be reinvested in accordance with the definition of "Reinvested
Amount" in Section 6.6(e) and the Company has not elected to reinvest such
proceeds, such notice shall be given on the earlier of (i) the date on which the
certificate of a Responsible Officer of the Company to such effect is delivered
to the Investor in accordance with such definition and (ii) the last day of the
period within which a certificate setting forth such election is required to be
delivered in accordance with such definition). If the Company shall not have
received a written response to such notice from any Holder of CD&R Barbados
Notes within ten (10) days after the date of posting of such notice to such
Holder, then the Company shall immediately send a second notice to such Holder.

          (d)  To accept a repurchase offer under this Section 6.6, a Holder of
CD&R Barbados Notes shall cause a notice of such acceptance to be delivered to
the Company not later than thirty (30) days after the date of receipt by such
Holder of the written offer of such repurchase. If accepted, such offered
repurchase shall be due and payable on the applicable Mandatory Repurchase Date
or, if later, five (5) Business Days after the date of delivery of such notice
of acceptance to the Company. If, upon the expiration of the period for which a
repurchase offer under this Section 6.6 remains open, the aggregate Principal
Amount of the CD&R Barbados Notes surrendered by Holders exceeds the amount of
Net Proceeds available for payment, the Company will select the CD&R Barbados
Notes to be purchased on a pro rata basis.

          (e)  As used in this Section 6.6, the following terms shall have the
following meanings:

     "Adjustment Period" means the period from the date of this Agreement to the
first date on or after June 30, 2003 on which no Bank Default Event has occurred
and is continuing.

     "Mandatory Repurchase Date" means a date specified in a notice given
pursuant to this Section 6.6 of an offer to repurchase CD&R Barbados Notes that
is not later than ten (10) Business Days after the date of such notice (or if no
date is so specified, the date that is ten (10) Business Days after the date
such notice is issued).

     "Net Proceeds" means, with respect to any of the events referred to in this
Section 6.6 and the defined terms used herein, (a) the gross cash consideration,
and all cash proceeds (as and when received) of non-cash consideration
(including, without limitation,

                                       31



any such cash proceeds in the nature of principal and interest payments on
account of promissory notes or similar obligations), received by the Company and
its Subsidiaries in connection with such event, minus (b) the sum, without
duplication, of (i) any taxes reasonably estimated to be payable to any federal,
state, local or foreign taxing authority by the Parent and its Subsidiaries as a
result thereof, (ii) the amount of fees and commissions (including reasonable
investment banking fees, legal, accounting, consulting, survey, title and
recording tax expenses and other costs and expenses) actually incurred in
connection with such event which are paid or payable by the Company and its
Subsidiaries, (iii) the amount of such net cash proceeds which are attributable
to (and payable to) minority interests, (iv) the amount of any reserve
reasonably maintained by the Company and its Subsidiaries with respect to
indemnification obligations owing pursuant to the definitive documentation
pursuant to which such event is consummated (with any unused portion of such
reserve to constitute Net Proceeds on the date upon which the indemnification
obligations terminate or such reserve is reduced other than in connection with a
payment), (v) the amount of Indebtedness (other than intercompany Indebtedness)
of any Person, or secured by a Lien permitted hereunder on or that otherwise
relates to any asset, that is the subject of such event, if any, which is
required to be repaid at the time or as a result of such event out of the
proceeds thereof and (vi) with respect to the determination of Net Proceeds from
a sale or other disposition of property or assets referred to in this Section
6.6, appropriate amounts to be provided by the Company or any of its
Subsidiaries to be applied to satisfy any reasonable expenses and liabilities
associated with any such property or assets and retained by the Company or any
such Subsidiary after such sale or other disposition and other appropriate
amounts which shall be used by the Company or any of its Subsidiaries to
discharge or pay on a current basis any other reasonable expenses and
liabilities associated with such property or assets.

     "Reinvested Amount" means, with respect to any sale, transfer or other
disposition of property or assets of the Company or any of its Subsidiaries or
any recovery of amounts under any property insurance policies, that portion of
the Net Proceeds thereof as shall, according to a certificate of a Responsible
Officer of the Company delivered to the Investor within thirty (30) days of such
sale or other disposition, be reinvested in the business of the Company and its
Subsidiaries in a manner consistent with the terms of this Agreement within
three hundred sixty (360) days of the receipt of such Net Proceeds or, if such
reinvestment is in a project authorized by the board of directors or comparable
body of the Company that will take longer than such three hundred sixty (360)
days to complete, the period of time necessary to complete such project (so long
as the Company or the relevant Subsidiary has committed to expend such portion
of the Net Proceeds within, and is diligently pursuing such project during, the
period of three hundred sixty (360) days from the receipt of such Net Proceeds);
provided that if any such certificate of a Responsible Officer is not delivered
to the Investor on the date of such sale or other disposition, any Net Proceeds
of such sale or other disposition shall be promptly (x) deposited in a cash
collateral account established in accordance

                                       32



with the terms of the Credit Agreement, to the extent then required thereby (it
being understood in such case that the Administrative Agent is acting as bailee
for the Secured Parties pursuant to the terms of the Intercreditor Agreement),
or applied to prepay revolving credit borrowings under the Credit Agreement
pending delivery of such certificate, (y) deposited in a cash collateral account
established in accordance with the terms of the Fund VI Investment Agreement at
the Collateral Account Bank (as defined in the Fund VI Guaranty and Collateral
Agreement), to the extent then required thereby, or applied in accordance with
Section 6.6 of the Fund VI Investment Agreement pending delivery of such
certificate, or (z) deposited in a cash collateral account established at the
Collateral Account Bank (as defined in the Guaranty and Collateral Agreement) to
be held as collateral in favor of the Secured Parties on terms reasonably
satisfactory to the Secured Parties and shall remain on deposit in such cash
collateral account until such certificate of a Responsible Officer is (or is
required to be) delivered to the Investor or such Net Proceeds are required to
be applied in accordance with this Section 6.6.

          (f)  The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 6.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 6.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 6.6 by virtue
thereof.

          (g)  The provisions of this Section 6.6 are in addition to and not in
limitation of the provisions of Section 8.4.

     6.7  Issuance of Warrants Upon Early Redemption or Repurchase.

          (a)  Upon the consummation of any redemption or repurchase of Notes
prior to the Maturity Date (whether pursuant to any provision of this Article
VI, Section 8.4 or otherwise), the Parent shall, at its own expense, execute,
issue and deliver Warrants to the Holders of the Notes so redeemed or
repurchased as provided by this Section 6.7. With respect to each Holder
receiving Warrants under this Section 6.7, the Warrants shall (a) be
substantially in the form of Exhibit B hereto, with such changes as may be
reasonably requested by such Holder and approved by the Parent, (b) expire on
the Maturity Date, (c) have an initial exercise price, subject to adjustment in
accordance with the terms of the warrant, equal to the Conversion Price in
effect immediately prior to such repurchase or redemption, and (d) entitle its
Holder to purchase a number of shares of Common Stock (or other property) equal
to the number of shares of Common Stock (or other property) into which such
Holder's Notes were convertible immediately prior to their redemption or
repurchase. Each Holder entitled to receive Warrants under this Section 6.7
shall receive them in the form of a single warrant certificate (or such greater
number of warrant certificates in denominations of at least 1,000 shares as such
Holder

                                       33



may request), delivered by the Parent to the registered address of such Holder
in the Register of Holders maintained by the Company in accordance with Section
6.8.

          (b)  If, pursuant to any Requirement of Law or rule or regulation of
any securities exchange or national securities quotation service, the
stockholders of the Parent are required to approve the issuance of shares of
Common Stock issuable upon exercise of the Warrants, no Warrant may be exercised
until such issuance upon exercise has been so approved in connection with the
stockholder approval of the issuance of Common Stock upon conversion of the
Notes as contemplated by Section 6.3(k). At any time prior to such approval,
upon the written request of holders of the Warrants, the Parent, at its own
expense and as soon as practicable following such request, shall obtain the
written consent of its stockholders to such issuance upon exercise of the
Warrants, prepare and file with the SEC an information statement relating to
such stockholder approval and take all other actions as are necessary or
advisable under any Requirement of Law or otherwise in respect of the issuance
of Common Stock upon exercise of the Warrants.

     6.8 Register of Holders. The Company shall keep, or shall cause to be kept,
by a Transfer Agent for the Notes or otherwise, a register (the "Register of
Holders") for the registration and transfer of Notes, in which register the
Company shall record (a) the name, address and facsimile number of each Holder
(subject to change by such Holder in accordance with Section 13.1) and (b) the
details of each transfer of one or more Notes made in accordance with Section
6.9, including the name and address of each transferee of one or more Notes. The
Person in whose name any Note shall be properly registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary, other than in
accordance with Section 6.9.

     6.9 Exchange of Notes Upon Transfer. Upon surrender of any Note to the
Company (or the Transfer Agent for the Notes, if any), duly endorsed or
accompanied by a written instrument of transfer duly executed by the Holder or
such Holder's attorney duly authorized in writing, the Company shall execute and
deliver a new Note or Notes in exchange therefor, in an aggregate principal
amount equal to the unpaid Principal Amount of the surrendered Note. Each new
Note shall (i) be registered in the name of such Person as the Holder may
request, (ii) be (A) dated and bear interest from the date to which interest had
been paid on the surrendered Note or (B) dated the date of the surrendered Note
if no interest shall have been paid thereon and (iii) carry the same rights to
unpaid interest and interest to accrue that were carried by the surrendered
Note. Notes shall not be transferred in denominations of less than $1,000,000,
provided that a Holder may transfer its entire holding of Notes regardless of
the principal amount of such Notes. Each Holder may transfer any Note (or any
portion thereof) to any Person without the Company's consent, provided that any
such transfer of Notes by the Investor or any Holder that is a member of the
CD&R Group to any Person not a member of the CD&R Group shall cause the Liens
and Guarantees established with respect to such Transferred

                                       34



Notes in accordance with the Guarantee and Collateral Agreement or any other
Note Security Documents to be irrevocably released, discharged and of no further
force or effect with respect to such Transferred Notes. The Company shall pay
the cost of executing, issuing and delivering the new Note or Notes to the home,
office or custodian bank of (or other location designated by) the Holder
thereof, insured to the reasonable satisfaction of such Holder. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any transfer of Notes.

     6.10 Mutilated, Destroyed, Lost and Stolen Notes.

          (a)  If (i) any mutilated Note is surrendered to the Company, or the
Company receives evidence reasonably satisfactory to it of the destruction, loss
or theft of any Note and (ii), in the case of any destroyed, lost or stolen
Note, there is delivered to the Company such security or indemnity as may be
required to hold the Company harmless, then, in the absence of notice to the
Company that such Note has been acquired by a bona fide purchaser, the Company
shall execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a new Note of like tenor and principal amount,
bearing a number not contemporaneously outstanding. The Company may require
payment of a sum sufficient to cover its reasonable expenses and any stamp tax
or governmental charge imposed in respect of such issuance of a new Note.

          (b)  Every new Note issued pursuant to this Section 6.10 in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Agreement and, as appropriate, the
other Transaction Agreements equally and ratably with any and all other duly
issued Notes.

          (c)  The provisions of this Section 6.10 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.

                                  Article VII
                      Affirmative Covenants of the Company

     The Company hereby agrees that, from and after the date hereof and until
the payment in full of the Principal Amount of the Notes, as well as any other
amount then due and owing under or with respect to the Notes, the Company shall
and (except in the case of delivery of financial information, reports and
notices) shall cause each of its Subsidiaries to:

     7.1  Financial Statements. Furnish the following financial statements of
the Parent to each Holder, it being understood all such financial statements
shall be complete

                                       35



and correct in all material respects and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by a Responsible
Officer of the Parent and disclosed therein, and except, in the case of
financial statements delivered pursuant to subsections (b) and (c), for the
absence of certain notes):

          (a)  as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Parent, a copy of the consolidated
balance sheet of the Parent and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of income, stockholders equity
and cash flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by PricewaterhouseCoopers or other independent certified public
accountants of nationally recognized standing;

          (b)  as soon as available, but in any event not later than forty-five
(45) days after the end of each of the first three quarterly periods of each
fiscal year of the Parent, the unaudited consolidated balance sheet of the
Parent and its consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of income, stockholders equity and
cash flows of the Parent and its consolidated Subsidiaries for such quarter and
the portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer of the Parent as being fairly stated in all material
respects (subject to normal year-end audit and other adjustments); and

          (c)  as soon as available, but in any event not later than forty-five
(45) days after the end of each calendar month, commencing with the month of
August, 2002, financial data for such month summarizing the results of
operations of the Parent and its consolidated Subsidiaries as at the end of such
month, certified by a Responsible Officer as being fairly stated in all material
respects.

     7.2  Certificates; Other Information. Furnish to each Holder:

          (a)  concurrently with the delivery of the financial statements
referred to in subsection (a) of Section 7.1, a certificate of the independent
certified public accountants reporting on such financial statements stating
that, in making the audit necessary therefor, no knowledge was obtained of any
Default or Event of Default, insofar as the same relates to any financial
accounting matters covered by their audit, except as specified in such
certificate;

          (b)  concurrently with the delivery of the financial statements
referred to in subsections (a) and (b) of Section 7.1, a certificate of a
Responsible Officer stating that, to the best of such Responsible Officer's
knowledge, during such period (i) no

                                       36



Subsidiary has been formed or acquired (or, if any such Subsidiary has been
formed or acquired, the Company has complied with the requirements of subsection
7.9 with respect thereto), (ii) neither the Company nor any other Note Financing
Party has changed its name, its principal place of business, its chief executive
office or the location of any material item of tangible Collateral without
complying with the requirements of this Agreement and the Note Security
Documents with respect thereto and (iii) to the best of such Responsible
Officer's knowledge, each of the Company and the other Note Financing Parties
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Note
Financing Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except, in each case as specified in such certificate;

          (c)  not later than sixty (60) days after the beginning of each fiscal
year of the Company, a copy of the projections by the Company of the operating
budget and cash flow budget of the Company and its Subsidiaries for such fiscal
year, such projections to be accompanied by a certificate of a Responsible
Officer to the effect that such Responsible Officer believes such projections
have been prepared on the basis of reasonable assumptions;

          (d)  within five (5) Business Days after the same are sent, copies of
all financial statements and reports which the Parent sends to its public
stockholders, and within five (5) Business Days after the same are filed, copies
of all financial statements and reports which the Parent or the Company may make
to, or file with, the SEC or any successor or analogous Governmental Authority;

          (e)  promptly, such additional financial and other information as any
Holder may from time to time reasonably request; and

          (f)  promptly, (x) any certificate of a Responsible Officer required
pursuant to the definition of "Consolidated Net Income" and (y) any additional
financial and other information provided to the Administrative Agent or any
lender or other party under the Credit Agreement, whether pursuant to the terms
of the Credit Agreement or upon the reasonable request of such party thereto.

     7.3  Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the consolidated books of the Parent.

     7.4  Conduct of Business and Maintenance of Existence. Continue to engage
in business of the same general type as the Company and its Subsidiaries now
conduct

                                       37



and preserve, renew and keep in full force and effect the corporate existence of
the Company and its Subsidiaries and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of the business of the Company and its Subsidiaries taken as a whole except as
otherwise permitted pursuant to Article IX; provided that the Company and its
Subsidiaries shall not be required to maintain any such rights, privileges or
franchises, or the corporate existence of such Subsidiary, if the failure to do
so would not reasonably be expected to have a Material Adverse Effect; and
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.

     7.5  Maintenance of Property; Insurance. Keep all property useful and
necessary in the business of the Company and its Subsidiaries taken as a whole
in good working order and condition; maintain with financially sound and
reputable insurance companies insurance on all its property material to the
business of the Company and its Subsidiaries taken as a whole in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies engaged in the same or a similar business; and
furnish to each Holder, upon written request, full information as to the
insurance carried.

     7.6  Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, complete and correct entries in
conformity with all material Requirements of Law shall be made of all dealings
and transactions in relation to the business and activities of the Company and
its Subsidiaries; and permit representatives of any Holder, at any reasonable
time, upon reasonable notice, and as often as may reasonably be desired, to
visit and inspect any of the properties of the Company and its Subsidiaries and
examine and, to the extent reasonable, make abstracts from any of its books and
records and to discuss the business, operations, properties and financial and
other condition of the Company and its Subsidiaries with officers and employees
of the Company and its Subsidiaries and with the independent certified public
accountants of the Parent, in each case at the expense of the Company.

     7.7  Notices. Promptly give notice (it being understood that each notice
provided pursuant to this Section 7.7 shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto) to
each Holder of:

          (a)  as soon as possible after any Responsible Officer knows, or
reasonably should know, of the occurrence of any Default or Event of Default;

          (b)  as soon as possible after any Responsible Officer knows or
reasonably should know thereof, (i) any (A) default or event of default under
any Contractual Obligation of the Company or any Subsidiary of the Company,
other than as

                                       38



previously disclosed to the Holders, or (B) litigation, investigation or
proceeding which may exist at any time between the Parent, the Company or any
Subsidiary of the Company and any Governmental Authority, which in either case,
if not cured or if adversely determined, as the case may be, would reasonably be
expected to have a Material Adverse Effect, or (ii) any Bank Default Event or
Senior Subordinated Default Event;

          (c)   as soon as possible after any Responsible Officer knows or
reasonably should know thereof, any litigation or proceeding which has a
reasonable possibility of an adverse determination which would result in a
judgment against the Parent, the Company or any Subsidiary of the Company of
$5,000,000 or more and which is not covered by insurance, or in which injunctive
or similar relief is sought that would reasonably be expected to have a Material
Adverse Effect;

          (d)   the following events, as soon as possible and in any event
within thirty (30) days after any Responsible Officer knows or reasonably should
know thereof:

          (i)   the occurrence or expected occurrence of any Reportable Event
     with respect to any Single Employer Plan (other than a Reportable Event
     described in Section 4043(c)(9) of ERISA), a failure to make any required
     contribution to a Single Employer Plan or Multiemployer Plan, the creation
     of any Lien on the property of the Parent, the Company or any Subsidiary of
     the Company in favor of the PBGC or a Plan or any withdrawal from, or the
     termination, Reorganization or Insolvency of, any Multiemployer Plan, if,
     as a result thereof, the Parent, the Company or any Subsidiary of the
     Company could reasonably be expected to incur any material liability;

          (ii)  the existence of an Underfunding under a Single Employer Plan
     that exceeds ten percent (10%) of the value of the assets of such Single
     Employer Plan, determined as of the most recent annual valuation date of
     such Single Employer Plan on the basis of the actuarial assumptions used to
     determine the funding requirements of such Single Employer Plan as of such
     date;

          (iii) the institution of proceedings or the taking of any other formal
     action by the PBGC or the Parent, the Company, any Subsidiary of the
     Company or any Commonly Controlled Entity or any Multiemployer Plan with
     respect to the withdrawal from, or the termination, Reorganization or
     Insolvency of, any Single Employer Plan or Multiemployer Plan if, as a
     result thereof, the Parent, the Company or any Subsidiary of the Company
     could reasonably be expected to incur any material liability; or

          (iv)  the occurrence or expected occurrence of any event or condition
     under which the Parent, the Company, any Subsidiary of the Company or any

                                       39



     Commonly Controlled Entity has incurred or could incur any liability in
     respect of a Former Plan;

          (e)   as soon as possible after any Responsible Officer knows, and
except as would not, individually or in the aggregate, reasonably be expected to
result in the payment of a Material Environmental Amount, that:

          (i)   any Governmental Authority has identified the Parent, the
     Company or any Subsidiary of the Company as a potentially responsible party
     under the Comprehensive Environmental Response, Compensation and Liability
     Act or any similar Environmental Law for the cleanup of Materials of
     Environmental Concern at any location, whether or not owned, leased or
     operated by the Parent, the Company or any Subsidiary of the Company;

          (ii)  any Governmental Authority may revoke any permit pursuant to
     Environmental Law held by the Parent, the Company or any Subsidiary of the
     Company, or deny or refuse to renew any such permit sought by the Parent,
     the Company or any Subsidiary of the Company; or

          (iii) any property owned, leased, or operated by the Parent, the
     Company or any Subsidiary of the Company is being listed on, or proposed
     for listing on, the National Priorities List or the Comprehensive
     Environmental Response, Compensation and Liability Information System
     maintained by the United States Environmental Protection Agency or any
     similar list maintained by any Governmental Authority;

          (f)   as soon as possible after any Responsible Officer knows or
reasonably should know thereof, any development or event which has had or would
reasonably be expected to have a Material Adverse Effect; and

          (g)   as soon as possible after any Responsible Officer knows or
reasonably should know thereof, any "Termination" as defined in Section 11 of
the Intercreditor Agreement.

     7.8  Environmental Laws.

          (a)   Comply substantially with all Environmental Laws applicable to
the Company and its Subsidiaries, and obtain, comply substantially with and
maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws (collectively, "Environmental
Permits"); and

          (b)   take all reasonable efforts to ensure that all of its tenants,
subtenants, contractors, subcontractors and invitees comply substantially with
all Environmental Laws, and obtain, comply substantially with and maintain any
and all

                                       40



Environmental Permits applicable to any of them insofar as any failure to so
comply, obtain or maintain reasonably would be expected to adversely affect the
Company or any of its Subsidiaries. For purposes of this Section 7.8,
noncompliance shall be deemed not to constitute a breach of this covenant,
provided that, upon learning of any actual or suspected noncompliance, the
Company or its Subsidiaries, as appropriate, shall in a timely manner undertake
all reasonable efforts to achieve substantial compliance, and provided, further,
that, in any case, such noncompliance, and any other such noncompliance with any
Environmental Law or Environmental Permit, individually or in the aggregate,
would not reasonably be expected to give rise to the payment of a Material
Environmental Amount.

     7.9  Additional Collateral.

          (a)  With respect to any owned real property or fixtures located on
owned real property, in each case with a purchase price or a fair market value
of at least $1,000,000, in which the Company or any of its Subsidiaries acquires
ownership rights at any time after the date hereof, promptly grant to the
Secured Parties, a Lien of record on all such owned real property and fixtures,
upon terms reasonably satisfactory in form and substance to such Secured Parties
(it being understood that such Lien shall be subject to the Intercreditor
Agreement), and in accordance with any applicable requirements of any
Governmental Authority (including, without limitation, any appraisals of such
property under the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 which any Secured Party reasonably deems to be required by law),
provided that (i) nothing in this Section 7.9(a) shall defer or impair the
attachment or perfection of any security interest in any Collateral covered by
any of the Note Security Documents which would attach or be perfected pursuant
to the terms thereof without action by the Company, any of its Subsidiaries or
any other Person and (ii) no such Lien shall be required to be granted as
contemplated by this Section 7.9(a) on any owned real property or fixtures the
acquisition of which is financed as permitted by Section 8.1(b)(iv), until such
Indebtedness is repaid in full (and not refinanced as permitted by Section
8.1(b)(iv)) or, as the case may be, the Company or its Subsidiary determines not
to proceed with such financing or refinancing. In connection with any such grant
to the Secured Parties of a Lien of record on any such real property in
accordance with this Section 7.9(a), the Company or such Subsidiary shall
deliver or cause to be delivered to the Secured Parties any surveys, title
insurance policies, environmental reports and other documents in connection with
such grant of such Lien obtained by it in connection with the acquisition of
such ownership rights in such real property or as any Secured Party shall
reasonably request (in light of the value of such real property and the cost and
availability of such surveys, title insurance policies, environmental reports
and other documents and whether the delivery of such surveys, title insurance
policies, environmental reports and other documents would be customary in
connection with such grant of such Lien in similar circumstances).

                                       41



          (b)  With respect to any Person that, subsequent to the date hereof,
becomes a Domestic Subsidiary or Foreign Subsidiary Holdco (other than to the
extent that compliance with this Section 7.9(b) would have an adverse tax
consequence to the Company), promptly upon the request of any Secured Party:

          (i)  (A) execute and deliver, or cause to be executed and delivered,
     to the Investor, for the benefit of the Secured Parties, a new pledge
     agreement or such amendments to the Guarantee and Collateral Agreement as
     any Secured Party shall reasonably deem necessary or reasonably advisable
     to grant to the Secured Parties a Lien on the Capital Stock of such
     Subsidiary which is owned by the Company or any of its Domestic
     Subsidiaries (provided that in no event shall more than sixty-five percent
     (65%) of the Capital Stock of any Foreign Subsidiary Holdco be required to
     be so pledged; and it being understood that such Lien shall be subject to
     the Intercreditor Agreement) and (B) (subject to the terms of the Guarantee
     and Collateral Agreement) deliver to the Secured Parties the certificates
     (if any) representing such Capital Stock, together with undated stock
     powers executed and delivered in blank by a duly authorized officer of the
     Company or such Subsidiary, as the case may be; and

          (ii) cause any such new Domestic Subsidiary (A) to become a party to
     the Guarantee and Collateral Agreement, in each case pursuant to
     documentation which is in form and substance reasonably satisfactory to the
     Secured Parties, and (B) to take all actions reasonably deemed by any
     Secured Party to be necessary or reasonably advisable to cause the Lien
     created by the Guarantee and Collateral Agreement to be duly perfected in
     accordance with all applicable Requirements of Law, including, without
     limitation, the filing of financing statements in such jurisdictions as may
     be reasonably requested by any Secured Party.

          (c)  With respect to any Person that, subsequent to the date hereof,
becomes a Foreign Subsidiary (other than a Foreign Subsidiary Holdco) and which
has Capital Stock that is owned directly by the Company or a Domestic Subsidiary
(other than Acterna WG) and with respect to any Foreign Subsidiary of Acterna WG
that, subsequent to the date hereof, becomes a direct Subsidiary of the Company
or of a Domestic Subsidiary (other than Acterna WG), promptly, upon the request
of any Secured Party, (i) execute and deliver to the Secured Parties a new
Foreign Pledge Agreement or such amendments to the relevant Foreign Pledge
Agreement or the Guarantee and Collateral Agreement as any Secured Party shall
reasonably deem necessary or reasonably advisable to grant to the Secured
Parties a Lien on the Capital Stock of such Foreign Subsidiary that is owned
directly by the Company or any of its Domestic Subsidiaries (other than Acterna
WG) (provided that in no event shall more than sixty-five percent (65%) of the
Capital Stock of any such Subsidiary be required to be so pledged; and it being
understood that such Lien shall be subject to the Intercreditor Agreement) and
(ii) to the extent deemed advisable by any Secured Party (subject to the

                                       42



terms of the Guarantee and Collateral Agreement) deliver to the Secured Parties
the certificates (if any) representing such Capital Stock, together with undated
stock powers executed and delivered in blank by a duly authorized officer of the
Company or such Subsidiary, as the case may be.

          (d)  Notwithstanding anything to the contrary contained herein, the
Company and its Subsidiaries shall not be required to (x) make the
representations and warranties set forth in Section 4 of the Guarantee and
Collateral Agreement or Sections 3.2, 3.6 or 3.18 of this Agreement or (y)
comply with the covenants set forth in Sections 5.2.1, 5.2.2, 5.2.4, 5.2.6,
5.2.7, 5.2.8, 5.2.9(b), 5.2.10, 5.2.11, 5.3.1, 5.3.2(iii), 5.3.3 or 6.7 of the
Guarantee and Collateral Agreement with respect to any Inactive Subsidiary or
any property or assets thereof so long as such Subsidiary is an Inactive
Subsidiary, and the exclusions of Inactive Subsidiaries from representations and
warranties and covenants described in this clause (ii) shall be given effect by
appropriate modifications (which shall be reasonably acceptable to each Secured
Party and the Company) to the assumption agreement entered into by the Inactive
Subsidiaries pursuant to Section 8.15 of the Guarantee and Collateral Agreement.

          (e)  Comply with subsection 14.15 of the Credit Agreement (entitled
Limitation on Inactive Subsidiaries) as in effect on the Closing Date.

     7.10 Liens. If after the date hereof, the Company or any of its
Subsidiaries creates or suffers to exist a Lien on any of their respective
properties or assets securing any Bank Indebtedness, then the Company shall, and
shall cause each such Subsidiary to, create a Lien on such property or assets
securing the CD&R Barbados Notes pursuant to the Guarantee and Collateral
Agreement (or, if requested by any Secured Party, one or more other Note
Security Documents in form and substance reasonably satisfactory to the Secured
Parties and substantially equivalent to one or more security documents in
respect of such Bank Indebtedness), which Lien securing the CD&R Barbados Notes
shall be on terms no less favorable to the Holders thereof than the terms of
such Lien securing such Bank Indebtedness, shall be to the holders of such Bank
Indebtedness (it being understood that such Lien securing the CD&R Barbados
Notes shall be subject to the Intercreditor Agreement).

     7.11 Note Guarantors.

          (a)  From and after the date hereof, the Company will cause each
Subsidiary that Guarantees payment of any Bank Indebtedness to execute and
deliver to each Holder of CD&R Barbados Notes an instrument pursuant to which
such Subsidiary will Guarantee payment of the CD&R Barbados Notes pursuant to
the Guarantee and Collateral Agreement (or, if requested by any Secured Party,
one or more other Note Security Documents in form and substance reasonably
satisfactory to the Secured

                                       43



Parties), whereupon such Subsidiary will become a Note Guarantor for all
purposes under this Agreement.

          (b)  From and after the date hereof, the Parent shall Guarantee
payment of the Transferred Notes in accordance with the terms of Annex A hereto.
From and after the date hereof, the Company will cause each Domestic Subsidiary
that is a Significant Subsidiary and that Guarantees Indebtedness of the Company
(other than Bank Indebtedness), to execute and deliver to each Holder of
Transferred Notes an instrument pursuant to which such Subsidiary will Guarantee
payment of the Transferred Notes in accordance with the terms of Annex A hereto,
whereupon such Subsidiary will become a Note Guarantor in respect of the
Transferred Notes for all purposes under this Agreement, provided, however, each
such Guarantee in respect of a Transferred Note (a "Springing Guarantee") by a
Domestic Significant Subsidiary (a "Significant Subsidiary Guarantor") will be
subject to termination and discharge under the following circumstances: Each
Significant Subsidiary Guarantor will automatically and unconditionally be
released from all obligations under its Springing Guarantee, and such Springing
Guarantee shall thereupon terminate and be discharged and of no further force or
effect, (i) concurrently with any sale or disposition (by merger or otherwise)
in accordance with the terms of this Agreement of any Significant Subsidiary
Guarantor or any interest therein by the Company or a Restricted Subsidiary,
following which such Significant Subsidiary Guarantor is no longer a Restricted
Subsidiary of the Company for the purposes of this Agreement and with respect to
the Notes, (ii) pursuant to the terms of its Springing Guarantee, (iii) at any
time that such Significant Subsidiary Guarantor is released from all of its
obligations under all of its Springing Guarantees of payment of Indebtedness
(other than Bank Indebtedness) of the Company, (iv) upon the merger or
consolidation of any Significant Subsidiary Guarantor with and into the Company
or another Significant Subsidiary Guarantor that is the surviving Person in such
merger or consolidation and (v) upon payment in full of the aggregate principal
amount of all Transferred Notes then outstanding and all other Guaranteed
Obligations in respect of Transferred Notes then due and owing. Upon any such
occurrence specified in the preceding sentence, each Holder of Transferred Notes
shall execute any documents reasonably required in order to evidence such
release, discharge and termination of such Significant Subsidiary Guarantee (at
the expense of the Company).

                                  Article VIII
                        Negative Covenants of the Company

     The Company hereby agrees that, from and after the date hereof and until
payment in full of the Principal Amount of the Notes, as well as any other
amount then due and owing under or with respect to the Notes:

                                       44



     8.1  Limitation on Indebtedness.

          (a)   The Company will not, and will not permit any Restricted
Subsidiary to, Incur any Indebtedness, provided, however, that the Company or
any Note Guarantor Subsidiary may Incur Indebtedness if on the date of the
Incurrence of such Indebtedness, after giving effect to the Incurrence thereof,
the Consolidated Coverage Ratio would be greater than 2.00:1.00.

          (b)   Notwithstanding subsection (a) of this Section 8.1, the Company
and its Restricted Subsidiaries may Incur the following Indebtedness:

          (i)   Indebtedness Incurred pursuant to the Credit Facility (including
     but not limited to in respect of letters of credit or bankers' acceptances
     issued or created thereunder) and Indebtedness of any Foreign Subsidiary
     that is a Restricted Subsidiary Incurred other than under the Credit
     Facility, and (without limiting the foregoing), in each case, any
     Refinancing Indebtedness in respect thereof, in a maximum principal amount
     at any time outstanding not exceeding in the aggregate the amount equal to
     (A) $410,000,000, plus (B) the amount, if any, by which the Borrowing Base
     exceeds $110,000,000, plus (C) in the case of any refinancing of the Credit
     Facility or any portion thereof, the aggregate amount of fees, underwriting
     discounts, premiums and other costs and expenses incurred in connection
     with such refinancing;

          (ii)  Indebtedness (A) of any Restricted Subsidiary to the Company or
     (B) of the Company or any Restricted Subsidiary to any Restricted
     Subsidiary, provided, that any subsequent issuance or transfer of any
     Capital Stock of such Restricted Subsidiary to which such Indebtedness is
     owed, or other event, that results in such Restricted Subsidiary ceasing to
     be a Restricted Subsidiary or any other subsequent transfer of such
     Indebtedness (except to the Company or a Restricted Subsidiary) will be
     deemed, in each case, an Incurrence of such Indebtedness by the issuer
     thereof;

          (iii) Indebtedness represented by the Notes, any Indebtedness
     represented by the Fund VI Notes, any Indebtedness represented by the
     Senior Subordinated Notes, any Indebtedness outstanding on the date hereof
     that was initially Incurred in accordance with Section 406(a) of the Senior
     Subordinated Note Indenture, and any Refinancing Indebtedness Incurred in
     respect of any Indebtedness described in this clause (iii) or subsection
     (a) of this Section 8.1;

          (iv)  Purchase Money Obligations and Capitalized Lease Obligations,
     and any Refinancing Indebtedness with respect thereto, in an aggregate
     principal amount at any time outstanding not exceeding an amount equal to
     ten percent (10%) of Consolidated Total Assets at any time outstanding;

                                       45



          (v)    Indebtedness of any Foreign Subsidiary that is a Restricted
     Subsidiary Incurred for working capital purposes;

          (vi)   (A) Guarantees by the Company or any Restricted Subsidiary of
     Indebtedness or any other obligation or liability of the Company or any
     Restricted Subsidiary (other than any Indebtedness incurred by the Company
     or such Restricted Subsidiary, as the case may be, in violation of this
     Section 8.1) or (B) Indebtedness of the Company or any Restricted
     Subsidiary arising by reason of any Lien granted by or applicable to such
     Person securing Indebtedness of the Company or any Restricted Subsidiary
     (other than any Indebtedness incurred by the Company or such Restricted
     Subsidiary, as the case may be, in violation of this Section 8.1);

          (vii)  Indebtedness of the Company or any Restricted Subsidiary (A)
     arising from the honoring of a check, draft or similar instrument of such
     Person drawn against insufficient funds, provided that such Indebtedness is
     extinguished within five (5) Business Days of its incurrence, or (B)
     consisting of guarantees, indemnities, obligations in respect of earnouts
     or other purchase price adjustments, or similar obligations, Incurred in
     connection with the acquisition or disposition of any business, assets or
     Person;

          (viii) Indebtedness of the Company or any Restricted Subsidiary in
     respect of (A) letters of credit, bankers' acceptances or other similar
     instruments or obligations issued, or relating to liabilities or
     obligations incurred, in the ordinary course of business (including those
     issued to any governmental entity in connection with self-insurance under
     applicable workers' compensation statutes), or (B) completion guarantees,
     surety, judgment, appeal or performance bonds, or other similar bonds,
     instruments or obligations, provided, or relating to liabilities or
     obligations incurred, in the ordinary course of business, or (C) Hedging
     Obligations entered into for bona fide hedging purposes in the ordinary
     course of business, or (D) Management Guarantees, or (E) the financing of
     insurance premiums in the ordinary course of business;

          (ix)   Indebtedness of a Receivables Subsidiary secured by a Lien on
     all or part of the assets disposed of in, or otherwise incurred in
     connection with, a Financing Disposition;

          (x)    Indebtedness of any Person that is assumed by the Company or
     any Restricted Subsidiary in connection with its acquisition of assets from
     such Person or any Affiliate thereof or is issued and outstanding on or
     prior to the date on which such Person was acquired by the Company or any
     Restricted Subsidiary or merged or consolidated with or into any Restricted
     Subsidiary (other than Indebtedness Incurred to finance, or otherwise in
     connection with, such

                                       46



     acquisition), provided that on the date of such acquisition, merger or
     consolidation, after giving effect thereto, (A) with respect to any such
     Indebtedness of the Company or any Note Guarantor Subsidiary, (1) the
     Company could Incur at least $1.00 of additional Indebtedness pursuant to
     paragraph (a) of this Section 8.1 or (2) the Consolidated Coverage Ratio is
     greater than it was on such date immediately prior to giving effect to such
     acquisition and (B) with respect to any such Indebtedness of any Restricted
     Subsidiary that is a not a Note Guarantor Subsidiary, the Company could
     Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a)
     of this Section 8.1; and any Refinancing Indebtedness with respect to any
     such Indebtedness;

          (xi)  Indebtedness of the Company or any Restricted Subsidiary in an
     amount at any time outstanding not exceeding twice the amount of Excluded
     Contributions made after May 21, 1998, provided that the proceeds of such
     Indebtedness and the related amount of such Excluded Contributions are used
     to finance the acquisition of assets of any Person in a Related Business or
     the merger or consolidation of such a Person into or with the Company or
     any Restricted Subsidiary (including but not limited to payment of any
     related fees and expenses) or to refinance any such acquisition, merger or
     consolidation with such Indebtedness being Incurred for such refinancing
     within nine (9) months of the closing of such acquisition, merger or
     consolidation; and any Refinancing Indebtedness with respect to any such
     Indebtedness; and

          (xii) Indebtedness of the Company or any Restricted Subsidiary in an
     aggregate principal amount at any time outstanding not exceeding an amount
     equal to (a) twenty percent (20%) of Consolidated Total Assets minus (b)
     the lesser of (x) $75.0 million and (y) the aggregate Principal Amount (as
     defined in the Fund VI Investment Agreement) of Fund VI Notes outstanding
     at any time minus (c) the lesser of (x) the aggregate Principal Amount of
     the Notes purchased from time to time by the Investor through the exercise
     of the Investment Right and (y) the aggregate Principal Amount of the Notes
     outstanding at any time.

          (c)   For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this Section 8.1, (i) any other obligation of the obligor on
such Indebtedness (or of any other Person who could have Incurred such
Indebtedness under this Section 8.1) arising under any Guarantee, Lien or letter
of credit, bankers' acceptance or other similar instrument or obligation
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit, bankers' acceptance or other similar
instrument or obligation secures the principal amount of such Indebtedness; (ii)
in the event that Indebtedness meets the criteria of more than one of the types
of Indebtedness described in paragraph (b) of this Section 8.1, the Company, in
its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of

                                       47



such Indebtedness in one of such clauses and (iii) the amount of Indebtedness
issued at a price that is less than the principal amount thereof shall be equal
to the amount of the liability in respect thereof determined in accordance with
GAAP.

          (d)  For purposes of determining compliance with any United States
dollar-denominated restriction on the Incurrence of Indebtedness denominated in
a foreign currency, the United States dollar-equivalent principal amount of such
Indebtedness Incurred pursuant thereto shall be calculated based on the relevant
currency exchange rate in effect on the date that such Indebtedness was
Incurred, in the case of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness, provided that (i) the United States
dollar-equivalent principal amount of any such Indebtedness outstanding on May
21, 1998 shall be calculated based on the relevant currency exchange rate in
effect on May 21, 1998, (ii) if such Indebtedness is Incurred to refinance other
Indebtedness denominated in a foreign currency, and such refinancing would cause
the applicable United States dollar-denominated restriction to be exceeded if
calculated at the relevant currency exchange rate in effect on the date of such
refinancing, such United States dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced and (iii) the United States dollar-equivalent principal amount of
Indebtedness denominated in a foreign currency and Incurred pursuant to the
Credit Agreement shall be calculated based on the relevant currency exchange
rate in effect on, at the Company's option, (x) May 21, 1998, (y) any date on
which any of the respective commitments under the Credit Agreement shall be
reallocated between or among facilities or subfacilities thereunder, or on which
such rate is otherwise calculated for any purpose thereunder, or (z) the date of
such Incurrence. The principal amount of any Indebtedness Incurred to refinance
other Indebtedness, if Incurred in a different currency from the Indebtedness
being refinanced, shall be calculated based on the currency exchange rate
applicable to the currencies in which such respective Indebtedness is
denominated that is in effect on the date of such refinancing.

          (e)  The Company shall not Incur any Indebtedness that is subordinated
in right of payment to any other Indebtedness of the Company, unless such
Indebtedness so Incurred is subordinated in right of payment to the Notes on
terms no less favorable to the Holders than the terms on which it is
subordinated to such other Indebtedness. No Note Guarantor shall Incur any
Indebtedness that is subordinated in right of payment to any other Indebtedness
of such Note Guarantor, unless such Indebtedness so Incurred is subordinated in
right of payment to any Note Guarantee of such Note Guarantor on terms no less
favorable to the Holders than the terms on which it is subordinated to such
other Indebtedness.

                                       48



     8.2  Limitation on Restricted Payments.

          (a)  The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make
any distribution on or in respect of its Capital Stock (including any such
payment in connection with any merger or consolidation to which the Company is a
party) except (A) dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and (B) dividends or distributions payable to
the Company or any Restricted Subsidiary (and, in the case of any such
Restricted Subsidiary making such dividend or distribution, to other holders of
its Capital Stock on no more than a pro rata basis, measured by value); (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of the
Company held by Persons other than the Company or a Restricted Subsidiary; (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligations (other than a purchase, redemption,
defeasance or other acquisition or retirement for value in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of such acquisition or retirement);
or (iv) make any Investment (other than a Permitted Investment) in any Person
(any such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition or retirement or Investment being herein referred to as a
"Restricted Payment"), if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment:

          (1)  a Default shall have occurred and be continuing (or would result
     therefrom);

          (2)  the Company could not incur at least an additional $1.00 of
     Indebtedness pursuant to paragraph (a) of Section 8.1; or

          (3)  the aggregate amount of such Restricted Payment and all other
     Restricted Payments (the amount so expended, if other than in cash, to be
     as determined in good faith by the Board of Directors, whose determination
     shall be conclusive) declared or made subsequent to May 21, 1998 and then
     outstanding would exceed the sum of:

               (A) fifty percent (50%) of the Consolidated Net Income accrued
          during the period (treated as one accounting period) from March 31,
          1998 to the end of the most recent fiscal quarter ending prior to the
          date of such Restricted Payment for which consolidated financial
          statements of the Company are available (or, in case such Consolidated
          Net Income shall be a negative number, one-hundred percent (100%) of
          such negative number);

                                       49



               (B) the aggregate Net Cash Proceeds, and fair value (as
          determined in good faith by the Board of Directors) of property or
          assets, received (x) by the Company as capital contributions to the
          Company after May 21, 1998 or from the issuance or sale (other than to
          a Restricted Subsidiary) of its Capital Stock (other than Disqualified
          Stock) after the Closing Date (other than Excluded Contributions) or
          (y) by the Company or any Restricted Subsidiary from the issuance and
          sale by the Company or any Restricted Subsidiary after May 21, 1998 of
          Indebtedness that shall have been converted into or exchanged for
          Capital Stock of the Company (other than Disqualified Stock), plus the
          amount of cash, property or assets (determined as provided above)
          received by the Company or any Restricted Subsidiary upon such
          conversion or exchange;

               (C) the aggregate amount equal to the net reduction since May 21,
          1998 in Investments in Unrestricted Subsidiaries resulting from (x)
          dividends, distributions, interest payments, return of capital,
          repayments of Investments or other transfers of assets to the Company
          or any Restricted Subsidiary from any Unrestricted Subsidiary, or (y)
          the redesignation of any Unrestricted Subsidiary as a Restricted
          Subsidiary (valued in each case as provided in the definition of
          "Investment"), not to exceed in the case of any such Unrestricted
          Subsidiary the aggregate amount of Investments (other than Permitted
          Investments) made by the Company or any Restricted Subsidiary in such
          Unrestricted Subsidiary after May 21, 1998; and

               (D) in the case of any disposition or repayment since May 21,
          1998 of any Investment constituting a Restricted Payment (without
          duplication of any amount deducted in calculating the amount of
          Investments at any time outstanding included in the amount of
          Restricted Payments), an amount in the aggregate equal to the lesser
          of the return of capital, repayment or other proceeds with respect to
          all such Investments and the initial amount of all such Investments.

          (b)  The provisions of subsection (a) of this Section 8.2 will not
prohibit any of the following (each, a "Permitted Payment"):

          (i)  any purchase, redemption, repurchase, defeasance or other
     acquisition or retirement of Capital Stock of the Company or Subordinated
     Obligations made by exchange (including any such exchange pursuant to the
     exercise of a conversion right or privilege in connection with which cash
     is paid in lieu of the issuance of fractional shares) for, or out of the
     proceeds of the substantially concurrent issuance or sale of, Capital Stock
     of the Company (other than Disqualified Stock and other than Capital Stock
     issued or sold to a

                                       50



     Subsidiary) or a substantially concurrent capital contribution to the
     Company, provided, that the Net Cash Proceeds from any such issuance, sale
     or capital contribution since May 21, 1998 shall be excluded in subsequent
     calculations under subsection (a) of this Section 8.2;

          (ii)  any purchase, redemption, repurchase, defeasance or other
     acquisition or retirement of Subordinated Obligations (A) made by exchange
     for, or out of the proceeds of the substantially concurrent issuance or
     sale of, Indebtedness of the Company or Refinancing Indebtedness Incurred
     in compliance with Section 8.1, (B) from Net Available Cash to the extent
     permitted by Section 8.4 or (C) to the extent required by the agreement
     governing such Subordinated Obligations, following the occurrence of a
     Change of Control (or other similar event described therein as a "change of
     control"), but only if the Company shall have repurchased all Notes
     surrendered for repurchase pursuant to Sections 6.5, 6.6 and 8.4 prior to
     purchasing or repaying such Subordinated Obligations;

          (iii) dividends paid within sixty (60) days after the date of
     declaration thereof if at such date of declaration such dividend would have
     complied with the subsection (a) of this Section 8.2;

          (iv)  Investments or other Restricted Payments in an aggregate amount
     outstanding at any time not to exceed the amount of Excluded Contributions,
     provided that such Excluded Contributions shall not include any Excluded
     Contribution the proceeds of which were used to finance the acquisition of
     assets from any Person in a Related Business or the merger or consolidation
     of such a Person into or with the Company or any Restricted Subsidiary
     pursuant to clause (xi) of subsection (b) of Section 8.1 (or, prior to the
     date hereof, pursuant to clause (xi) of paragraph (b) of Section 406 of the
     Senior Subordinated Note Indenture);

          (v)   loans, advances, dividends or distributions by the Company to
     the Parent to permit the Parent to repurchase or otherwise acquire its
     Capital Stock (including any options, warrants or other rights in respect
     thereof), or payments by the Company to repurchase or otherwise acquire
     Capital Stock (including any options, warrants or other rights in respect
     thereof), in each case from Management Investors, such payments, loans,
     advances, dividends or distributions not to exceed an amount (net of
     repayments of any such loans or advances) equal to (A) $25,000,000, plus
     (B) $5,000,000 multiplied by the number of calendar years that have
     commenced since May 21, 1998, plus the Net Cash Proceeds received by the
     Company since May 21, 1998 from, or as a capital contribution from, the
     issuance or sale to Management Investors of Capital Stock (including any
     options, warrants or other rights in respect thereof), to the extent

                                       51



     such Net Cash Proceeds since May 21, 1998 are not included in any
     calculation under clause (3)(B)(x) of subsection (a) of this Section 8.2;

          (vi)   the payment by the Company of, or loans, advances, dividends or
     distributions by the Company to the Parent to pay, dividends on the common
     stock or equity of the Company or the Parent following a public offering of
     such common stock or equity, in an amount not to exceed in any fiscal year
     six percent (6%) of the aggregate gross proceeds received by the Company in
     or from such public offering;

          (vii)  Restricted Payments (including loans or advances) in an
     aggregate amount outstanding at any time not to exceed $10,000,000 (net of
     repayments of any such loans or advances); provided that any "Restricted
     Payments" (as defined in the Senior Subordinated Note Indenture)
     outstanding on the date hereof under clause (vii) of paragraph (b) of
     Section 408 of the Senior Subordinated Note Indenture shall be deemed
     outstanding on such date under this clause (vii);

          (viii) loans, advances, dividends or distributions to the Parent or
     other payments by the Company or any Restricted Subsidiary (A) to satisfy
     or permit the Parent to satisfy obligations under the Management
     Agreements, (B) pursuant to the Tax Sharing Agreement or (C) to pay or
     permit the Parent to pay any Parent Expenses or any Related Taxes;

          (ix)   payments by the Company, or loans, advances, dividends or
     distributions by the Company to the Parent to make payments, to holders of
     Capital Stock of the Company or the Parent in lieu of issuance of
     fractional shares of such Capital Stock, not to exceed $100,000 in the
     aggregate outstanding at any time; and

          (x)    dividends or other distributions of Capital Stock, Indebtedness
     or other securities of Unrestricted Subsidiaries.

provided that (A) in the case of clauses (iii), (vi), (vii) and (ix), the net
amount of any such Permitted Payment since May 21, 1998 shall be included in
subsequent calculations of the amount of Restricted Payments, (B) in the case of
clause (v), at the time of any calculation of the amount of Restricted Payments,
the net amount of Permitted Payments that have then actually been made under
clause (v) (or, prior to the date hereof, clause (v) of paragraph (b) of Section
408 of the Senior Subordinated Note Indenture) since May 21, 1998 that is in
excess of fifty percent (50%) of the total amount of Permitted Payments then
permitted under clause (v) shall be included in such calculation of the amount
of Restricted Payments, (C) in all cases other than pursuant to clauses (A) and
(B) immediately above, the net amount of any such Permitted Payment since May
21, 1998 shall be excluded in subsequent calculations of the amount of
Restricted Payments

                                       52



and (D) solely with respect to clause (vii), no Default or Event of Default
(and, prior to the date hereof, no Senior Subordinated Default Event) shall have
occurred or be continuing at the time of any such Permitted Payment after giving
effect thereto.

     8.3  Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (x) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (y) make
any loans or advances to the Company or (z) transfer any of its property or
assets to the Company, except any encumbrance or restriction:

          (a)  pursuant to an agreement or instrument in effect at or entered
into on the date hereof (including, without limitation, the Credit Agreement,
the Senior Subordinated Note Indenture, the Fund VI Investment Agreement and
this Agreement);

          (b)  pursuant to any agreement or instrument of a Person, or relating
to Indebtedness or Capital Stock of a Person, which Person is acquired by or
merged or consolidated with or into the Company or any Restricted Subsidiary, or
which agreement or instrument is assumed by the Company or any Restricted
Subsidiary in connection with an acquisition of assets from such Person, as in
effect at the time of such acquisition, merger or consolidation (except to the
extent that such Indebtedness was incurred to finance, or otherwise in
connection with, such acquisition, merger or consolidation), provided that for
purposes of this clause (b), if another Person is the Successor Company, any
Subsidiary thereof or agreement or instrument of such Person or any such
Subsidiary shall be deemed acquired or assumed, as the case may be, by the
Company or a Restricted Subsidiary, as the case may be, when such Person becomes
the Successor Company;

          (c)  pursuant to an agreement or instrument (a "Refinancing
Agreement") effecting a refinancing of Indebtedness Incurred pursuant to, or
that otherwise extends, renews, refunds, refinances or replaces, an agreement or
instrument referred to in clause (a) or (b) of this Section 8.3 or this clause
(c) (an "Initial Agreement") or contained in any amendment, supplement or other
modification to an Initial Agreement (an "Amendment"), provided, however, that
the encumbrances and restrictions contained in any such Refinancing Agreement or
Amendment are not materially less favorable to the Holders taken as a whole than
encumbrances and restrictions contained in the Initial Agreement or Initial
Agreements to which such Refinancing Agreement or Amendment relates (as
determined in good faith by the Company);

          (d)  (i) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease,
license or similar contract, or

                                       53



the assignment or transfer of any lease, license or other contract, (ii) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Agreement, (iii) contained in
mortgages, pledges or other security agreements securing Indebtedness of a
Restricted Subsidiary to the extent restricting the transfer of the property or
assets subject thereto, (iv) pursuant to customary provisions restricting
dispositions of real property interests set forth in any reciprocal easement
agreements of the Company or any Restricted Subsidiary, (v) pursuant to Purchase
Money Obligations that impose encumbrances or restrictions on the property or
assets so acquired, (vi) on cash or other deposits or net worth imposed by
customers under agreements entered into in the ordinary course of business,
(vii) pursuant to customary provisions contained in agreements and instruments
entered into in the ordinary course of business (including but not limited to
leases and joint venture and other similar agreements entered into in the
ordinary course of business) or (viii) that arises or is agreed to in the
ordinary course of business and does not detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner material to the
Company or such Restricted Subsidiary;

          (e)  with respect to a Restricted Subsidiary (or any of its property
or assets) imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary (or the property or assets that are subject
to such restriction) pending the closing of such sale or disposition;

          (f)  required by any applicable law, rule, regulation or order or by
any regulatory authority having jurisdiction over the Company or any Restricted
Subsidiary or any of their businesses; or

          (g)  pursuant to an agreement or instrument (i) relating to any
Indebtedness permitted to be Incurred subsequent to the date hereof pursuant to
the provisions of Section 8.1 if the Company determines that such encumbrance or
restriction will not cause the Company not to have the funds necessary to pay
the principal of or interest on the Notes, (ii) relating to any sale of
receivables by a Foreign Subsidiary that is a Restricted Subsidiary or (iii)
relating to Indebtedness of or a Financing Disposition to or by any Receivables
Entity.

     8.4  Limitation on Sales of Assets and Subsidiary Stock.

          (a)  The Company will not, and will not permit any Restricted
Subsidiary to, make any Asset Disposition unless:

          (i)  the Company or such Restricted Subsidiary receives consideration
     (including by way of relief from, or by any other Person assuming
     responsibility

                                       54



     for, any liabilities, contingent or otherwise) at the time of such Asset
     Disposition at least equal to the fair market value of the shares and
     assets subject to such Asset Disposition, as such fair market value may be
     determined (and shall be determined, to the extent such Asset Disposition
     or any series of related Asset Dispositions involves aggregate
     consideration in excess of $10,000,000) in good faith by the Board of
     Directors, whose determination shall be conclusive (including as to the
     value of all non-cash consideration);

          (ii)  in the case of any Asset Disposition (or series of related Asset
     Dispositions) having a fair market value of $10,000,000 or more, at least
     seventy-five percent (75%) of the consideration therefor (excluding, in the
     case of an Asset Disposition (or series of related Asset Dispositions) of
     assets, any consideration by way of relief from, or by any other Person
     assuming responsibility for, any liabilities, contingent or otherwise, that
     are not Indebtedness) received by the Company or such Restricted Subsidiary
     is in the form of cash, and provided that this clause (ii) shall not apply
     to any Asset Disposition (or series of related Asset Dispositions),
     involving assets that accounted for less than two percent (2%) of
     Consolidated EBITDA during the period of the most recent four (4)
     consecutive fiscal quarters ending prior to the date of such Asset
     Disposition for which consolidated financial statements of the Company are
     available; and

          (iii) an amount equal to one-hundred percent (100%) of the Net
     Available Cash from such Asset Disposition is applied by the Company (or
     any Restricted Subsidiary, as the case may be) as follows:

                (A) first, either (1) to the extent the Company elects (or is
          required by the provisions of this Agreement or the terms of the
          Credit Agreement or of Indebtedness of a Restricted Subsidiary that is
          not a Note Guarantor of any of the Notes), to prepay, repay or
          purchase the Notes, the Fund VI Notes, the Bank Indebtedness under the
          Credit Agreement or such Indebtedness of a Restricted Subsidiary (in
          each case other than Indebtedness owed to the Company or a Restricted
          Subsidiary) within 365 days after the date of such Asset Disposition
          or (2) to the extent the Company or such Restricted Subsidiary elects,
          to reinvest in Additional Assets (including by means of an investment
          in Additional Assets by a Restricted Subsidiary with Net Available
          Cash received by the Company or another Restricted Subsidiary) within
          365 days from the date of such Asset Disposition, or, if such
          reinvestment in Additional Assets is a project that is authorized by
          the Board of Directors that will take longer than such 365 days to
          complete, the period of time necessary to complete such project;

                                       55



               (B)  second, to the extent of the balance of such Net Available
          Cash after application in accordance with clause (A) above, to make an
          offer to purchase the Notes pursuant and subject to the conditions of
          this Section 8.4; and

               (C)  third, to the extent of the balance of such Net Available
          Cash after application in accordance with clauses (A) and (B) above,
          to fund (to the extent consistent with any other applicable provision
          of this Agreement) any general corporate purpose (including but not
          limited to the repurchase, repayment or other acquisition or
          retirement of any Subordinated Obligations to the extent otherwise
          permitted hereby);

provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A)(1) or (B) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.

          (b)  Notwithstanding the foregoing provisions of this Section 8.4, the
Company and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 8.4 except to the extent that the
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this Section 8.4 exceeds $15,000,000, it being understood that
lesser amounts of Net Available Cash shall be carried forward for future
application in accordance with this Section 8.4.

          (c)  For the purposes of clause (ii) of the first paragraph of this
Section 8.4, the following are deemed to be cash: (i) Temporary Cash Investments
and Cash Equivalents, (ii) the assumption of Indebtedness of the Company (other
than Disqualified Stock of the Company) or any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all liability on
payment of the principal amount of such Indebtedness in connection with such
Asset Disposition, (iii) Indebtedness of any Restricted Subsidiary that is no
longer a Restricted Subsidiary as a result of such Asset Disposition, to the
extent that the Company and each other Restricted Subsidiary are released from
any Guarantee of payment of the principal amount of such Indebtedness in
connection with such Asset Disposition, (iv) securities received by the Company
or any Restricted Subsidiary from the transferee that are converted by the
Company or such Restricted Subsidiary into cash and (v) consideration consisting
of Indebtedness of the Company or any Restricted Subsidiary.

          (d)  In the event of an Asset Disposition that requires the purchase
of Notes pursuant to clause (iii)(B) of the first paragraph of this Section 8.4,
the Company will be required to purchase Notes tendered pursuant to an offer by
the Company for the

                                       56



Notes (the "Offer") at a purchase price of 100% of their Principal Amounts plus
accrued and unpaid interest to the date of such purchase in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
paragraph (e) of this Section 8.4. If the aggregate purchase price of the Notes
tendered pursuant to the Offer is less than the Net Available Cash allotted to
the purchase of Notes, the remaining Net Available Cash will be available to the
Company for use in accordance with clause (iii)(C) of the subsection (a) of this
Section 8.4. The Company shall not be required to make an Offer for Notes
pursuant to this Section 8.4 if the Net Available Cash available therefor (after
application of the proceeds as provided in clause (iii)(A) of the first
paragraph of this Section 8.4) is less than $15,000,000 for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).

          (e)  The Company will, not later than five (5) days after the Company
becomes obligated to make an Offer pursuant to this Section 8.4, mail a notice
to each Holder stating: (i) that an Asset Disposition that requires the purchase
of a portion of the Notes has occurred and that such Holder has the right
(subject to the prorating described below) to require the Company, to purchase a
portion of such Holder's Notes at a purchase price in cash equal to one hundred
percent (100%) of the Principal Amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase; (ii) the circumstances and relevant
facts and financial information regarding such Asset Disposition; (iii) the
repurchase date (which shall be no earlier than forty-five (45) days nor later
than sixty (60) days from the date such notice is mailed); (iv) the instructions
determined by the Company, consistent with this Section 8.4, that a Holder must
follow in order to have its Notes purchased; and (v) the amount of the Offer.
If, upon the expiration of the period for which the Offer remains open, the
aggregate Principal Amount of Notes surrendered by Holders exceeds the amount of
the Offer, the Company will select the Notes to be purchased on a pro rata
basis.

          (f)  The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 8.4. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 8.4, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 8.4 by virtue
thereof.

          (g)  The provisions of this Section 8.4 are in addition to and not in
limitation of the provisions of Section 6.6.

                                       57



     8.5  Limitation on Transactions with Affiliates.

          (a)   The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or conduct any transaction or
series of related transactions (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless (i) the terms of such Affiliate
Transaction are not materially less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could be obtained at the time in
a transaction with a Person who is not such an Affiliate and (ii), if such
Affiliate Transaction involves aggregate consideration in excess of $10,000,000,
the terms of such Affiliate Transaction have been approved by a majority of the
Disinterested Directors. For purposes of this paragraph, any Affiliate
Transaction shall be deemed to have satisfied the requirements set forth in this
paragraph if (x) such Affiliate Transaction is approved by a majority of the
Disinterested Directors or (y) in the event there are no Disinterested
Directors, a fairness opinion is provided by a nationally recognized appraisal
or investment banking firm with respect to such Affiliate Transaction.

          (b)   The provisions of the preceding subsection (a) of this Section
8.5 shall not apply to:

          (i)   any Restricted Payment Transaction;

          (ii)  (A) the entering into, maintaining or performance of any
     employment contract, collective bargaining agreement, benefit plan, program
     or arrangement, related trust agreement or any other similar arrangement
     for or with any employee, officer or director heretofore or hereafter
     entered into in the ordinary course of business, including vacation,
     health, insurance, deferred compensation, severance, retirement, savings or
     other similar plans, programs or arrangements, (B) the payment of
     compensation, performance of indemnification or contribution obligations,
     or any issuance, grant or award of stock, options, other equity-related
     interests or other securities, to employees, officers or directors in the
     ordinary course of business, (C) the payment of fees to directors of the
     Company or any of its Subsidiaries, (D) any transaction with an officer or
     director in the ordinary course of business not involving more than
     $100,000 in any one case or (E) Management Advances and payments in respect
     thereof;

          (iii) any transaction with the Company, any Restricted Subsidiary, or
     any Receivables Entity;

          (iv)  any transaction arising out of agreements or instruments in
     existence on the date hereof, and any payments made pursuant thereto;

                                       58



          (v)   the execution, delivery and performance of the Tax Sharing
     Agreement and Management Agreements, including payment to CD&R or any
     Affiliate of CD&R of fees of up to $1,000,000 in any fiscal year, plus all
     out-of-pocket expenses incurred by CD&R or any such Affiliate in connection
     with its performance of management consulting, monitoring, financial
     advisory or other services with respect to the Company and its Restricted
     Subsidiaries;

          (vi)  any transaction in the ordinary course of business on terms not
     materially less favorable to the Company or the relevant Restricted
     Subsidiary than those that could be obtained at the time in a transaction
     with a Person who is not an Affiliate of the Company; and

          (vii) any transaction in the ordinary course of business, or approved
     by a majority of the Board of Directors, between the Company or any
     Restricted Subsidiary and any Affiliate of the Company controlled by the
     Company that is a joint venture or similar entity.

     8.6  Limitation on Liens.

          (a)  Without the prior written consent of the Majority CD&R Barbados
Note Holders, so long as any CD&R Barbados Notes are outstanding, the Company
shall not, and shall not permit any Subsidiary to, directly or indirectly,
create or permit to exist any Lien upon any of its property or assets, whether
owned on the date of this Agreement or thereafter acquired, except for Permitted
Liens. Without in any way limiting the foregoing, in the event that the Company
or any of its Subsidiaries shall create or permit to exist any such Lien that is
not a Permitted Lien securing any liability or obligation, the Company shall,
and shall cause each such Subsidiary to, make effective provision to secure the
Indebtedness due under the CD&R Barbados Notes or, in respect of Liens on any
Subsidiary's property or assets, any Note Guarantee of such Subsidiary in
respect of the CD&R Barbados Notes, (i) equally and ratably with any such
liability or obligation that ranks pari passu in right of payment with the CD&R
Barbados Notes or (ii) prior to any such liability or obligation that is
subordinated in right of payment to the CD&R Barbados Notes.

          (b)  Without the prior written consent of the Majority Transferred
Note Holders, so long as any Transferred Notes are outstanding, the Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, create or permit to exist any Lien (other than Permitted Liens) on
any of its property or assets (including Capital Stock of any other Person),
whether owned on the date of this Agreement or thereafter acquired, securing any
Indebtedness of the Company or any Note Guarantor of the Transferred Notes (the
"Initial Lien"), unless contemporaneously therewith effective provision is made
to secure the Indebtedness due under the Transferred Notes or, in respect of
Liens on any Restricted Subsidiary's property or assets, any Note Guarantee of

                                       59



such Restricted Subsidiary in respect of the Transferred Notes, (i) equally and
ratably with any such obligation that ranks pari passu in right of payment with
the Transferred Notes or (ii) prior to any such obligation that by its terms is
expressly subordinated in right of payment to the Transferred Notes, in each
case for so long as such obligation is so secured by such Initial Lien. Any such
Lien thereby created in favor of the Transferred Notes or any such Note
Guarantee will be automatically and unconditionally released and discharged upon
(i) the release and discharge of the Initial Lien to which it relates, or (ii)
any sale, exchange or transfer to any Person not an Affiliate of the Company of
the property or assets secured by such Initial Lien, or of all of the Capital
Stock held by the Company or any Restricted Subsidiary in, or all or
substantially all the assets of, any Restricted Subsidiary creating such Lien.

     8.7  Limitation on Optional Payments and Modifications of Debt Instruments
and other Material Agreements. The Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:

          (a) make any optional payment, prepayment, repurchase or redemption of
     the Senior Subordinated Notes or make any optional payments on account of
     or for a sinking or other analogous fund for the repurchase, redemption,
     defeasance or other acquisition thereof (other than (i) mandatory payments
     of principal and interest and payments of, in each case, fees and expenses
     required by the Senior Subordinated Notes or the Senior Subordinated Note
     Indenture, only to the extent permitted under the subordination provisions,
     if any, applicable thereto or (ii) pursuant to the Offers to Purchase);

          (b) make any amendment, supplement, modification or waiver of any of
     the terms of the Senior Subordinated Notes or the Senior Subordinated Note
     Indenture which (i) amends or modifies the subordination provisions
     contained in the Senior Subordinated Notes and the Senior Subordinated Note
     Indenture, (ii) shortens the fixed maturity or increases the principal
     amount of, or increases the rate or shortens the time of payment of
     interest on, or increases the amount or shortens the time of payment of any
     principal or premium payable whether at maturity, at a date fixed for
     prepayment or by acceleration or otherwise of the Indebtedness evidenced by
     the Senior Subordinated Notes or increases the amount of, or accelerates
     the time of payment of, any fees or other amounts payable in connection
     therewith to any holder of the Senior Subordinated Notes, (iii) relates to
     any material affirmative or negative covenants or any events of default or
     remedies under the Senior Subordinated Notes and the Senior Subordinated
     Note Indenture, and the effect of which is to subject the Company, or any
     of its Subsidiaries, to any more onerous or more restrictive provisions or
     (iv) which otherwise adversely affects the interests of the Holders as
     senior creditors with respect to the Senior Subordinated Notes or the
     interests of the Holders hereunder in any material respect;

                                       60



          (c) in the event of the occurrence of a Change of Control, repurchase
     the Senior Subordinated Notes, unless the Company shall have (i) made, or
     caused to have been made, payment in full of the Notes and any other
     amounts then due and owing to any Holder under the Notes or this Agreement
     (including, without limitation, accrued but unpaid interest on the Notes)
     or (ii) made, or caused to have been made, an offer to pay the Notes and
     any amounts then due and owing to each Holder under the Notes or this
     Agreement (including, without limitation, accrued but unpaid interest on
     the Notes), or caused to have been made, payment in full thereof to each
     such Holder which has accepted such offer; or

          (d) make any amendment, supplement, modification or waiver of any of
     the terms of (i) Section 14.12(d) and (f) of the Credit Agreement as
     amended by the Second Credit Agreement Amendment or (ii) Section 14.12(e)
     of the Credit Agreement as amended by the Second Credit Agreement Amendment
     and the Third Credit Agreement Amendment, in each case that adversely
     affects any Holder without the consent of the Majority CD&R Barbados Note
     Holders.

     8.8  Limitation on Negative Pledge Clauses. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, enter into
any agreement which prohibits or limits the ability of the Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property or revenues, whether now owned or hereafter acquired, to secure the
obligations under the CD&R Barbados Notes or any Note Financing Document to the
extent relating to the CD&R Barbados Notes or, in the case of any Note
Guarantor, its obligations under its Note Guarantee of the CD&R Barbados Notes
or any Note Financing Document to the extent relating to such Note Guarantee,
other than (a) the Credit Facility, the Fund VI Note Financing Documents, this
Agreement and the other Note Financing Documents and any related documents and
(b) any industrial revenue or development bonds, agreements governing any
purchase money Liens, acquisition agreements or Financing Leases or operating
leases of real property entered into in the ordinary course of business
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed, acquired or leased thereby).

                                   Article IX
                                Successor Company

     9.1  When the Company May Merge, etc.

          (a) The Company will not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:

                                       61



          (i)   the resulting, surviving or transferee Person (the "Successor
     Company") will be a Person organized and existing under the laws of the
     United States of America, any State thereof or the District of Columbia and
     the Successor Company (if not the Company) will expressly assume all the
     obligations of the Company under this Agreement, the Notes and the other
     Note Financing Documents by executing and delivering to the Holders an
     agreement or one or more other documents or instruments in form reasonably
     satisfactory to the Holders;

          (ii)  immediately after giving effect to such transaction (and
     treating any Indebtedness that becomes an obligation of the Successor
     Company or any Restricted Subsidiary as a result of such transaction as
     having been Incurred by the Successor Company or such Restricted Subsidiary
     at the time of such transaction), no Default or Event of Default will have
     occurred and be continuing;

          (iii) immediately after giving effect to such transaction, either (A)
     the Successor Company could Incur at least $1.00 of additional Indebtedness
     pursuant to paragraph 8.1(a) or (B) the Consolidated Coverage Ratio of the
     Successor Company would equal or exceed the Consolidated Coverage Ratio of
     the Company immediately prior to giving effect to such transaction;

          (iv)  each Note Guarantor (other than any party to any such
     consolidation or merger) shall have delivered a document or instrument in
     form and substance reasonably satisfactory to the Holders confirming its
     Note Guarantee; and

          (v)   the Company shall have delivered to the Holders a certificate of
     a Responsible Officer and an opinion of counsel (which counsel shall be
     reasonably acceptable to the Holders), each to the effect that such
     consolidation, merger or transfer complies with the provisions described in
     this paragraph of this Section 9.1, and each in form and substance
     reasonably satisfactory to the Holders, provided that (A) in giving such
     opinion such counsel may rely on a certificate of a Responsible Officer as
     to compliance with the foregoing clauses (ii) and (iii) and as to any
     matters of fact, and (B) no opinion of counsel will be required for a
     consolidation, merger or transfer described in subsection (c) of this
     Section 9.1.

          (b)   Any Indebtedness that becomes an obligation of the Company or
any Restricted Subsidiary (or that is deemed to be Incurred by any Restricted
Subsidiary that becomes a Restricted Subsidiary) as a result of any such
transaction undertaken in compliance with this Section 9.1, and any Refinancing
Indebtedness with respect thereto, shall be deemed to have been Incurred in
compliance with Section 8.1.

                                       62



          (c)   Clauses (ii) and (iii) of subsection (a) of this Section 9.1
will not apply to any transaction in which (A) any Restricted Subsidiary
consolidates with, merges into or transfers all or part of its properties and
assets to the Company or (B) the Company consolidates or merges with or into or
transfers all or substantially all its assets to (1) an Affiliate incorporated
or organized for the purpose of reincorporating or reorganizing the Company in
another jurisdiction or changing its legal structure to a corporation or other
entity or (2) a Restricted Subsidiary of the Company so long as all assets of
the Company and the Restricted Subsidiaries immediately prior to such
transaction (other than Capital Stock of such Restricted Subsidiary) are owned
by such Restricted Subsidiary and its Restricted Subsidiaries immediately after
the consummation thereof.

     9.2  Successor Company Substituted. Upon any transaction involving the
Company in accordance with Section 9.1, in which the Company is not the
Successor Company, the Successor Company will succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Agreement, and thereafter (other than in the case of a lease) the predecessor
Company shall be relieved of all obligations and covenants under this Agreement.

                                   Article X
                                Events of Default

     10.1 Events of Default. An "Event of Default" occurs if, voluntarily or
involuntarily, by operation of law or pursuant to any judgment, decree or order
of any Governmental Authority or otherwise:

          (a)   the Company defaults in any payment of interest on any Note when
due or any other amount payable under any Note Financing Document when due
(other than a payment governed by the following clause (b)), and such default
continues for a period of thirty (30) days;

          (b)   the Company defaults in the payment of the principal of any Note
when the same becomes due and payable, whether at the Maturity Date, upon
optional redemption, upon purchase, upon declaration of acceleration or
otherwise;

          (c)   the Company fails to comply with any covenant or obligation (x)
contained in Section 6.5 (other than a failure to purchase Notes, which shall be
governed by the preceding clause (b)) or Article IX and such failure continues
for a period of thirty (30) days after notice thereof is given to the Company by
any Holder or (y) to issue shares of Common Stock or Warrants pursuant to
Section 6.3, 6.7 or 13.9(b) or any other provision of any Note Financing
Document and such failure continues for a period of ten (10) days;

                                       63



          (d)   the Company or any other Note Financing Party fails to comply
with any covenant or obligation (x) contained in Section 6.6 (other than a
failure to purchase Notes, which shall be governed by clause (b) of this Section
10.1), Article VII (other than any covenant or obligation referred to in clause
(o) of this Section 10.1) or Section 13.9 or (y) under any Note Financing
Document other than this Agreement and the Notes (other than any covenant or
obligation referred to in clauses (a), (b), (c), (o) and (p) of this Section
10.1), and in any such case, such failure continues for a period of thirty (30)
days after either a Responsible Officer shall have discovered or should have
discovered such default or notice thereof is given to the Company by any Holder;

          (e)   the Company or any other Note Financing Party fails to comply
with any of its covenants and obligations under this Agreement or any Note
(other than those referred to in clauses (a), (b), (c), (d), (o) and (p) of this
Section 10.1) and such failure continues for a period of sixty (60) days after
notice thereof is given to the Company by any Holder;

          (f)   (i) Any Senior Subordinated Default Event shall occur or exist,
(ii) any Fund VI Default Event shall occur or exist or (iii) any Bank Default
Event shall occur or exist and either the Commitments (as defined in the Credit
Agreement) shall be terminated or the Loans (as defined in the Credit Agreement)
shall be declared due and payable;

          (g)   The Company, any Note Guarantor or any other Subsidiary of the
Company shall (i) default in any payment of principal of or interest of any
Indebtedness (other than the Notes), beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created; or (ii) default in the observance or performance of any other agreement
or condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice or lapse of time if required,
such Indebtedness to become due prior to its stated maturity, and (in the case
of any such Indebtedness not constituting Subordinated Obligations) such
Indebtedness shall have so become due; provided, however, that no Default or
Event of Default shall exist under this paragraph unless the amount of any such
Indebtedness in respect of which any default or other event or condition
referred to in this paragraph shall have occurred shall be equal to at least
$15,000,000;

          (h)   the Parent, the Company or any Material Subsidiary shall
commence any case, proceeding or other action (i) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or

                                       64



seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (ii) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the Parent, the Company or any
Material Subsidiary shall make a general assignment for the benefit of its
creditors;

          (i)   there shall be commenced against any of the Parent, the Company
or any Material Subsidiary any case, proceeding or other action of a nature
referred to in clause (g) above which (i) results in the entry of an order for
relief or any such adjudication or appointment or (ii) remains undismissed,
undischarged or unbonded for a period of sixty (60) days;

          (j)   there shall be commenced against the Parent, the Company or any
Material Subsidiary any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof;

          (k)   the Parent, the Company or any Material Subsidiary shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (g), (h), or (i) of this
Section 10.1;

          (l)   the Parent, the Company or any Material Subsidiary shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due;

          (m)   one or more judgments or decrees shall be entered against the
Company or any of its Active Subsidiaries involving in the aggregate a liability
(net of any insurance or indemnity payments actually received in respect thereof
prior to or within sixty (60) days from the entry thereof, or to be received in
respect thereof, in the event any appeal thereof shall be unsuccessful) of
$15,000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within sixty (60) days from
the entry thereof;

          (n)   (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Company or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single

                                       65



Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is reasonably likely to result in the termination of
such Plan for purposes of Title IV of ERISA (other than a standard termination
pursuant to Section 4041(b) of ERISA), (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or any Commonly
Controlled Entity shall, or is reasonably likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, (vi) the occurrence or expected occurrence of any event or
condition which results or is reasonably likely to result in the Company's or
any Commonly Controlled Entity's becoming responsible for any liability in
respect of a Former Plan, or (vii) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vii)
above, such event or condition, together with all other such events or
conditions, if any, would be reasonably expected to result in liability which
would have a Material Adverse Effect;

          (o)   (i) Any of the Note Security Documents (or any guarantee
thereunder by any Note Financing Party of the monetary obligations of the
Company hereunder) shall cease, for any reason, to be in full force and effect
other than pursuant to the terms hereof and thereof, or the Company or any other
Note Financing Party which is a party to any of the Note Security Documents
shall so assert in writing, (ii) the Company shall fail to perform any covenant
or obligation contained in Section 7.10, 7.11(a), 8.6(a) or 8.8 or (iii) the
Lien created by any of the Note Security Documents shall cease to be enforceable
and of the same effect as to perfection and priority purported to be created
thereby with respect to any significant portion of the Collateral (other than in
connection with any termination of such Lien in respect of any Collateral as
permitted hereby or by any Note Security Document), and such failure of such
Lien to be perfected and enforceable with such priority shall have continued
unremedied for a period of twenty (20) days; or

          (p)   (i) The Senior Subordinated Notes, for any reason, shall not be
or shall cease to be validly subordinated as provided therein and in the Senior
Subordinated Note Indenture to the obligations of the Company under this
Agreement, any Notes and the other Note Financing Documents or (ii) the Company
shall fail to perform any covenant or obligation contained in Section 8.7.

     10.2 Acceleration of Maturity; Rescission and Annulment.

          (a)   If an Event of Default (other than an Event of Default specified
in clauses 10.1(h) through (l) with respect to the Company) occurs and is
continuing, the Holders of at least a twenty five percent (25%) of the aggregate
Principal Amount of the outstanding Notes, by notice to the Company specifying
the respective Event of Default and that such notice is a "Notice of
Acceleration," may declare the principal of and accrued but unpaid interest on
all the Notes to be due and payable. Upon such declaration, such principal and
interest will be due and payable immediately.


                                       66



          (b)   Notwithstanding subsection (a) of this Section 10.2, if an Event
of Default specified in clauses 10.1(h) through (l) with respect to the Company
occurs and is continuing, then the principal of and any accrued interest on the
outstanding Notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of any Holder.

          (c)   The Holders of a majority in aggregate Principal Amount of the
outstanding Notes may, by notice to the Company, rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.

     10.3 Unconditional Right of Holders to Receive Principal, Premium and
Interest. Notwithstanding any other provision of this Agreement or any other
Note Financing Document, each Holder's right to receive payment of the principal
of and all interest on the Note or Notes held by it on the Interest Payment
Dates and Stated Maturity expressed in such Note or Notes, and to institute suit
for the enforcement of any such payment on or after such Interest Payment Dates
and Stated Maturity, shall not be impaired without the consent of such Holder.

     10.4 Restoration of Rights and Remedies. If any Holder has instituted any
proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to such Holder, then and in every such case the Company,
any other obligor upon the Notes and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Holders shall continue as though no such proceeding had been instituted.

     10.5 Rights and Remedies Cumulative. No right or remedy herein conferred
upon the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

     10.6 Delay or Omission Not Waiver. No delay or omission of any Holder to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article X or by law
to the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Holders.

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     10.7 Waiver of Past Defaults. The Holders of not less than a majority in
aggregate Principal Amount of the outstanding Notes may, on behalf of the
Holders of all of the Notes, waive any past Default hereunder and its
consequences, except a Default in the payment of the principal of or interest on
any Note (which may only be waived with the consent of each Holder of Notes
directly affected), and except as may otherwise be provided in Section 13.7.
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,
but no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereon. In case of any such waiver, the
Company, each Note Guarantor, any other obligor upon the Notes and the Holders
shall be restored to their former positions and rights hereunder and under the
Notes, respectively.

     10.8 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury or other similar law wherever enacted,
now or at any time hereafter in force, that would prohibit or forgive the
Company from paying all or any portion of the principal of (or premium, if any)
or interest on the Notes contemplated herein or in the Notes or that may affect
the covenants or the performance of this Agreement.

                                   Article XI
                                   Termination

     11.1 Termination. This Agreement may be terminated prior to any Closing (a)
at any time by the written agreement of the Parent, the Company and the
Investor, (b) at any time upon written notice given by the Parent and the
Company to the other parties that the consummation of the transactions
contemplated hereby would violate, in whole or in part, a Requirement of Law and
(c) at any time upon written notice given by the Investor to the other parties.

     11.2 Effect of Termination. In the event of the termination of this
Agreement prior to the first Closing pursuant to the provisions of Section 11.1,
this Agreement shall become void and have no effect, without any liability to
any Person; provided that the provisions of Sections, 13.1, 13.2, 13.3, 13.6,
13.7, 13.8, 13.9, 13.10, 13.11, 13.12, 13.13 and 13.14 shall survive any
termination of this Agreement.

                                   Article XII
                                   Definitions

     "Acterna WG" means Acterna WG International Holdings LLC, a Delaware
limited liability company, and any successors thereto.

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     "Active Subsidiaries" means each Subsidiary of the Company other than any
Inactive Subsidiary.

     "Additional CD&R Barbados Senior Subordinated Notes" has the meaning given
to it in the Recitals.

     "Affiliate" means, with respect to any Person, a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a Person (whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise) and shall be deemed to exist
upon the ownership of securities entitling the holder thereof to exercise more
than 20% of the voting power in the election of directors of such Person (or
other Persons or body performing similar functions).

     "Affiliate Transaction" has the meaning given to it in Section 8.5.

     "Agreement Currency" has the meaning given to it in Section 13.10.

     "Amendment" has the meaning given to it in Section 8.3(c).

     "Appraiser" means Houlihan Lokey Howard & Zukin Financial Advisers, Inc.
or, if Houlihan Lokey Howard & Zukin Financial Advisers, Inc. is unwilling or
unable to perform such services, an independent appraisal firm selected by the
Special Committee (but at the Company's expense), following consultation with
the Investor, from among any nationally recognized appraising or investment
banking firms engaged in valuation of securities of publicly traded companies.

     "Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares, or, in the case of a Foreign Subsidiary, to the extent
required by any Requirement of Law), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction), other than (a) a disposition to the
Company or a Restricted Subsidiary, (b) a disposition in the ordinary course of
business, (c) the sale or discount (with or without recourse, and on customary
or commercially reasonable terms) of accounts receivable or notes receivable
arising in the ordinary course of business, or the conversion or exchange of
accounts receivable for notes receivable, (d) any Restricted Payment
Transactions, (e) a disposition that is governed by the provisions described
under Article IX hereof, (f) any Financing Disposition, (g) any "fee in lieu" or
other disposition of assets to any governmental authority or agency that
continue in use by the Company or any Restricted Subsidiary, so

                                       69



long as the Company or any Restricted Subsidiary may obtain title to such assets
upon reasonable notice by paying a nominal fee, (h) any exchange of like
property pursuant to Section 1031 (or any successor section) of the Code, (i)
any financing transaction with respect to property built or acquired by the
Company or any Restricted Subsidiary after the Closing Date, including without
limitation any sale/leaseback transaction or asset securitization, (j) any
disposition arising from foreclosure, condemnation or similar action with
respect to any property or other assets, (k) any disposition of Capital Stock,
Indebtedness or other securities of an Unrestricted Subsidiary, (l) a
disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement
or other obligation with or to a Person (other than the Company or a Restricted
Subsidiary) from whom such Restricted Subsidiary was acquired, or from whom such
Restricted Subsidiary acquired its business and assets (having been newly formed
in connection with such acquisition), entered into in connection with such
acquisition, (m) a disposition of not more than five-percent (5%) of the
outstanding Capital Stock of a Foreign Subsidiary that is a Restricted
Subsidiary that has been approved by the Board of Directors, or (n) any
disposition or series of related dispositions for aggregate consideration not to
exceed $2.5 million.

     "Assumption Agreement" means the Assumption Agreement, dated as of August
7, 2002, pursuant to which the Investor became a party to the Intercreditor
Agreement.

     "Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (b) the sum of all such payments.

     "Bank Agent" means JPMorgan Chase Bank (as successor by merger to the
Morgan Guaranty Trust Company of New York), and any successors thereto, in its
capacity as administrative agent under the Credit Agreement.

     "Bank Default Event" means a "Default" or "Event of Default" as those terms
are defined in the Credit Agreement, or any other default or event of default
under the Credit Agreement.

     "Bank Indebtedness" means any and all amounts, whether outstanding on the
date hereof or thereafter incurred, payable under or in respect of the Credit
Facility, including without limitation principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or any Restricted
Subsidiary whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees,
other monetary obligations of any nature and all other amounts payable
thereunder or in respect thereof.

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     "Board of Directors" means, unless the context otherwise requires, the
Board of Directors of the Company.

     "Borrowing Base" means the sum (determined as of the end of the most
recently ended fiscal quarter for which consolidated financial statements of the
Company are available) of (a) sixty percent (60%) of Inventory of the Company
and its Restricted Subsidiaries and (b) eighty percent (80%) of Receivables of
the Company and its Restricted Subsidiaries.

     "Business" has the meaning given to it in Section 3.17.

     "Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in the City of New York, New York are authorized or
obligated by any Requirement of Law to be closed.

     "Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.

     "Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The stated maturity of any Capitalized Lease
Obligation shall be the date of the last payment of rent or any other amount due
under the related lease.

     "CD&R" means Clayton, Dubilier & Rice, Inc., a Delaware corporation, and
any successors thereto.

     "CD&R Barbados Investment" means the investment by the Investor in the
Notes from time to time pursuant to this Agreement.

     "CD&R Barbados Notes" means one or more Notes held by the Investor or any
other member of the CD&R Group.

     "CD&R Barbados-Owned Senior Subordinated Notes" has the meaning given to it
in the Recitals.

     "CD&R Group" means CD&R, Fund V, Fund VI or any other investment fund or
vehicle managed, sponsored or advised by CD&R, or any Affiliate of or successor
to CD&R, Fund V, Fund VI or any such other investment fund or vehicle.

     "Change of Control" means the occurrence of the following: (a) any Person
or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act),
other than any of the Permitted Investors, shall have acquired a percentage of
shares of Voting

                                       71



Stock that is greater than as held in the aggregate by the Permitted Investors
or (b) the Permitted Investors shall cease to hold in the aggregate at least (i)
at any time prior to a New Equity Financing, thirty-five percent (35%) of the
outstanding Voting Stock of the Parent or (ii) upon or at any time after a New
Equity Financing, twenty-five percent (25%) of the outstanding Voting Stock of
the Parent or (c) a "Change of Control" as defined in the Senior Subordinated
Note Indenture. "Voting Stock" means shares of Capital Stock entitled to vote
generally in the election of directors and "Permitted Investors" means any of
(x) the Investor, CD&R, Fund V, Fund VI, any other investment fund or vehicle
managed, sponsored or advised by CD&R, or any Affiliate of or successor to the
Investor, CD&R, Fund V or any such other investment fund or vehicle, (y) any
Management Investor and (z) for a period not exceeding three (3) Business Days,
any Person acting in the capacity of an underwriter in connection with a public
or private offering of Capital Stock of the Parent. "New Equity Financing" means
the receipt by the Parent of at least $150,000,000 in gross cash proceeds from
the issuance and sale of newly-issued shares of Common Stock after the Closing
Date to Persons other than the Permitted Investors and "Management Investor"
means, collectively, the officers, directors, employees and other members of the
management of the Parent, the Company or any Subsidiary of the Company, or
immediate family members or relatives thereof, or trusts or partnerships for the
benefit of any of the foregoing, or any of their heirs, executors or legal
representatives, who at any particular date shall beneficially own or have the
right to acquire, directly or indirectly, common stock of the Parent or the
Company.

     "Change of Control Notice Event" means (a) the execution of any written
agreement (including, without limitation, any "letter of intent" or other
similar agreement which contemplates more complete documentation or agreement)
which, when fully performed by the parties thereto, would result in a Change of
Control or (b) the making of any written offer by any person (as such term is
used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the Closing Date) or related persons constituting a group (as such term is used
in Rule 13d-5 under the Exchange Act as in effect on the Closing Date), which
offer, if accepted by the requisite number of such Holders, would result in a
Change of Control.

     "Change of Control Payment Date" has the meaning given to it in Section
6.5.

     "Closing" has the meaning given to it in Section 2.1.

     "Closing Date" has the meaning given to it in Section 2.1.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

                                       72



     "Collateral" means all assets of the Note Financing Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any Note
Security Document.

     "Common Stock" means the common stock, par value $0.01 per share, of the
Parent.

     "Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Parent, the Company or any Subsidiary of
the Company within the meaning of Section 4001 of ERISA or is part of a group
which includes the Parent, the Company or any Subsidiary of the Company and
which is treated as a single employer under Section 414(b) or 414(c) of the
Code.

     "Company" has the meaning given to it in the Heading.

     "Consent" means any consent, approval, authorization, waiver, permit,
concession, decree, agreement, license, exemption or order of, registration,
declaration or filing with, or report or notice to, any Person.

     "Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of Consolidated EBITDA of the Company and the
Restricted Subsidiaries for the period of the most recent four consecutive
fiscal quarters ending prior to the date of such determination for which
consolidated financial statements of the Company are available to (y)
Consolidated Interest Expense for such four fiscal quarters, provided that:

          (a) if since the beginning of such period the Company or any
Restricted Subsidiary has Incurred any Indebtedness that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period (except that
in making such computation, the amount of Indebtedness under any revolving
credit facility outstanding on the date of such calculation shall be computed
based on (i) the average daily balance of such Indebtedness during such four
fiscal quarters or such shorter period for which such facility was outstanding
or (ii) if such facility was created after the end of such four fiscal quarters,
the average daily balance of such Indebtedness during the period from the date
of creation of such facility to the date of such calculation);

          (b) if since the beginning of such period the Company or any
Restricted Subsidiary has repaid, repurchased, redeemed, defeased or otherwise
acquired, retired or discharged any Indebtedness (each, a "Discharge") or if the
transaction giving

                                       73



rise to the need to calculate the Consolidated Coverage Ratio involves a
Discharge of Indebtedness (in each case other than Indebtedness Incurred under
any revolving credit facility unless such Indebtedness has been permanently
repaid), Consolidated EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such Discharge
of such Indebtedness, including with the proceeds of such new Indebtedness, as
if such Discharge had occurred on the first day of such period;

          (c) if since the beginning of such period the Company or any
Restricted Subsidiary shall have disposed of any company, any business or any
group of assets constituting an operating unit of a business (any such
disposition, a "Sale"), the Consolidated EBITDA for such period shall be reduced
by an amount equal to the Consolidated EBITDA (if positive) attributable to the
assets that are the subject of such Sale for such period or increased by an
amount equal to the Consolidated EBITDA (if negative) attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to (i) the Consolidated Interest Expense attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
redeemed, defeased or otherwise acquired, retired or discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Sale for such period (including but not limited to through the assumption of
such Indebtedness by another Person) plus (ii) if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such Sale;

          (d) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger, consolidation or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company, any business or any group of assets constituting
an operating unit of a business, including any such Investment or acquisition
occurring in connection with a transaction causing a calculation to be made
hereunder (any such Investment or acquisition, a "Purchase"), Consolidated
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any related
Indebtedness) as if such Purchase occurred on the first day of such period; and

          (e) if since the beginning of such period any Person became a
Restricted Subsidiary or was merged or consolidated with or into the Company or
any Restricted Subsidiary, and since the beginning of such period such Person
shall have Discharged any Indebtedness or made any Sale or Purchase that would
have required an adjustment pursuant to clause (b), (c) or (d) above if made by
the Company or a Restricted Subsidiary during such period, Consolidated EBITDA
and Consolidated

                                       74



Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Discharge, Sale or Purchase occurred on the first day
of such period.

For purposes of this definition, whenever pro forma effect is to be given to any
Sale, Purchase or other transaction, or the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness Incurred or repaid, repurchased, redeemed, defeased or
otherwise acquired, retired or discharged in connection therewith, the pro forma
calculations in respect thereof (including without limitation in respect of
anticipated cost savings or synergies relating to any such Sale, Purchase or
other transaction) shall be as determined in good faith by a responsible
financial or accounting officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness). If
any Indebtedness bears, at the option of the Company or a Restricted Subsidiary,
a rate of interest based on a prime or similar rate, a eurocurrency interbank
offered rate or other fixed or floating rate, and such Indebtedness is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated by applying such optional rate as the Company or such Restricted
Subsidiary may designate. If any Indebtedness that is being given pro forma
effect was Incurred under a revolving credit facility, the interest expense on
such Indebtedness shall be computed based upon the average daily balance of such
Indebtedness during the applicable period. Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate determined in good
faith by a responsible financial or accounting officer of the Company to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP.

     "Consolidated EBITDA" means, for any period, the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (a) provision for all taxes (whether or not paid,
estimated or accrued) based on income, profits or capital, (b) Consolidated
Interest Expense and any Receivables Fees, (c) depreciation, amortization
(including but not limited to amortization of goodwill and intangibles and
amortization and write-off of financing costs) and all other non-cash charges or
non-cash losses, (d) any expenses or charges related to any sale of Capital
Stock (other than Disqualified Stock) of the Company and (e) the amount of any
minority interest expense.

     "Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its Restricted Subsidiaries, determined on a consolidated basis
in accordance with GAAP and before any reduction in respect of Preferred Stock
dividends, if any; provided, that there shall not be included in such
Consolidated Net Income:

                                       75



          (a) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (i) subject to the limitations contained in
clause (d) below, the Company's equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution to a Restricted Subsidiary, to
the limitations contained in clause (c) below) and (ii) the Company's equity in
the net loss of such Person shall be included to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such Person;

          (b) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;

          (c) any net income (loss) of any Restricted Subsidiary that is not a
Note Guarantor Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of similar distributions by such Restricted Subsidiary, directly or indirectly,
to the Company by operation of the terms of such Restricted Subsidiary's charter
or any agreement, instrument, judgment, decree, order, statute or governmental
rule or regulation applicable to such Restricted Subsidiary or its stockholders
(other than (x) restrictions that have been waived or otherwise released, (y)
restrictions pursuant to the Notes or this Agreement and (z) restrictions in
effect on May 21, 1998 with respect to a Restricted Subsidiary and other
restrictions with respect to such Restricted Subsidiary that taken as a whole
are not materially less favorable to the Holders than such restrictions in
effect on May 21, 1998), except that (i) subject to the limitations contained in
clause (d) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of any dividend or distribution that was or that could
have been made by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary (subject, in the case of a dividend that could
have been made to another Restricted Subsidiary, to the limitation contained in
this clause) and (ii) the net loss of such Restricted Subsidiary shall be
included to the extent of the aggregate Investment of the Company or any of its
other Restricted Subsidiaries in such Restricted Subsidiary;

          (d) any gain or loss realized upon the sale or other disposition of
any asset of the Company or any Restricted Subsidiary (including pursuant to any
sale/leaseback transaction) that is not sold or otherwise disposed of in the
ordinary course of business (as determined in good faith by the Board of
Directors);

                                       76



          (e) any item classified as an extraordinary, unusual or nonrecurring
gain, loss or charge, including, without limitation, fees, expenses and charges
associated with any acquisition, merger or consolidation after the Closing Date;

          (f) the cumulative effect of a change in accounting principles;

          (g) all deferred financing costs written off and premiums paid in
connection with any early extinguishment of Indebtedness;

          (h) any unrealized gains or losses in respect of Currency Agreements;

          (i) any unrealized foreign currency transaction gains or losses in
respect of Indebtedness of any Person denominated in a currency other than the
functional currency of such Person; and

          (j) any non-cash compensation charge arising from any grant of stock,
stock options or other equity-based awards.

In the case of any unusual or nonrecurring gain, loss or charge not included in
Consolidated Net Income pursuant to clause (f) above in any determination
thereof, the Company will deliver a certificate of a Responsible Officer to each
Holder promptly after the date on which Consolidated Net Income is so
determined, setting forth the nature and amount of such unusual or nonrecurring
gain, loss or charge.

     "Consolidated Total Assets" means, as of any date of determination, the
total assets shown on the consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the most recent date for which such a balance
sheet is available, determined on a consolidated basis in accordance with GAAP
(and, in the case of any determination relating to any Incurrence of
Indebtedness or any Investment, on a pro forma basis including any property or
assets being acquired in connection therewith), provided that for purposes of
paragraph (b) of Section 8.1 and the definition of "Permitted Investment,"
Consolidated Total Assets shall not be less than $285,300,000 million.

     "Constituent Person" has the meaning given to it in Section 6.3(i).

     "Contractual Obligation" means, with respect to any Person, any provision
of any material security issued by such Person or of any material agreement,
instrument or other undertaking to which such Person is a party or by which it
or any of its property is bound.

     "Conversion Price" means, at any time, a price per share of Common Stock
equal to $1,000 divided by the number of shares of Common Stock delivered upon
conversion for each $1,000 Principal Amount of Notes as determined by the
Conversion Rate in effect at such time.

                                       77



     "Conversion Rate" has the meaning given to it in Section 6.3(a).

     "Credit Agreement" means the credit agreement dated as of May 23, 2000,
among the Company, the banks and other financial institutions party thereto from
time to time, Credit Suisse First Boston, as syndication agent, The Chase
Manhattan Bank, as documentation agent, and the Bank Agent, as administrative
agent, as such agreement may be assumed by any successor in interest, and as
such agreement may be amended, supplemented, waived or otherwise modified from
time to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Credit Agreement or otherwise).

     "Credit Facility" means the collective reference to the Credit Agreement,
any Credit Documents (as defined therein), any notes and letters of credit
issued pursuant thereto and any guarantee and collateral agreement, patent and
trademark security agreement, mortgages, letter of credit applications and other
guarantees, pledge agreements, security agreements and collateral documents, and
other instruments and documents, executed and delivered pursuant to or in
connection with any of the foregoing, in each case as the same may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Credit Agreement or one or more other credit agreements, indentures or
financing agreements or otherwise). Without limiting the generality of the
foregoing, the term "Credit Facility" shall include any agreement (i) changing
the maturity of any Indebtedness incurred thereunder or contemplated thereby,
(ii) adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder or (iv) otherwise altering the terms and
conditions thereof.

     "Currency Agreement" means, in respect of a Person, any foreign exchange
contract, currency swap agreement or other similar agreement or arrangements
(including derivative agreements or arrangements), as to which such Person is a
party or a beneficiary.

     "Current CD&R Barbados Senior Subordinated Notes" has the meaning given to
it in the Recitals.

     "Current Market Price" means, on any date specified herein, (a) in the case
of securities that have an existing public trading market, the amount per
security equal to (i) the average of the last sale price of such security,
regular way, for the five (5) consecutive trading days selected by the Company
commencing not more than ten (10)

                                       78



trading days before, and ending not later than the earlier of the day in
question and the day before the "ex" date with respect to the issuance or
distribution requiring such computation (the five (5) trading days so selected
by the Company, the "Trading Period"), or, if no such sale takes place during
such period, the average of the closing bid and asked prices thereof during the
Trading Period, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no such security is then listed or admitted to trading on any national
securities exchange but such security is designated as a national market system
security by the NASD, the average of the last sale price of such security,
regular way, during the Trading Period, or if such security is not so
designated, the average of the reported closing bid and asked prices thereof
during the Trading Period as shown by the NASD automated quotation system or, if
no shares thereof are then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any successor organization, and in either case
as reported by any member firm of the New York Stock Exchange selected by the
Company, and (b) in the case of securities that do not have an existing public
trading market and in the case of other property, the higher of (i) the book
value thereof as determined by agreement between the Company and the Holder, or
if the Company and the Holder fail to agree, by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company, as of the last day of any month ending within sixty (60) days preceding
the date as of which the determination is to be made and (ii) the fair value
thereof (w) determined by an agreement between the Company and the Holder or (x)
if the Company and the Holder fail to agree, determined jointly by an
independent investment banking firm retained by the Company and by an
independent investment banking firm retained by the Holder, either of which
firms may be an independent investment banking firm regularly retained by the
Company or the Holder or (y) if the Company or the Holder shall fail so to
retain an independent investment banking firm within five Business Days of the
retention of such firm by the Holders or the Company, as the case may be,
determined solely by the firm so retained or (z) if the firms so retained by the
Company and by such holders shall be unable to reach a joint determination
within fifteen (15) Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm chosen by the first
two such firms and which is not a regular investment banking firm of the Company
or any such holder.

     "Default" means any of the events specified in Section 10.1, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

     "Disinterested Director" means, with respect to any Affiliate Transaction,
a member of the Board of Directors of the Parent having no material direct or
indirect financial interest in or with respect to such Affiliate Transaction. A
member of the Board of Directors shall not be deemed to have such a financial
interest by reason of such

                                       79



member's holding Capital Stock of the Parent or any options, warrants or other
rights in respect of such Capital Stock.

     "Disqualified Stock" means, with respect to any Person, any Capital Stock
(other than Management Stock) that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event (other than following the occurrence of a Change
of Control or other similar event described under such terms as a "change of
control" or an Asset Disposition) (a) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (b) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (c) is redeemable at the
option of the holder thereof (other than following the occurrence of a Change of
Control or other similar event described under such terms as a "change of
control," or an Asset Disposition), in whole or in part, in each case on or
prior to the Maturity Date.

     "Domestic Subsidiary" means any Subsidiary of the Company organized under
the laws of any jurisdiction within the United States (other than any Foreign
Subsidiary Holdco).

     "Election Notice" has the meaning given to it in Section 1.4.

     "Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority properly promulgated and
having the force and effect of law, or other Requirements of Law (including,
without limitation, common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or human health as
related to the environment, as now or may at any relevant time hereafter be in
effect.

     "Environmental Permits" has the meaning given to it in Section 7.8.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     "Event of Default" means any of the events specified in Section 10.1,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.

     "Exchange Act" means the Securities Exchange Act of 1934, or any successor
statute, and the rules and regulations of the SEC thereunder, as amended.

     "Excluded Contribution" means Net Cash Proceeds, or the fair value, as
determined in good faith by the Board of Directors, of property or assets,
received by the Company as capital contributions to the Company after the
Closing Date or from the issuance or sale (other than to a Restricted
Subsidiary) of Capital Stock (other than

                                       80



Disqualified Stock) of the Company, in each case not previously included in the
calculation set forth in subparagraph (a)(3)(B)(x) of Section 8.2 for purposes
of determining whether a Restricted Payment may be made.

     "Exercise Period" has the meaning given to it in Section 1.4.

     "Fair Market Value" as applied to the Notes, means the price at which the
Notes would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell, and both having reasonable
knowledge of all relevant facts, which buyer and seller are unrelated parties
having no business dealings with each other, other than such dealings as would
be conducted by unrelated parties acting at arm's length. The Appraiser shall
determine the Fair Market Value of the Notes in a manner consistent with
customary valuation methodologies used in the valuation of securities of
publicly traded companies, taking into account in particular interest rates and
conversion rates for convertible securities of companies comparable, both as to
industry and financial condition, to the Company.

     "Financing Disposition" means any sale, transfer, conveyance or other
disposition of property or assets by the Company or any Subsidiary of the
Company to any Receivables Entity, or by any Receivables Subsidiary, in each
case in connection with the Incurrence by a Receivables Entity of Indebtedness,
or obligations to make payments to the obligor on Indebtedness, which may be
secured by a Lien in respect of such property or assets.

     "Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.

     "Foreign Pledge Agreement" each pledge agreement (or analogous document),
which pledge agreement (or analogous document) shall be in form and substance
reasonably satisfactory to the Secured Parties, pursuant to which the Company or
any of its Domestic Subsidiaries purports to grant a Lien on any portion of the
Capital Stock of any Foreign Subsidiary, as the same may be amended,
supplemented or otherwise modified from time to time.

     "Foreign Subsidiary" means any Subsidiary of the Company that is organized
under the laws of any jurisdiction outside the United States of America, or that
is a Foreign Subsidiary Holdco.

     "Foreign Subsidiary Holdco" means any Subsidiary of the Company that has no
material assets other than Capital Stock or other securities of one or more
Foreign Subsidiaries or other Foreign Subsidiary Holdcos, and other assets
relating to an ownership interest in such Capital Stock, securities or Foreign
Subsidiaries.

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     "Former Plan" means any employee benefit plan in respect of which the
Parent, the Company or any Subsidiary of the Company or a Commonly Controlled
Entity has engaged in a transaction described in Section 4069 or Section 4212(c)
of ERISA.

     "Fund V" means Clayton, Dubilier & Rice Fund V Limited Partnership, a
Cayman Islands exempted limited partnership managed by CD&R, and its successors
and assigns who are members of the CD&R Group at the time of any such
assignment.

     "Fund VI" has the meaning given to it in the Recitals.

     "Fund VI Default Event" means a "Default" or "Event of Default" as those
terms are defined in the Fund VI Investment Agreement, or any other default or
event of default under the Fund VI Investment Agreement.

     "Fund VI Guaranty and Collateral Agreement" means "Guaranty and Collateral
Agreement" as this term is defined in the Fund VI Investment Agreement.

     "Fund VI Investment Agreement" means the Investment Agreement, dated as of
December 27, 2001, among the Parent, the Company and Fund VI, as such agreement
may be amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with the
original agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Investment Agreement or otherwise).

     "Fund VI Note Financing Documents" means the "Note Financing Documents" as
defined in the Fund VI Investment Agreement.

     "Fund VI Notes" means the "Notes" as defined in the Fund VI Investment
Agreement.

     "GAAP" means generally accepted accounting principles in the United States
of America as in effect on May 21, 1998 (for purposes of the definitions of the
terms "Consolidated Coverage Ratio," "Consolidated EBITDA," "Consolidated
Interest Expense," "Consolidated Net Income" and "Consolidated Total Assets,"
all defined terms in this Agreement to the extent used in or relating to any of
the foregoing definitions, and all ratios and computations in this Agreement
based on any of the foregoing definitions) and as in effect from time to time
(for purposes of Section 8.1(c)(iii) and for all other purposes of this
Agreement), including those 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 approved by
a significant segment of the accounting profession. All ratios and computations
based on GAAP contained in this Agreement shall be computed in conformity with
GAAP.

                                       82



     "Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

     "Guarantee and Collateral Agreement" has the meaning given to it in the
Recitals.

     "Guarantee" and "Guarantee Obligations" means, with respect to any Person
(the "guaranteeing person"), any obligation of (a) the guaranteeing person or
(b) another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any such obligation of the guaranteeing person, whether or
not contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (A) for the purchase or payment of any such primary obligation or (B) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (x) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (y) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith. (The term "Guarantee" used as a verb has a corresponding
meaning.)

     "Holder" means the Person in whose name a Note is registered in the
Register of Holders.

     "Inactive Subsidiaries" means each Subsidiary of the Company listed on
Schedule 3.16 so long as such Subsidiary is in compliance with Section 7.9(e).

                                       83



     "Incur" means issue, assume, enter into any Guarantee of, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Accrual of
interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an Incurrence of
Indebtedness. Any Indebtedness issued at a discount (including Indebtedness on
which interest is payable through the issuance of additional Indebtedness) shall
be deemed Incurred at the time of original issuance of the Indebtedness at the
initial accreted amount thereof. For purposes of this Agreement, all
Indebtedness of the Company and its Restricted Subsidiaries that is outstanding
on the date hereof and was initially Incurred in accordance with Section 406(b)
of the Senior Subordinated Note Indenture, shall be deemed Incurred on the date
hereof and outstanding under the respective clauses of Section 8.1(b)
corresponding to the respective clauses of Section 406(b) of the Senior
Subordinated Indenture under which such Indebtedness was initially Incurred and
is outstanding on the date hereof (with the United States dollar equivalent
principal amount of any Indebtedness denominated in a foreign currency being
calculated in accordance with Section 8.1(d) without giving effect to such
deemed new Incurrence thereof on the date hereof).

     "Initial Agreement" has the meaning given to it in Section 8.3(c).

     "Initial Lien" has the meaning given to it in Section 8.6(b).

     "Initial Notes" has the meaning given to it in the Recitals.

     "Indebtedness" means with respect to any Person on any date of
determination (without duplication):

          (a) the principal of indebtedness of such Person for borrowed money;

          (b) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;

          (c) all reimbursement obligations of such Person in respect of letters
of credit or other similar instruments (the amount of such obligations being
equal at any time to the aggregate then undrawn and unexpired amount of such
letters of credit or other instruments plus the aggregate amount of drawings
thereunder that have not then been reimbursed);

          (d) all obligations of such Person to pay the deferred and unpaid
purchase price of property (except Trade Payables), which purchase price is due
more than one year after the date of placing such property in final service or
taking final delivery and title thereto;

                                       84



          (e) all Capitalized Lease Obligations of such Person;

          (f) the redemption, repayment or other repurchase amount of such
Person with respect to any Disqualified Stock of such Person or (if such Person
is a Subsidiary of the Company other than a Note Guarantor Subsidiary) any
Preferred Stock of such Subsidiary, but excluding, in each case, any accrued
dividends (the amount of such obligation to be equal at any time to the maximum
fixed involuntary redemption, repayment or repurchase price for such Capital
Stock, or if less (or if such Capital Stock has no such fixed price), to the
involuntary redemption, repayment or repurchase price therefor calculated in
accordance with the terms thereof as if then redeemed, repaid or repurchased,
and if such price is based upon or measured by the fair market value of such
Capital Stock, such fair market value shall be as determined in good faith by
the board of directors or other governing body of the issuer of such Capital
Stock);

          (g) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, that the amount of Indebtedness of such Person shall be the lesser of
(i) the fair market value of such asset at such date of determination (as
determined in good faith by the Company) and (ii) the amount of such
Indebtedness of such other Persons;

          (h) all Indebtedness of other Persons to the extent Guaranteed by such
Person; and

          (i) to the extent not otherwise included in this definition, net
hedging obligations in respect of any Currency Agreements and Interest Rate
Agreements of such Person (the amount of any such obligation to be equal at any
time to the termination value of such agreement or arrangement giving rise to
such hedging obligation that would be payable by such Person at such time).

The amount of Indebtedness of any Person at any date shall be determined as set
forth above or otherwise provided in this Agreement, or otherwise shall equal
the amount thereof that would appear on a balance sheet of such Person
(excluding any notes thereto) prepared in accordance with GAAP.

     "Insolvency" means, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.

     "Intellectual Property" has the meaning given to it in Section 3.10.

     "Intercreditor Agreement" has the meaning given to it in the Recitals.

     "Interest Payment" has the meaning given to it in Section 6.2.

     "Interest Payment Date" has the meaning given to it in Section 6.1.

                                       85



     "Interest Rate" has the meaning given to it in Section 6.1.

     "Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement (including derivative agreements or arrangements), as to which
such Person is party or a beneficiary.

     "Investment" in any Person by any other Person means any direct or indirect
advance, loan or other extension of credit (other than to customers, suppliers,
directors, officers or employees of any Person in the ordinary course of
business) or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and Section 8.2(a), (a) "Investment"
shall include the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of any Subsidiary of
the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary, provided that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation, (b) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer and (c) in each case under clause (a) or (b) above, fair
market value shall be as determined in good faith by the Board of Directors.
Guarantees shall not be deemed to be Investments. The amount of any Investment
outstanding at any time shall be the original cost of such Investment, reduced
(at the Company's option) by any dividend, distribution, interest payment,
return of capital, repayment or other amount or value received in respect of
such Investment; provided, that to the extent that the amount of Restricted
Payments outstanding at any time since May 21, 1998 (including, prior to the
date hereof, pursuant to the Senior Subordinated Note Indenture) is so reduced
by any portion of any such amount or value that would otherwise be included in
the calculation of Consolidated Net Income, such portion of such amount or value
shall not be so included for purposes of calculating the amount of Restricted
Payments that may be made pursuant to paragraph (a) of Section 8.2.

     "Investment Right" has the meaning given to it in Section 1.1.

     "Investor" has the meaning given to it in the Heading.

     "Judgment Currency" has the meaning given to it in Section 13.10.

                                       86



     "Lien" means any mortgage, pledge, hypothecation, assignment, security
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing).

     "Majority CD&R Barbados Note Holders" means, at any time, Holders holding
more than fifty percent (50%) of the aggregate principal amount of CD&R Barbados
Notes outstanding at such time.

     "Majority Holders" means, at any time, Holders holding more than fifty
percent (50%) of the aggregate principal amount of Notes outstanding at such
time.

     "Majority Transferred Note Holders" means, at any time, Holders holding
more than fifty percent (50%) of the aggregate principal amount of Transferred
Notes outstanding at such time.

     "Management Advances" means (a) loans or advances made to directors,
officers or employees of the Parent, the Company or any Restricted Subsidiary
(i) in respect of travel, entertainment or moving-related expenses incurred in
the ordinary course of business, (ii) in respect of moving-related expenses
incurred in connection with any closing or consolidation of any facility or
(iii) in the ordinary course of business and (in the case of this clause (iii))
not exceeding $2,500,000 in the aggregate outstanding at any time, (b)
promissory notes of Management Investors acquired in connection with the
issuance of Management Stock to such Management Investors, (c) Management
Guarantees, or (d) other Guarantees of borrowings by Management Investors in
connection with the purchase of Management Stock, which Guarantees are permitted
under Section 8.1.

     "Management Agreements" means, collectively, the Consulting Agreement and
the Indemnification Agreement, each dated as of May 21, 1998, each between the
Company and CD&R (and its permitted successors and assigns thereunder), as each
may be amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof and of this Agreement.

     "Management Guarantees" means guarantees (a) of up to an aggregate
principal amount of $20,000,000 of borrowings by Management Investors in
connection with their purchase of Management Stock or (b) made on behalf of, or
in respect of loans or advances made to, directors, officers or employees of the
Parent, the Company or any Restricted Subsidiary (i) in respect of travel,
entertainment and moving-related expenses incurred in the ordinary course of
business, or (ii) in the ordinary course of business and

                                       87



(in the case of this clause (ii)) not exceeding $2,500,000 million in the
aggregate outstanding at any time.

     "Management Investors" means the officers, directors, employees and other
members of the management of the Parent, the Company and any Subsidiary of the
Company, or family members or relatives thereof, or trusts or partnerships for
the benefit of any of the foregoing, or any of their heirs, executors,
successors and legal representatives, who at any date beneficially own or have
the right to acquire, directly or indirectly, Capital Stock of the Parent or the
Company.

     "Management Stock" means Capital Stock of the Parent or the Company
(including any options, warrants or other rights in respect thereof) held by any
of the Management Investors.

     "Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Parent, the Company and the Subsidiaries of the Company, taken as a whole, or
(b) the validity or enforceability of the Note Financing Documents as to any
Note Financing Parties party thereto or the rights and remedies of the Investor
or any other Holder hereunder and thereunder, taken as a whole.

     "Material Environmental Amount" means an amount payable by the Parent, the
Company or any Subsidiary of the Company in respect of or under any
Environmental Law for remedial costs, compliance costs, compensatory damages,
punitive damages, fines, penalties or any combination thereof in an amount that
would reasonably be expected to have a Material Adverse Effect.

     "Material Subsidiary" means, at any date, any Subsidiary of the Company
which at such date has assets with a market value in excess of $5,000,000 or
annual revenues in excess of $5,000,000.

     "Materials of Environmental Concern" means any hazardous or toxic
substances, materials, pollutants or wastes, defined or regulated as such in or
under any applicable Environmental Law, including, without limitation, gasoline
or petroleum (including, without limitation, crude oil or any fraction thereof)
or petroleum products, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.

     "Maturity Date" means December 31, 2007.

     "Moody's" means Moody's Investors Service, Inc., and its successors.

     "Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.

                                       88



     "Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other non-cash form) therefrom, in each case net of (a) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition (including as a consequence of any transfer of funds in connection
with the application thereof in accordance with the covenant described in
Section 8.4), (b) all payments made, and all installment payments required to be
made, on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or that
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (c) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, or to any other Person (other than the Company or a
Restricted Subsidiary) owning a beneficial interest in the assets disposed of in
such Asset Disposition and (d) any liabilities or obligations associated with
the assets disposed of in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition, including without
limitation pension and other post-employment benefit liabilities, liabilities
related to environmental matters, and liabilities relating to any
indemnification obligations associated with such Asset Disposition.

     "Net Cash Interest Amount," with respect to interest paid on any date in
respect of interest payable to the Investor by the Company on any Senior
Subordinated Note Interest Payment Date on or after the date hereof by the
Company to the Investor in respect of any CD&R Barbados-Owned Senior
Subordinated Notes pursuant to the terms of the Senior Subordinated Note
Indenture and such notes, means an amount (rounded down to the nearest $1,000)
equal to (a) the cash interest received by the Investor on such date minus (b)
the aggregate amount of all withholding and income taxes with respect to the
receipt or accrual of such interest paid or payable by or in respect of the
Investor or any Person (including the direct and indirect owners of the capital
stock of the Investor) whose tax liability is determined by reference to the
income of the Investor, the amount of such taxes to be determined in good faith
by the Investor.

     "Net Cash Proceeds," with respect to any issuance or sale of any securities
of the Company or any Subsidiary of the Company by the Company or any Subsidiary
of the Company, or any capital contribution, means the cash proceeds of such
issuance, sale or contribution net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred

                                       89



in connection with such issuance, sale or contribution and net of taxes paid or
payable as a result thereof.

     "New Common Stock" means any newly-issued shares of Common Stock (or
securities convertible into or exercisable or exchangeable for newly-issued
shares of Common Stock) issued or proposed to be issued after the Closing Date,
other than (a) shares of Common Stock issued upon the exercise of any Warrant
issued by the Parent pursuant to this Agreement or upon the conversion of any of
the Notes pursuant to Section 6.3 and, (b) any issuance of shares of Common
Stock issuable as a result of an adjustment of the Conversion Rate under clauses
(i), (ii), (iii), (iv), (v) or (vi) of Section 6.3(c).

     "New Issue Price" has the meaning given to it in Section 6.3(c).

     "New Price Per Share" has the meaning given to it in Section 6.3(c)(vi).

     "New York Court" has the meaning given to it in Section 13.3.

     "Non-electing Share" has the meaning given to it in Section 6.3(i).

     "Note Financing Documents" means this Agreement, the Notes, the
Intercreditor Agreement and the Note Security Documents.

     "Note Financing Party" means the Parent, the Company and each Subsidiary of
the Company that is a party to a Note Financing Document.

     "Note Guarantee" means any Guarantee with respect to any of the Notes by
Parent or any Subsidiary of the Company.

     "Note Guarantor" means Parent or any Restricted Subsidiary of the Company
that is party to a Note Guarantee.

     "Note Guarantor Subsidiary" means any Restricted Subsidiary of the Company
that is a Note Guarantor of both the CD&R Barbados Notes and the Transferred
Notes (if any).

     "Note Security Documents" means the Guarantee and Collateral Agreement and
all other security documents hereafter delivered to any of the Secured Parties
granting a Lien on any asset or assets of any Person to secure the obligations
and liabilities of the Company hereunder and under any of the other Note
Financing Documents or to secure any guarantee of any such obligations and
liabilities.

     "Notes" means (a) the Initial Notes, (b) any additional promissory notes
issued by the Company (i) in lieu of payment of an Interest Payment in cash, in
accordance with

                                       90



Section 6.2, (ii) in connection with any Optional Redemption, in accordance with
Section 6.4, (iii) in connection with any repurchase offer, in accordance with
Section 6.6, (iv) in connection with any transfer of Notes, in accordance with
Section 6.9, (v) in replacement of any mutilated, destroyed, lost or stolen
Notes, in accordance with Section 6.10 and (vi) in connection with any
repurchase offer, in accordance with Section 8.4.

     "Offer" has the meaning given to it in Section 8.4(d).

     "Offers to Purchase" has the meaning given to it in the Recitals.

     "Optional Redemption" has the meaning given to it in Section 6.4.

     "Parent" has the meaning given to it in the first paragraph of this
Agreement.

     "Parent Expenses" means (a) costs (including all professional fees and
expenses) incurred by the Parent to comply with its reporting obligations under
federal or state laws or under this Indenture, including any reports filed with
respect to the Securities Act, Exchange Act or the respective rules and
regulations promulgated thereunder, (b) indemnification obligations of the
Parent owing to directors, officers, employees or other Persons under its
charter or by-laws or pursuant to written agreements with any such Person, (c)
other operational expenses of the Parent incurred in the ordinary course of
business and (d) expenses incurred by the Parent in connection with any public
offering of Capital Stock or Indebtedness (i) where the net proceeds of such
offering are intended to be received by or contributed or loaned to the Company
or a Restricted Subsidiary, or (ii) in a prorated amount of such expenses in
proportion to the amount of such net proceeds intended to be so received,
contributed or loaned or (iii) otherwise on an interim basis prior to completion
of such offering so long as the Parent shall cause the amount of such expenses
to be repaid to the Company or the relevant Restricted Subsidiary out of the
proceeds of such offering promptly if completed.

     "PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.

     "Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in, or consisting of, any of the following:

          (a)  a Restricted Subsidiary, the Company, or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;

          (b)  another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, or is liquidated into, the Company or a
Restricted Subsidiary;

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          (c)  Temporary Cash Investments or Cash Equivalents;

          (d)  receivables owing to the Company or any Restricted Subsidiary, if
created or acquired in the ordinary course of business;

          (e)  any securities or other Investments received as consideration in,
or retained in connection with, sales or other dispositions of property or
assets, including Asset Dispositions made in compliance with Section 8.4;

          (f)  securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement
of any Lien, or in satisfaction of judgments, including in connection with any
bankruptcy proceeding or other reorganization of another Person;

          (g)  Investments in existence or made pursuant to legally binding
written commitments in existence on the Closing Date;

          (h)  Currency Agreements, Interest Rate Agreements and related hedging
obligations, which obligations are Incurred in compliance with Section 8.1;

          (i)  pledges or deposits (x) with respect to leases or utilities
provided to third parties in the ordinary course of business or (y) otherwise
described in the definition of "Permitted Liens";

          (j)  any Investment in a joint venture or similar entity that is not a
Restricted Subsidiary, or in any Related Business, in an aggregate amount
outstanding at any time not to exceed seven percent (7%) of Consolidated Total
Assets;

          (k)  (i) Investments in any Receivables Subsidiary, or in connection
with a Financing Disposition by or to any Receivables Entity, including
Investments of funds held in accounts permitted or required by the arrangements
governing such Financing Disposition or any related Indebtedness, or (ii) any
promissory note issued by the Company or the Parent, provided that if the Parent
receives cash from the relevant Receivables Entity in exchange for such note, an
equal cash amount is contributed by the Parent to the Company;

          (l)  bonds secured by assets leased to and operated by the Company or
any Restricted Subsidiary that were issued in connection with the financing of
such assets so long as the Company or any Restricted Subsidiary may obtain title
to such assets at any time by paying a nominal fee, canceling such bonds and
terminating the transaction;

          (m)  the Fund VI Notes or the Notes;

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          (n)  any Investment to the extent made using Capital Stock of the
Company (other than Disqualified Stock), or Capital Stock of the Parent, as
consideration;

          (o)  Management Advances; and

          (p)  other Investments in an aggregate amount outstanding at any time
not to exceed ten percent (10%) of Consolidated Total Assets.

     "Permitted Liens" means:

          (a)  Liens for taxes, assessments or other governmental charges not
yet delinquent or the nonpayment of which in the aggregate would not reasonably
be expected to have a material adverse effect on the Company and its Restricted
Subsidiaries, or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or a Subsidiary thereof, as the case may be, in accordance
with GAAP;

          (b)  carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations that are not overdue for a period of more than sixty (60)
days, or that are bonded or that are being contested in good faith and by
appropriate proceedings;

          (c)  pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other similar
legislation or other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers under
insurance or self-insurance arrangements);

          (d)  pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations, completion
guarantees, surety, judgment, appeal or performance bonds, other similar bonds,
instruments or obligations, and other obligations of a like nature incurred in
the ordinary course of business;

          (e)  easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility agreements,
covenants, reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially interfere with the ordinary conduct of the business of the Company
and its Subsidiaries, taken as a whole;

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          (f)  Liens existing on, or provided for under written arrangements
existing on, the date hereof, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising under
written arrangements existing on the date hereof) securing any Refinancing
Indebtedness in respect of such Indebtedness so long as the Lien securing such
Refinancing Indebtedness is limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or under such written arrangements could secure)
the original Indebtedness;

          (g)  (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company or
any Restricted Subsidiary of the Company has easement rights or on any leased
property and subordination or similar agreements relating thereto and (ii) any
condemnation or eminent domain proceedings affecting any real property;

          (h)  Liens securing (i) Hedging Obligations Incurred in compliance
with clause (b)(viii)(C) of Section 8.1 or (ii) Purchase Money Obligations or
Capitalized Lease Obligations Incurred in compliance with Section 8.1; provided
that, in the case of this clause (ii), (A) such Liens shall be created prior to
or substantially simultaneously with or within six months of the acquisition
thereby financed or the date of the incurrence or assumption of such
Indebtedness and (B) such Liens do not at any time encumber any property other
than the property financed by such Indebtedness;

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

          (j)  leases, subleases, licenses or sublicenses to third parties;

          (k)  Liens (1) on Collateral securing Bank Indebtedness Incurred under
the Credit Agreement in compliance with Section 8.1, (2) on property or assets
of a Foreign Subsidiary that is a Restricted Subsidiary securing Indebtedness of
a Foreign Subsidiary that is a Restricted Subsidiary Incurred in compliance with
clause (b)(v) of Section 8.1, (3) securing the Fund VI Notes, (4) securing the
Notes or (5) securing Indebtedness or other obligations of any Receivables
Entity;

          (l)  Liens existing on property or assets of a Person at the time such
Person becomes a Subsidiary of the Company (or at the time the Company or a
Restricted Subsidiary acquires such property or assets); provided, however, that
such Liens are not created in connection with, or in contemplation of, such
other Person becoming such a Subsidiary (or such acquisition of such property or
assets), and that such Liens are

                                       94



limited to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which such Liens arose, could
secure) the obligations to which such Liens relate;

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

          (n)  any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement; and

          (o)  Liens securing Refinancing Indebtedness Incurred in respect of
any Indebtedness secured by, or securing any refinancing, refunding, extension,
renewal or replacement (in whole or in part) of any other obligation secured by,
any other Permitted Liens, provided that any such new Lien is limited to all or
part of the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or, under the
written arrangements under which the original Lien arose, could secure) the
obligations to which such Liens relate; and

          (p) Liens securing the Transferred Notes incurred pursuant to Section
8.6(b).

For purposes of Section 8.6(b), "Permitted Liens" shall also mean and include
Liens securing (1) other Hedging Obligations, Purchase Money Obligations and
Capitalized Lease Obligations Incurred in compliance with Section 8.1, (2)
Indebtedness Incurred in compliance with clause (b)(i), (b)(iv), (b)(v),
(b)(vii), (b)(viii) or (b)(x) of Section 8.1, (3) Bank Indebtedness, (4)
commercial bank Indebtedness, (5) Indebtedness of any Restricted Subsidiary that
is not a Note Guarantor of the Transferred Notes, (6) the Fund VI Notes, (7) the
Notes or (8) Indebtedness or other obligations of any Receivables Entity

     "Permitted Payment" has the meaning given to it in Section 8.2(b).

     "Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

     "Plan" means any employee benefit plan that is covered by ERISA and in
respect of which the Parent, the Company, any Subsidiary of the Company or a
Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA.

     "Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that by its terms is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or

                                       95



involuntary liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.

     "Principal Amount" means, with respect to any Note, the principal amount
that will become due and payable to the Holder thereof on the Maturity Date, as
adjusted from time to time to account for the partial redemption or repurchase
of such Note by the Company prior to the Maturity Date.

     "Properties" has the meaning given to it in Section 3.17.

     "Purchase Money Obligations" means any Indebtedness Incurred to finance or
refinance the acquisition, leasing, construction or improvement of property
(real or personal) or assets, and whether acquired through the direct
acquisition of such property or assets or the acquisition of the Capital Stock
of any Person owning such property or assets, or otherwise.

     "Purchase Price" has the meaning given to it in Section 1.4.

     "Receivable" means a right to receive payment arising from a sale or lease
of goods or services by a Person pursuant to an arrangement with another Person
pursuant to which such other Person is obligated to pay for goods or services
under terms that permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.

     "Receivables Entity" means (a) any Receivables Subsidiary or (b) any other
Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts and/or other receivables, and/or related assets.

     "Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Financing.

     "Receivables Financing" means any financing of Receivables of the Company
or any Restricted Subsidiary that have been transferred to a Receivables Entity
in a Financing Disposition.

     "Receivables Subsidiary" means a Subsidiary of the Company that (a) is
engaged solely in the business of acquiring, selling, collecting, financing or
refinancing Receivables, accounts (as defined in the Uniform Commercial Code as
in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all

                                       96



proceeds thereof and all rights (contractual and other), collateral and other
assets relating thereto, and any business or activities incidental or related to
such business, and (b) is designated as a "Receivables Subsidiary" by the Board
of Directors.

     "Redemption Date" has the meaning given to it in Section 6.4.

     "Redemption Notice" has the meaning given to it in Section 6.4.

     "Redemption Price" has the meaning given to it in Section 6.4.

     "Refinancing Agreement" has the meaning given to it in Section 8.3(c).

     "refinance" means, for purposes of Articles VIII and IX, to refinance,
refund, replace, renew, repay, modify, restate, defer, substitute, supplement,
reissue, resell or extend (including pursuant to any defeasance or discharge
mechanism); and the terms "refinances," "refinanced" and "refinancing" as used
for any purpose of Articles VIII and IX shall have a correlative meaning.

     "Refinancing Indebtedness" means Indebtedness that is Incurred to refinance
any Indebtedness existing on the date of this Agreement or Incurred in
compliance with this Agreement (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in
this Agreement) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, that (a) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced, (b) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the sum of (x) the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being refinanced, plus (y) fees,
underwriting discounts, premiums and other costs and expenses incurred in
connection with such Refinancing Indebtedness, (c) in the event that the
Indebtedness to be refinanced is subordinated in right of payment to the Notes
or any Note Guarantee, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is issued or
remains outstanding, is made subordinate in right of payment to the Notes or
such Note Guarantee at least to the same extent that the Indebtedness to be
refinanced is subordinated to the Notes or such Note Guarantee, and (d)
Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that is not a Note Guarantor Subsidiary that refinances Indebtedness
of the Company or a Note Guarantor that was incurred pursuant to paragraph (a)
of Section 8.1 or (prior to the date hereof) Section 406(a) of the Senior
Subordinated Note Indenture or (y) Indebtedness of the Company or a Restricted
Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.

                                       97



     "Register of Holders" has the meaning given to it in Section 6.8.

     "Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of May 21, 1998, and subsequently amended on May 23, 2000
and January 15, 2002, among the Parent, Fund VI, Fund V and certain other
parties, the third amendment of which shall be in the form of Exhibit C hereto,
as such agreement may be amended, supplemented, waived or otherwise modified
from time to time in accordance with the terms thereof and of this Agreement.

     "Related Business" means those businesses in which the Company or any of
its Subsidiaries is engaged on the date of this Agreement, or that are related,
complementary, incidental or ancillary thereto or extensions, developments or
expansions thereof.

     "Related Taxes" means (a) any taxes, charges or assessments, including but
not limited to sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments (other
than federal, state or local taxes measured by income and federal, state or
local withholding imposed on payments made by the Parent), required to be paid
by the Parent by virtue of its being incorporated or having Capital Stock
outstanding (but not by virtue of owning stock or other equity interests of any
corporation or other entity other than the Company or any of its Subsidiaries),
or being a holding company parent of the Company or receiving dividends from or
other distributions in respect of the Capital Stock of the Company, or having
guaranteed any obligations of the Company or any Subsidiary thereof, or having
made any payment in respect of any of the items for which the Company is
permitted to make payments to the Parent pursuant to Section 8.2, or (b) any
other federal, state, foreign, provincial or local taxes measured by income for
which the Parent is liable up to an amount not to exceed with respect to such
federal taxes the amount of any such taxes that the Company would have been
required to pay on a separate company basis or on a consolidated basis if the
Company had filed a consolidated return on behalf of an affiliated group (as
defined in Section 1504 of the Code, or an analogous provision of state, local
or foreign law) of which it were the common parent, or with respect to state and
local taxes, on a combined basis if the Company had filed a combined return on
behalf of an affiliated group consisting only of the Company and its
Subsidiaries.

     "Reorganization" means, with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

     "Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615.

                                       98



     "Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject; provided that the foregoing shall not apply to
any non-binding recommendation of any Governmental Authority.

     "Responsible Officer" means the chief executive officer and the President
of the Company or, with respect to financial matters, the chief financial
officer of the Company.

     "Restricted Payment" has the meaning given to it in Section 8.2(a). For
purposes of this Agreement, all Investments and Restricted Payments of the
Company and its Restricted Subsidiaries outstanding on the date hereof that have
been made since May 21, 1998 in accordance with Section 408(b) of the Senior
Subordinated Note Indenture, or (in the case of any Investment) the definition
of "Permitted Investments" contained in such indenture, shall be deemed made on
the date hereof and outstanding under the respective clauses of Section 8.2(b)
and the definition of "Permitted Investments" contained herein corresponding to
the respective clauses of Section 408(b) of the Senior Subordinated Note
Indenture and the definition of "Permitted Investments" contained in such
indenture under which such Investments and Restricted Payments were made and are
outstanding on the date hereof.

     "Restricted Payment Transaction" means any Restricted Payment permitted
pursuant to Section 8.2, any Permitted Payment, any Permitted Investment, or any
transaction specifically excluded from the definition of the term "Restricted
Payment."

     "Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.

     "S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.

     "SEC" means the United States Securities and Exchange Commission.

     "Second Credit Agreement Amendment" means the Second Amendment, dated as of
December 27, 2001, to the Credit Agreement.

     "Secured Parties" means the Investor and each other member of the CD&R
Group that is a Holder.

     "Securities Act" means the Securities Act of 1933, or any successor
statute, and the rules and regulations of the SEC thereunder, as amended.

                                       99



     "Senior Subordinated Default Event" means a "Default" or "Event of
Default", as those terms are defined in the Senior Subordinated Note Indenture,
or any other default or event of default under the Senior Subordinated Note
Indenture.

     "Senior Subordinated Note Indenture" means the Indenture, dated as of May
21, 1998, among the Parent, the Company and State Street Bank and Trust Company,
as Trustee, relating to the 9 3/4% Senior Subordinated Notes Due 2008 of the
Company, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof and of this Agreement.

     "Senior Subordinated Note Interest Payment Date" has the meaning given to
it in the Recitals.

     "Senior Subordinated Notes" means the Company's 9 3/4% Senior Subordinated
Notes due 2008, in an aggregate principal amount not exceeding $275,000,000
outstanding at any time, issued and outstanding pursuant to the Senior
Subordinated Note Indenture.

     "Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, as in effect on May 21, 1998.

     "Significant Subsidiary Guarantor" has the meaning given to it in Section
7.11.

     "Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.

     "Solvent", when used with respect to any Person, means that, as of any date
of determination, (a) the amount of the assets of such Person, at a fair
valuation, will, as of such date, exceed the amount of all liabilities of such
Person, contingent or otherwise, as of such date, (b) the present fair saleable
value of the assets of such Person will, as of such date, be greater than the
amount that will be required to pay the probable liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

     "Special Committee" means a special committee of the Board of Directors of
the Company consisting of directors that are not Affiliated with the Investor
and formed for the purpose of determining from time to time the Specified
Conversion Rate and the Specified Interest Rate as set forth herein.

                                       100



     "Specified Change" has the meaning given to it in Section 13.7.

     "Specified Conversion Rate" means, in respect of any Notes issued
hereunder, the number of shares of Common Stock issuable upon conversion of each
$1,000 Principal Amount of Notes as mutually agreed between the Company's Board
of Directors (on the recommendation of the Special Committee after receiving the
advice of the Appraiser) and the Investor prior to the time of the issuance of
such Notes, such that the Fair Market Value of such Notes, taking into
consideration all other terms of the Notes, including but not limited to the
Specified Interest Rate, will be equal to the Purchase Price for such Notes;
provided however that in the case of any Note issued pursuant to the exercise of
the Investment Right with respect to the Senior Subordinated Note Interest
Payment Date falling on each May 15, the Specified Conversion Rate for such Note
shall be the Conversion Rate set forth in the Notes issued following the
immediately preceding Senior Subordinated Note Interest Payment Date. In
relation to each Senior Subordinated Note Interest Payment Date falling on
November 15, if the Company and the Investor shall not have agreed on the
Specified Conversion Rate within five (5) Business Days following the later to
occur of (i) such Senior Subordinated Note Interest Payment Date, and (ii) the
date of receipt by the Company of the Election Notice relating to such Senior
Subordinated Note Interest Payment Date, the Specified Conversion Rate shall be
a rate determined by the Appraiser, taking into account, together with other
relevant factors, the price per share of the Common Stock at the time of
issuance of such Notes, to be within the range of such rates that would apply to
notes issued on or about the time of issuance of such Notes by companies
comparable, both as to industry and financial condition, to the Company, and
having all other terms similar to those applicable to the Notes (including but
not limited to the Specified Interest Rate), such that the Fair Market Value of
the Notes as determined by the Appraiser, taking into consideration all other
terms of the Notes (including but not limited to the Specified Interest Rate) to
be issued, will be equal to the Purchase Price for such Notes. The Appraiser
shall complete its determination of the Conversion Rate not later than the tenth
(10) Business Day following the referral of the dispute to the Appraiser. Such
determination shall be final and binding on the Company, Parent and the
Investor, and the Appraiser shall deliver a notice thereof to the Company,
Parent and the Investor, together with the financial analyses supporting its
determination.

     "Specified Interest Rate" means, in respect of any Notes issued hereunder,
the interest rate per annum to be payable on such Notes as mutually agreed
between the Company's Board of Directors (on the recommendation of the Special
Committee after receiving the advice of the Appraiser) and the Investor prior to
the time of the issuance of such Notes, such that the Fair Market Value of such
Notes, taking into consideration all other terms of the Notes, including but not
limited to the Specified Conversion Rate, will be equal to the Purchase Price
for such Notes; provided however that in the case of any Note issued pursuant to
the exercise of the Investment Right with respect to the Senior Subordinated
Note Interest Payment Date falling on each May 15, the Specified Interest

                                       101



Rate for such Note shall be the Interest Rate set forth in the Notes issued
following the immediately preceding Senior Subordinated Note Interest Payment
Date. In relation to each Senior Subordinated Note Interest Payment Date falling
on November 15, if the Company and the Investor shall not have agreed on the
Specified Interest Rate within five (5) Business Days following the later to
occur of (i) such Senior Subordinated Note Interest Payment Date, and (ii) the
date of receipt by the Company of the Election Notice relating to such Senior
Subordinated Note Interest Payment Date, the Specified Interest Rate shall be a
rate determined by the Appraiser to be within the range of such rates that would
apply to notes issued on or about the time of issuance of such Notes by
companies comparable, both as to industry and financial condition, to the
Company, and having all other terms similar to those applicable to the Notes
(including but not limited to the Specified Conversion Rate), such that the Fair
Market Value of the Notes as determined by the Appraiser, taking into
consideration all other terms of the Notes (including but not limited to the
Specified Conversion Rate) to be issued, will be equal to the Purchase Price for
such Notes. The Appraiser shall complete its determination of the Interest Rate
not later than the tenth (10) Business Day following the referral of the dispute
to the Appraiser. Such determination shall be final and binding on the Company,
Parent and the Investor, and the Appraiser shall deliver a notice thereof to the
Company, Parent and the Investor, together with the financial analyses
supporting its determination.

     "Springing Guarantee" has the meaning given to it in Section 7.11.

     "Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).

     "Subordinated Obligations" means (a) any Indebtedness represented by any
Senior Subordinated Note or any Guarantee thereof or (b) any Indebtedness of the
Company or any Note Guarantor (whether outstanding on the date of this Agreement
or thereafter Incurred) that is subordinated in right of payment to the Notes,
any Note Guarantee or any other Indebtedness of the Company or any Note
Guarantor.

     "Subsidiary" of any Person means any corporation, association, partnership
or other entity of which more than 50% of the total voting power of shares of
Capital Stock or other equity or ownership interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person or (ii) one or
more Subsidiaries of such Person.

     "Successor Company" has the meaning given to it in Section 9.1.

                                       102



     "Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of May
21, 1998, between the Parent and the Company, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance with
the terms thereof and of this Agreement.

     "Temporary Cash Investments" means any of the following: (a) any investment
in (i) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations Guaranteed by the United States of
America or any agency or instrumentality thereof or (ii) direct obligations of
any foreign country recognized by the United States of America rated at least
"A" by S&P or "A-1" by Moody's (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists, the
equivalent of such rating by any nationally recognized rating organization), (b)
overnight bank deposits, and investments in time deposit accounts, certificates
of deposit, bankers' acceptances and money market deposits (or, with respect to
foreign banks, similar instruments) maturing not more than one year after the
date of acquisition thereof issued by (i) any lender under the Credit Agreement
or (ii) a bank or trust company that is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by the
United States of America having capital and surplus aggregating in excess of
$250,000,000 (or the foreign currency equivalent thereof) and whose long term
debt is rated at least "A" by S&P or "A-1" by Moody's (or, in either case, the
equivalent of such rating by such organization or, if no rating of S&P or
Moody's then exists, the equivalent of such rating by any nationally recognized
rating organization) at the time such Investment is made, (c) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) or (b) above entered into with a
bank meeting the qualifications described in clause (c) above, (d) Investments
in commercial paper, maturing not more than two-hundred and seventy (270) days
after the date of acquisition, issued by a Person (other than the Company or any
of its Subsidiaries), with a rating at the time as of which any Investment
therein is made of "P-2" (or higher) according to Moody's or "A-2" (or higher)
according to S&P (or, in either case, the equivalent of such rating by such
organization or, if no rating of S&P or Moody's then exists, the equivalent of
such rating by any nationally recognized rating organization), (e) Investments
in securities maturing not more than one year after the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or "A" by Moody's (or, in either case, the
equivalent of such rating by such organization or, if no rating of S&P or
Moody's then exists, the equivalent of such rating by any nationally recognized
rating organization), (f) Preferred Stock (other than of the Company or any of
its Subsidiaries) having a rating of "A" or higher by S&P or "A2" or higher by
Moody's (or, in either case, the equivalent of such rating by such organization
or, if no rating of S&P or Moody's then exists, the equivalent of such rating by
any nationally recognized rating organization), (g) investment funds investing
ninety-five percent (95%) of their assets in securities of the type described in
clauses (a)-(f) above (which funds may also hold

                                       103



reasonable amounts of cash pending investment and/or distribution), (h) any
money market deposit accounts issued or offered by a domestic commercial bank or
a commercial bank organized and located in a country recognized by the United
States of America, in each case, having capital and surplus in excess of
$250,000,000 (or the foreign currency equivalent thereof), or investments in
money market funds complying with the risk limiting conditions of Rule 2a-7 (or
any successor rule) of the SEC under the Investment Company Act of 1940, as
amended, and (i) similar short-term investments approved by the Board of
Directors in the ordinary course of business.

     "Third Credit Agreement Amendment" means the Third Amendment, dated as of
August 7, 2002, to the Credit Agreement.

     "Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.

     "Transactions" means the CD&R Barbados Investment, the effectiveness of the
Third Credit Agreement Amendment and all other transactions relating thereto.

     "Transaction Agreements" means (a) this Agreement, (b) Amendment No. 3 to
the Registration Rights Agreement, (c) the Guarantee and Collateral Agreement,
(d) the Intercreditor Agreement, (e) the Notes, (f) the Third Credit Agreement
Amendment, (g) the Note Security Documents, (h) the Warrants and (i) the
Assumption Agreement.

     "Transferred Notes" means one or more Notes held by any Person other than
the Investor or a member of the CD&R Group.

     "Trigger Event" has the meaning given to it in Section 6.3(j).

     "Underfunding" means an excess of all accrued benefits under a Plan (based
on those assumptions used to fund such Plan), determined as of the most recent
annual valuation date, over the value of the assets of such Plan allocable to
such accrued benefits.

     "Unrestricted Subsidiary" means (a) any Subsidiary of the Company that at
the time of determination is an Unrestricted Subsidiary, as designated by the
Board of Directors in the manner provided below, and (b) any Subsidiary of an
Unrestricted Subsidiary; provided that any Subsidiary of the Company that on the
date hereof is an "Unrestricted Subsidiary" (as defined in the Senior
Subordinated Note Indenture) for purposes of the Senior Subordinated Note
Indenture (if any) shall, as of the date hereof, be deemed to have been
designated an Unrestricted Subsidiary hereunder as of the date on which such
Subsidiary became an "Unrestricted Subsidiary" (as defined in the Senior
Subordinated Note Indenture). The Board of Directors may designate any
Subsidiary of

                                       104



the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated, provided
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under Section 8.2. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that immediately after giving effect to such designation
either (x) the Company could incur at least $1.00 of additional Indebtedness
under paragraph (a) of Section 8.1 or (y) the Consolidated Coverage Ratio would
be greater than it was immediately prior to giving effect to such designation.

     "Warrant" has the meaning given to it in Section 1.3.

                                  Article XIII
                                  Miscellaneous

     13.1   Notices. Except as otherwise specifically provided for in this
Agreement, notices and other communications given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given (a) on receipt,
if delivered personally, (b) three Business Days after being mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, (c) one Business Day after being sent by internationally recognized
courier (appropriately marked for two-day delivery) or (d) upon transmission, if
it is sent by telecopy (so long as the transmitting machine records electronic
confirmation of due transmission) to the address or telecopy number set forth
below, or such other address or telecopy number as may be specified to the other
parties hereto from time to time:

            (i)    if to the Parent, at

                   20410 Observation Drive
                   Germantown, Maryland 20876
                   Fax: (301) 353-1536
                   Attention: Chief Financial Officer

                   with a copy to:

                   Acterna Corporation
                   20410 Observation Drive
                   Germantown, Maryland 20876
                   Fax: (301) 353-1536
                   Attention: General Counsel

                                       105



          (ii)  if to the Company, at

                20410 Observation Drive
                Germantown, Maryland 20876
                Fax: (301) 353-1536
                Attention: Chief Financial Officer

                with a copy to:

                Acterna Corporation
                20410 Observation Drive
                Germantown, Maryland 20876
                Fax: (301) 353-1536
                Attention: General Counsel

          (iii) if to the Investor, at

                c/o Corporate Services Limited
                The Financial Services Centre
                Bishop's Court Hill
                St. Michael, Barbados
                Fax: (246) 436-7057
                Attention: Janelle Ifill

                with a copy to:

                Debevoise & Plimpton
                919 Third Avenue
                New York, New York 10022
                Fax: (212) 909-6836
                Attention: Paul S. Bird, Esq.

          (iv)  if to any Holder other than the Investor, at the address or
     facsimile number of such Holder recorded in the Register of Holders (or
     such other address or facsimile number provided to the Company in writing
     for use under this Section 13.1 by such Holder).

          (v)   Copies of any notice or other communication given under this
     Agreement shall be given to:

                                       106



                Clayton, Dubilier & Rice, Inc.
                375 Park Avenue
                New York, New York 10152
                Fax: (212) 407-7042
                Attention: Richard J. Schnall

     13.2  Governing Law, etc. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.

     13.3  Jurisdiction; Waiver of Jury Trial; Waiver of Punitive Damages.

           (a)  Each of the parties hereto irrevocably and unconditionally (i)
agrees that any legal suit, action or proceeding brought by any party hereto
arising out of or based upon this Agreement or the transactions contemplated
hereby may be brought in the United States District Court for the Southern
District of New York or any New York State court sitting in the Borough of
Manhattan, in the City of New York (each, a "New York Court"), (ii) waives, to
the fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such proceeding brought in the New
York Court, and any claim that any such action or proceeding brought in the New
York Court has been brought in an inconvenient forum and (iii) submits to the
non-exclusive jurisdiction of the New York Court in any suit, action or
proceeding. Each of the parties agrees that a judgment in any suit, action or
proceeding brought in the New York Court shall be conclusive and binding upon it
and may be enforced in any other courts to whose jurisdiction it is or may be
subject, by suit upon such judgment.

           (b)  EACH OF THE PARTIES AGREES AND ACKNOWLEDGES THAT ANY CONTROVERSY
THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY TRANSACTION AGREEMENT, OR THE BREACH, TERMINATION OR
VALIDITY OF THIS AGREEMENT OR ANY TRANSACTION AGREEMENT.

           (c)  Each of the parties waives, to the maximum extent not prohibited
by law, any right it may have to claim or recover any punitive damages in any
legal action or proceeding referred to in this Section 13.3.

     13.4  Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.

                                       107



     13.5  Assignment. This Agreement and the other Note Financing Documents may
not be assigned or otherwise transferred (by merger, consolidation, operation of
law or otherwise) by the Parent or the Company without the prior written consent
of the Majority CD&R Barbados Note Holders, and any attempt to so assign or
otherwise transfer this Agreement or any other Note Financing Document without
such consent shall be void and of no effect. The Investor and each other Holder
may assign or otherwise transfer this Agreement or any other Note Financing
Document to any Person without the consent of the Parent or the Company.
Notwithstanding the foregoing, without the prior consent of the Parent or the
Company, which shall not be unreasonably withheld, the Investor may not assign
or otherwise transfer the Investment Right to any Person other than a member of
the CD&R Group and any member of the CD&R Group that has been assigned or
otherwise transferred the Investment Right may not assign or otherwise transfer
the Investment Right to any Person other than a member of the CD&R Group.

     13.6  No Third-Party Beneficiaries. Nothing in this Agreement shall be
construed as conferring any rights upon any person or entity other than the
parties hereto, each Holder and their respective heirs, successors and permitted
assigns.

     13.7  Amendment; Waivers, etc.

          (a)  Neither this Agreement nor any other Note Financing Document, nor
any terms hereof or thereof, may be amended, supplemented, modified or waived
except in accordance with the provisions of this Section 13.7.

          (b)  Except as set forth in the succeeding paragraphs of this Section
13.7, the Majority Holders may (i) enter into with the relevant Note Financing
Parties written amendments, supplements or modifications to this Agreement and
the other Note Financing Documents for the purpose of adding any provisions to
this Agreement or the other Note Financing Documents or changing in any manner
the rights of the Holders or of the Note Financing Parties hereunder or
thereunder or (ii) waive at any Note Financing Party's request on such terms and
conditions as the Majority Holders may specify in such instrument, any of the
requirements of this Agreement or the other Note Financing Documents or any
Default or Event of Default and its consequences (any such amendment,
supplement, modification or waiver, a "Specified Change"); provided, that
without the written consent of all Holders, no Specified Change shall reduce the
percentage specified in the definition of "Majority Holders".

          (c)  Without the written consent of the Majority CD&R Barbados Note
Holders, no Specified Change shall amend, supplement, modify or waive any of the
provisions of Sections 6.6, 6.9, 7.9, 7.10, 7.11(a), 8.6(a), 8.8 or 13.5, or any
provision of any Note Security Document, or the definition of "Majority CD&R
Barbados Note Holders".

                                       108



          (d)  Without the written consent of the Majority Transferred Note
Holders, no Specified Change shall amend, supplement, modify or waive any of the
provisions of Sections 7.11(b) and 8.6(b), Annex A or the definition of
"Majority Transferred Note Holders".

          (e)  Without the written consent of the Majority CD&R Barbados Note
Holders, no Specified Change shall take any action which has the effect of
releasing any of the Collateral securing any CD&R Barbados Notes or any of the
Note Guarantors from their Guarantee in respect of any CD&R Barbados Note
(except as permitted hereby or by any Note Financing Document).

          (f)  Subject to Section 10.7, without the written consent of each
Holder directly affected thereby, no Specified Change shall reduce the Principal
Amount of any Note, extend the Maturity Date or any Interest Payment Date,
reduce the Interest Rate or any fee payable hereunder or extend the scheduled
date of any payment thereof or amend, modify or waive any provision of this
Section 13.7(f).

          (g)  Without the written consent of the Majority CD&R Barbados Note
Holders, no Specified Change shall consent to the assignment or transfer by the
Company of any of its rights and obligations under this Agreement and the other
Note Financing Documents.

          (h)  Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Holders and shall be binding
upon the Note Financing Parties and the Holders (including all future Holders).
In the case of any waiver, each of the Note Financing Parties and the Holders
shall be restored to their former positions and rights hereunder and under the
other Note Financing Documents, and any Default or Event of Default waived shall
be deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.

          (i)  No delay or omission of any Holder to exercise any right, remedy,
power or privilege hereunder or under the other Transaction Agreements shall
impair such right, remedy, power or privilege or operate as a waiver thereof or
acquiescence therein; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided hereunder or
now or hereafter existing at law or in equity or otherwise.

          (j)  Any consent by the Company to any amendment, supplement,
modification or waiver of, or other action that would require the Company's
consent

                                       109



under, this Agreement or any other Note Financing Document shall be granted or
taken only upon the prior recommendation of the Special Committee.

     13.8  Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Transaction Agreements and in any
certificate delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the purchase and sale of the
Notes and the issuance of the Warrants hereunder.

     13.9  Payment of Expenses and Taxes.

           (a)  The Company agrees (i) to pay or reimburse each Holder for all
its reasonable out-of-pocket costs and expenses incurred in connection with the
preparation and execution of, and any amendment, supplement or modification to,
or proposed amendment, supplement or modification to, this Agreement and the
other Transaction Agreements and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Holders; (ii) to pay or
reimburse each Holder for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Transaction Agreements and any such other documents,
including, without limitation, the reasonable fees and disbursements of counsel
to the Holders; (iii) to pay, indemnify, and hold each Holder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other
Transaction Agreements and any such other documents and (iv) to pay, indemnify,
and hold harmless each Holder from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Transaction Agreements and any such other documents, or the
use of the proceeds of the Notes, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or liability under,
any Environmental Law applicable to the operations of the Company, any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (iv),
collectively, the "indemnified liabilities"), provided that the Company shall
have no obligation under this Section 13.9(a)(iv) to any Holder with respect to
indemnified liabilities arising from (A) the gross negligence or willful
misconduct of such Holder (or any of its respective directors, trustees,
officers, employees, agents, successors and assigns) or (B) claims made or legal
proceedings commenced against such Holder by any securityholder or creditor
thereof arising out of

                                       110



and based upon rights afforded any such securityholder or creditor solely in its
capacity as such.

          (b)  Notwithstanding the foregoing provisions of Section 13.9(a),
except as provided in clauses (ii) and (iii) of Section 13.9(a) and subject to
the provisions of this Section 13.9(b), the Company shall have no obligation
under Section 13.9(a) to any Holder with respect to any withholding or deduction
required by any Governmental Authority to be made by the Company from any
payment by the Company to such Holder of principal of or interest on any Note,
for or on account of any tax, levy, impost or duty, or any charge or fee in the
nature of a tax, levy, impost or duty, that is imposed, levied, collected or
assessed by such Governmental Authority (a "withholding tax"). If any payment of
withholding tax shall be required by any Governmental Authority to be made by
the Company from any payment of principal of or interest on any Note, the
Company shall give notice thereof to the Holder of such Note no later than 15
Business Days prior to such payment. If any payment of withholding tax shall be
required by any Governmental Authority to be made by the Company from any
payment of principal of or interest on any Note in cash, a portion of such
payment of principal or interest equal to the amount of such withholding tax
paid to such Governmental Authority shall be deemed to have been paid to the
Holder of such Note for all purposes of this Agreement. If any payment of
withholding tax shall be required by any Governmental Authority to be made by
the Company from any payment of interest on any Note through the issuance of an
additional Note as provided in Section 6.2(a), the Company shall withhold and
reduce the face value of such additional Note by an amount equal to the amount
of such withholding tax paid to such Governmental Authority, and a portion of
such payment of interest equal to the amount of face value so withheld and
reduced shall be deemed to have been paid to the Holder of such Note for all
purposes of this Agreement, provided that the Parent shall, upon such
withholding and reduction of face amount, issue and deliver Warrants to the
Holder of such Note that entitle such Holder to purchase a number of shares of
Common Stock (or other property) that shall fairly compensate such Holder for
the loss of the conversion rights pursuant to Section 6.3 with respect to the
face amount of such additional Note so withheld and reduced, and with respect to
the face amount of any additional Notes that would have been issued in respect
of interest on any such additional Note if the face amount thereof had not been
so withheld and reduced, the provisions of such Warrants and the issuance and
delivery thereof to be effected as provided in Section 6.7, with such changes as
may be necessary or appropriate under the circumstances. The Company and the
relevant Holder shall use their respective good faith efforts to agree on the
number of such shares of Common Stock (or other property) and the provisions of
such Warrants. The Company and the relevant Holder shall use their respective
good faith efforts to avoid or minimize the payment of withholding tax from any
payment of principal of or interest on the Notes, provided that such Holder
shall not be required to (x) change its place of organization or any office or
other place of business thereof or (y) take other any action or refrain from
taking any action, which action or inaction, in its reasonable judgment, would
be significantly disadvantageous to

                                       111



its business or operations or would require it to incur additional costs. Such
efforts shall include but not be limited to such Holder's provision of all
applicable withholding certificates, compliance certificates and representations
relating to status, subject to the proviso to the preceding sentence. Nothing in
this Section 13.9(b) shall be construed to require any Holder to disclose any of
such Holder's books, records or tax filings to the Company or any other party.

            (c)  The agreements in this Section 13.9 shall survive repayment of
the Notes and all other amounts payable hereunder and the issuance of the
Warrants.

     13.10  Judgment Currency.

            (a)  If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder in one currency into another currency,
the parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures each Holder could purchase the first currency with such other
currency in the City of New York, New York for the first currency on the
Business Day preceding the day on which final judgment is given.

            (b)  The obligation of the Company in respect of any sum due from it
to any Holder hereunder shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the "Agreement
Currency"), be discharged only to the extent that on the Business Day following
receipt by such Holder of any sum adjudged to be so due in the Judgment Currency
such Holder may in accordance with normal banking procedures purchase the
Agreement Currency with the Judgment Currency; if the amount of Agreement
Currency so purchased is less than the sum originally due to such Holder in the
Agreement Currency, the Company agrees notwithstanding any such judgment to
indemnify such Holder against such loss, and if the amount of the Agreement
Currency so purchased exceeds the sum originally due to any Holder, such Holder
agrees to remit to the Company such excess.

     13.11  Entire Agreement. This Agreement and the other Transaction
Agreements (when executed and delivered) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and thereof.

     13.12  Severability. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that

                                       112



jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.

     13.13  Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.

     13.14  Rules of Construction. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

     (a) the terms defined in this Agreement have the meanings assigned to them
in this Agreement;

     (b) "or" is not exclusive;

     (c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;

     (d) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision;

     (e) all references to "$" or "dollars" shall refer to the lawful currency
of the United States of America;

     (f) the words "include," "included" and "including" as used herein shall be
deemed in each case to be followed by the phrase "without limitation," if not
expressly followed by such phrase or the phrase "but not limited to";

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

     (h) any reference to a Section or Article refers to such Section or Article
of this Agreement.

     13.15  Schedules. No later than five (5) Business Days prior to the initial
Closing Date, the Parent and the Company shall deliver all Schedules to this
Agreement and the Guarantee and Collateral Agreement to the Investor, which
Schedules shall be subject in all respects to review and approval by the
Investor. Unless the context otherwise requires, if a Closing shall occur, all
references to any "Schedule" herein shall be deemed to be a reference to a
Schedule hereto delivered pursuant this Section 13.15, as if such Schedule had
been delivered on the date hereof. Notwithstanding anything to the contrary
herein, from and after the initial Closing Date, this Agreement shall be
construed as if all such Schedules hereto delivered pursuant to this Section
13.15 had been delivered on the date hereof.

                                       113



     13.16  Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.

     13.17  Limitation on Certain Transactions. The Investor hereby agrees that,
from and after the date hereof, the Investor shall not engage in any Rule 13e-3
transaction, as such term is defined in Rule 13e-3 of the Exchange Act, without
the prior written consent of the Special Committee. The agreements in this
Section 13.17 shall survive repayment of the Notes and all other amounts payable
hereunder and the issuance of the Warrants.

                                       114



         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

                                           ACTERNA CORPORATION


                                           By: _________________________________
                                               Name:
                                               Title:


                                           ACTERNA LLC


                                           By: _________________________________
                                               Name:
                                               Title:


                                           CD&R VI (BARBADOS), LTD.
                                           By: Corporate Services Limited,
                                               Secretary


                                             By:______________________________
                                                Name:
                                                Title:

                                       115



                                                                         Annex A

                  Terms of Note Guarantees of Transferred Notes

     1.    Guarantees Generally.


     (a) Parent Guarantee. Parent, as a primary obligor and not merely as
surety, hereby irrevocably and fully and unconditionally Guarantees, on a senior
basis, the punctual payment when due, whether at the Maturity Date, by
acceleration or otherwise, of all monetary obligations of the Company under the
Agreement and the Transferred Notes, whether for principal of or interest on the
Transferred Notes, expenses, indemnification or otherwise (all such obligations
guaranteed by Parent being herein called the "Parent Guaranteed Obligations").

     (b) Note Guarantees. Any Significant Subsidiary Guarantor from time to time
party hereto, as primary obligor and not merely as surety, hereby jointly and
severally, irrevocably and fully and unconditionally Guarantees, on a senior
basis, the punctual payment when due, whether at the Maturity Date, by
acceleration or otherwise, of all monetary obligations of the Company under the
Agreement and the Transferred Notes, whether for principal of or interest on the
Transferred Notes, expenses, indemnification or otherwise (all such obligations
guaranteed by such Significant Subsidiary Guarantors being herein called the
"Springing Guaranteed Obligations").

     Any term or provision of the Agreement notwithstanding, each Springing
Guarantee shall not exceed the maximum amount that can be guaranteed by the
applicable Significant Subsidiary Guarantor without rendering the Springing
Guarantee, as it relates to such Significant Subsidiary Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.

     (c) Further Agreements of Parent Guarantor and any Significant Subsidiary
Guarantor. (i) Parent, in its capacity as guarantor of the Parent Guaranteed
Obligations hereunder (in such capacity, the "Parent Guarantor") and any
Significant Subsidiary Guarantor from time to time party hereto (each of the
Parent Guarantor and any Significant Subsidiary Guarantor, a "Guarantor") each
hereby agrees that (to the fullest extent permitted by law) its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Agreement, the Transferred Notes or the obligations of the
Company or any other Guarantor to the Holders of the Transferred Notes hereunder
or thereunder, the absence of any action to enforce the same, any waiver or
consent by any Holder of Transferred Notes with respect to any provisions hereof
or thereof, any release of any other Guarantor, the recovery of any judgment
against the Company, any action to enforce the same, whether or not a notation
concerning its respective Parent Guarantee or Springing Guarantee is made on any
particular Transferred Note, or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a guarantor.



     (ii)  Each Guarantor hereby waives (to the fullest extent permitted by law)
the benefit of diligence, presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Parent Guarantee or (except as otherwise
provided in Section 7.11(b) of the Agreement) Springing Guarantee, as the case
may be, will not be discharged except by complete performance of the obligations
contained in the Transferred Notes, the Agreement, and its Parent Guarantee or
Springing Guarantee, as the case may be. Such Parent Guarantee or Springing
Guarantee, as the case may be, is a guarantee of payment and not of collection.
Each Guarantor further agrees (to the fullest extent permitted by law) that, as
between it, on the one hand, and the Holders of the Transferred Notes, on the
other hand, subject to the provisions of this Annex A, (1) the maturity of the
obligations guaranteed by its Parent Guarantee or Springing Guarantee, as the
case may be, may be accelerated as and to the extent provided in Article X of
the Agreement for the purposes of such Parent Guarantee or Springing Guarantee,
as the case may be, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed by such
Parent Guarantee or Springing Guarantee, as the case may be, and (2) in the
event of any acceleration of such obligations as provided in Article X of the
Agreement, such obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor in accordance with the terms of the
provisions of this Annex A for the purpose of such Parent Guarantee or Springing
Guarantee, as the case may be. No Holder of Transferred Notes shall have any
obligation to enforce or exhaust any rights or remedies or to take any other
steps under any security for the Parent Guaranteed Obligations or the Springing
Guaranteed Obligations (collectively, the "Guaranteed Note Obligations") or
against the Company or any other Person or any property of the Company or any
other Person before the Holder of Transferred Notes is entitled to demand
payment and performance by any or all Guarantors of their obligations under
their respective Parent Guarantee or Significant Guarantees or under the
Agreement.

     (iii) The Parent Guarantee and, unless and until terminated in accordance
with Section 7.11(b) of the Agreement, any Springing Guarantee, shall remain in
full force and effect and continue to be effective should any petition be filed
by or against the Company for liquidation or reorganization, should the Company
become insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Company's assets, and shall, to the fullest extent permitted by law, continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Transferred Notes are, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
on such Transferred Notes, whether as a "voidable preference," "fraudulent
transfer" or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded, reduced,
restored or returned, the

                                       A-2



Transferred Notes shall, to the fullest extent permitted by law, be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.

     (d) Each Guarantor that makes a payment or distribution under the Parent
Guarantee or any Springing Guarantee, as the case may be, shall have the right
to seek contribution from the Company or any non-paying Guarantor that has also
Guaranteed the Guaranteed Note Obligations in respect of which such payment or
distribution is made, so long as the exercise of such right does not impair the
rights of the Holders of the Transferred Notes under the Parent Guarantee or
such Springing Guarantee.

     (e) Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Agreement and that
its Parent Guarantee or its Springing Guarantee, as the case may be, and the
waiver set forth in Section 3 of this Annex A is knowingly made in contemplation
of such benefits.

     (f) Each Guarantor also hereby agrees to pay any and all reasonable
out-of-pocket expenses (including reasonable counsel fees and expenses) incurred
by the Holders of Transferred Notes in enforcing any rights under its Parent
Guarantee or its Springing Guarantee, as the case may be.

     2.    Continuing Guarantees. (a) The Parent Guarantee shall be a continuing
Guarantee and shall (i) remain in full force and effect until payment in full of
the Principal Amount of all outstanding Transferred Notes (whether by payment at
maturity, purchase, redemption, defeasance, retirement or other acquisition) and
all other Parent Guaranteed Obligations then due and owing, (ii) be binding upon
Parent and (iii) inure to the benefit of and be enforceable by the Holders of
Transferred Notes and their permitted successors, transferees and assigns.

     (b) Each Springing Guarantee shall be a continuing Guarantee and shall (i)
remain in full force and effect until payment in full of the principal amount of
all outstanding Transferred Notes (whether by payment at maturity, purchase,
redemption, defeasance, retirement or other acquisition) and all other
Guaranteed Obligations then due and owing, unless earlier terminated as provided
in Section 7.11(b) of the Agreement, (ii) be binding upon such Guarantor and
(iii) inure to the benefit of and be enforceable by the Holders of the
Transferred Notes and their permitted successors, transferees and assigns.

     3.    Waiver of Subrogation. Each of the Parent Guarantor and each
Significant Subsidiary Guarantor hereby irrevocably waives any claim or other
rights that it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of the Company's obligations
under the Transferred Notes and the Agreement or such Guarantor's obligations
under its Parent Guarantee or Springing Guarantee, as the case may be, and the
Agreement, including, without

                                       A-3



limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Transferred Notes against the Company, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
until the Agreement is discharged and all of the Transferred Notes are
discharged and paid in full. If any amount shall be paid to a Guarantor in
violation of the preceding sentence and the Transferred Notes shall not have
been paid in full, such amount shall have been deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Transferred Notes, and shall forthwith be paid to the Holders of
Transferred Notes to be credited and applied upon the Transferred Notes, whether
matured or unmatured, in accordance with the terms of the Agreement and this
Annex A.

     4.   Notation Not Required. Neither the Company nor any Guarantor shall be
required to make a notation on the Transferred Notes to reflect the Parent
Guarantee or any Springing Guarantee or any such release, termination or
discharge thereof.

     5.   Successors and Assigns of the Parent Guarantor and the Other
Guarantors. All covenants and agreements in the Agreement or the terms of this
Annex A by each Guarantor shall bind its respective successors and assigns,
whether so expressed or not.

     6.   Execution and Delivery of Note Guarantees. Concurrently with the
execution and delivery of the instrument required to be delivered under Section
7.11(b) of the Agreement, the Company shall deliver to the Holders of
Transferred Notes an opinion of counsel (which counsel shall be reasonably
satisfactory to the Majority Transferred Note Holders) in form and substance
reasonably satisfactory to the Majority Transferred Note Holders to the effect
that such instrument has been duly authorized, executed and delivered by the
relevant Significant Subsidiary Guarantor and that, subject to the applicable
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, moratorium and other laws now or hereafter in effect affecting
creditors' rights or remedies generally and the general principles of equity
(including standards of materiality, good faith, fair dealing and
reasonableness), whether considered in a proceeding at law or at equity such
instrument is a valid and binding agreement of such Significant Subsidiary
Guarantor, enforceable against such Significant Subsidiary Guarantor in
accordance with its terms.

                                       A-4

EX-4.14

                                                                    Exhibit 4.14

                                 [FORM OF NOTE]

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

            THIS NOTE (AND THE SHARES OF COMMON STOCK ISSUABLE UPON
          CONVERSION OF THIS NOTE) HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
          MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
          AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR AN APPLICABLE
             EXEMPTION FROM THE REQUIREMENTS OF, SUCH ACT OR STATE
                                SECURITIES LAWS.

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

                                   ACTERNA LLC

                   Senior Secured Convertible Notes Due 2007,
                   Series 2-[A][B][C][D][E][F][G][H][I][J][K]

No. [__________]
Date of Issuance:  [__________]

                                                                   $[__________]

         Acterna LLC (together with its successors and assigns, the "Company"),
a Delaware limited liability company wholly-owned and controlled by Acterna
Corporation (together with its successors and assigns, the "Parent"), hereby
promises to pay to [____________________], or registered assigns, the principal
sum of [____________________] United States Dollars ($[__________]) (the
"Principal Amount") on December 31, 2007 (the "Maturity Date") or, if such date
is not a Business Day, the next succeeding Business Day.

         1. Interest. The Company promises to pay interest semi-annually, in
arrears, on each March 31st and September 30th (each, an "Interest Payment
Date") of each year (commencing on the later of March 31, 2003 and the Interest
Payment Date next succeeding the date of issuance of this Note) at the rate of
[__] percent ([__]%) per annum (the "Interest Rate"), until the Principal Amount
of this Note shall have become due and payable. Interest on this Note shall be
computed on the basis of a three hundred sixty (360) day year of twelve (12)
thirty (30) day months. The interest payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Investment
Agreement, be paid to the Holder in whose name this Note is registered at the
close of business on the applicable Interest Payment Date. Any overdue
installment of interest or payment of any Principal Amount (the due date of such
installment or payment to be determined without giving effect to any grace
period) shall be payable



upon demand and shall bear interest at a rate per annum equal to the lesser of
(x) the highest rate allowed by applicable law and (y) the Interest Rate plus
two percent (2%).

         2. Method of Payment.

                (a) Payments of principal and accrued and unpaid interest on
         this Note shall be made by wire transfer of immediately available funds
         to an account designated in writing by the Holder to whom such payment
         is due.

                (b) Notwithstanding the foregoing, at the option of the Company,
         payments of accrued and unpaid interest may be made by the issuance of
         an additional Note (i) substantially in the form of this Note, (ii)
         registered in the name of the Holder, (iii) bearing interest at the
         Interest Rate and (iv) having a face value equal to the amount of the
         applicable interest payment. In the event that a payment of accrued and
         unpaid interest is made by the Company through the issuance of an
         additional Note as provided in the previous sentence, such interest
         payment shall be deemed paid in full and shall not constitute an
         overdue installment of interest.

         3. The Investment Agreement. This Note is one of the duly-authorized
issue of Senior Secured Convertible Notes Due 2007, Series 2 of the Company
(collectively, the "Notes") issued under that certain Investment Agreement,
dated as of August 5, 2002 (as amended, supplemented or otherwise modified from
time to time, the "Investment Agreement"), among the Parent, the Company and
CD&R VI (Barbados), Ltd. (the "Initial Holder"), and reference is hereby made to
the Investment Agreement for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Parent, the Company (and any
other obligor upon the Notes) and each Holder, and of the terms upon which the
Notes are, and are to be, delivered. The terms of the Notes include those stated
in the Investment Agreement. The Notes are subject to all such terms, and
Holders are referred to the Investment Agreement for a statement of such terms.
In the event of any conflict or inconsistency between the terms of this Note and
the terms of the Investment Agreement, the terms of the Investment Agreement
shall control and govern.

         Defined terms used in this Note without definition have the meanings
given to them in the Investment Agreement.

         The Company will furnish to any Holder, without charge, upon the
written request of such Holder, a copy of the Investment Agreement. Requests may
be made to:

                Acterna LLC
                20410 Observation Drive

                                       2



                Germantown, Maryland  20876
                Attn:  General Counsel

         4. Guarantees and Collateral. This Note is entitled to the benefits of
(a) certain Liens on certain assets and property of the Parent, the Company and
certain Subsidiaries of the Company and (b) Note Guarantees of the Parent and
certain Subsidiaries of the Company made for the benefit of the Holders.
Reference is made to the Investment Agreement and (if applicable) to the
Guarantee and Collateral Agreement referred to in the Investment Agreement.
Neither the Parent, the Company nor any Subsidiary of the Company shall be
required to make any notation on this Note to reflect any such Lien or Note
Guarantee or any release, termination or discharge thereof.

         5. Conversion.

                (a) Subject to and upon the terms set forth in the Investment
         Agreement, at the option of the Holder hereof, this Note may be
         converted into fully paid and nonassessable shares (calculated as to
         each conversion to the nearest 1/100th of a share) of Common Stock at
         the Conversion Rate in effect at the time of conversion. Such
         conversion right shall commence on the initial issuance date of this
         Note and expire at the close of business on the Maturity Date. The rate
         at which shares of Common Stock shall be delivered upon conversion (the
         "Conversion Rate") shall be initially [_________________________]
         [(____)] shares of Common Stock for each $1,000 Principal Amount of
         Notes. The Conversion Rate will be adjusted by the Company in certain
         instances as provided in the Investment Agreement. (An "increase" or
         "decrease" in the Conversion Rate means that the number of shares of
         Common stock issuable upon conversion of each $1,000 of Principal
         Amount of this Note will be increased or decreased, as appropriate.)

                (b) In case this Note (or portion hereof) is called for
         redemption at the election of the Company or the Holder hereof
         exercises his right to require the Company to repurchase the Note
         following a Change of Control, the conversion right in respect of the
         Note, or portion thereof so called, will expire at the close of
         business on the Business Day prior to the Redemption Date or the Change
         of Control Payment Date, as the case may be, unless the Company
         defaults in making the payment due upon redemption or repurchase, as
         the case may be.

         6. Optional Redemption. Subject to and upon the terms set forth in the
Investment Agreement, the Company may, at its option, redeem (each, an "Optional
Redemption") the Notes at any time, in whole or in part, without penalty or
premium, in a minimum aggregate Principal Amount of $1,000,000 (or, if the
aggregate outstanding Principal Amount of the Notes is less than $1,000,000 at
such time, then such Principal

                                       3



Amount) and in integral multiples of $1,000,000, or in whole, in each case
together with accrued but unpaid interest on such Principal Amount to the date
of redemption.

         7. Repurchases. Subject to and upon the terms set forth in the
Investment Agreement, the Company shall offer to repurchase the Notes in the
event of a change of control and upon certain asset dispositions.

         8. Issuance of Warrants Upon Early Redemption or Repurchase. Subject to
and upon the terms set forth in the Investment Agreement, upon the consummation
of any redemption or repurchase of Notes prior to the Maturity Date (whether
pursuant to Article VI and Section 8.4 or otherwise), the Parent shall, at its
own expense issue and deliver Warrants to the Holders of the Notes so redeemed
or repurchased. Each Warrant shall (a) expire on the Maturity Date, (b) have an
initial exercise price, subject to adjustment in accordance with its terms,
equal to the Conversion Price in effect immediately prior to such repurchase or
redemption and (c) entitle its Holder to purchase a number of shares of Common
Stock (or other property) equal to the number of shares of Common Stock (or
other property) into which such Holder's Notes were convertible immediately
prior to their redemption or repurchase.

         9. Denominations; Transfer; Exchange. The Notes are in registered form
without coupons in denominations of at least $1,000. A Holder may transfer or
exchange Notes in accordance with the Investment Agreement, subject to the
limitations set forth in the Investment Agreement and provided that any transfer
of CD&R Barbados Notes by the Investor or any Holder that is a member of the
CD&R Group to any Person not a member of the CD&R Group shall cause certain
Liens and Guarantees established with respect to such CD&R Barbados Notes to be
released, discharged and of no further force or effect with respect to such
Notes. No charge shall be made by the Company for any transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
stamp tax or other governmental charge that may be imposed in connection
therewith.

         10. Persons Deemed Owners. The registered Holder of this Note may be
treated as the owner of it for all purposes.

         11. Defaults and Remedies. If an Event of Default with respect to the
Notes occurs and is continuing, the Notes may become or be declared due and
payable immediately in the manner and with the effect provided in the Investment
Agreement.

         12. Amendment, Waiver. The Investment Agreement and the Notes may be
amended as specified in the Investment Agreement.

         13. Governing Law. THE INVESTMENT AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE

                                       4



LAWS OF THE STATE OF NEW YORK. THE PARENT, THE COMPANY AND ANY OTHER OBLIGOR IN
RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE
TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTION AGREEMENTS OR
THE NOTES.

                                       5



         IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.

                                          ACTERNA LLC



                                          By:______________________________
                                               Name:
                                               Title:

                                       6

EX-4.15

                                                                    Exhibit 4.15

                                [FORM OF WARRANT]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.


                               ACTERNA CORPORATION

                          Common Stock Purchase Warrant
                           Expiring December 31, 2007

                                                        New York, N.Y.
                                                        [DATE]

No. W-

                  Acterna Corporation, a Delaware corporation (the "Company"),
for value received, hereby certifies that CD&R VI (Barbados), Ltd. (the
"Purchaser"), or its permitted assigns, is entitled to purchase from the Company
[insert the number of shares of Common Stock (or other property) into which the
Purchaser's redeemed or repurchased Notes were convertible immediately prior to
early redemption or repurchase] duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock") at the purchase price per share determined pursuant to
Sections 1.1 and 2 hereof, subject to Section 6.7(b) of the Investment Agreement
(as defined below), at any time or from time to time after [insert date of
repurchase or redemption prior to stated maturity of applicable Notes] (the
"Issuance Date"), but prior to 5:00 P.M., New York City time, on December 31,
2007, all subject to the terms, conditions and adjustments set forth below in
this Warrant.

                  This Warrant is the Common Stock Purchase Warrant (the
"Warrant," such term to include all Warrants issued substantially in the form
hereof or in substitution therefor), originally issued on the Issuance Date in
connection with the redemption or repurchase prior to stated maturity by Acterna
LLC, a Delaware limited liability company and a wholly owned subsidiary of the
Company ("Acterna LLC") of one or more of its Senior Secured Convertible Notes
due 2007, Series 2 (the "Notes"), which were originally issued pursuant to the
Investment Agreement (the "Investment Agreement"), dated as of August 5, 2002,
among the Company, Acterna LLC and CD&R VI (Barbados), Ltd. This Warrant
evidences rights to purchase [insert number of shares of



Common Stock set forth above] duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (such number of shares of Common Stock
referred to herein as the "Initial Exercise Shares"), subject to adjustment as
provided herein. Certain capitalized terms used in the Warrant are defined in
Section 12.

                  1. Exercise of Warrant.

                  1.1. Manner of Exercise

                  (a) Subject to Section 6.7(b) of the Investment Agreement, the
Warrant may be exercised by the holder of the Warrant or any portion hereof (the
"Holder"), in whole or in part, during normal business hours on any Business Day
on or after the Issuance Date by surrender of the Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) (the
"Subscription Notice") duly executed by such Holder, to the Company at its
principal office (or, if such exercise shall be in connection with an
underwritten Public Offering of shares of Common Stock (or Other Securities)
subject to the Warrant, at the location at which the Company shall have agreed
to deliver the shares of Common Stock (or Other Securities) subject to such
offering), accompanied by payment, in cash or by wire transfer in same-day
funds, in the amount (such amount referred to herein as the "Exercise Price")
obtained by multiplying (i) the number of shares of Common Stock (without giving
effect to any adjustment provided for in Section 2) designated in such
Subscription Notice by (ii) [insert dollar amount equal to $1,000 divided by the
number of shares issuable upon conversion of $1,000 principal amount of the
Notes determined by the Conversion Rate then in effect under the Investment
Agreement], and such Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) determined as provided in Section 2 hereof.

                  (b) In lieu of tendering the Exercise Price to the Company,
the holder may elect to perform a "Cashless Exercise" of the Warrant, in whole
or in part, by surrendering the Warrant to the Company, with a duly executed
Subscription Notice marked "Cashless Exercise" and designating the number of
shares of Common Stock desired by the Holder out of the total for which the
Warrant is exercisable (without giving effect to any adjustments provided for in
Section 2). The Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) having a value (at the Market Price) that is equal to the
excess of (i) the then Market Price per share of Common Stock (or Other
Securities) multiplied by the number of the shares of Common Stock (or Other
Securities) (determined as of the date immediately preceding the date of any
such Subscription Notice) into which the Warrant, or portion thereof designated
by the Holder, would have been exercisable pursuant to Section 1.1(a) upon
payment of the Exercise Price by the Holder over (ii) the Exercise Price the
Holder would have been required to pay under Section 1.1(a) in respect of such
an exercise.

                                       2



                  1.2. When Exercise Deemed Effected. Each exercise of the
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which the Warrant shall have been surrendered to
the Company as provided in Section 1.1, and at such time the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock (or Other Securities) shall be issuable upon such exercise as provided in
Section 1.2 shall be deemed to have become the holder or holders of record
thereof.

                  1.3. Delivery of Stock Certificates, etc. As soon as
practicable after the exercise of the Warrant, in whole or in part, and in any
event within five Business Days thereafter (unless such exercise shall be in
connection with an underwritten Public Offering of shares of Common Stock (or
Other Securities) subject to the Warrant, in which event, concurrently with such
exercise), the Company at its expense (including the payment by it of any taxes
applicable to an issuer upon the issuance of shares, but excluding transfer
taxes) shall cause to be issued in the name of and delivered to the Holder or,
subject to Section 6, as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct,

                  (a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) to which such Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Holder would otherwise be
entitled, cash in an amount equal to the same fraction of the Market Price per
share of such Common Stock (or Other Securities) on the Business Day next
preceding the date of such exercise, and

                  (b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces thereof
for the number of shares of Common Stock equal (without giving effect to any
adjustment therein) to the number of such shares called for on the face of the
Warrant minus the number of such shares designated by the Holder upon such
exercise as provided in Section 1.1.

                  1.4. Company to Reaffirm Obligations. The Company shall, at
the time of or at any time after each exercise of the Warrant, upon the request
of the Holder, acknowledge in writing its continuing obligation to afford to
such Holder all rights (including, without limitation, any right of registration
of any shares of Common Stock (or Other Securities) issuable upon exercise of
the Warrant pursuant to Section 7) to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of the Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Company to afford such
rights to such Holder.

                                       3



                  2. Adjustment of Common Stock Issuable upon Exercise.

                  2.1. Number of Shares; Warrant Price. The number of shares of
Common Stock which the Holder shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for any application of the provisions of this Section
2) be issuable upon such exercise, as designated by the Holder pursuant to
Section 1.1, by a fraction of which (i) the numerator is $[insert dollar amount
equal to $1,000 divided by the number of shares issuable upon conversion of
$1,000 principal amount of the Notes determined by the Conversion Rate then in
effect with respect to any particular Note under the Investment Agreement] and
(ii) the denominator is the Warrant Price (as defined below) in effect on the
date of such exercise. The "Warrant Price," which shall initially be $[insert
dollar amount equal to $1,000 divided by the number of shares issuable upon
conversion of $1,000 principal amount of the Notes determined by the Conversion
Rate then in effect with respect to any particular Note under the Investment
Agreement] and shall be adjusted and readjusted from time to time as provided in
Section 2 hereof and, as so adjusted or readjusted, shall remain in effect until
a further adjustment or readjustment thereof is required by Section 2.

                  2.2. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:

                  (i)   issue or deliver any shares of Common Stock as a result
         of the declaration or payment of a dividend of Common Stock payable in,
         or other distribution to holders of Common Stock of, shares of Common
         Stock,

                  (ii)  subdivide its outstanding shares of Common Stock into a
         larger number of shares of Common Stock, or

                  (iii) combine its outstanding shares of Common Stock into a
         smaller number of shares of Common Stock,

then the Warrant Price then in effect shall be adjusted to equal (1) the Warrant
Price in effect immediately prior to such event multiplied by the number of
shares of Common Stock for which the Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares of Common Stock which a
record holder of the same number of shares of Common Stock for which the Warrant
is exercisable immediately prior to the happening of such event would own or be
entitled to receive after the happening of such event.

                  2.3. Extraordinary Dividends and Distributions. If at any time
the Company shall distribute to all holders of its outstanding Common Stock
evidences of indebtedness of the Company, cash or assets or securities other
than the Common Stock

                                       4



(any such evidences of indebtedness, cash, assets or securities, the "Assets"),
then, in each case, the Warrant Price then in effect shall be reduced to a price
determined by multiplying such Warrant Price by a fraction,

                  (i)  the numerator of which shall be the Market Price then in
         effect less the value of such Assets applicable to one share of Common
         Stock, and

                  (ii) the denominator of which shall be such Market Price.

                  Any adjustment required by this Section 2.3 shall be made
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.

                  2.4. Issuance of Additional Shares of Common Stock.

                  (a) If at any time after the date hereof the Company shall
(except as hereinafter provided) issue or sell any Additional Shares of Common
Stock (other than pursuant to Section 2.5 or Section 2.6) without consideration
or in exchange for consideration in an amount per Additional Share of Common
Stock (such consideration for purposes of this Section 2.4, the "New Issue
Price") less than the Market Price of such securities, then the Warrant Price
then in effect shall be reduced to a price determined by multiplying such
Warrant Price by a fraction,

                  (i) the numerator of which shall be (x) the number of shares
         of Common Stock outstanding immediately prior to such issue or sale
         plus (y) the number of shares of Common Stock which the aggregate
         consideration received by the Company for the total number of such
         Additional Shares of Common Stock so issued or sold would purchase at
         such Market Price, and

                  (ii) the denominator of which shall be the number of shares of
         Common Stock outstanding immediately after such issue or sale.

                  (b) The provisions of paragraph (a) of this Section 2.4 shall
   not apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 2.2.

                  2.5. Issuance of Warrants or Other Rights. If at any time
after the date hereof the Company shall take a record of holders of Common Stock
for the purpose of entitling them to receive a distribution of, or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell, any warrants or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not such rights thereunder are immediately
exercisable, and the price per share (such price per share for purposes of this

                                       5



Section 2.5, the "New Issue Price") for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Market Price, then the Warrant
Price shall be adjusted as provided in Section 2.4 on the basis that the maximum
number of shares of Common Stock issuable pursuant to all such warrants or other
rights or necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of the actual issuance of such warrants or other rights. No further
adjustments of the Warrant Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon exercise of such warrants or
other rights or upon the actual issuance of such Common Stock upon such
conversion or exchange of such Convertible Securities.

                  2.6. Issuance of Convertible Securities. If at any time the
Company shall take a record of the holders of Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share (such price per share for purposes of this Section 2.6, the "New
Issue Price") for which Common Stock is issuable upon such conversion or
exchange shall be less than the Market Price, then the Warrant Price shall be
adjusted as provided in Section 2.4 on the basis that the maximum number of
shares of Common Stock necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued and outstanding
and the Company shall have received all of the consideration payable therefor,
if any, as of the date of actual issuance of such Convertible Securities. No
adjustment of the Warrant Price shall be made under this Section 2.6 upon the
issuance of any Convertible Securities which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 2.5. No further adjustments of the Warrant
Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities, and, if any issuance or
sale of such Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase any such Convertible Securities for
which adjustments of the Warrant Price have been or are to be made pursuant to
other provisions of this Section 2, no further adjustments of the Warrant Price
shall be made by reason of such issuance or sale.

                  The provisions of Sections 2.4, 2.5 and 2.6 shall not apply to
any issuance of Notes or Warrants, or Common Stock in exchange therefor or upon
exercise thereof, pursuant to the Investment Agreement.

                  2.7. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which the Warrant is
exercisable shall have been

                                       6



made pursuant to Section 2.5 or 2.6 as the result of any issuance of warrants,
rights or Convertible Securities,

                  (i)  such warrants or rights, or the right of conversion or
         exchange in such other Convertible Securities, shall expire, and all or
         a portion of such warrants or rights, or the right of conversion or
         exchange with respect to all or a portion of such other Convertible
         Securities, as the case may be, shall not have been exercised, or

                  (ii) the consideration per share for which shares of Common
         Stock are issuable pursuant to such warrants or rights, or the terms of
         such other Convertible Securities, shall be increased solely by virtue
         of provisions therein contained for an automatic increase in such
         consideration per share upon the occurrence of a specified date or
         event,

then such previous adjustment shall be rescinded and annulled and the shares of
Common Stock which were deemed to have been issued by virtue of the computation
made in connection with the adjustment so rescinded and annulled shall no longer
be deemed to have been issued by virtue of such computation. Thereupon, a
recomputation shall be made of the effect of such rights or options or other
Convertible Securities effective as of the date of such previous adjustment on
the basis of

                  (A) treating the number of shares of Common Stock or other
         property, if any, theretofore actually issued or issuable pursuant to
         the previous exercise of any such warrants or rights or any such right
         of conversion or exchange, as having been issued on the date or dates
         of any such exercise and for the consideration actually received and
         receivable therefor, and

                  (B) treating any such warrants or rights or any such other
         Convertible Securities which then remain outstanding as having been
         granted or issued immediately after the time of such increase of the
         consideration per share for which shares of Common Stock or other
         property are issuable under such warrants or rights or other
         Convertible Securities,

whereupon a new adjustment of the number of shares of Common Stock for which the
Warrant is exercisable shall be made effective as of the date of such previous
adjustment, which new adjustment shall supersede the previous adjustment so
rescinded and annulled. Any reduction in the number of shares of Common Stock
for which the Warrant is exercisable as a result of this Section 2.7 shall be
applied in its entirety to the number of shares of Common Stock for which the
Warrant is exercisable as of the date such new adjustment is made.

                                       7



                  2.8. Consolidation, Merger, Sale of Assets, Reorganization,
etc. (a) In case at any time the Company shall be a party to any transaction
(including without limitation a merger, consolidation, sale of all or
substantially all of the Company's assets or recapitalization of the Common
Stock) in which the previously outstanding Common Stock shall be changed into or
exchanged for different securities of the Company or changed into or exchanged
for common stock or other securities of another corporation or interests in a
noncorporate entity or other property (including cash) or any combination of any
of the foregoing (each such transaction being hereinafter referred to as the
"Transaction") then, as a condition to the consummation of the Transaction,
lawful and adequate provisions shall be made so that, upon the basis and terms
and in the manner provided in this Section 2.8, the Holder, upon the exercise of
the Warrant, shall be entitled to receive, in lieu of the Common Stock issuable
upon such exercise prior to such consummation, the stock and other securities,
cash and property to which the Holder would have been entitled upon the
consummation of the Transaction if the Holder had exercised the Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Section 2.

                  (b) Notwithstanding anything contained herein to the contrary,
the Company will not effect any Transaction unless, prior to the consummation
thereof, each corporation or entity (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
the Warrant as provided herein shall assume, by written instrument delivered to
the Holder, (i) the obligations of the Company hereunder (and if the Company
shall survive the consummation of such Transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company hereunder) and (ii) the obligation to deliver to the Holder such
shares of stock, securities, cash or property as, in accordance with the
foregoing provisions, the Holder may be entitled to receive, and the terms
hereof (including, without limitation, all of the applicable provisions of
Section 2) shall be applicable to the stock, securities, cash or property which
such corporation or entity may be required to deliver upon any conversion of any
Warrants or the exercise of any rights pursuant hereto.

                  (c) Upon any liquidation, dissolution or winding up of the
Company, the Holder shall receive such cash or property (less the Warrant Price)
which the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrant been exercised in full
and the shares of Common Stock in respect of such exercise issued immediately
prior to the occurrence of such liquidation, dissolution or winding-up.

                  2.9. Other Dilutive Events. In case any event shall occur as
to which the provisions of Section 2 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the exercise rights
with respect to the Warrant in

                                       8



accordance with the essential intent and principles of such Section, then, in
each such case, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Company), which shall give their opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in
Section 2, necessary to preserve, without dilution, the exercise rights
represented by the Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of the Warrant and shall make the
adjustments, if any, described therein.

                  2.10. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms hereof, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be reasonably necessary or appropriate in order to protect the
rights of the Holders of this Warrant against dilution in respect of which the
Holders are not fully protected by this Section 2 or other impairment. Without
limiting the generality of the foregoing, the Company:

                  (a) will not permit the par value $.01 per share, if any, of
any shares of Common Stock receivable upon the exercise of the Warrant to exceed
the amount payable therefor upon such exercise,

                  (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of the Warrant from time to
time outstanding,

                  (c) will not take or permit to be taken any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after such action upon the complete
exercise of the Warrant would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's articles of incorporation
and available for the purpose of issue upon such exercise, and

                  (d) will not (i) issue any equity securities (other than
Common Stock or Convertible Securities) that participate with the shares of
Common Stock in dividends, distributions and/or other rights ("Other Dilutive
Securities"), or (ii) declare or make dividends or distributions (whether of
evidences of indebtedness of the Company, cash, assets or securities, including,
without limitation, options, warrants or other rights to acquire Common Stock)
in respect of any Other Dilutive Securities or Convertible Securities, unless,
in each case, this Section 2 is first amended so as to provide the Holders of
the Warrant with full protection against dilution caused by or resulting from
such issuances, dividends or distributions.

                                       9



                  2.11. Other Provisions Applicable to Adjustments under this
Section 2. The following provisions shall be applicable to the making of
adjustments to the number of shares of Common Stock for which the Warrant is
exercisable provided for in this Section 2:

                  (i)   Computation of Consideration. To the extent that any
         shares of Common Stock or any Convertible Securities or any warrants or
         other rights to subscribe for or purchase any shares of Common Stock or
         any Convertible Securities shall be issued for cash consideration, the
         cash consideration received by the Company therefor shall be the amount
         of the cash received by the Company therefor, or, if such shares of
         Common Stock or Convertible Securities are offered by the Company for
         subscription, the subscription price, or, if such shares of Common
         Stock or Convertible Securities are sold to underwriters or dealers for
         public offering without a subscription offering, the initial public
         offering price (in any such case subtracting any amounts paid or
         receivable for accrued interest or accrued dividends and taking into
         account any compensation, discounts or expenses paid or incurred by the
         Company for and in the underwriting of, or otherwise in connection
         with, the issuance thereof). To the extent that such issuance shall be
         for a consideration other than cash, then, except as herein otherwise
         expressly provided, the amount of such non-cash consideration shall be
         deemed to be the fair market value of such consideration at the time of
         such issuance as determined in good faith by the Board of Directors of
         the Company. In case any shares of Common Stock or any Convertible
         Securities or any warrants or other rights to subscribe for or purchase
         such shares of Common Stock or Convertible Securities shall be issued
         in connection with any merger in which the Company issues any
         securities, the amount of consideration therefor shall be deemed to be
         the fair market value, as determined by an independent investment
         banking firm retained by the Company, which firm may be an independent
         investment banking firm regularly retained by the Company, of such
         portion of the assets and business of the nonsurviving corporation as
         such firm shall determine to be attributable to such shares of Common
         Stock, Convertible Securities, warrants or other rights, as the case
         may be. The consideration for any shares of Common Stock issuable
         pursuant to any warrants or other rights to subscribe for or purchase
         the same shall be the consideration received by the Company for issuing
         such warrants or other rights plus the additional consideration payable
         to the Company upon exercise of such warrants or other rights. The
         consideration for any shares of Common Stock issuable pursuant to the
         terms of any Convertible Securities shall be the consideration, if any,
         received by the Company for issuing warrants or other rights to
         subscribe for or purchase such Convertible Securities, plus the
         consideration paid or payable to the Company in respect of the
         subscription for or purchase of such Convertible Securities, plus the
         additional consideration, if any, payable to the Company upon the
         exercise of the right of conversion or exchange in such Convertible
         Securities.

                                       10



         In case of the issuance at any time of any shares of Common Stock or
         Convertible Securities in payment or satisfaction of any dividends upon
         any class of stock other than Common Stock, the Company shall be deemed
         to have received for such shares of Common Stock or Convertible
         Securities a consideration equal to the amount of such dividend so paid
         or satisfied.

                  (ii)  Computation of Asset Value. To the extent that any
         Assets shall be distributed to all holders of the Company's outstanding
         Common Stock in cash, the value of such Assets shall be the amount of
         cash so distributed, or, if such Assets are securities offered by the
         Company for subscription, the subscription price, or if such Assets are
         securities sold to underwriters or dealers for public offering without
         a subscription offering, the initial public offering price (in any such
         case adding any accrued interest or dividends but without taking into
         account any compensation, discounts or expenses paid or incurred by the
         Company in connection therewith). To the extent that the Company shall
         so distribute Assets other than cash, except as herein otherwise
         expressly provided, then the value of such Assets shall be deemed to be
         fair value of such Assets at the time of such distribution as
         determined in good faith by the Board of Directors of the Company.

                  (iii) When Adjustment to Be Made. The adjustments required by
         this Section 2 shall be made whenever and as often as any specified
         event requiring an adjustment shall occur, except that any adjustment
         of the number of shares of Common Stock for which the Warrant is
         exercisable that would otherwise be required may be postponed (except
         in the case of a subdivision or combination of shares of the Common
         Stock, as provided for in Section 2.2) up to but not beyond the date of
         exercise if such adjustment either by itself or with other adjustments
         not previously made adds or subtracts less than 1% of the shares of
         Common Stock for which the Warrant is exercisable immediately prior to
         the making of such adjustment. Any adjustment representing a change of
         less than such minimum amount (except as aforesaid) which is postponed
         shall be carried forward and made as soon as such adjustment, together
         with other adjustments required by this Section 2 and not previously
         made, would result in a minimum adjustment or on the date of exercise.
         For the purpose of any adjustment, any specified event shall be deemed
         to have occurred at the close of business on the date of its
         occurrence.

                  (iv)  Fractional Interest; Rounding. In computing adjustments
         under this Section 2, fractional interests in Common Stock shall be
         taken into account to the nearest 1/10th of a share, and adjustments in
         the Warrant Price shall be made to the nearest $.01.

                                       11



                  (v)   When Adjustment Not Required. If the Company shall take
         a record of the holders of its Common Stock for the purpose of
         entitling them to receive subscription or purchase rights and shall,
         thereafter and before the distribution to shareholders thereof, legally
         abandon its plan to deliver such subscription or purchase rights, then
         no adjustment shall be required by reason of the taking of such record
         and any such adjustment previously made in respect thereof shall be
         rescinded and annulled.

                  (vi)  Escrow of Warrant Stock. If the Holder exercises the
         Warrant after any property becomes distributable by reason of the
         taking of any record of the holders of Common Stock as described in
         this Section 2, but prior to the occurrence of the event for which such
         record is taken, any shares of Common Stock issuable upon exercise by
         reason of any adjustment required by this Section 2 shall be deemed the
         last shares of Common Stock for which the Warrant is exercised
         (notwithstanding any other provision to the contrary herein). Such
         shares or other property shall be held in escrow for the Holder by the
         Company to be issued to the Holder upon and to the extent that the
         event actually takes place, upon payment of the Exercise Price.
         Notwithstanding any other provision to the contrary herein, if the
         event for which such record was taken fails to occur or is rescinded,
         then such escrowed shares shall be canceled by the Company and escrowed
         property returned.

                  (vii) Shareholder Rights Plans. Rights or warrants distributed
         by the Company to all holders of Common Stock pursuant to a shareholder
         rights plan (or "poison pill") entitling the holders thereof to
         subscribe for or purchase shares of the Company's capital stock, which
         rights or warrants, until the occurrence of a specified event or events
         (a "Trigger Event"), (x) are deemed to be transferred with the Common
         Stock in respect of which they are issued, (y) are not exercisable, and
         (z) are also issued in respect of future issuances of Common Stock,
         shall be deemed not to have been distributed for purposes of Section
         2.5 and 2.6 (and no adjustment to the Warrant Price under those
         Sections shall be required) until first the occurrence of a Trigger
         Event, unless the Trigger Event is rescinded within 15 days. If upon
         the occurrence of any event such right or warrant becomes exercisable
         to purchase different securities, evidences of indebtedness or other
         assets or entitles its holder to purchase a different amount of the
         foregoing or to purchase any of the foregoing at a different purchase
         price (an "Other Trigger Event"), then the occurrence of each such
         Other Trigger Event, unless the Other Trigger Event is rescinded within
         15 days, shall be deemed to be the date of issuance and Record Date
         with respect to a new right or warrant (and a termination or expiration
         of the existing right or warrant without exercise by the holder thereof
         to the extent not actually exercised). In addition, in the event of any
         distribution (or deemed distribution) of rights or warrants, or any
         Trigger Event or Other Trigger Event with respect thereto, that
         resulted in an adjustment

                                       12



         of the Warrant Price under Section 2.5 or 2.6, (1) in the case of any
         such rights or warrants which shall have been redeemed or repurchased
         without exercise by the holders thereof, the Warrant Price shall be
         adjusted upon such redemption or repurchase to give effect to such
         distribution, Trigger Event or Other Trigger Event, as the case may be,
         as though it were an extraordinary cash distribution equal to the
         per-share redemption or repurchase price received by a holder of Common
         Stock with respect to such rights or warrants (assuming such holder had
         retained such rights), made to all holders of Common Stock on the date
         of such redemption or repurchase, and (2) in the case of such rights or
         warrants all of which shall have expired or been terminated without
         exercise, the Warrant Price shall be readjusted as if such rights or
         warrants had never been issued.

                  2.12. Exercise Rights Subject to Stockholder Vote. If,
pursuant to any Requirement of Law or rule or regulation of any securities
exchange or national securities quotation service, the stockholders of the
Parent are required to approve the issuance of shares of Common Stock issuable
upon exercise of this Warrant, this Warrant may not be exercised until such
issuance upon exercise has been so approved at the next annual meeting of the
Parent's stockholders or otherwise. At any time prior to such approval, upon the
written request of the Purchaser, the Parent, at its own expense and as soon as
practicable following such request, shall seek the written consent or approval
of its stockholders to such issuance upon exercise of this Warrant, prepare and
file with the SEC an information statement relating to such stockholder approval
and take all other actions as are necessary or advisable under any Requirement
of Law or otherwise in respect of the issuance of Common Stock upon exercise of
this Warrant.

                  3. Notice of Adjustment. Whenever the number of shares of
Common Stock for which the Warrant is exercisable or the Warrant Price shall be
adjusted pursuant to Section 2, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment, the method by
which the adjustment was calculated, the number of shares of Common Stock for
which the Warrant is exercisable and the Warrant Price after giving effect to
such adjustment or change. The Company shall promptly cause a signed copy of
such certificate to be delivered to the Holder. The Company shall keep at the
office of the Company copies of all such certificates and cause the same to be
available for inspection during normal business hours by the Holder.

                  4. Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment to the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms of
the Warrant and cause independent public accountants of recognized national
standing selected by the Company (which may be the regular auditors of the
Company) to verify such computation and prepare a report setting forth such
adjustment or readjustment and showing in reasonable

                                       13



detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including without limitation a statement of
(a) the consideration received or to be received by the Company for any shares
of Common Stock issued or sold or deemed to have been issued, (b) the number of
shares of Common Stock outstanding or deemed to be outstanding, and (c) the
Warrant Price in effect immediately prior to such issuance or sale and as
adjusted and readjusted (if required by Section 2) on account thereof. The
Company shall forthwith mail a copy of each such report to each Holder and
shall, upon the written request at any time of any Holder, furnish to such
Holder a like report setting forth the Warrant Price at the time in effect and
showing in reasonable detail how it was calculated. The Company shall also keep
copies of all such reports at its principal office and shall cause the same to
be available for inspection at such office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by the Holder.

                  5. Notices of Corporate Action. In the event of

                  (a) any taking by the Company of a record of the holders of
its Common Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend payable in, or other distribution of, shares of
Common Stock, or any other dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of Common Stock or any
Convertible Securities, or to receive any other right,

                  (b) any subdivision of outstanding shares of Common Stock into
a larger number of shares of Common Stock, or any combination of such shares
into smaller number of shares of Common Stock,

                  (c) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or

                  (d) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

the Company shall mail to each Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the date or expected date on which any such
subdivision, combination or issuance is to take place, and the amount of Common
Stock that shall be the subject of such subdivision, combination or issuance and
(iii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall

                                       14



be entitled to exchange their shares of Common Stock (or Other Securities) for
the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed no later
than 15 Business Days prior to the date specified in subdivisions (i), (ii) and
(iii) above.

                  6. Legend, etc. Except as otherwise permitted by this Section
6, the Warrant originally issued pursuant to the Investment Agreement, each
Warrant issued upon direct or indirect transfer or in substitution for any
Warrant pursuant to Section 12 hereof, each certificate for Common Stock (or
Other Securities) issued upon the exercise of any Warrant and each certificate
issued upon the direct or indirect transfer of any such Common Stock (or Other
Securities) (other than shares of Common Stock (or Other Securities) or Warrants
which have been transferred in a transaction registered under the Securities Act
or exempt from the registration requirements of the Securities Act pursuant to
Rule 144 thereunder or any similar rule or regulation) shall bear the following
legend (or a reasonable facsimile):

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
         LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
         PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
         APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
         REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."

                  The restrictions imposed by this Section 6 shall cease and
terminate as to any particular securities (a) when such securities shall have
been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering such securities, (b) when,
in the opinion of counsel for the Holder (which counsel shall be reasonably
acceptable to the Company), such restrictions are no longer required in order to
insure compliance with the Securities Act, or (c) when such securities have been
beneficially owned, by a Person who has not been an Affiliate of the Company for
at least three months, for a period of at least two years (or such shorter
period as may be applicable under Rule 144(k) under the Securities Act or any
successor thereto), all as determined under Rule 144 under the Securities Act.
Whenever such restrictions shall terminate as to any securities, as soon as
practicable thereafter and in any event within five days, the Holder thereof
shall be entitled to receive from the Company, without expense (other than
transfer taxes, if any), new securities of like tenor not bearing the applicable
legend set forth in this Section 6.

                  7. Registration Rights. All shares of Common Stock (and Other
Securities) issuable or issued upon the exercise of the Warrant are subject to
and entitled

                                       15



to the benefits of the registration rights and other provisions set forth in the
Registration Rights Agreement.

                  8. Availability of Information. The Company shall comply with
the reporting requirements of sections 13 and 15(d) of the Exchange Act (whether
or not it shall be required to do so pursuant to such sections) and shall comply
with all public information reporting requirements of the Commission (including
Rule 144 promulgated by the Commission under the Securities Act) from time to
time in effect and relating to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities. The Company shall
cooperate with each holder of any Restricted Securities in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Restricted Securities. The Company shall furnish to the Holder, or
to any Holder of a portion of the Warrant, promptly upon their becoming
available, copies of all reports on Form 10-K and Form 10-Q and proxy statements
filed by the Company with the Commission, and copies of all regular and periodic
reports and all registration statements and prospectuses filed by the Company
with any securities exchange or with the Commission.

                  9. Reservation of Stock, etc. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant at the time outstanding. All
shares of Common Stock (or Other Securities) shall be duly authorized and, when
issued upon such exercise, shall be validly issued and, in the case of shares,
fully paid and nonassessable with no liability on the part of the holders
thereof.

                  10. Listing on Securities Exchanges. The Company shall list on
each national securities exchange (or the Nasdaq National Market or the Nasdaq
SmallCap Market) on which any Common Stock may at any time be listed, and shall
maintain such listing of, all shares of Common Stock from time to time issuable
upon the exercise of the Warrant, subject to official notice of issuance upon
the exercise of the Warrant. The Company shall also so list on each national
securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market,
and shall maintain such listing of, any Other Securities, if at the time any
securities of the same class shall be listed on such national securities
exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, as the case
may be.

                  11. Ownership, Transfer and Substitution of the Warrant. (a)
Ownership of Warrant. The Company may treat the Person in whose name the
Warrant, or any Warrant or Warrants issued in substitution therefor, is
registered on the register kept at the principal office of the Company as the
owner and the Holder thereof for all purposes,

                                       16



notwithstanding any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes,
notwithstanding any notice to the contrary. Subject to Section 6, a Warrant, if
properly assigned, may be exercised by a new Holder without first having a new
Warrant issued.

                  (b) Transfer and Exchange of the Warrant. Upon the surrender
of the Warrant, properly endorsed, for registration of transfer or for exchange
at the principal office of the Company, the Company at its expense shall
(subject to compliance with Section 6, if applicable) execute and deliver to or
upon the order of the Holder thereof a new Warrant or Warrants of like tenor, in
the name of such Holder or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.

                  (c) Replacement of the Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than the Purchaser, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
shall execute and deliver, in lieu thereof, a new Warrant of like tenor.

                  12. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:

                  Additional Shares of Common Stock: all shares (including
treasury shares) of Common Stock issued or sold by the Company after the
Issuance Date, whether or not subsequently reacquired or retired by the Company,
other than shares of Common Stock issued (i) upon the exercise of this Warrant
or any other Warrant issued by the Company pursuant to the Investment Agreement
or (ii) upon conversion of the Notes.

                  Affiliate: with respect to any Person, any Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.

                  Assets:  the meaning specified in Section 2.3.

                  Beneficially Own: with respect to any securities shall mean
having "beneficial ownership" of such securities (as determined pursuant to Rule
13d-3 under the Exchange Act), including pursuant to any agreement, arrangement
or understanding, whether or not in writing.

                                       17



                  Business Day: any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York are
authorized by law to be closed, provided that, in determining the period within
which certificates or Warrants are to be issued and delivered pursuant to
Section 1.3 at a time when shares of Common Stock (or Other Securities) are
listed or admitted to trading on any national securities exchange or in the
over-the-counter market and in determining the Market Price of any securities
listed or admitted to trading on any national securities exchange or in the
over-the-counter market, "Business Day" shall mean any day when the principal
exchange in which securities are then listed or admitted to trading is open for
trading or, if such securities are traded in the over-the-counter market in the
United States, such market is open for trading, and provided further that any
reference to "days" (unless Business Days are specified) shall mean calendar
days.

                  Commission: the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular purpose.

                  Common Stock: the Company's Common Stock, as constituted on
the date hereof, any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.

                  Company:  the meaning specified in the opening paragraphs of
the Warrant.

                  Convertible Securities: any evidences of indebtedness, shares
of stock (other than Common Stock and Preferred Shares) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.

                  Exchange Act: the Securities Exchange Act of 1934, or any
successor statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934 shall include a reference to the
comparable section, if any, of any such successor statute.

                  Exercise Price:  the meaning specified in Section 1.1.

                  Governmental Authority: any nation or government, any state or
other political subdivision thereof, and any entity, authority or body
exercising executive,

                                       18



legislative, judicial, regulatory or administrative functions of or pertaining
to government.

                  Holder:  the meaning specified in Section 1.1.

                  Initial Exercise Shares: the meaning specified in the opening
paragraphs of the Warrant.

                  Investment Agreement: the meaning specified in the opening
paragraphs of the Warrant.

                  Issuance Date: the meaning specified in the opening paragraphs
of the Warrant.

                  Market Price: on any date specified herein, (a) in the case of
securities that have an existing public trading market, the amount per security
equal to (i) the average of the last sale price of such security, regular way,
for the five (5) consecutive trading days selected by the Company commencing not
more than ten (10) trading days before, and ending not later than the earlier of
the day in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation (the five (5) trading days
so selected by the Company, the "Trading Period"), or, if no such sale takes
place during such period, the average of the closing bid and asked prices
thereof during the Trading Period, in each case as officially reported on the
principal national securities exchange on which the same are then listed or
admitted to trading, or (ii) if no such security is then listed or admitted to
trading on any national securities exchange but such security is designated as a
national market system security by the NASD, the average of the last sale price
of such security, regular way, during the Trading Period, or if such security is
not so designated, the average of the reported closing bid and asked prices
thereof during the Trading Period as shown by the NASD automated quotation
system or, if no shares thereof are then quoted in such system, as published by
the National Quotation Bureau, Incorporated or any successor organization, and
in either case as reported by any member firm of the New York Stock Exchange
selected by the Company, and (b) in the case of securities that do not have an
existing public trading market and in the case of other property, the higher of
(i) the book value thereof as determined by agreement between the Company and
the Holder, or if the Company and the Holder fail to agree, by any firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company, as of the last day of any month ending within sixty
(60) days preceding the date as of which the determination is to be made and
(ii) the fair value thereof (w) determined by an agreement between the Company
and the Holder or (x) if the Company and the Holder fail to agree, determined
jointly by an independent investment banking firm retained by the Company and by
an independent investment banking firm retained by the Holder, either of which
firms may be an independent investment banking firm regularly retained by the
Company or the

                                       19



Holder or (y) if the Company or the Holder shall fail so to retain an
independent investment banking firm within five Business Days of the retention
of such firm by the Holders or the Company, as the case may be, determined
solely by the firm so retained or (z) if the firms so retained by the Company
and by such holders shall be unable to reach a joint determination within
fifteen (15) Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm chosen by the first
two such firms and which is not a regular investment banking firm of the Company
or any such holder.

                  NASD:  the National Association of Securities Dealers, Inc.

                  Other Securities: any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the Holder at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or other securities pursuant to
Section 2.8 or otherwise.

                  Person: an individual, a partnership, an association, a joint
venture, a corporation, a limited liability company, a business, a trust, an
unincorporated organization or a government or any department, agency or
subdivision thereof.

                  Public Offering: any offering of Common Stock to the public
pursuant to an effective registration statement under the Securities Act.

                  Purchaser: the meaning specified in the first paragraph of the
Warrant.

                  Registration Rights Agreement means that certain Registration
Rights Agreement, dated as of May 21, 1998, among the Company and Clayton,
Dubilier & Rice Fund V Limited Partnership ("Fund V") and the other parties
thereto, as amended by Amendment No. 1 to the Registration Rights Agreement,
dated as of May 23, 2000, among the Company, Fund V and Clayton, Dubilier & Rice
Fund VI Limited Partnership ("Fund VI"), as further amended by Amendment No. 2
to the Registration Rights Agreement, dated as of January 15, 2002, among the
Parent, Fund V and Fund VI, and as further amended by Amendment No. 3 to the
Registration Rights Agreement, dated as of August 5, 2002, among the Parent,
Fund V, Fund VI and the Purchaser, as the same may be amended from time to time.

                  Requirement of Law: as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject; provided that the

                                       20



foregoing shall not apply to any non-binding recommendation of any Governmental
Authority.

                  Restricted Securities: (a) any Warrants bearing the applicable
legend set forth in Section 6, (b) any shares of Common Stock (or Other
Securities) which have been issued upon the exercise of Warrants and which are
evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, shall be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.

                  Securities Act: the Securities Act of 1933, or any successor
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. Reference to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such successor statute.

                  Subsidiary: as to any Person, any corporation at least a
majority of the shares of stock of which having general voting power under
ordinary circumstances to elect a majority of the Board of Directors of such
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency) is, at the time as of which the determination is being made,
owned by such Person, or one or more of its Subsidiaries or by such Person and
one or more of its Subsidiaries.

                  Transaction:  the meaning specified in Section 2.8.

                  Voting Securities: at any time shares of any class of capital
stock of the Company which are then entitled to vote generally in the election
of directors.

                  Warrant: the meaning specified in the second paragraph of the
Warrant.

                  Warrant Price:  the meaning specified in Section 2.1.

                  Warrant Shares: the shares of Common Stock (and Other
Securities) issuable upon exercise of the Warrant.

                  13. Remedies. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of the Warrant are not
and shall not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

                                       21



                  14. No Rights or Liabilities as Shareholder. Nothing contained
in the Warrant shall be construed as conferring upon the Holder hereof any
rights as a shareholder of the Company or as imposing any liabilities on such
Holder to purchase any securities or as a shareholder of the Company, whether
such liabilities are asserted by the Company or by creditors or shareholders of
the Company or otherwise.

                  15. Notices. All notices and other communications under the
Warrant, except notices of the exercise of any Warrant (which shall be effected
in the manner provided in Section 1), shall be in writing and shall be mailed by
registered or certified mail, return receipt requested, addressed as follows or
to such other address as such party may have designated to the other in writing:

                  (a)   if to the Purchaser, to it at:

                           CD&R VI (Barbados) Ltd.
                           c/o Corporate Services Limited
                           The Financial Services Centre
                           Bishop's Court Hill
                           St. Michael, Barbados

                           Attention:  Janelle Ifill
                           Telecopy No.:  (246) 436-7057



                  with a copy to:

                           Clayton, Dubilier & Rice, Inc.
                           375 Park Avenue
                           New York, New York  10152

                           Attention:  Richard J. Schnall
                           Telecopy No.:  (212) 407-7042

                  with a copy to:

                           Debevoise & Plimpton
                           919 Third Avenue
                           New York, New York  10022

                           Attention:  Paul S. Bird
                           Telecopy No.:  (212) 909-6836

                                       22



                  (b) if to any other Holder or any holder of any Common Stock
(or Other Securities), at the registered address of such Holder as set forth in
the register kept at the principal office of the Company,

                           or

                  (c) if to the Company, to it at:

                           Acterna Corporation
                           20410 Observation Drive
                           Germantown, Maryland  20876

                           Attention:  General Counsel
                           Telecopy No.:  (301) 353-0740

                  16. Severability. If any term, provision, covenant or
restriction of the Warrant is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of the Warrant shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.

                  17. Miscellaneous. The Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The agreements of the Company contained in the Warrant
other than those applicable solely to the Warrant and the Holder thereof shall
inure to the benefit of and be enforceable by any Holder or Holders at the time
of any shares of Common Stock (or Other Securities) issued upon the exercise of
the Warrant, whether so expressed or not. THE WARRANT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION). EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL
COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF NEW YORK SOLELY
IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
WARRANT. EACH PARTY HEREBY WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY
ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION AND ENFORCEMENT HEREOF, THAT
SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN
SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS
WARRANT

                                       23



MAY NOT BE ENFORCED IN OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND
GRANTS ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE
SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREES THAT THE MAILING OF PROCESS OR
OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN ANY MANNER
PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF. The section
headings in the Warrant are for purposes of convenience only and shall not
constitute a part hereof.

                              ACTERNA CORPORATION



                              By:   ______________________________________
                                    Name:
                                    Title:

                                       24



                              FORM OF SUBSCRIPTION

                 (To be executed only upon exercise of Warrant)

To:  Acterna Corporation

                  The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, ________/1/
shares of Common Stock of Acterna Corporation, and herewith makes payment [of
$  ]/2/ [by application, pursuant to Section 1.1(b) of such Warrant, of [a
portion of] the Warrant representing a right to purchase ________/1/ shares of
Common Stock],/3/ and requests that the certificates for such shares be issued
in the name of, and delivered to _____________ whose address is _______________.

Dated:
                                    [HOLDER]/4/
                                    [Address]



                              By    ______________________________________
                                    Name:
                                    Title:

__________
/1/  Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised), in either case without making any adjustment for additional
Common Stock or any other stock or other securities or property or cash which,
pursuant to the adjustment provisions of the Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or Warrants shall be
issued and delivered, representing the unexercised portion of the Warrant, to
the holder surrendering the same.
/2/  Delete inapplicable language in brackets.
/3/  Delete inapplicable language in brackets.
/4/  Signature must conform in all respects to name of holder as specified on
the face of the Warrant.

                                       25



                               FORM OF ASSIGNMENT

                 (To be executed only upon transfer of Warrant)

                  For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto ________________ the
right represented by such Warrant to purchase ______ shares of Common Stock of
Acterna Corporation to which such Warrant relates, and appoints ___________
Attorney to make such transfer on the books of the Company maintained for such
purpose, with full power of substitution in the premises.

Dated:
                                    [HOLDER]/5/
                                    [Address]



                              By    ______________________________________
                                    Name:
                                    Title:


Signed in the presence of:


___________________________________




___________
/5/  Signature must conform in all respects to name of holder as specified on
the face of the Warrant.

                                       26

EX-4.16

                                                                    Exhibit 4.16

                                 FIRST AMENDMENT

                  FIRST AMENDMENT, dated as of August 5, 2002 (this
"Amendment"), to the Investment Agreement, dated as of December 27, 2001 (as
amended, supplemented or otherwise modified, the "Investment Agreement"), among
Acterna Corporation, a Delaware corporation (together with its successors and
assigns, the "Parent"), Acterna LLC, a Delaware limited liability company wholly
owned and controlled by the Parent (together with its successors and assigns,
the "Company") and Clayton, Dubilier & Rice Fund VI Limited Partnership, a
Cayman Islands exempted limited partnership (together with its successors and
assigns, the "Investor").

                              W I T N E S S E T H:

                  WHEREAS, pursuant to the Investment Agreement, the Investor
has purchased certain 12% Senior Secured Convertible Notes due December 31, 2007
of the Company;

                  WHEREAS, in connection with a proposed purchase by CD&R VI
(Barbados), Ltd. of the Senior Secured Convertible Notes due December 31, 2007,
Series 2 of the Company, the Company and the Parent have requested the Investors
to agree to amend the Investment Agreement; and

                  WHEREAS, the Investor has agreed to the requested amendments
but only on the terms and conditions contained in this Amendment;

                  NOW, THEREFORE, the parties hereto hereby agree as follows:

                  Section 1. Defined Terms. Terms defined in the Investment
Agreement and used herein shall have the meanings given to them in the
Investment Agreement.

                  Section 2. Amendment to Subsection 6.6 (Mandatory Offer to
Repurchase the CD&R Notes Upon Disposition of Assets). Section 6.6(a) of the
Investment Agreement is hereby amended by deleting the parenthetical "(other
than to the Company or any of its Restricted Subsidiaries)" where it appears in
clause (i) of the definition of Mandatory 6.6(a) Repurchase Event and inserting
in lieu thereof the parenthetical "(other than to the Company or any of its
Restricted Subsidiaries, and other than any sale, transfer or other disposition
described in subsection 14.5(m) of the Credit Agreement as amended by the Third
Credit Agreement Amendment, to the extent the proceeds thereof are used in
accordance with the Credit Agreement as so amended)".

                  Section 3. Amendment to Section 7.10 (Liens). Section 7.10 of
the Investment Agreement is hereby amended by inserting the phrase "other than
Airshow Sale Proceeds Cash Collateral Account (as defined in the Credit
Agreement as amended by the Third Credit Agreement Amendment)" immediately after
the phrase "properties or assets" in such Section 7.10.

                  Section 4. Amendment to Section 8.2 (Limitation on Restricted
Payments). Section 8.2(a) of the Investment Agreement is hereby amended by
inserting at the end of the parenthetical in clause (iii), and at the end of the
first parenthetical in clause (iv), of such Section



8.2(a) the phrase "and other than as permitted by Section 14.12 of the Credit
Agreement as amended by the Third Credit Agreement Amendment".

                  Section 5. Amendment to Section 8.7 (Limitation on Optional
Payments and Modifications of Debt Instruments and other Material Agreements).
Section 8.7 of the Investment Agreement is hereby amended by inserting at the
beginning of clause (a) of such Section 8.7 the phrase "except as permitted by
Section 14.12(a) of the Credit Agreement as amended by the Third Credit
Agreement Amendment,".

                  Section 6. Amendment to Section 8.8 (Limitation on Negative
Pledge Clauses). Section 8.8 of the Investment Agreement is hereby amended by
inserting in clause (a) of such Section 8.8 immediately after the phrase "this
Agreement and the other Note Financing Documents" the phrase ", the Barbados
Investment Agreement and any Note Financing Documents as defined in the Barbados
Investment Agreement".

                  Section 7. Amendment to Section 10.1 (Events of Default).
Section 10.1(f) of the Investment Agreement is hereby amended by deleting the
phrase "or (ii)" in such Section 10.1(f) and inserting in lieu thereof the
phrase ", (ii) any Barbados Default Event shall occur or exist or (iii)".

                  Section 8. Amendment to Article XII (Definitions). (a) Article
XII of the Investment Agreement is hereby amended by adding the following new
definitions in the appropriate alphabetical order:

                           "Barbados Default Event" means a "Default" or "Event
                  of Default" as those terms are defined in the Barbados
                  Investment Agreement, or any other default or event of default
                  under the Barbados Investment Agreement.

                           "Barbados Investment Agreement" means the Investment
                  Agreement, dated as of August 5, 2002, among the Company, the
                  Parent and CD&R VI (Barbados), Ltd., as the same may be
                  amended, supplemented, waiver or otherwise modified from time
                  to time.

                           "Barbados Notes" means the "Notes" as defined in the
                  Barbados Investment Agreement.

                           "Third Credit Agreement Amendment" means the Third
                  Amendment, dated as of August 7, 2002, to the Credit
                  Agreement.

                  (b) Article XII of the Investment Agreement is hereby further
amended by deleting the phrase "or (4)" where it occurs in clause (k) of the
definition of "Permitted Liens" and inserting in lieu thereof the phrase ", (4)
securing the Barbados Notes or (5)" in clause (p) of the definition of
"Permitted Liens."

                  (c) Article XVIII of the Investment Agreement is hereby
amended by adding the following provision as Section 13.17 of the Investment
Agreement:

                                        2



                           "Limitation on Certain Transactions. The Investor
                  hereby agrees that, from and after the date hereof, neither
                  the Investor nor any other investment vehicle managed by
                  Clayton, Dubilier & Rice, Inc. shall engage in any Rule 13e-3
                  transaction, as such term is defined in Rule 13e-3 of the
                  Exchange Act, without the prior written consent of the Special
                  Committee (as such term is defined in the Barbados Investment
                  Agreement). The agreements in this Section 13.17 shall survive
                  repayment of the Notes and all other amounts payable hereunder
                  and the issuance of the Warrants."

                  Section 9. Amendments to Guarantee and Collateral Agreement.
The definition of "Credit Agreement" in Section 1.1 of the Guarantee and
Collateral Agreement is hereby amended by deleting "2001" and inserting in lieu
thereof "2000".

                  Section 10. Consent. The Investor hereby consents to the
amendment contained in the Third Credit Agreement Amendment to Section 14.12(e)
of the Credit Agreement.

                  Section 11. Waiver. In furtherance of the foregoing, the
Investor consents to the Company's and the Parent's execution, delivery and
performance of the Investment Agreement, dated as of the date of this Amendment,
among the Company, the Parent and CD&R VI (Barbados), Ltd., and hereby waives
any default or event of default under the Investment Agreement or the other Note
Financing Documents that may result from such execution, delivery or
performance.

                  Section 12. Representation and Warranties; No Defaults or
Events of Default. Each of the Company and the Parent represents and warrants to
the Administrative Agent and the Lenders that as of the date hereof, after
giving effect to this Amendment, no Default or Event of Default has occurred and
is continuing, and the representations and warranties made by the Company and
the Parent in or pursuant to the Investment Agreement or any other Note
Financing Document are true and correct in all material respects on and as of
the date hereof as if made on such date (except to the extent of changes
resulting from transactions contemplated or permitted by this Amendment, and
except to the extent that any such representations and warranties expressly
relate to an earlier date, in which case such representations and warranties
were true and correct in all material respects on and as of such earlier date).

                  Section 13. Payment of Expenses. The Company agrees to pay or
reimburse the Investor for all of its reasonable out-of-pocket costs and
expenses incurred in connection with this Amendment, any other documents
prepared in connection herewith and the transactions contemplated hereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Investor.

                  Section 14. Continuing Effect of the Investment Agreement.
This Amendment shall not constitute an amendment or waiver of or consent to any
provision of the Investment Agreement not expressly referred to herein and shall
not be construed as an amendment, waiver or consent to any action on the part of
the Parent or the Company or any of its Subsidiaries that would require an
amendment, waiver or consent of the Investor except as expressly stated herein.
Except as expressly amended hereby, the provisions of the Investment Agreement
are and shall remain in full force and effect in accordance with its terms.

                                       3



                  Section 15. Counterparts. This Amendment may be executed by
one or more of the parties to this Amendment on any number of separate
counterparts (including by facsimile), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

                  Section 16. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

            [The remainder of this page is intentionally left blank.]

                                       4



                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.

                                    ACTERNA LLC



                                    By: __________________________________
                                          Name:
                                          Title:

                                    ACTERNA CORPORATION



                                    By: ____________________________________
                                          Name:
                                          Title:



                                    CLAYTON, DUBILIER & RICE FUND VI
                                     LIMITED PARTNERSHIP

                                    By: CD&R Associates VI Limited Partnership,
                                     its general partner

                                    By: CD&R Investment Associates VI, Inc., its
                                     managing general partner


                                    By: ____________________________________
                                          Name:
                                          Title:




                           ACKNOWLEDGMENT AND CONSENT

         Each of the undersigned as guarantors under the Guarantee and
Collateral Agreement, dated as of December 27, 2001, made by the undersigned in
favor of the Investor and the other Secured Parties referred to therein, hereby
(a) consents to the transactions contemplated by this Amendment and (b)
acknowledges and agrees that the guarantees (and grants of collateral security
therefor) contained in such Guarantee and Collateral Agreement are, and shall
remain, in full force and effect after giving effect to this Amendment.

                                    ACTERNA BUSINESS TRUST



                                    By: ____________________________________
                                          Name:
                                          Title:


                                    Airshow, Inc.



                                    By: ____________________________________
                                          Name:
                                          Title:


                                    APPLIED DIGITAL ACCESS, INC.

                                    By: ____________________________________
                                          Name:
                                          Title:


                                    DA VINCI SYSTEMS, INC.



                                    By: ____________________________________
                                          Name:
                                          Title:




                                    ITRONIX CORPORATION

                                    By: ____________________________________
                                          Name:
                                          Title:

EX-4.17

                                                                    Exhibit 4.17

         AMENDMENT NO. 3, dated as of August 5, 2002 ("Amendment No. 3"), among
Acterna Corporation, a Delaware corporation (the "Company"), Clayton, Dubilier &
Rice Fund V Limited Partnership, a Cayman Islands limited partnership ("Fund
V"), Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands
limited partnership ("Fund VI") and CD&R VI (Barbados), Ltd., a company
organized under the laws of Barbados ("CD&R Barbados"), to the Registration
Rights Agreement, dated as of May 21, 1998 (the "Registration Rights
Agreement"), among the Company, Fund V and the other parties thereto, and as
previously amended by Amendment No. 1, dated as of May 23, 2000, among the
Company, Fund V and Fund VI and as further amended by Amendment No. 2, dated as
of January 15, 2002, among the Company, Fund V and Fund VI. Capitalized terms
used herein without definition have the meanings given to them in the
Registration Rights Agreement.

         WHEREAS, in order to obtain additional liquidity for general corporate
purposes, Acterna LLC, a Delaware limited liability company wholly-owned and
controlled by the Company ("Acterna LLC"), and the Company entered into an
Investment Agreement, dated as of August 5, 2002 (the "Series 2 Notes Investment
Agreement") with CD&R Barbados, under which Acterna LLC agreed to issue and sell
to CD&R Barbados its Senior Secured Convertible Notes Due 2007, Series 2 (the
"Series 2 Notes");

         WHEREAS, the Series 2 Investment Agreement and the Series 2 Notes
provide for the issuance by the Company of warrants (the "Warrants") to purchase
Common Stock to the holders of any Series 2 Notes repurchased or redeemed by
Acterna LLC prior to their stated maturity; and

         WHEREAS, the Company, Fund V, Fund VI and CD&R Barbados desire to amend
the Registration Rights Agreement to provide registration rights to CD&R
Barbados in respect of the shares of Common Stock issuable upon conversion of
the Series 2 Notes or upon exercise of the Warrants.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements herein made, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

         1. Amendment to Section 2. The definition of "Registrable Securities"
in Section 2 of the Registration Rights Agreement is hereby amended to read in
its entirety as follows:

                  "Registrable Securities": (a) The Common Stock (i) received by
                  Fund V, the Manager and the Trusts as a result of the Merger,
                  (ii) issued to each of Fund V and Fund VI pursuant to the Fund
                  Stock Subscription Agreements, (iii) issued to Fund VI (or any
                  permitted transferee) upon conversion of any of the Company's
                  12% Senior Secured Convertible Notes Due 2007 (the "Notes")
                  issued pursuant to that certain Investment Agreement, dated as
                  of December 27, 2001 (the "Investment Agreement"), between the



                  Company, Acterna LLC and Fund VI, (iv) issued to Fund VI (or
                  any permitted transferee) upon exercise of any warrants to
                  purchase Common Stock received by Fund VI (or its transferee)
                  pursuant to the Investment Agreement or the Notes, (v) issued
                  to CD&R VI (Barbados), Ltd. ("CD&R Barbados") (or any
                  permitted transferee) upon conversion of any of the Company's
                  Senior Secured Convertible Notes Due 2007, Series 2 (the
                  "Series 2 Notes") issued pursuant to that certain Investment
                  Agreement, dated as of August 5, 2002 (the "Series 2 Notes
                  Investment Agreement"), among the Company, Acterna LLC and
                  CD&R Barbados, (vi) issued to CD&R Barbados (or any permitted
                  transferee) upon exercise of any warrants to purchase Common
                  Stock received by CD&R Barbados (or its transferee) pursuant
                  to the Series 2 Notes Investment Agreement or the Series 2
                  Notes, or (vii) issued to Individual Investors pursuant to a
                  stock subscription agreement or other agreement that provides
                  that such Common Stock shall be Registrable Securities, (b)
                  any shares of Common Stock issued pursuant to the terms of,
                  and under the circumstances set forth in, Section 4, and (c)
                  any securities issued or issuable with respect to any Common
                  Stock referred to in the foregoing clauses (w) upon any
                  conversion or exchange thereof, (x) by way of stock dividend
                  or stock split, (y) in connection with a combination of
                  shares, recapitalization, merger, consolidation or other
                  reorganization or (z) otherwise, in all cases subject to the
                  last paragraph of Section 3.3. As to any particular
                  Registrable Securities, once issued such securities shall
                  cease to be Registrable Securities when (A) a registration
                  statement (other than a Special Registration pursuant to which
                  such securities were issued by the Company) with respect to
                  the sale of such securities shall have become effective under
                  the Securities Act and such securities shall have been
                  disposed of in accordance with such registration statement,
                  (B) such securities shall have been distributed to the public
                  in reliance upon Rule 144, (C) such securities shall have been
                  otherwise transferred, new certificates for such securities
                  not bearing a legend restricting further transfer shall have
                  been delivered by the Company and subsequent disposition of
                  such securities shall not require registration or
                  qualification of such securities under the Securities Act or
                  any similar state law then in force, or (D) such securities
                  shall have ceased to be outstanding.

         2. Confirmation of Registration Rights Agreement. Other than as
expressly modified pursuant to this Amendment, all provisions of the
Registration Rights Agreement remain unmodified and in full force and effect.

         3. Miscellaneous. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule to the extent such provision
or rule would require or permit the application of the laws of any jurisdiction
other than the State of

                                       2



New York. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument and shall bind and inure to the benefit of the parties
and their respective successors and assigns.

                                       3



         IN WITNESS WHEREOF, each of the undersigned has executed this Amendment
as of the date first written above.

                     ACTERNA CORPORATION


                     By:______________________________
                        Name:
                        Title:


                     CLAYTON, DUBILIER & RICE
                        FUND V LIMITED PARTNERSHIP

                     By:   CD&R Associates V Limited Partnership,
                             the general partner

                     By:   CD&R Investment Associates II, Inc.,
                             its managing general partner



                     By:______________________________
                        Name:
                        Title:


                     CLAYTON, DUBILIER & RICE
                        FUND VI LIMITED PARTNERSHIP

                     By:   CD&R Associates VI Limited Partnership,
                             the general partner

                     By:   CD&R Investment Associates VI, Inc.,
                             its managing general partner



                     By:______________________________
                        Name:
                        Title:

                                       4



                     CD&R VI (BARBADOS), LTD.

                     By:   Corporate Services Limited,
                           Secretary

                     By:______________________________
                        Name:
                        Title:

                                       5

EX-10.25

                                                                   Exhibit 10.25

                                 THIRD AMENDMENT

                  THIRD AMENDMENT, dated as of August 7, 2002 (this
"Amendment"), to the Credit Agreement, dated as of May 23, 2000 (as amended,
supplemented or otherwise modified, the "Credit Agreement"), among Acterna LLC
(f/k/a Dynatech LLC), a Delaware limited liability company (the "Primary
Borrower"), Acterna International GmbH, a German company, the banks and other
financial institutions from time to time parties thereto (collectively, the
"Lenders"), JPMorgan Chase Bank (as successor by merger to Morgan Guaranty Trust
Company of New York), as agent for the German Term Loan Lenders named therein,
JPMorgan Chase Bank (as successor by merger to Morgan Guaranty Trust Company of
New York), as administrative agent (in such capacity, the "Administrative
Agent") for the Lenders, Credit Suisse First Boston, as syndication agent for
the Lenders and JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank) and Bankers
Trust Company, each in its capacity as co-documentation agents for the Lenders.

                              W I T N E S S E T H:

                  WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
the Primary Borrower;

                  WHEREAS, the Primary Borrower has requested the Lenders to
agree to amend the Credit Agreement; and

                  WHEREAS, the Lenders have agreed to the requested amendments
but only on the terms and conditions contained in this Amendment;

                  NOW, THEREFORE, the parties hereto hereby agree as follows:

                  Section 1. Defined Terms. Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.

                  Section 2. Amendment to Subsection 1.1 (Definitions).
Subsection 1.1 of the Credit Agreement is hereby amended as follows:

                  (a) by deleting therefrom the definition of the following
defined terms in their respective entireties and substituting in lieu thereof
the following definitions:

                  "'Additional Indebtedness': Indebtedness of the Primary
                  Borrower (i) having terms and conditions not less favorable to
                  the Primary Borrower than those of the Convertible Notes or
                  (ii) issued pursuant to the CD&R Barbados Purchase Agreement,
                  as the same may be amended, supplemented or otherwise modified
                  from time to time in accordance with



                  subsection 14.12. Such Indebtedness may be secured and
                  guaranteed to the same extent as the Convertible Notes so long
                  as (a) such Indebtedness is held by one or more members of the
                  CD&R Group and (b) the holder or holders of such Indebtedness
                  be or become party to the Intercreditor Agreement as
                  contemplated by paragraph 18(d) of the Intercreditor
                  Agreement."

                  "'Applicable Margin": (a) with respect to Tranche B Loans,
                  4.25% (for Eurocurrency Loans), and 3.25% (for ABR Loans), (b)
                  with respect to the German Term Loan, 0.30% and (c) with
                  respect to Revolving Credit Loans, Swing Line Loans, Tranche A
                  Loans and Reimbursement Term Loans (if any), the rate per
                  annum set forth below under the relevant column heading below
                  opposite the Level then in effect:

                 ===============================================================
                                                      Applicable Margin
                                         ---------------------------------------
                          Level             Eurocurrency            ABR Loans
                                               Loans
                 ---------------------------------------------------------------
                         Level I                2.75%                 1.75%
                        Level II                3.00%                 2.00%
                        Level III               3.25%                 2.25%
                        Level IV                3.50%                 2.50%
                         Level V                3.75%                 2.75%

                 ===============================================================

                  Notwithstanding the foregoing, (y) the "Applicable Margin"
                  from time to time in effect for Swing Line Loans shall be the
                  rate which would then be applicable to Revolving Credit Loans
                  which are ABR Loans and (z) for each day prior to the date
                  which is six months following the Closing Date, the Level in
                  effect shall be deemed to be Level V."; and

                  "'Credit Documents': this Agreement, the Notes, the German
                  L/C, the Applications, the Intercreditor Agreement, the
                  Airshow Sale Proceeds Cash Collateral Agreement and the
                  Security Documents."

                  (b) by adding the following new definitions in the appropriate
alphabetical order:

                  "'Airshow Sale Proceeds Cash Collateral Account': the "Cash
                  Collateral Account" as defined in the Airshow Sale Proceeds
                  Cash Collateral Agreement."

                  "'Airshow Sale Proceeds Cash Collateral Agreement: the Cash
                  Collateral Agreement, dated as of the Third Amendment
                  Effective Date, among the

                                       2



                  Primary Borrower, the Securities Intermediary named therein
                  and the Administrative Agent, as the same may be amended from
                  time to time in accordance with this Agreement."

                  "'Available Airshow Sale Proceeds: an amount equal to (a)
                  $24,000,000, less (b) the amount, if any, by which $10,000,000
                  exceeds the aggregate purchase price of Senior Subordinated
                  Notes purchased by CD&R Barbados and its Affiliates in
                  connection with the Senior Subordinated Notes Tender Offer
                  (based upon evidence of such aggregate purchase price
                  delivered, and reasonably acceptable, to the Administrative
                  Agent)."

                  "'CD&R Barbados': CD&R VI (Barbados), Ltd., a company
                  organized under the laws of Barbados and a wholly-owned
                  Subsidiary of the Investor."

                  "'CD&R Barbados Purchase Agreement': the Investment Agreement,
                  dated on or about the Third Amendment Effective Date, among
                  the Primary Borrower, the Guarantor and CD&R Barbados with
                  respect to the right of CD&R Barbados to purchase Additional
                  Indebtedness."

                  "'CD&R Barbados Senior Subordinated Notes Agreement': the
                  Agreement, dated on or about the Third Amendment Effective
                  Date, among CD&R Barbados and the Administrative Agent with
                  respect to Senior Subordinated Notes owned by CD&R Barbados."

                  "'Extraordinary Prepayment Date': the date on which the
                  aggregate principal amount of all optional or mandatory
                  prepayments of the Term Loans (other than pursuant to
                  paragraphs (i) and (j) of subsection 9.5) during the period
                  from and after the consummation of the Permitted Airshow Sale
                  to and including June 30, 2003, equals or exceeds
                  $100,000,000."

                  "'Permitted Airshow Sale':  as defined in subsection 14.5(m)."

                  "[Text redacted.]:  as defined in subsection 14.5(n).

                  "[Text redacted.]:  as defined in subsection 14.5(n).

                  "'Senior Subordinated Notes Tender Offer: as defined in
                  subsection 14.12(a)."

                  "'Third Amendment Effective Date': the date on which the Third
                  Amendment to this Agreement becomes effective in accordance
                  with its terms."

                                       3



                  Section 3. Amendment to Section 9.5 (Mandatory Reduction of
Commitments and Prepayments). Section 9.5 is hereby amended as follows:

                  (a) by deleting the phrase "subsection 9.5(c), (d) or (e)"
where it appears in subsections 9.5(f) and 9.5(g) and inserting in lieu thereof
the phrase "subsection 9.5(c), (d), (e), (i), (j) or (k)"; and

                  (b) by inserting the following new subsections at the end
thereof:

                  "(i) Upon consummation of the Permitted Airshow Sale, the
                  Primary Borrower shall give notice thereof to the
                  Administrative Agent, and shall deliver 100% of the Net
                  Proceeds from such sale to the Administrative Agent. The
                  Administrative Agent shall (i) immediately deposit $24,000,000
                  of such Net Proceeds into the Airshow Sale Proceeds Cash
                  Collateral Account to be administered in accordance with the
                  terms of the Airshow Sale Proceeds Cash Collateral Agreement
                  and (ii) on the applicable Mandatory Prepayment Date, apply
                  the balance of such Net Proceeds to the prepayment of the
                  Loans and reduction of the Commitments in accordance with the
                  provisions of subsection 9.5(f).

                  (j) On the date that is 75 days after the Third Amendment
                  Effective Date (or such earlier date as the Primary Borrower
                  shall request in writing), the Primary Borrower shall give
                  notice to the Administrative Agent, and on the applicable
                  Mandatory Prepayment Date, the Administrative Agent shall
                  apply the funds on deposit in the Airshow Sale Proceeds Cash
                  Collateral Account to the prepayment of the Loans and
                  reduction of the Commitments in accordance with the provisions
                  of subsection 9.5(f) and the Airshow Sale Proceeds Cash
                  Collateral Agreement (it being understood and agreed that if
                  the Senior Subordinated Notes Tender Offer is consummated
                  prior to such date, the Available Airshow Sale Proceeds shall
                  be released to the Primary Borrower on such earlier date
                  pursuant to the terms of the Airshow Sale Proceeds Cash
                  Collateral Agreement).

                  (k) [Text redacted.]

                  Section 4. Amendment to Section 12.2 (Certificates; Other
Information). Section 12.2 of the Credit Agreement is hereby amended by deleting
the word "copies" the second time it occurs in Subsection 12.2(d) and inserting
in lieu thereof the word "notice".

                  Section 5. Amendment to Section 13.1 (Minimum Interest
Coverage Ratio). Section 13.1 of the Credit Agreement is hereby amended by
inserting the following proviso at the end of such Section:

                                       4



                  "provided, however, that at any time after the Extraordinary
                  Prepayment Date, the references to each of the fiscal quarters
                  ending June 30, 2003, September 30, 2003, December 31, 2003
                  and March 31, 2004 set forth above and the ratio set forth
                  opposite each such period shall be deemed to be deleted."

                  Section 6. Amendment to Section 13.2 (Maximum Leverage
Coverage Ratio). Section 13.2 of the Credit Agreement is hereby amended by
inserting the following proviso at the end of such Section:

                  "provided, however, that at any time after the Extraordinary
                  Prepayment Date, the references to each of the fiscal quarters
                  ending June 30, 2003, September 30, 2003, December 31, 2003
                  and March 31, 2004 set forth above and the ratio set forth
                  opposite each such period shall be deemed to be deleted."

                  Section 7. Amendment to Section 13.3 (Minimum EBITDA). Section
13.3 of the Credit Agreement is hereby amended by deleting such Section in its
entirety and inserting in lieu thereof the following new Section:

                  "Section 13.3 Minimum EBITDA. (a) So long as the Permitted
                  Airshow Sale has not been consummated, permit EBITDA for any
                  period of consecutive fiscal quarters of the Guarantor set
                  forth below to be less than the amount set forth opposite such
                  period:

                  Fiscal Periods                            EBITDA
                  --------------                            ------

                  Two fiscal quarters ending 9/30/02        negative $10,000,000

                  Three fiscal quarters ending 12/31/02     $17,000,000

                  Four fiscal quarters ending 3/31/03       $40,000,000.

                  (b) At any time after the Permitted Airshow Sale has been
                  consummated and so long as the Extraordinary Prepayment Date
                  has not occurred, permit EBITDA for any period of consecutive
                  fiscal quarters of the Guarantor set forth below to be less
                  than the amount set forth opposite such period:

                  Fiscal Periods                            EBITDA
                  --------------                            ------

                  Two fiscal quarters ending 9/30/02        negative $40,000,000

                                       5



                  Three fiscal quarters ending 12/31/02     negative $17,000,000

                  Four fiscal quarters ending 3/31/03       -- 0 --.

                  (c) At any time after the Permitted Airshow Sale has been
                  consummated and the Extraordinary Prepayment Date has
                  occurred, permit EBITDA for any period of consecutive fiscal
                  quarters of the Guarantor set forth below to be less than the
                  amount set forth opposite such period:

                  Fiscal Periods                            EBITDA
                  --------------                            ------

                  Four fiscal quarters ending 6/30/03       $20,000,000

                  Four fiscal quarters ending 9/30/03       $30,000,000

                  Four fiscal quarters ending 12/31/03      $40,000,000

                  Four fiscal quarters ending  3/31/04      $50,000,000.

                  (d)  [Text redacted.]

                  (e)  [Text redacted.]

                  Section 8. Amendment to Section 14.1 (Indebtedness). Section
14.1 of the Credit Agreement and Section 14.1 of Exhibit K to the Credit
Agreement are each hereby amended by deleting the proviso in paragraph (e)
thereof in its entirety and inserting in lieu thereof the following new proviso:

                  "provided that the aggregate principal amount at any time
                  outstanding of Convertible Notes and Additional Indebtedness
                  shall not exceed the sum of (x) $125,000,000, plus (y) the
                  amount of Additional Indebtedness under the CD&R Barbados
                  Purchase Agreement, plus (z) the amount of any interest
                  accreted or paid in kind in respect of the Convertible Notes
                  and the Additional Indebtedness."

                  Section 9.  [Text redacted.]

                  Section 10. Amendment to Section 14.5 (Limitation on Sale of
Assets). Section 14.5 of the Credit Agreement and Section 14.5 of Exhibit K to
the Credit Agreement are each hereby amended by (i) deleting the word "and"
following paragraph (k) thereof, and (ii) deleting the period at the end of
paragraph (l) thereof and inserting in lieu thereof a semicolon followed by the
following:

                                       6



                  "(m) the sale of the Capital Stock or substantially all the
                  assets of Airshow, Inc. (the "Permitted Airshow Sale"),
                  provided that (i) the Primary Borrower shall receive
                  approximately $152,000,000 in Net Proceeds from such sale,
                  (ii) an amount equal to 100% of the Net Proceeds of such sale
                  shall be delivered to the Administrative Agent for application
                  in accordance with subsection 9.5(i) and (j), (iii) no Default
                  or Event of Default shall have occurred and be continuing
                  before and after giving effect to the consummation of such
                  sale and (iv) the terms and conditions of such sale shall be
                  as set forth in the Stock Purchase Agreement, dated as of June
                  13, 2002, among the Guarantor, the Primary Borrower and
                  Rockwell Collins Inc., and other terms and conditions of such
                  sale (including any amendment to such agreement) shall be
                  reasonably satisfactory to the Administrative Agent, its
                  counsel and other advisors; and

                  (n) [Text redacted.]

                  Section 11. Amendment to Subsection 14.6 (Restricted
Payments). Section 14.6 of the Credit Agreement and Section 14.6 of Exhibit K to
the Credit Agreement are each hereby amended as follows:

                  (a) by correcting the reference to clause "(iii)" in clause
(a) of Section 16 of the Second Amendment to the Credit Agreement to read clause
"(ii)"; and

                  (b) by inserting the phrase "or Additional Indebtedness" after
the phrase "Convertible Note Documents" (a) in clause (ii) of paragraph (c)
thereof and (b) in clause (ii) of paragraph (f) thereof.

                  Section 12. Amendment to Section 15.2 (Other Events of
Default). Section 15.2 of the Credit Agreement is hereby amended by inserting
the word "or" at the end of paragraph (j) thereof followed by the following new
paragraph:

                  "(k) (i) CD&R Barbados shall default in the observance or
                  performance of any agreement contained in the CD&R Barbados
                  Senior Subordinated Notes Agreement, (ii) the Primary Borrower
                  shall default in the observance or performance of any
                  agreement contained in the CD&R Barbados Purchase Agreement
                  that is adverse to the Lenders hereunder in any material
                  respect or (iii) any amendment, supplement, modification or
                  waiver of any of the terms of the CD&R Barbados Senior
                  Subordinated Notes Agreement which relates to any material
                  provision thereunder or otherwise adversely affects the
                  interests of the Lenders hereunder in any material respect
                  shall have occurred;"

                                       7



                  Section 13. Amendment to Section 14.12 (Optional Payments).
Section 14.12 of the Credit Agreement and Section 14.12 of Exhibit K to the
Credit Agreement are each hereby amended as follows:

                  (a) by inserting at the end of paragraph (a) thereof the
following (it being understood that the word "further" in the first phrase below
shall not be included in the amendment to Section 14.12 of Exhibit K):

                  "provided further, however, that the Primary Borrower shall be
                  permitted to make and consummate an offer (the "Senior
                  Subordinated Notes Tender Offer") to purchase a portion of the
                  Senior Subordinated Notes, provided that (i) the aggregate
                  purchase price of the Senior Subordinated Notes that are
                  acquired by the Primary Borrower or any of its Subsidiaries
                  pursuant to the Senior Subordinated Notes Tender Offer shall
                  not exceed $24,000,000, (ii) immediately upon the acquisition
                  of Senior Subordinated Notes by the Primary Borrower pursuant
                  to the Senior Subordinated Notes Tender Offer, the Primary
                  Borrower shall return such Senior Subordinated Notes to the
                  trustee under the Senior Subordinated Notes Indenture for
                  cancellation, (iii) no Default or Event of Default shall have
                  occurred and be continuing before and after giving effect to
                  the consummation of the Senior Subordinated Notes Tender
                  Offer, (iv) no Senior Subordinated Notes are purchased by the
                  Primary Borrower or any of its Subsidiaries prior to
                  consummation of the Permitted Airshow Sale and (v) the other
                  terms and conditions of the Senior Subordinated Notes Tender
                  Offer shall be reasonably satisfactory to the Administrative
                  Agent, its counsel and its other advisors," and

                  (b) by deleting the phrase "$125,000,000 plus the amount of
any interest accreted or paid in kind in respect thereof" in clause (e)(i)
thereof and inserting in lieu thereof the phrase "the aggregate amount of
Convertible Notes and Additional Indebtedness permitted to be incurred pursuant
to subsection 14.1(e)".

                  Section 14. New Section 17.17 (Financial Advisor). Section
17.17 of the Credit Agreement is hereby amended by inserting the following new
Subsection 17.17:

                  "Section 17.17 Financial Advisor. The Primary Borrower hereby
                  agrees (a) to the engagement of FTI Policano & Manzo ("P&M")
                  by counsel to the Administrative Agent as a financial advisor
                  in connection with this Agreement and the other Credit
                  Documents to, among other things, monitor the financial
                  performance of, make visits to, and discuss financial,
                  operational and collateral matters with the Primary Borrower
                  and its Subsidiaries and to advise the Administrative Agent,
                  its counsel and the Lenders with respect to such matters, (b)
                  to cooperate (and cause its

                                       8



                  Subsidiaries to cooperate) with P&M and provide P&M with
                  access to the properties, books and records of the Primary
                  Borrower and its Subsidiaries on the same terms as such access
                  is to be provided to the Administrative Agent pursuant to
                  subsection 12.6 (it being understood and agreed that P&M is to
                  keep confidential any Confidential Information on the same
                  terms and conditions as the Administrative Agent pursuant to
                  Section 17.15) and (c) to pay all reasonable fees and expenses
                  of P&M in connection with such engagement promptly upon
                  receipt of invoices for such fees and expenses."

                  Section 15. Conditions to Effectiveness. This Amendment shall
become effective on the date (the "Amendment Effective Date") on which the
Administrative Agent shall have received:

                  (a) this Amendment, duly executed and delivered by each of the
Borrowers, each Subsidiary Guarantor and the Majority Lenders;

                  (b) reasonably satisfactory evidence that CD&R Barbados and
its Affiliates own an aggregate principal amount of Senior Subordinated Notes
equal to $50,000,000;

                  (c) the Airshow Cash Collateral Agreement, duly executed and
delivered by the parties thereto, on terms and conditions reasonably
satisfactory to the Administrative Agent;

                  (d) the CD&R Barbados Senior Subordinated Notes Agreement,
duly executed and delivered by the parties thereto, on terms and conditions
reasonably satisfactory to the Administrative Agent;

                  (e) the CD&R Barbados Purchase Agreement, duly executed and
delivered by the parties thereto, on terms and conditions reasonably
satisfactory to the Administrative Agent;

                  (f) an amendment fee, for the account of the Lenders that have
delivered an executed signature page to this Amendment to the Administrative
Agent or its counsel no later than 5:00 p.m., New York City time, on July 12,
2002, in an amount equal to 0.125% of the aggregate amount (without duplication)
of the Commitments in effect and Loans outstanding of such Lenders; and

                  (g) an executed legal opinion of each of Debevoise & Plimpton,
the general counsel of the Primary Borrower and Barbados counsel to CD&R
Barbados, in each case covering such matters relating to the transactions
contemplated hereby as shall be reasonably requested by the Administrative
Agent.

                                       9



                  The Administrative Agent shall promptly notify the Primary
Borrower in writing upon the occurrence of the Amendment Effective Date.

                  Section 16. Representation and Warranties; No Defaults or
Events of Default. The Primary Borrower represents and warrants to the
Administrative Agent and the Lenders that as of the Amendment Effective Date,
after giving effect to this Amendment, no Default or Event of Default has
occurred and is continuing, and the representations and warranties made by the
Borrowers in or pursuant to the Credit Agreement or any other Credit Document
are true and correct in all material respects on and as of the Amendment
Effective Date as if made on such date (except to the extent that any such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties were true and correct in all material
respects on and as of such earlier date).

                  Section 17. Payment of Expenses. The Primary Borrower agrees
to pay or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with this Amendment, any
other documents prepared in connection herewith and the transactions
contemplated hereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent.

                  Section 18. Continuing Effect of the Credit Agreement. This
Amendment shall not constitute an amendment or waiver of or consent to any
provision of the Credit Agreement not expressly referred to herein and shall not
be construed as an amendment, waiver or consent to any action on the part of the
Borrowers that would require an amendment, waiver or consent of the
Administrative Agent or the Lenders except as expressly stated herein. Except as
expressly amended hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect in accordance with its terms.

                  Section 19. Counterparts. This Amendment may be executed by
one or more of the parties to this Amendment on any number of separate
counterparts (including by facsimile), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

                  Section 20. Release. Each Borrower hereby acknowledges and
agrees that (i) it is truly and justly indebted to the Administrative Agent and
the Lenders on account of the Obligations (as defined in the Collateral
Agreement) without any defense, counterclaim or setoff of any kind and (ii) it
releases the Administrative Agent and each Lender from any claim, cause of
action or liability at any time arising prior to the date hereof out of or with
respect to the Credit Agreement, this Amendment and the transactions
contemplated hereby, other than as a result of the Administrative Agent's or
such Lender's gross negligence or willful misconduct.

                                       10



                  Section 21. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

            [The remainder of this page is intentionally left blank.]

                                       11



                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.

                                        ACTERNA LLC


                                        By:_____________________________
                                           Name:
                                           Title:

                                        ACTERNA INTERNATIONAL GMBH

                                        By:_____________________________
                                           Name:
                                           Title:



                                        ________________________________
                                        (NAME OF LENDER)


                                        By:_____________________________
                                           Name:
                                           Title:



                           ACKNOWLEDGMENT AND CONSENT

         Each of the undersigned as guarantors under the Guarantee and
Collateral Agreement, dated as of May 23, 2000, made by the undersigned in favor
of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents
to the transactions contemplated by this Amendment and (b) acknowledges and
agrees that the guarantees (and grants of collateral security therefor)
contained in such Guarantee and Collateral Agreement are, and shall remain, in
full force and effect after giving effect to this Amendment.

                                        ACTERNA BUSINESS TRUST

                                        By:___________________________________
                                           Name:
                                           Title:

                                        AIRSHOW, INC.


                                        By:___________________________________
                                           Name:
                                           Title:

                                        APPLIED DIGITAL ACCESS, INC.


                                        By:___________________________________
                                           Name:
                                           Title:

                                        DA VINCI SYSTEMS, INC.


                                        By:___________________________________
                                           Name:
                                           Title:



                                        ITRONIX CORPORATION


                                        By:___________________________________
                                           Name:
                                           Title:

EX-10.26

                                                                   Exhibit 10.26

                       GUARANTEE AND COLLATERAL AGREEMENT

                                     made by

                                   ACTERNA LLC

                                 and its parent

                               ACTERNA CORPORATION

                                       and

                           certain of its Subsidiaries

                                   in favor of

                            CD&R VI (Barbados), Ltd.
                   and the other Secured Parties named herein

                           Dated as of August 7, 2002




                                TABLE OF CONTENTS



                                                                                      Page
                                                                                   
SECTION 1.  DEFINED TERMS .............................................................  2
1.1      Definitions ..................................................................  2
1.2      Other Definitional Provisions ................................................  8

SECTION 2.  GUARANTEE .................................................................  9
2.1      Guarantee ....................................................................  9
2.2      Right of Contribution ........................................................ 10
2.3      No Subrogation ............................................................... 10
2.4      Amendments, etc. with respect to the Obligations ............................. 10
2.5      Guarantee Absolute and Unconditional ......................................... 11
2.6      Reinstatement ................................................................ 12
2.7      Payments ..................................................................... 12

SECTION 3.  GRANT OF SECURITY INTEREST ................................................ 12
3.1      Grant ........................................................................ 12
3.2      Pledged Collateral ........................................................... 14
3.3      Certain Exceptions ........................................................... 14

SECTION 4.  REPRESENTATIONS AND WARRANTIES ............................................ 15
4.1      Representations and Warranties of Each Guarantor ............................. 15
4.2      Representations and Warranties of Each Grantor ............................... 15
         4.2.1    Title; No Other Liens ............................................... 15
         4.2.2    Perfected Third Priority Liens ...................................... 15
         4.2.3    Jurisdiction of Organization ........................................ 17
         4.2.4    Inventory and Equipment ............................................. 18
         4.2.5    Farm Products ....................................................... 18
         4.2.6    Accounts ............................................................ 18
         4.2.7    Patents and Trademarks .............................................. 18
4.3      Representations and Warranties of Each Pledgor ............................... 18

SECTION 5.  COVENANTS ................................................................. 19
5.1      Covenants of Each Guarantor .................................................. 19
5.2      Covenants of Each Grantor .................................................... 20
         5.2.1    Delivery of Instruments and Chattel Paper ........................... 20
         5.2.2    Maintenance of Insurance ............................................ 20
         5.2.3    Payment of Obligations .............................................. 21
         5.2.4    Maintenance of Perfected Security Interest; Further Documentation ... 21
         5.2.5    Deposit Accounts .................................................... 22
         5.2.6    Changes in Name, etc ................................................ 22


                                       ii



                                                                                   
         5.2.7    Notices ............................................................. 22
         5.2.8    Pledged Securities .................................................. 22
         5.2.9    Accounts ............................................................ 23
         5.2.10   Maintenance of Records .............................................. 23
         5.2.11   Acquisition of Intellectual Property ................................ 23
         5.2.12   Protection of Trade Secrets ......................................... 24
5.3      Covenants of Each Pledgor .................................................... 24
5.4      Covenant of the Parent ....................................................... 26

SECTION 6.  REMEDIAL PROVISIONS ....................................................... 27
6.1      Certain Matters Relating to Accounts ......................................... 27
6.2      Communications with Obligors; Grantors Remain Liable ......................... 28
6.3      Pledged Stock ................................................................ 29
6.4      Proceeds to be Turned Over to Secured Parties ................................ 30
6.5      Application of Proceeds ...................................................... 31
6.6      Code and Other Remedies ...................................................... 32
6.7      Registration Rights .......................................................... 33
6.8      Waiver; Deficiency ........................................................... 34

SECTION 7.  THE SECURED PARTIES ....................................................... 34
7.1      Secured Parties' Appointment as Attorney-in-Fact, etc ........................ 34
7.2      Duty of Secured Parties ...................................................... 36
7.3      Execution of Financing Statements ............................................ 36
7.4      Authority of Secured Parties ................................................. 37
7.5      Right Of Inspection .......................................................... 37

SECTION 8.  MISCELLANEOUS ............................................................. 37
8.1      Amendments in Writing ........................................................ 37
8.2      Notices ...................................................................... 37
8.3      No Waiver by Course of Conduct; Cumulative Remedies .......................... 38
8.4      Enforcement Expenses; Indemnification ........................................ 38
8.5      Successors and Assigns ....................................................... 39
8.6      Set-Off ...................................................................... 39
8.7      Counterparts ................................................................. 39
8.8      Severability ................................................................. 39
8.9      Section Headings ............................................................. 40
8.10     Integration .................................................................. 40
8.11     GOVERNING LAW ................................................................ 40
8.12     Submission To Jurisdiction; Waivers .......................................... 40
8.13     Acknowledgments .............................................................. 41
8.14     WAIVER OF JURY TRIAL ......................................................... 41
8.15     Additional Granting Parties .................................................. 41
8.16     Releases ..................................................................... 41



                                      iii



                                                                                   
8.17     Senior Indebtedness .......................................................... 42
8.18     Schedules .................................................................... 43






                       GUARANTEE AND COLLATERAL AGREEMENT

         GUARANTEE AND COLLATERAL AGREEMENT, dated as of August 7, 2002, made by
Acterna Corporation, a Delaware corporation (the "Parent"), Acterna LLC, a
Delaware limited liability company wholly owned by the Parent (the "Company")
and certain Subsidiaries of the Company party hereto, in favor of CD&R VI
(Barbados), Ltd. ("CD&R Barbados"), and the other Secured Parties referred to
herein.

                              W I T N E S S E T H:

         WHEREAS, the Parent and the Company issued and sold to and Clayton,
Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited
partnership ("Fund VI"), $75,000,000 in aggregate principal amount of 12% Senior
Convertible Notes due December 31, 2007 of the Company (the "Fund VI Notes"),
pursuant to the Investment Agreement, dated as of December 27, 2001 (as amended,
waived, supplemented or otherwise modified from time to time, the "Fund VI
Investment Agreement"), among the Parent, the Company and Fund VI (the "Fund VI
Investment Agreement");

         WHEREAS, the Parent and the Company desire to issue and sell to CD&R
Barbados, and CD&R Barbados desires to purchase from the Parent and the Company,
Senior Convertible Notes due December 31, 2007, Series 2 of the Company (the
"Initial Notes"), pursuant to the Investment Agreement, dated as of August 5,
2002 (as amended, waived, supplemented or otherwise modified from time to time,
the "Investment Agreement"), among the Parent, the Company and CD&R Barbados;

         WHEREAS, the Company is a member of an affiliated group of companies
that includes the Parent, the Company's Active Subsidiaries which are Domestic
Subsidiaries and any Subsidiary of the Company that becomes a party hereto from
time to time after the date hereof (the Company, the Parent, the Company's
Active Subsidiaries which are Domestic Subsidiaries and each such other
Subsidiary collectively, the "Granting Parties");

         WHEREAS, the net proceeds of the issuance and sale of the Initial Notes
under the Investment Agreement will be utilized in meeting the working capital
needs of such affiliated group, including through making valuable transfers to
one or more of the Granting Parties in connection with the operation of their
respective businesses;

         WHEREAS, the Company and the other Granting Parties are engaged in
related businesses, and each such Granting Party will derive substantial direct
and indirect benefit from the issuance and sale of the Initial Notes under the
Investment Agreement; and



         WHEREAS, it is a condition to the obligation of CD&R Barbados to
purchase the Initial Notes under the Investment Agreement that the Granting
Parties shall execute and deliver this Agreement to CD&R Barbados;

         NOW, THEREFORE, in consideration of the premises and to induce CD&R
Barbados to enter into the Investment Agreement and purchase the Initial Notes,
each Granting Party hereby agrees with and for the benefit of the Investor and
the other Secured Parties, as follows:

                            SECTION 1. DEFINED TERMS

         1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
the Investment Agreement and used herein shall have the meanings given to them
in the Investment Agreement, and the following terms that are defined in the
Code (as defined below) are used herein as so defined: Chattel Paper, Documents,
Electronic Chattel Paper, Equipment, Farm Products and Fixtures.

         (b) The following terms shall have the following meanings:

         "Accounts": all accounts (as defined in the Code) of each Grantor.

         "Administrative Agent": JPMorgan Chase Bank (as successor by merger to
Morgan Guaranty Trust Company of New York), in its capacity as administrative
agent under the Credit Agreement Security Agreement.

         "Agreement": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.

         "Code": the Uniform Commercial Code as from time to time in effect in
the State of New York.

         "Collateral": as defined in Section 3.

         "Collateral Account Bank": JPMorgan Chase Bank or another bank selected
by the relevant Grantor and approved by the Secured Parties.

         "Collateral Proceeds Account": the cash collateral account established
by the relevant Grantor at an office of the Collateral Account Bank in the name
of the Secured Parties or their nominee.

         "Company Obligations": the collective reference to the unpaid principal
of and interest on the Notes and all other obligations and liabilities of the
Company (including, without limitation, interest accruing at the then applicable
rate provided in the Investment Agreement after the maturity of such Notes and
interest accruing at the then applicable

                                       2



rate provided in the Investment Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to any of the Secured
Parties, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Investment Agreement, this Agreement, the other Note
Financing Documents or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all reasonable fees and disbursements of counsel to any of the
Secured Parties that are required to be paid by the Company pursuant to the
terms of any of the foregoing agreements).

         "Contracts": with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof (except for the
contracts listed on Schedule 6), to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder.

         "Controlled Affiliate": as to the Company, any other Person that,
directly or indirectly, is controlled by the Company, the Parent, or any Person
of which the Company or the Parent is a Subsidiary. For the purposes of this
definition, "control" of a Person means the power, directly or indirectly, to
(a) vote 10% or more of the securities having ordinary voting power for the
election of directors of such Persons or (b) direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.

         "Copyright Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor providing for the grant by or to such
Grantor of any right to use any Copyright of such Grantor, other than agreements
with any Person who is an Affiliate or a Subsidiary of the Company, including,
without limitation, any license agreements listed on Schedule 4 hereto, subject,
in each case, to the terms of such license agreements, and the right to prepare
for sale, sell and advertise for sale, all Inventory now or hereafter covered by
such licenses.

         "Copyrights": with respect to any Grantor, all of such Grantor's right,
title and interest in and to all United States copyrights, whether or not the
underlying works of authorship have been published or registered, United States
copyright registrations and copyright applications, including, without
limitation the copyright registrations, if any,

                                       3



listed on Schedule 4 and (a) all renewals thereof, (b) all income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including, without limitation, payments under all licenses entered into in
connection therewith, and damages and payments for past or future infringements
thereof and (c) the right to sue or otherwise recover for past, present and
future infringements thereof.

         "Credit Agreement": the Credit Agreement, dated as of May 23, 2000,
among the Company, the German Borrowers named therein, the lenders from time to
time parties thereto, the Administrative Agent, JPMorgan Chase Bank (as
successor by merger to Morgan Guaranty Trust Company of New York) as agent for
the German Term Loan Lenders, and JPMorgan Chase Bank (f/k/a The Chase Manhattan
Bank) and Bankers Trust Company, each in its capacity as documentation agent, as
the same may be amended, supplemented or otherwise modified from time to time.

         "Credit Agreement Security Agreement": the Guarantee and Collateral
Agreement, dated as of May 23, 2000, made by the Company, the Parent and certain
subsidiaries of the Company in favor of JPMorgan Chase Bank (as successor by
merger to Morgan Guaranty Trust Company of New York), as administrative agent,
as the same may be amended, waived, supplemented or otherwise modified from time
to time.

         "Credit Documents": the collective reference to (x) the Credit
Agreement and (y) the Notes, the German L/C, the Applications and the Security
Documents, in each case as defined in the Credit Agreement as in effect on the
date hereof.

         "Deposit Accounts": with respect to any Grantor, all deposit accounts
(as defined by the Code) of such Grantor.

         "Fund VI Note Financing Documents": the Note Financing Documents as
defined in the Fund VI Investment Agreement.

         "Fund VI Secured Parties": the Secured Parties as defined in the Fund
VI Security Agreement.

         "Fund VI Security Agreement": the Guarantee and Collateral Agreement,
dated as of December 27, 2001, made by the Company, the Parent and certain
subsidiaries of the Company in favor of Fund VI and the other Fund VI Secured
Parties referred to therein, as the same may be amended, waived, supplemented or
otherwise modified from time to time.

         "Excluded Agreements":  as defined in Section 3.3(a).

         "General Intangibles": all "general intangibles" as such term is
defined in Section 9-102(a)(42) of the Uniform Commercial Code in effect in the
State of New York on the date hereof.

                                       4



         "Granting Parties":  as defined in the recitals hereto.

         "Grantor": the Company and each Domestic Subsidiary of the Company that
from time to time becomes a party hereto.

         "Guarantor Obligations": with respect to any Guarantor, the collective
reference to (i) the Obligations guaranteed by such Guarantor pursuant to
Section 2 and (ii) all obligations and liabilities of such Guarantor that may
arise under or in connection with this Agreement or any other Note Financing
Document to which such Guarantor is a party, in each case whether on account of
guarantee obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to any Secured Party that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Note Financing Document).

         "Guarantor":  each Granting Party other than the Company.

         "Instruments": has the meaning specified in the Code, but excluding the
Pledged Securities.

         "Intellectual Property": with respect to any Grantor, the collective
reference to such Grantor's Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trade Secrets, Trademarks and Trademark Licenses.

         "Investment Property": the collective reference to (i) all investment
property as such term is defined in Section 9-102(a)(49) of the New York UCC
(other than any Capital Stock of any Foreign Subsidiary excluded from the
definition of "Pledged Stock") and (ii) whether or not constituting "investment
property" as so defined, all Pledged Securities.

         "Intercompany Note": with respect to any Grantor, any promissory note
in a principal amount in excess of $1,000,000 evidencing loans made by such
Grantor to the Company or any of its Subsidiaries.

         "Inventory": with respect to any Grantor, all inventory (as defined in
the Code) of such Grantor.

         "Investor": CD&R Barbados and its successors and assigns, including any
transferee of the aggregate outstanding amount of the Notes held thereby that is
a member of the CD&R Group.

         "Issuers": the collective reference to the Persons identified on
Schedule 2 as the issuers of the Pledged Stock.

                                       5



         "Letter-of-Credit Rights": with respect to any Grantor, all
letter-of-credit rights (as defined in the Code) of such Grantor.

         "Management Subscription Agreements": as defined in the Credit
Agreement as in effect on the date hereof.

         "Notes": the collective reference to the "Notes" as defined in the
Investment Agreement.

         "Obligations": (i) in the case of the Company, the Company Obligations,
and (ii) in the case of each Guarantor, the Guarantor Obligations of such
Guarantor.

         "Patent Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary of the Company or such Grantor, in connection with any
of the Patents of such Grantor or such other Person's patents, whether such
Grantor is a licensor or a licensee under any such agreement, including, without
limitation, the license agreements listed on Schedule 4, subject, in each case,
to the terms of such license agreements, and the right to prepare for sale, sell
and advertise for sale, all Inventory now or hereafter covered by such licenses.

         "Patents": with respect to any Grantor, all of such Grantor's right,
title and interest in and to all United States patents, patent applications and
patentable inventions, including, without limitation, all patents and patent
applications identified in Schedule 4, and including, without limitation, (a)
all inventions and improvements described and claimed therein, (b) the right to
sue or otherwise recover for any and all past, present and future infringement
thereof, (c) all income, royalties, damages and other payments now and hereafter
due and/or payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (d) all other rights
corresponding thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever
of such Grantor accruing thereunder or pertaining thereto.

         "Permitted Liens": Permitted Liens (as defined in the Investment
Agreement) permitted under Section 8.6(a) of the Investment Agreement.

         "Pledged Collateral": with respect to any Pledgor, the Pledged
Securities owned or at any time acquired by such Pledgor, and any Proceeds
thereof.

         "Pledged Notes": with respect to any Pledgor, all Intercompany Notes at
any time issued to such Pledgor.

                                       6



         "Pledged Securities": the collective reference to the Pledged Notes and
the Pledged Stock.

         "Pledged Stock": with respect to any Pledgor, the shares of Capital
Stock listed on Schedule 2 as held by such Pledgor, together with any other
shares, stock certificates, options or rights of any nature whatsoever in
respect of the Capital Stock of any Issuer that may be issued or granted to, or
held by, such Pledgor while this Agreement is in effect (provided that, in no
event shall there be pledged, nor shall any Pledgor be required to pledge,
directly or indirectly, more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary pursuant to this Agreement).

         "Pledgor": the Parent (with respect to the Pledged Stock of the
Company), the Company (with respect to Pledged Stock of the entities listed on
Schedule 2 hereto under the name of the Company and any other Pledged Securities
held by the Company) and any other Granting Party (with respect to Pledged
Securities held by such Granting Party).

         "Proceeds": all "proceeds" as such term is defined in Section
9-102(a)(64) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, Proceeds of Pledged Securities shall
include, without limitation, all dividends or other income from the Pledged
Securities, collections thereon or distributions or payments with respect
thereto.

         "Secured Parties": means the Investor and each other member of the CD&R
Group that is a holder of any of the Notes.

         "Securities Act": the Securities Act of 1933, as amended from time to
time.

         "Security Collateral": with respect to any Granting Party, means,
collectively, the Collateral (if any) and the Pledged Collateral (if any) of
such Granting Party.

         "Trade Secrets": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trade secrets, including,
without limitation, know-how, processes, formulae, compositions, designs, and
confidential business and technical information, and all rights of any kind
whatsoever accruing thereunder or pertaining thereto, including, without
limitation, (a) all income, royalties, damages and payments now and hereafter
due and/or payable with respect thereto, including, without limitation, payments
under all licenses, non-disclosure agreements and memoranda of understanding
entered into in connection therewith, and damages and payments for past or
future misappropriations thereof, and (b) the right to sue or otherwise recover
for past, present or future misappropriations thereof.

         "Trademark Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a

                                       7



Subsidiary of the Company or such Grantor in connection with any of the
Trademarks of such Grantor or such other Person's names or trademarks, whether
such Grantor is a licensor or a licensee under any such agreement, including,
without limitation, the license agreements listed on Schedule 4, subject, in
each case, to the terms of such license agreements, and the right to prepare for
sale, sell and advertise for sale, all Inventory now or hereafter covered by
such licenses.

         "Trademarks": with respect to any Grantor, all of such Grantor's right,
title and interest in and to all United States trademarks, service marks, trade
names, trade dress or other indicia of trade origin or business identifiers,
trademark and service mark registrations, and applications for trademark or
service mark registrations (except for "intent to use" applications for
trademark or service mark registrations filed pursuant to Section 1(b) of the
Lanham Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use or a
Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and
any renewals thereof, including, without limitation, each registration and
application identified in Schedule 4, and including, without limitation, (a) the
right to sue or otherwise recover for any and all past, present and future
infringements or dilutions thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto (including,
without limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past or future infringements thereof),
and (c) all other rights corresponding thereto in the United States and all
other rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto in the United States, together in each case with the goodwill
of the business connected with the use of, and symbolized by, each such
trademark, service mark, trade name, trade dress or other indicia of trade
origin or business identifiers.

         "Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.

         1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Annex references are to this Agreement
unless otherwise specified.

             (b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

             (c) Where the context requires, terms relating to the Collateral,
Pledged Collateral or Security Collateral, or any part thereof, when used in
relation to a Granting Party shall refer to such Granting Party's Collateral,
Pledged Collateral or Security Collateral or the relevant part thereof.

                                       8



             (d) All references in this Agreement to any of the property
described in the definition of the term "Collateral" or "Pledged Collateral," or
to any Proceeds thereof, shall be deemed to be references thereto only to the
extent the same constitute Collateral or Pledged Collateral, respectively.

                              SECTION 2. GUARANTEE

         2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to (and for the ratable
benefit of) each of the Secured Parties, the prompt and complete payment and
performance by the Company when due and payable (whether at the stated maturity,
by acceleration or otherwise) of the Company Obligations.

             (b) Anything herein or in any other Note Financing Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Note Financing Documents shall in no event exceed the amount
that can be guaranteed by such Guarantor under applicable law, including
applicable federal and state laws relating to the insolvency of debtors.

             (c) Each Guarantor agrees that the Obligations guaranteed by it
hereunder may at any time and from time to time exceed the amount of the
liability of such Guarantor hereunder without impairing the guarantee contained
in this Section 2 or affecting the rights and remedies of any Secured Party
hereunder.

             (d) The guarantee contained in this Section 2 shall remain in full
force and effect until the earlier to occur of (i) the first date on which all
the Notes, all other Obligations then due and owing, and the obligations of each
Guarantor under the guarantee contained in this Section 2 then due and owing
shall have been satisfied by payment in full, or (ii) as to any Guarantor that
is a Subsidiary of the Company, the sale or other disposition of all of the
Capital Stock of such Guarantor (other than to a Controlled Affiliate of the
Company) as permitted under the Investment Agreement following which such
Guarantor is no longer a Subsidiary of the Company, provided that such guarantee
of such Guarantor shall only so terminate if such sale or other disposition
complies with the provisions of the Intercreditor Agreement (including but not
limited to Section 7 thereof).

             (e) No payment made by the Company, any of the Guarantors, any
other guarantor or any other Person or received or collected by any Secured
Party from the Company, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
any of the Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such

                                       9



Guarantor in respect of the Obligations or any payment received or collected
from such Guarantor in respect of the Obligations), remain liable for the
Obligations guaranteed by it hereunder up to the maximum liability of such
Guarantor hereunder until the earlier to occur of (i) the first date on which
the Notes and all other Obligations then due and owing, are paid in full or (ii)
as to any Guarantor that is a Subsidiary of the Company, the sale or other
disposition of all of the Capital Stock of such Guarantor (other than to a
Controlled Affiliate of the Company) as permitted under the Investment Agreement
following which such Guarantor is no longer a Subsidiary of the Company,
provided that such guarantee of such Guarantor shall only so terminate if such
sale or other disposition complies with the provisions of the Intercreditor
Agreement (including but not limited to Section 7 thereof).

         2.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder that has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to any of the Secured Parties, and each Guarantor shall remain
liable to each of the Secured Parties for the full amount guaranteed by such
Guarantor hereunder.

         2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by any Secured
Party, no Guarantor shall be entitled to be subrogated to any of the rights of
any Secured Party against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Secured Parties for the
payment of the Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
each of the Secured Parties by the Company on account of the Obligations are
paid in full. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Guarantor in trust for the
Secured Parties, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Secured Parties
in the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Secured Parties, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as any Secured Party may determine.

         2.4 Amendments, etc. with respect to the Obligations. To the maximum
extent permitted by law, each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor, any demand for payment
of any of the

                                       10



Obligations made by any Secured Party may be rescinded by such Secured Party and
any of the Obligations continued, and the Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Secured Party, and the
Investment Agreement or any other Note Financing Document and any other document
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Secured Parties (or any
of them) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Secured Party for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. No Secured Party shall have any obligation to protect, secure, perfect
or insure any Lien at any time held by any Secured Party as security for the
Obligations or for the guarantee contained in this Section 2 or any property
subject thereto, except to the extent required by applicable law.

         2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the
maximum extent permitted by applicable law, any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by any Secured Party upon the guarantee contained in this Section 2
or acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company or
any of the Guarantors, on the one hand, and any of the Secured Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives, to the maximum extent permitted by applicable law, diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or any of the other Guarantors with respect to the
Obligations. Each Guarantor understands and agrees, to the extent permitted by
law, that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment. Each Guarantor
hereby waives, to the maximum extent permitted by applicable law, any and all
defenses (other than any suit for breach of a contractual provision of any of
the Note Financing Documents) that it may have arising out of or in connection
with any and all of the following: (a) the validity or enforceability of the
Investment Agreement or any other Note Financing Document, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by any Secured
Party, (b) any defense, set-off or counterclaim (other than a defense of payment
or performance) that may at any time be available to or be asserted by the
Company against any Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Security Collateral, (e) any change in the
structure or existence of the Company, (f) any application of Security
Collateral to

                                       11



Obligations or (g) any other circumstance whatsoever (other than payment in full
of the Obligations guaranteed by it hereunder) (with or without notice to or
knowledge of the Company or such Guarantor) that constitutes, or might be
construed to constitute, an equitable or legal discharge of the Company for such
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, any
Secured Party may, but shall be under no obligation to, make a similar demand on
or otherwise pursue such rights and remedies as it may have against the Company,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations guaranteed by such Guarantor hereunder or any
right of offset with respect thereto, and any failure by any Secured Party to
make any such demand, to pursue such other rights or remedies or to collect any
payments from the Company, any other Guarantor or any other Person or to realize
upon any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Company, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Secured Party against any Guarantor. For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.

         2.6 Reinstatement. The guarantee of any Guarantor contained in this
Section 2 shall continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the Obligations
guaranteed by such Guarantor hereunder is rescinded or must otherwise be
restored or returned by any Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.

         2.7 Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to each Secured Party without set-off or counterclaim, in the
currency in which the relevant Obligations are outstanding pursuant to the
Investment Agreement, the relevant other Note Financing Document, or otherwise.
Such payments shall be made by wire transfer of immediately available funds to
an account designated by the Secured Party to whom such payment is due, or in
such other manner as may be designated in writing by such Secured Party to such
Guarantor from time to time.

                     SECTION 3. GRANT OF SECURITY INTEREST

         3.1 Grant. Each Granting Party that is a Grantor hereby grants, subject
to existing licenses to use the Copyrights, Patents, Trademarks and Trade
Secrets granted by

                                       12



such Grantor in the ordinary course of its business, to (and for the ratable
benefit of) each of the Secured Parties, a security interest in all of the
Collateral of such Grantor, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations of such Grantor, except as
provided in Section 3.3. The term "Collateral", as to any Grantor, means the
following property now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest, except as provided in Section 3.3:

             (a) all Accounts;

             (b) all Chattel Paper;

             (c) all Contracts;

             (d) all Deposit Accounts;

             (e) all Documents;

             (f) all Equipment (other than Vehicles);

             (g) all General Intangibles;

             (h) all Instruments;

             (i) all Intellectual Property;

             (j) all Inventory;

             (k) all Investment Property;

             (l) all Letter-of-Credit Rights;

             (m) all books and records pertaining to any of the foregoing;

             (n) the Collateral Proceeds Account; and

             (o) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees given
by any Person with respect to any of the foregoing;

provided that Collateral shall not include any Pledged Collateral, or any
property or assets specifically excluded from Pledged Collateral (including any
Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such
stock).

                                       13



         3.2 Pledged Collateral. Each Granting Party that is a Pledgor hereby
grants to (and for the ratable benefit of) each of the Secured Parties, a
security interest in all of the Pledged Collateral of such Pledgor, as
collateral security for the prompt and complete performance when due (whether at
the stated maturity, by acceleration or otherwise) of the Obligations of such
Pledgor, except as provided in Section 3.3.

         3.3 Certain Exceptions. No security interest is or will be granted
pursuant hereto in any right, title or interest of any Granting Party under or
in:

             (a) any Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements with or issued by Persons other than a Subsidiary of the Company
(collectively, "Excluded Agreements") that would otherwise be included in the
Security Collateral (and such Excluded Agreements shall not be deemed to
constitute a part of the Security Collateral) for so long as, and to the extent
that, the granting of such a security interest pursuant hereto would result in a
breach, default or termination of such Excluded Agreements; or

             (b) any Equipment that would otherwise be included in the Security
Collateral (and such Equipment shall not be deemed to constitute a part of the
Security Collateral) if such Equipment is subject to Permitted Liens permitted
under clause (h)(ii) of the definition of "Permitted Liens" in the Investment
Agreement that secure Purchase Money Obligations or Capitalized Lease
Obligations not exceeding $25,000,000 at any one time outstanding;

             (c) any Capital Stock of Holdings I GmbH held by the Primary
Borrower (so long as such Capital Stock is equal to or less than 1% of the
Capital Stock of Holdings I GmbH);

             (d) Capital Stock of any Subsidiary listed in Schedule 8 (so long
as such Capital Stock is not required to be pledged hereunder pursuant to the
Investment Agreement); or

             (e) any property or asset of such Granting Party to the extent (and
solely to the extent) that a security interest or other Lien shall not at any
time have been created in respect thereof securing Bank Indebtedness or in favor
of or for the benefit of any holder of Bank Indebtedness or any agent or
representative thereof (including without limitation the Administrative Agent);
provided that (i) any property or asset that shall at any time be or have been
subject to any such security interest or other Lien shall not be excluded from
the Security Collateral by operation of this clause (g), regardless of whether
such security interest or other Lien is subsequently released, extinguished or
otherwise terminated, and (ii) this clause (g) shall terminate and be of no
further force or effect, and any such property or asset shall thereupon and
thereafter constitute a part of

                                       14



the Security Collateral, from and after the occurrence of a "Termination" (as
defined in Section 11 of the Intercreditor Agreement).

                   SECTION 4. REPRESENTATIONS AND WARRANTIES

         4.1 Representations and Warranties of Each Guarantor. To induce the
Investor to enter into the Investment Agreement and purchase the Initial Notes
thereunder, each Guarantor hereby represents and warrants to the Investor and
each other Secured Party that the representations and warranties set forth in
Article III of the Investment Agreement as they relate to such Guarantor or to
the Note Financing Documents to which such Guarantor is a party, each of which
representations and warranties is hereby incorporated herein by reference, are
true and correct in all material respects, and the Secured Parties shall be
entitled to rely on each of such representations and warranties as if fully set
forth herein; provided that each reference in each such representation and
warranty to the Company's knowledge shall, for the purposes of this Section 4.1,
be deemed to be a reference to such Guarantor's knowledge.

         4.2 Representations and Warranties of Each Grantor. To induce the
Investor Party to enter into the Investment Agreement and purchase the Initial
Notes thereunder, each Grantor hereby represents and warrants to the Investor
and each other Secured Party that:

             4.2.1 Title; No Other Liens. Except for the security interest
granted to the Secured Parties pursuant to this Agreement and the other
Permitted Liens permitted to exist on such Grantor's Collateral by the
Investment Agreement and the Credit Agreement, such Grantor shall own each item
of such Grantor's Collateral free and clear of any and all Liens. Except as set
forth on Schedule 5, no currently effective financing statement or other similar
public notice with respect to all or any part of such Grantor's Collateral is on
file or of record in any public office, except (a) such as have been filed in
favor of (i) the Secured Parties, pursuant to this Agreement or any other Note
Financing Document, (ii) the Fund VI Secured Parties, pursuant to the Fund VI
Security Agreement or any other Fund VI Note Financing Document, or (iii) the
Administrative Agent for the ratable benefit of the secured parties under the
Credit Agreement Security Agreement, pursuant to the Credit Agreement Security
Agreement or any other Credit Document or (b) for which termination statements
will be delivered on the initial Closing Date under the Investment Agreement
(the "Initial Closing Date").

             4.2.2 Perfected Third Priority Liens. (i) This Agreement is
effective to create, as collateral security for the Obligations of such Grantor,
valid and enforceable Liens on such Grantor's Collateral in favor of the Secured
Parties, except as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditor's rights

                                       15



generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.

             (ii) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings, and the delivery to and continuing possession by
the Secured Parties or their agent (or the Administrative Agent as bailee for
the Secured Parties pursuant to the Intercreditor Agreement, or the Fund VI
Secured Parties as bailee for the Secured Parties) of all Instruments, Chattel
Paper and Documents a security interest in which is perfected by possession, and
the obtaining and maintenance of "control" (as described in the Code) by the
Secured Parties of all Deposit Accounts, the Collateral Proceeds Account and
Electronic Chattel Paper a security interest in which is perfected by "control",
the Liens created pursuant to this Agreement will constitute valid Liens on and
(to the extent provided herein) perfected security interests in such Grantor's
Collateral in favor of the Secured Parties, and will be prior to all other Liens
of all other Persons other than Permitted Liens that are also permitted by the
Credit Agreement, and enforceable as such as against all other Persons other
than Ordinary Course Buyers, except to the extent that the recording of an
assignment or other transfer of title to any Secured Party or the recording of
other applicable documents in the United States Patent and Trademark Office or
United States Copyright Office may be necessary for perfection or
enforceability, and except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law) or by an
implied covenant of good faith and fair dealing. As used in this Section
4.2.2(ii), the following terms shall have the following meanings:

             "Filings": the filing or recording of (i) the Financing Statements
      as set forth in Schedule 7, (ii) this Agreement or a notice thereof with
      respect to Intellectual Property as set forth in Schedule 4, and (iii) any
      filings after any Closing Date in any other jurisdiction as may be
      necessary under any Requirement of Law.

             "Financing Statements": the financing statements delivered to the
      Investor by such Grantor on the Initial Closing Date for filing in the
      jurisdictions listed in Schedule 7.

             "Ordinary Course Buyers": (i) with respect to goods only, buyers in
      the ordinary course of business and lessees in the ordinary course of
      business to the extent provided in Section 9-320(a) and 9-321 of the
      Uniform Commercial Code as in effect from time to time in the relevant
      jurisdiction, and (ii) with respect to general intangibles only, licensees
      in the ordinary course of business to the extent provided in Section 9-321
      of the Uniform Commercial Code as in effect from time to time in the
      relevant jurisdiction.

                                       16



             "Specified Assets": the following property and assets of such
      Grantor:

                   (1) Equipment constituting Fixtures;

                   (2) Patents, Patent Licenses, Trademarks and Trademark
            Licenses to the extent that (a) Liens thereon cannot be perfected by
            the filing of financing statements under the Uniform Commercial Code
            or by the filing and acceptance thereof in the United States Patent
            and Trademark Office or (b) such Patents, Patent Licenses,
            Trademarks and Trademark Licenses are not, individually or in the
            aggregate, material to the business of the Parent and its
            Subsidiaries taken as a whole;

                   (3) Copyrights and Copyright Licenses and Accounts or
            receivables arising therefrom to the extent that the Uniform
            Commercial Code as in effect from time to time in the relevant
            jurisdiction is not applicable to the creation or perfection of
            Liens thereon;

                   (4) uncertificated securities;

                   (5) Collateral for which the perfection of Liens thereon
            requires filings in or other actions under the laws of jurisdictions
            outside the United States of America, any State, territory or
            dependency thereof or the District of Columbia;

                   (6) contracts, Accounts or receivables subject to the
            Assignment of Claims Act;

                   (7) goods included in Collateral received by any Person for
            "sale or return" within the meaning of Section 2-326 of the Uniform
            Commercial Code of the applicable jurisdiction, to the extent of
            claims of creditors of such Person;

                   (8) Proceeds of Accounts, receivables or Inventory which do
            not themselves constitute Collateral or which have not been
            transferred to or deposited in the Collateral Proceeds Account (if
            any); and

                   (9) Equipment at various sales offices with a fair market
            value of less than $10,000 per sales office and mobile goods.

            4.2.3  Jurisdiction of Organization. On the Initial Closing Date,
such Grantor's jurisdiction of organization and the location of such Grantor's
chief executive office or sole place of business are specified on Schedule 3.

                                       17



             4.2.4 Inventory and Equipment. On the Initial Closing Date, such
Grantor's Inventory (other than Inventory held by various Persons (other than a
Grantor and its Affiliates) that is being finished or modified by such Persons
and thereafter returned to the respective Grantor ("WIP Inventory")) and
Equipment (other than equipment at various sales offices with a fair market
value of less than $10,000 per sales office and mobile goods) are kept at the
locations listed on Schedule 9.

             4.2.5 Farm Products. None of such Grantor's Collateral shall
constitute, or be the Proceeds of, Farm Products.

             4.2.6 Accounts. The amount represented by such Grantor to the
Secured Parties from time to time as owing by each account debtor or by all
account debtors in respect of such Grantor's Accounts will at such time be the
correct amount, in all material respects, actually owing by such account debtor
or debtors thereunder, except to the extent that appropriate reserves therefor
have been established on the books of such Grantor in accordance with GAAP. The
places where such Grantor keeps its records concerning such Grantor's Accounts
as of the Initial Closing Date are listed on Schedule 10. Unless otherwise
indicated in writing to the Secured Parties, each Account of such Grantor shall
arise out of a bona fide sale and delivery of goods or rendition of services by
such Grantor. Such Grantor has not given and shall not give any account debtor
any deduction in respect of the amount due under any such Account, except in the
ordinary course of business or as such Grantor may otherwise advise the Secured
Parties in writing.

             4.2.7 Patents and Trademarks. Schedule 4 lists all material
Trademarks and material Patents, in each case, registered in the United States
Patent and Trademark Office and owned by such Grantor in its own name as of the
Initial Closing Date, and all material Trademark Licenses and all material
Patent Licenses (including, without limitation, material Trademark Licenses for
registered Trademarks and material Patent Licenses for registered Patents) owned
by such Grantor in its own name as of the date hereof.

         4.3 Representations and Warranties of Each Pledgor. To induce the
Investor to enter into the Investment Agreement and purchase the Initial Notes
thereunder, each Pledgor hereby represents and warrants to the Investor and each
other Secured Party that:

             4.3.1 Except as provided in Section 3.3, the shares of Pledged
Stock pledged by such Pledgor hereunder shall constitute (i) in the case of
shares of an Active Subsidiary which is a Domestic Subsidiary, all the issued
and outstanding shares of all classes of the Capital Stock of such Active
Subsidiary owned by such Pledgor and (ii) in the case of shares of a Foreign
Subsidiary such percentage (not more than 65%) as is specified on Schedule 2 of
all the issued and outstanding shares of each class of the Capital Stock of such
Foreign Subsidiary owned by such Pledgor.

                                       18



             4.3.2 All the shares of the Pledged Stock pledged by such Pledgor
hereunder shall have been duly and validly issued and fully paid and
nonassessable.

             4.3.3 Such Pledgor shall be the record and beneficial owner of, and
shall have good title to, the Pledged Securities pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement, the Fund VI Guaranty and
Collateral Agreement or the Credit Agreement Security Agreement and Permitted
Liens that are also permitted by the Credit Agreement.

             4.3.4 The security interest created by this Agreement in such
Pledged Securities evidenced by certificates, upon delivery (if any) thereof to,
and assuming the continuing possession (in the case of Pledged Notes) or control
(in the case of Pledged Stock) of such Pledged Securities by, the Secured
Parties or their agent (or the Administrative Agent as bailee for the Secured
Parties pursuant to the Intercreditor Agreement or the Fund VI Secured Parties
as bailee for the Secured Parties), will constitute a valid, perfected third
priority security interest in such Pledged Securities to the extent provided in
and governed by the Code (third in priority only to the security interest
therein held by (i) the Administrative Agent for the benefit of the secured
parties under the Credit Agreement Security Agreement and (ii) the Fund VI
Secured Parties), enforceable in accordance with its terms against all creditors
of such Pledgor and any persons purporting to purchase such Pledged Securities
from such Pledgor, except as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

             4.3.5 Upon the filing of financing statements in the appropriate
jurisdictions under the Code, the security interest created by this Agreement in
the Pledged Securities will constitute a valid, perfected third priority
security interest in such Pledged Securities to the extent provided in and
governed by the Code (third in priority only to Permitted Liens that are also
permitted under (i) the Credit Agreement and (ii) the Fund VI Investment
Agreement), enforceable in accordance with its terms against all creditors of
such Pledgor and any persons purporting to purchase such Pledged Securities from
such Pledgor, except as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

                              SECTION 5. COVENANTS

         5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees
with the Secured Parties that, from and after the date of this Agreement until
the date on which

                                       19



the guarantee of such Guarantor contained in Section 2 shall terminate pursuant
to Section 2.1(d), such Guarantor shall take, or shall refrain from taking, as
the case may be, each action that is necessary to be taken or not taken, as the
case may be, so that no Default or Event of Default is caused by the failure to
take such action or to refrain from taking such action by such Guarantor or any
of its Subsidiaries.

         5.2 Covenants of Each Grantor. Each Grantor covenants and agrees with
the Secured Parties that, from and after the date of this Agreement until the
earlier to occur of (i) all the Notes, and all other Obligations then due and
owing, shall have been paid in full, or (ii) as to any such Grantor that is a
Subsidiary of the Company, the sale or other disposition of all of the Capital
Stock of such Grantor (other than to a Controlled Affiliate of the Company) as
permitted under the Investment Agreement following which such Grantor is no
longer a Subsidiary of the Company (and provided that such sale or other
disposition complies with the provisions of the Intercreditor Agreement,
including but not limited to Section 7 thereof):

             5.2.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Grantor shall (except
as provided in the following sentence) be entitled to retain possession of all
Collateral of such Grantor evidenced by any Instrument or Chattel Paper, and
shall hold all such Collateral in trust for the Secured Parties. In the event
that an Event of Default shall have occurred and be continuing, upon the request
of the Secured Parties, such Instrument or Chattel Paper shall be promptly
delivered to the Secured Parties or their nominee, duly indorsed in a manner
satisfactory to the Secured Parties, to be held as Collateral pursuant to this
Agreement. Such Grantor shall not permit any other Person to possess any such
Collateral at any time (other than the Administrative Agent, to the extent
provided in, and in accordance with, the Intercreditor Agreement, or the Fund VI
Secured Parties to the extent provided in, and in accordance with, the
Intercreditor Agreement and the Fund VI Security Agreement), other than in
connection with any sale or other disposition of such Collateral in a
transaction permitted by the Investment Agreement.

             5.2.2 Maintenance of Insurance. (a) Such Grantor will maintain,
with financially sound and reputable companies, insurance policies (i) insuring
such Grantor's Inventory and Equipment against loss by fire, explosion, theft
and such other casualties as may be reasonably satisfactory to the Secured
Parties and (ii) insuring such Grantor and the Secured Parties against liability
for personal injury and property damage relating to such Inventory and
Equipment, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Secured Parties.

             (b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 15 days after receipt by the Secured Parties of written
notice thereof, (ii) name the

                                       20



Secured Parties (or, if they so request, their agent) as additional insured
parties or loss payee, (iii) include deductibles consistent with past practice
or consistent with industry practice or otherwise reasonably satisfactory to the
Secured Parties.

             5.2.3 Payment of Obligations. Such Grantor will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all material taxes, assessments and governmental charges or
levies imposed upon such Grantor's Collateral or in respect of income or profits
therefrom, as well as all material claims of any kind (including, without
limitation, material claims for labor, materials and supplies) against or with
respect to such Grantor's Collateral, except that no such tax, assessment,
charge or levy need be paid or satisfied if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
such Grantor.

             5.2.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.

             (b) Such Grantor will furnish to the Secured Parties from time to
time statements and schedules further identifying and describing such Grantor's
Collateral and such other reports in connection with such Grantor's Collateral
as any Secured Party may reasonably request in writing, all in reasonable
detail.

             (c) At any time and from time to time, upon the written request of
any Secured Party, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Secured Parties may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted by such Grantor, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code (or other similar laws) in effect in any jurisdiction
with respect to the security interests created hereby.

             (d) Such Grantor shall not allow any Person (other than the
Administrative Agent to the extent required under the Credit Documents or Fund
VI to the extent required under the Fund VI Note Financing Documents) to obtain,
or take any action or omit to take any action the result of which would be to
allow any Person (other than the Administrative Agent to the extent required
under the Credit Agreement Security Agreement or Fund VI to the extent required
under the Fund VI Security Agreement) to obtain, "possession" or "control" (each
within the meaning of the UCC) of any Collateral.

                                       21



             5.2.5 Deposit Accounts. Such Grantor shall, as soon as reasonably
possible after the Initial Closing Date but in any event no later that than 45
days after the Initial Closing Date, enter into control agreements in form and
substance reasonably satisfactory to the Secured Parties with respect to
Security Collateral consisting of Deposit Accounts, or in otherwise obtaining a
valid, perfected third priority security interest in Deposit Accounts in favor
of the Secured Parties (third in priority only to the security interest therein
held by (i) the Administrative Agent for the benefit of the secured parties
under the Credit Agreement Security Agreement and (ii) the Fund VI Secured
Parties); provided that, until a "Termination" as defined in Section 11 of the
Intercreditor Agreement has occurred, any such control agreement or security
interest shall only be required hereunder in respect of any Deposit Account in
the event and to the extent that a security interest in such Deposit Account is
granted to the Administrative Agent or otherwise to any other secured party
pursuant to the Credit Agreement Security Agreement or any other Credit
Document, or as otherwise granted to secure Bank Indebtedness or in favor of or
for the benefit of any holder of Bank Indebtedness or any agent or
representative thereof.

             5.2.6 Changes in Name, etc. Such Grantor will not, except upon not
less than 30 days' prior written notice to the Secured Parties, change its name,
identity or corporate structure to such an extent that any financing statement
filed by any Secured Party in connection with this Agreement would become
seriously misleading; provided that, prior to taking any such action, or
promptly after receiving a written request therefor from any Secured Party, such
Grantor shall deliver to the Secured Parties all additional executed financing
statements and other documents reasonably requested by any Secured Party to
maintain the validity, perfection and priority of the security interests
provided for herein.

             5.2.7 Notices. Such Grantor will advise the Secured Parties
promptly, in reasonable detail, of:

                   (a) any Lien (other than security interests created hereby or
         Permitted Liens that are also permitted under the Credit Agreement) on
         any of such Grantor's Collateral which would adversely affect the
         ability of any of the Secured Parties to exercise any of such Secured
         Party's remedies hereunder; and

                   (b) of the occurrence of any other event which would
         reasonably be expected to have a material adverse effect on the
         aggregate value of such Grantor's Collateral or on the security
         interests created hereby.

             5.2.8 Pledged Securities. In the case of each Grantor that is an
Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Secured Parties promptly in writing of the

                                       22



occurrence of any of the events described in Section 5.3.1 with respect to the
Pledged Stock issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall
apply to it, mutatis mutandis, with respect to all actions that may be required
of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Stock issued
by it.

             5.2.9 Accounts. (a) Other than in the ordinary course of business
or as permitted by the Note Financing Documents, such Grantor will not (i) grant
any extension of the time of payment of any of such Grantor's Accounts, (ii)
compromise or settle any such Account for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Account, (iv) allow any credit or discount whatsoever on any such Account or (v)
amend, supplement or modify any Account unless such extensions, compromises,
settlements, releases, credits or discounts would not reasonably be expected to
materially adversely affect the value of the Accounts constituting Collateral
taken as a whole.

             (b) Such Grantor will deliver to the Secured Parties a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 10% of the aggregate amount of
the then outstanding Accounts.

             5.2.10 Maintenance of Records. Such Grantor will keep and maintain
at its own cost and expense reasonably satisfactory and complete records of its
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to such Collateral, and shall mark such records
to evidence this Agreement and the Liens and the security interests created
hereby.

             5.2.11 Acquisition of Intellectual Property. Within 90 days after
the end of each calendar year, such Grantor will notify the Secured Parties of
any acquisition by such Grantor of (i) any registration of any material
Copyright, Patent or Trademark or (ii) any exclusive rights under a material
Copyright License, Patent License or Trademark License constituting Collateral,
and shall take such actions as may be reasonably requested by any Secured Party
(but only to the extent such actions are within such Grantor's control) to
perfect the security interest granted to the Secured Parties therein, to the
extent provided herein in respect of any Copyright, Patent or Trademark
constituting Collateral on the date hereof, by (x) the execution and delivery of
a Patent and Trademark Security Agreement (or amendments to any such agreement
previously executed or delivered by such Grantor) or other comparable agreements
with respect to Copyrights or Copyright Licenses constituting Collateral and/or
(y) the making of appropriate filings (I) of financing statements under the
Uniform Commercial Code of any applicable jurisdiction and/or (II) in the United
States Patent and Trademark Office, or with respect to Copyrights and Copyright
Licenses, another applicable office).

                                       23



             5.2.12 Protection of Trade Secrets. Such Grantor shall take all
steps which it deems commercially reasonable to preserve and protect the secrecy
of all material Trade Secrets of such Grantor.

         5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees with
each of the Secured Parties that, from and after the date of this Agreement
until the earlier to occur of (i) the Notes and all other Obligations then due
and owing shall have been paid in full, or (ii) as to any Pledgor that is a
Subsidiary of the Company, all the Capital Stock of such Pledgor shall have been
sold or otherwise disposed of (other than to a Controlled Affiliate of the
Company) as permitted under the terms of the Investment Agreement (and provided
that such sale or other disposition complies with the terms of the Intercreditor
Agreement, including but not limited to Section 7 thereof):

             5.3.1 If such Pledgor shall, as a result of its ownership of its
Pledged Securities, becomes entitled to receive or shall receive any stock
certificate (including, without limitation, any stock certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection with
any reorganization), stock option or similar rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Pledgor shall accept the same as the agent of the Secured Parties,
hold the same in trust for the Secured Parties and deliver the same forthwith to
the Secured Parties in the exact form received, duly indorsed by such Pledgor to
such Secured Party or nominee of the Secured Parties as any Secured Party may
direct, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor, to be held by the Secured
Parties, subject to the terms hereof, as additional collateral security for the
Obligations (subject to Section 3.3) and provided that:

             (a) No such delivery to the Secured Parties shall be required to
         the extent such certificate, option or similar rights are required to
         be delivered to the Administrative Agent in accordance with the Credit
         Agreement Security Agreement or the Fund VI Secured Parties in
         accordance with the Fund VI Security Agreement, it being understood
         that (x) the Administrative Agent is acting as bailee for the Secured
         Parties pursuant to the Intercreditor Agreement or, as the case may be,
         the Fund VI Secured Parties are acting as bailee for the Secured
         Parties and (y) such delivery of such certificate, option or similar
         right to the Administrative Agent or, as the case may be, the Fund VI
         Secured Parties shall not impair the security interest created therein
         hereunder or any of the rights or remedies of any Secured Party in
         respect thereof or hereof, and

             (b) In no event shall there be pledged, nor shall any Pledgor be
         required to pledge, more than 65% of any series of the outstanding
         Capital Stock

                                       24



         of any Foreign Subsidiary Holdco or other Foreign Subsidiary pursuant
         to this Agreement.

Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer or maker (except any liquidation or dissolution of
any Subsidiary of the Company in accordance with the Investment Agreement) shall
be paid over to the Secured Parties to be held by them hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Secured Parties, be
delivered to the Secured Parties to be held by them hereunder as additional
collateral security for the Obligations; provided that no such paying over or
delivery shall be required to the extent such sums or property are required to
be paid over or delivered to the Administrative Agent in accordance with the
Credit Agreement Security Agreement or the Fund VI Secured Parties in accordance
with the Fund VI Security Agreement, it being understood that (x) the
Administrative Agent is acting as bailee for the Secured Parties pursuant to the
Intercreditor Agreement or, as the case may be, the Fund VI Secured Parties are
acting as bailee for the Secured Parties, (y) such paying over of such sums or
delivery of such property to the Administrative Agent as a result of compliance
with the Credit Agreement Security Agreement or, as the case may be, to the Fund
VI Secured Parties as a result of compliance with the Fund VI Security Agreement
shall not impair the security interest created therein hereunder or any of the
rights or remedies of any Secured Party in respect thereof or hereof. If any
sums of money or property so paid or distributed in respect of the Pledged
Securities shall be received by such Pledgor, such Pledgor shall, until such
money or property is paid or delivered to the Secured Parties (or, if required
pursuant to the terms of the Credit Agreement Security Agreement or the Fund VI
Security Agreement, the Administrative Agent or, as the case may be, the Fund VI
Secured Parties), hold such money or property in trust for the Secured Parties,
segregated from other funds of such Pledgor, as additional collateral security
for the Obligations.

             5.3.2 Without the prior written consent of the Secured Parties,
such Pledgor will not (except as permitted by the Investment Agreement) (i) vote
to enable, or take any other action to permit, any Issuer to issue any stock or
other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of any Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Pledged Securities or Proceeds thereof or (iii) create, incur or permit
to exist any Lien or option in favor of, or any material adverse claim of any
Person with respect to, any of the Pledged Securities or Proceeds thereof, or
any interest therein, except for the security interests created by this
Agreement, the Fund VI Security

                                       25



Agreement or the Credit Agreement Security Agreement or Liens arising by
operation of law.

             5.3.3 Such Pledgor shall maintain the security interest created by
this Agreement in such Pledgor's Pledged Collateral as a perfected security
interest having at least the priority described in Section 4.3.4 and shall
defend such security interest against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Secured Parties, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as any Secured Party may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted by such Pledgor. Such Pledgor shall not
allow any Person (other than the Administrative Agent to the extent required
under the Credit Documents or the Fund VI Secured Parties to the extent required
under the Fund VI Note Financing Documents) to obtain, or take any action or
omit to take any action the result of which would be to allow any Person (other
than the Administrative Agent to the extent required under the Credit Documents
or the Fund VI Secured Parties to the extent required under the Fund VI Note
Financing Documents) to obtain, "possession" or "control" (each within the
meaning of the UCC) of any Pledged Collateral.

         5.4 Covenant of the Parent. The Parent covenants and agrees with the
Secured Parties that, from and after the date of this Agreement until the Notes
and all other Obligations then due and owing, shall have been paid in full that
the Parent shall not conduct or otherwise engage, in any business or operations
other than: (i) the transactions contemplated by the Transaction Agreements or
the provision of administrative, legal, accounting and management services to or
on behalf of any of its Subsidiaries, (ii) the ownership of the Capital Stock or
other interests of its Subsidiaries, the sale and transfer of such ownership
interests (to the extent not otherwise prohibited by the Note Financing
Documents), and the exercise of rights and performance of obligations in
connection therewith, (iii) the entry into, and exercise of rights and
performance of obligations in respect of, (A) the Transaction Agreements, this
Agreement and any other Note Financing Document to which the Parent is a party,
the Fund VI Note Financing Documents, the Credit Documents, any other agreement
to which the Parent is a party on the date hereof, the Senior Subordinated Note
Indenture and the Senior Subordinated Notes or any guarantee thereof, and any
guarantee of Indebtedness or other obligations of any of its Subsidiaries
permitted pursuant to the Note Financing Documents, in each case as amended,
supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of the Parent or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or

                                       26



any offering, issuance or sale thereof, including but not limited to in respect
of the Management Subscription Agreements, (iv) the offering, issuance, sale and
repurchase or redemption of, and dividends or distributions on, its equity
securities, (v) the filing of registration statements, and compliance with
applicable reporting and other obligations, under federal, state or other
securities laws, (vi) the listing of its equity securities and compliance with
applicable reporting and other obligations in connection therewith, (vii) the
retention of (and the entry into, and exercise of rights and performance of
obligations in respect of, contracts and agreements with) transfer agents,
private placement agents, underwriters, counsel, accountants and other advisors
and consultants, (viii) the performance of obligations under and compliance with
its certificate of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including, without
limitation, as a result of or in connection with the activities of its
Subsidiaries, (ix) the incurrence and payment of its operating and business
expenses and any taxes for which it may be liable, (x) making loans to or other
Investments in, or incurrence of Indebtedness to, its Subsidiaries, (xi) the
ownership of, and exercise of rights and performance of obligations in respect
of, Intellectual Property (as defined in the Investment Agreement for the
purposes of this subsection only) and foreign patents, trademarks, trade names,
copyrights, technology, know-how and processes and licensing such Intellectual
Property and foreign patents, trademarks, trade names, copyrights, technology,
know-how and processes (other than such Intellectual Property and foreign
patents, trademarks, trade names, copyrights, technology, know-how and processes
which is material to the business of the Company and its Subsidiaries, which
Intellectual Property and foreign patents, trademarks, trade names, copyrights,
technology, know-how and processes shall be owned by the Company and its
Subsidiaries) and (xii) other activities incidental or related to the foregoing.

                         SECTION 6. REMEDIAL PROVISIONS

         6.1 Certain Matters Relating to Accounts. (a) At any time and from time
to time after the occurrence and during the continuance of an Event of Default,
any Secured Party shall have the right to make test verifications of the
Accounts in any reasonable manner and through any reasonable medium that such
Secured Party reasonably considers advisable, and the relevant Grantor shall
furnish all such assistance and information as any Secured Party may reasonably
require in connection with such test verifications. At any time and from time to
time after the occurrence and during the continuance of an Event of Default,
upon any Secured Party's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Secured Parties to furnish to the Secured Parties
reports showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts.

             (b) The Secured Parties hereby authorize each Grantor to collect
such Grantor's Accounts, and any Secured Party may curtail or terminate said
authority at any

                                       27



time after the occurrence and during the continuance of an Event of Default. If
required by any Secured Party at any time after the occurrence and during the
continuance of an Event of Default, any Proceeds constituting collections of
such Accounts, when collected by such Grantor, (i) shall be forthwith (and, in
any event, within two Business Days of receipt by such Grantor) be deposited in
or otherwise transferred to the Collateral Proceeds Account established by such
Grantor maintained under the sole dominion and control of the Secured Parties,
subject to withdrawal by the Secured Parties only as provided in Section 6.5,
and (ii) until so turned over, shall be held by such Grantor in trust for the
Secured Parties, segregated from other funds of such Grantor. All Proceeds
constituting collections of Accounts while held by the Collateral Account Bank
(or by any Guarantor in trust for the benefit of the Secured Parties shall
continue to be collateral security for all of the Obligations and shall not
constitute payment thereof until applied as hereinafter provided. At any time
when an Event of Default has occurred and is continuing, at any Secured Party's
election, any Secured Party may apply all or any part of the funds on deposit in
the Collateral Proceeds Account established by the relevant Grantor to the
payment of the Obligations of such Grantor then due and owing, such application
to be made as set forth in Section 6.5 hereof. So long as no Event of Default
has occurred and is continuing, the funds on deposit in the Collateral Proceeds
Account shall be remitted as provided in Section 6.1(d) hereof.

             (b) At any time and from time to time after the occurrence and
during the continuance of an Event of Default and if the Secured Parties have
terminated a Grantor's right to collect Accounts pursuant to clause (b) above,
at the Secured Parties' request, each Grantor shall deliver to the Secured
Parties all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to such Grantor's Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.

             (c) So long as no Event of Default has occurred and is continuing,
the Secured Parties shall instruct the Collateral Account Bank to promptly remit
any funds on deposit in each Grantor's Collateral Proceeds Account to such
Grantor. In the event that an Event of Default has occurred and is continuing,
the Secured Parties and the Grantors agree that any Secured Party, at such
Secured Party's option, may require that each Collateral Proceeds Account be
established at a bank or other financial institution designated by such Secured
Party (which designation shall be deemed to be made on behalf of all Secured
Parties for purposes of this section 6.1(d)).

         6.2 Communications with Obligors; Grantors Remain Liable. (a) Each
Secured Party in such Secured Party's own name or in the name of others may, at
any time and from time to time after the occurrence and during the continuance
of an Event of Default specified in Section 10.1(a) or 10.1(b) of the Investment
Agreement, communicate with obligors under the Accounts and parties to the
Contracts (in each case,

                                       28



to the extent constituting Collateral) to verify with them to the Secured
Parties' satisfaction the existence, amount and terms of any Accounts or
Contracts.

             (b) Upon the request of any Secured Party at any time after the
occurrence and during the continuance of an Event of Default specified in
Section 10.1(a) or 10.1(b) of the Investment Agreement, each Grantor shall
notify obligors on such Grantor's Accounts and parties to such Grantor's
Contracts (in each case, to the extent constituting Collateral) that such
Accounts and such Contracts have been assigned to the Secured Parties and that
payments in respect thereof shall be made directly to the Secured Parties.

             (c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of such Grantor's Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. No Secured Party shall have any obligation or liability under any
Account (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by any Secured Party of any payment relating
thereto, nor shall any Secured Party be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Account (or any
agreement giving rise thereto) to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts that may have been assigned to it or to which it may be entitled
at any time or times.

         6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred
and be continuing and any Secured Party shall have given notice to the relevant
Pledgor of such Secured Party's intent to exercise such Secured Party's
corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted
to receive all cash dividends and distributions paid in respect of the Pledged
Stock and all payments made in respect of the Pledged Notes, to the extent
permitted in the Investment Agreement, and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, however, that no vote shall
be cast or corporate right exercised or such other action taken (other than in
connection with a transaction expressly permitted by the Investment Agreement)
which, in any Secured Party's reasonable judgment, would materially impair the
Pledged Collateral or the related rights or remedies of any Secured Party or
which would be inconsistent with or result in any violation of any provision of
the Investment Agreement, this Agreement or any other Note Financing Document.

             (b) If an Event of Default shall occur and be continuing and any
Secured Party shall give notice of such Secured Party's intent to exercise such
rights to the relevant Pledgor or Pledgors, (i) the Secured Parties shall have
the right to receive any and all cash dividends, payments or other Proceeds paid
in respect of the Pledged Stock

                                       29



and make application thereof to the Obligations in such order as is provided in
Section 6.5, and (ii) any or all of the Pledged Stock shall be registered in the
name of such Secured Party or nominee of the Secured Parties as any Secured
Party may direct, and such named Secured Party or nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such Pledged
Stock at any meeting of shareholders of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to such Pledged Stock as if
such Secured Party or nominee were the absolute owner thereof (including,
without limitation, the right to exchange at such Secured Party's or nominee's
discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by the relevant Pledgor or such
named Secured Party or nominee of any right, privilege or option pertaining to
such Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as such named Secured Party or nominee may reasonably determine), all
without liability (other than for such Secured Party's or nominee's gross
negligence or willful misconduct) except to account for property actually
received by such Secured Party or nominee, but no Secured Party or nominee shall
have any duty to any Pledgor to exercise any such right, privilege or option and
no Secured Party or nominee shall be responsible for any failure to do so or
delay in so doing, provided that the Secured Parties shall not exercise any
voting or other consensual rights pertaining to the Pledged Stock in any way
that would constitute an exercise of the remedies described in Section 6.6 other
than in accordance with Section 6.6.

             (b) Each Pledgor hereby authorizes and instructs each Issuer or
maker of any Pledged Securities pledged by such Pledgor hereunder to (i) comply
with any instruction received by it from any Secured Party in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Pledgor, and each Pledgor agrees that each Issuer
or maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to any Secured Party.

         6.4 Proceeds to be Turned Over to Secured Parties. In addition to the
rights of the Secured Parties specified in Section 6.1 with respect to payments
of Accounts, if an Event of Default shall occur and be continuing, and any
Secured Party shall have instructed any Grantor to do so, all Proceeds received
by such Grantor consisting of cash, checks and other Cash Equivalent items shall
be held by such Grantor in trust for the Secured Parties, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Secured Parties in the exact form received by such Grantor
(duly indorsed by such Grantor to such Secured Party or nominee of the Secured
Parties as any Secured Party may direct, if required); provided that no such
turn-

                                       30



over shall be required to the extent such Proceeds are required to be delivered
to the Administrative Agent in accordance with the Credit Agreement Security
Agreement or the Fund VI Secured Parties in accordance with the Fund VI Security
Agreement, it being understood that (x) the Administrative Agent is acting as
bailee for the Secured Parties pursuant to the Intercreditor Agreement or, as
the case may be, the Fund VI Secured Parties are acting as bailee for the
Secured Parties and (y) such turning over of such Proceeds to the Administrative
Agent as a result of compliance with the Credit Agreement Security Agreement or,
as the case may be, to the Fund VI Secured Parties as a result of compliance
with the Fund VI Security Agreement shall not impair the security interest
created therein hereunder or any of the rights or remedies of any Secured Party
in respect thereof or hereof. All Proceeds received by the Secured Parties
hereunder shall be held by the Secured Parties in the relevant Collateral
Proceeds Account maintained under their sole dominion and control. All Proceeds
while held by the Secured Parties in such Collateral Proceeds Account (or by
such Grantor in trust for the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 6.5.

         6.5 Application of Proceeds. It is agreed that if an Event of Default
shall occur and be continuing, any and all Proceeds of the relevant Granting
Party's Security Collateral received by the Secured Parties (whether from the
relevant Granting Party, the Administrative Agent in accordance with the
Intercreditor Agreement, the Fund VI Secured Parties or otherwise) shall be held
by the Secured Parties as collateral security for the Obligations of the
relevant Granting Party (whether matured or unmatured), and/or then or at any
time thereafter may, in the sole discretion of any Secured Party, be applied by
the Secured Parties against the Obligations of the relevant Granting Party then
due and owing in the following order of priority:

                 FIRST, to the payment of all reasonable costs and expenses
         incurred by any Secured Party in connection with this Agreement, the
         Investment Agreement, any other Note Financing Document or any of the
         Obligations of the relevant Granting Party, including, without
         limitation, all court costs and the reasonable fees and expenses of its
         agents and legal counsel, and any other reasonable costs or expenses
         incurred in connection with the exercise by any Secured Party of any
         right or remedy under this Agreement, the Investment Agreement, or any
         other Note Financing Document;

                 SECOND, to the ratable satisfaction of all other Obligations of
         the relevant Granting Party; and

                 THIRD, to the relevant Granting Party or its successors or
         assigns, or to whomsoever may be lawfully entitled to receive the same.

                                       31



         6.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, each Secured Party may exercise, in addition to all other rights and
remedies granted to any of them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations to the extent
permitted by applicable law, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law each Secured Party, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Granting Party or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Security Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Security Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of any Secured Party or elsewhere upon such
terms and conditions as such Secured Party may deem advisable and at such prices
as such Secured Party may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Each Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Security Collateral so sold, free of any right or equity of redemption in
any Granting Party, which right or equity is hereby waived or released. Each
Granting Party further agrees, at any Secured Party's request, to assemble the
Security Collateral and make it available to the Secured Parties at places which
any Secured Party shall reasonably select, whether at such Granting Party's
premises or elsewhere. Each Secured Party shall apply the net proceeds of any
action taken by such Secured Party pursuant to this Section 6.6, after deducting
all reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Security Collateral or in
any way relating to the Security Collateral or the rights of the Secured Parties
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations of the
relevant Granting Party then due and owing, in the order of priority specified
in Section 6.5 above, and only after such application and after the payment by
the Secured Parties of any other amount required by any provision of law,
including, without limitation, Section 9-615(a)(3) of the Code, need the Secured
Parties account for the surplus, if any, to any Granting Party. To the extent
permitted by applicable law, each Granting Party waives all claims, damages and
demands it may acquire against any Secured Party arising out of the
repossession, retention or sale of collateral, except to the extent arising as a
result of the gross negligence or willful misconduct of such Secured Party. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.

                                       32



         6.7 Registration Rights. (a) If any Secured Party shall determine to
exercise such Secured Party's right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the reasonable opinion of any Secured Party
it is necessary or reasonably advisable to have the Pledged Stock, or that
portion thereof to be sold, registered under the provisions of the Securities
Act, the relevant Pledgor will use its reasonable best efforts to cause the
Issuer thereof to (i) execute and deliver, and use its best efforts to cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the reasonable opinion of any Secured Party, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its reasonable best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of not more than one year from the date of the first
public offering of such Pledged Stock, or that portion thereof to be sold, and
(iii) make all amendments thereto and/or to the related prospectus which, in the
reasonable opinion of any Secured Party, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Such
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all states and the District of Columbia
that any Secured Party shall reasonably designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need not
be audited) that will satisfy the provisions of Section 11(a) of the Securities
Act.

             (b) Such Pledgor recognizes that the Secured Parties may be unable
to effect a public sale of any or all such Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. No Secured Party
shall be under any obligation to delay a sale of any of the Pledged Stock for
the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.

             (c) Such Pledgor agrees to use its reasonable best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of such Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Such Pledgor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the
Secured Parties, that the Secured Parties have no adequate

                                       33



remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Pledgor, and to the extent permitted by applicable law, such
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Investment Agreement.

         6.8 Waiver; Deficiency. Each Granting Party shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Security
Collateral are insufficient to pay in full, the Notes and, to the extent then
due and owing, all other Obligations of such Granting Party and the reasonable
fees and disbursements of any attorneys employed by any Secured Party to collect
such deficiency.

                         SECTION 7. THE SECURED PARTIES

         7.1 Secured Parties' Appointment as Attorney-in-Fact, etc. (a) Each
Granting Party hereby irrevocably constitutes and appoints each Secured Party
and any authorized officer or agent thereof, with full power of substitution, as
its true and lawful attorneys-in-fact with full irrevocable power and authority
in the place and stead of such Granting Party and in the name of such Granting
Party or in its own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments that may be reasonably necessary or desirable to
accomplish the purposes of this Agreement to the extent permitted by applicable
law, provided that each Secured Party agrees not to exercise such power except
upon the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, at any time when an Event of Default
has occurred and is continuing (in each case to the extent permitted by
applicable law), (x) each Pledgor hereby gives each Secured Party the power and
right, on behalf of such Pledgor, without notice or assent by such Pledgor, to
execute, in connection with any sale provided for in Section 6.6 or 6.7, any
indorsements, assessments or other instruments of conveyance or transfer with
respect to such Pledgor's Pledged Collateral, and (y) each Grantor hereby gives
each Secured Party the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:

             (i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Account of such
Grantor that constitutes Collateral or with respect to any other Collateral of
such Grantor and file any claim or take any other action or institute any
proceeding in any court of law or equity or otherwise deemed appropriate by any
Secured Party for the purpose of collecting any and all such moneys due under
any Account of such Grantor that constitutes Collateral or with respect to any
other Collateral of such Grantor whenever payable;

                                       34



             (ii)  in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and all
agreements, instruments, documents and papers as any Secured Party may
reasonably request to such Grantor to evidence the Secured Parties' security
interest in such Copyright, Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby;

             (iii) pay or discharge taxes and Liens, other than Permitted Liens
that are also permitted under the Credit Agreement, levied or placed on the
Collateral of such Grantor, effect any repairs or any insurance called for by
the terms of this Agreement and pay all or any part of the premiums therefor and
the costs thereof; and

             (iv)  (i) direct any party liable for any payment under any of the
Collateral of such Grantor to make payment of any and all moneys due or to
become due thereunder directly to any Secured Party or as any Secured Party
shall direct; (ii) ask or demand for, collect, receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due at any
time in respect of or arising out of any Collateral of such Grantor; (iii) sign
and indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral of such Grantor;
(iv) commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral of such
Grantor or any portion thereof and to enforce any other right in respect of any
Collateral of such Grantor; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral of such Grantor; (vi)
settle, compromise or adjust any such suit, action or proceeding described in
clause (v) above and, in connection therewith, to give such discharges or
releases as any Secured Party may deem appropriate; (vii) subject to any
existing reserved rights or licenses, assign any Copyright, Patent or Trademark
constituting Collateral of such Grantor (along with the goodwill of the business
to which any such Copyright, Patent or Trademark pertains), for such term or
terms, on such conditions, and in such manner, as any Secured Party shall in
such Secured Party's sole discretion determine; and (viii) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise deal with
any of the Collateral of such Grantor as fully and completely as though any
Secured Party were the absolute owner thereof for all purposes, and do, at any
Secured Party's option and such Grantor's expense, at any time, or from time to
time, all acts and things which any Secured Party deems necessary to protect,
preserve or realize upon the Collateral of such Grantor and the Secured Parties'
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.

         Anything in this Section 7.1(a) to the contrary notwithstanding, each
Secured Party agrees that such Secured Party will not exercise any rights under
the power

                                       35



of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.

             (b) The reasonable expenses of each Secured Party incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the Specified Interest Rate
(as defied in the Investment Agreement) applicable to the Notes issued
immediately prior to any date of payment by such Secured Party, from such date
of payment by such Secured Party to the date reimbursed by the relevant Granting
Party, shall be payable by such Granting Party to such Secured Party on demand.

             (c) Each Granting Party hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable as to the relevant Granting Party until this
Agreement is terminated as to such Granting Party, and the security interests in
the Security Collateral of such Granting Party created hereby are released.

         7.2 Duty of Secured Parties. Each Secured Party's sole duty with
respect to the custody, safekeeping and physical preservation of the Security
Collateral in such Secured Party's possession, under Section 9-207 of the Code
or otherwise, shall be to deal with it in the same manner as such Secured Party
deals with similar property for such Secured Party's own account. Neither any of
the Secured Parties nor any of their respective officers, directors, employees
or agents shall be liable for failure to demand, collect or realize upon any of
the Security Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Security Collateral upon the
request of any Granting Party or any other Person or, except as otherwise
provided herein, to take any other action whatsoever with regard to the Security
Collateral or any part thereof. The powers conferred on the Secured Parties
hereunder are solely to protect the Secured Parties' interests in the Security
Collateral and shall not impose any duty upon any Secured Party to exercise any
such powers. The Secured Parties shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Granting Party for any act or failure to act hereunder, except as
otherwise provided herein or for their own gross negligence or willful
misconduct.

         7.3 Execution of Financing Statements. Pursuant to Section 9-509 of the
Code and any other applicable law, each Granting Party authorizes each Secured
Party to file or record financing statements with respect to such Granting
Party's Security Collateral without the signature of such Granting Party in such
form and in such filing offices as any Secured Party reasonably determines
appropriate to perfect the security interests of the Secured Parties under this
Agreement. Each Secured Party agrees to (or to cause another Secured Party to)
notify the relevant Granting Party of any financing or

                                       36



continuation statement filed by such Secured Party pursuant to this Section 7.3,
provided that any failure to give such notice shall not affect the validity or
effectiveness of any such filing.

         7.4 Authority of Secured Parties. Each Granting Party acknowledges that
the rights and responsibilities of any Secured Party under this Agreement with
respect to any action taken by such Secured Party or the exercise or
non-exercise by such Secured Party of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement or any amendment, supplement or other modification of this
Agreement shall, as between such Secured Party and the other Secured Parties, be
governed by such agreements with respect thereto as may exist from time to time
among them, but, as between such Secured Party and the Granting Parties such
Secured Party shall be conclusively presumed to be acting as agent for the
Secured Parties with full and valid authority so to act or refrain from acting,
and no Granting Party shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.

         7.5 Right Of Inspection. Upon reasonable written advance notice to any
Grantor and as often as may reasonably be desired, each Secured Party shall have
reasonable access during normal business hours to all the books, correspondence
and records of such Grantor, and each of the Secured Parties and their
representatives may examine the same, and to the extent reasonable, take
extracts therefrom and make photocopies thereof, and such Grantor agrees to
render to each Secured Party, at such Grantor's reasonable cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto. Each of the Secured Parties and their representatives shall also have
the right, upon reasonable advance written notice to such Grantor subject to any
lease restrictions to enter during normal business hours into and upon any
premises owned, leased or operated by such Grantor where any of such Grantor's
Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting any Secured Party's interests therein.

                            SECTION 8. MISCELLANEOUS

         8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Granting Party and the Secured
Parties, provided that any provision of this Agreement imposing obligations on
any Granting Party may be waived by the Secured Parties in a written instrument
executed by the Secured Parties.

         8.2 Notices. All notices, requests and demands to or upon any Secured
Party or any Granting Party hereunder shall be effected in the manner provided
for in Section 13.1 of the Investment Agreement; provided that any such notice,
request or demand to or

                                       37



upon any Guarantor shall be addressed to such Guarantor at its notice address
set forth on Schedule 1, unless and until such Guarantor shall change such
address in accordance with Section 13.1 of the Investment Agreement and any such
notice, request or demand to or upon any Secured Party other than the Investor
shall be addressed to such Secured Party at the address such Secured Party
specifies to the other parties hereto from time to time.

         8.3 No Waiver by Course of Conduct; Cumulative Remedies. No Secured
Party shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which any Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

         8.4 Enforcement Expenses; Indemnification. (a) Each Granting Party
agrees to pay or reimburse each Secured Party for all such Secured Party's
reasonable costs and expenses incurred in collecting against such Guarantor
under the guarantee contained in Section 2 or otherwise enforcing or preserving
any rights under this Agreement against such Granting Party and the other Note
Financing Documents to which such Granting Party is a party, including, without
limitation, the reasonable fees and disbursements of one firm of counsel to the
Secured Parties.

             (b) Each Granting Party agrees to pay, and to save each of the
Secured Parties harmless from, (x) any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
similar taxes which may be payable or determined to be payable with respect to
any of the Security Collateral or in connection with any of the transactions
contemplated by this Agreement and (y) any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement
(collectively, the "indemnified liabilities") and in any event excluding any
taxes or other indemnified liabilities arising from gross negligence or willful
misconduct of such Secured Party.

             (c) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Investment Agreement and
the other Note Financing Documents.

                                       38



         8.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Granting Parties, the Secured Parties and
their respective successors and assigns; provided that no Granting Party may
assign, transfer or delegate any of its rights or obligations under this
Agreement or any other Note Financing Document without the prior written consent
of the Secured Parties.

         8.6 Set-Off. Each Granting Party hereby irrevocably authorizes each
Secured Party at any time and from time to time without notice to such Granting
Party or any other Granting Party, any such notice being expressly waived by
each Granting Party, to the extent permitted by applicable law, upon the
occurrence and during the continuance of an Event of Default specified in
Section 10.1(a) or 10.1(b) of the Investment Agreement so long as any amount
remains unpaid after it becomes due and payable by such Granting Party
hereunder, to set-off and appropriate and apply against any such amount any and
all deposits (general or special, time or demand, provisional or final) (other
than the Collateral Proceeds Account), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Secured Party to or for the credit or the account of such Granting
Party, or any part thereof in such amounts as such Secured Party may elect. Each
Secured Party shall notify such Granting Party promptly of any such set-off and
the application made by such Secured Party of the proceeds thereof; provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Secured Party under this Section 8.6
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Secured Party may have.

         8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.

         8.8 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction; provided that, with
respect to any Pledged Stock issued by a Foreign Subsidiary, all rights, powers
and remedies provided in this Agreement may be exercised only to the extent that
they do not violate any provision of any law, rule or regulation of any
Governmental Authority applicable to any such Pledged Stock or affecting the
legality, validity or enforceability of any of the provisions of this Agreement
against the Pledgor (such laws, rules or regulations, "Applicable Law") and are
intended to be limited to the extent necessary so that they will not render this
Agreement invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any Applicable Law.

                                       39



         8.9 Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

         8.10 Integration. This Agreement and the other Note Financing Documents
represent the entire agreement of the Granting Parties and the Secured Parties
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Granting Parties or any of
the Secured Parties relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Note Financing Documents.

         8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

         8.12 Submission To Jurisdiction; Waivers. Each party hereto hereby
irrevocably and unconditionally:

             (a) submits for itself and its property in any legal action or
         proceeding relating to this Agreement and the other Note Financing
         Documents to which it is a party, or for recognition and enforcement of
         any judgment in respect thereof, to the non-exclusive general
         jurisdiction of the courts of the State of New York, the courts of the
         United States of America for the Southern District of New York, and
         appellate courts from any thereof;

             (b) consents that any such action or proceeding may be brought in
         such courts and waives any objection that it may now or hereafter have
         to the venue of any such action or proceeding in any such court or that
         such action or proceeding was brought in an inconvenient court and
         agrees not to plead or claim the same;

             (c) agrees that service of process in any such action or proceeding
         may be effected by mailing a copy thereof by registered or certified
         mail (or any substantially similar form of mail), postage prepaid, to
         such party at its address referred to in Section 8.2 or at such other
         address of which the Secured Parties (in the case of any other party
         hereto) or the Company (in the case of the Secured Parties) shall have
         been notified pursuant thereto;

             (d) agrees that nothing herein shall affect the right to effect
         service of process in any other manner permitted by law or shall limit
         the right to sue in any other jurisdiction; and

                                       40



              (e) waives, to the maximum extent not prohibited by law, any right
         it may have to claim or recover in any legal action or proceeding
         referred to in this Section any punitive damages.

         8.13 Acknowledgments. Each Granting Party hereby acknowledges that:

              (a) it has been advised by counsel in the negotiation, execution
         and delivery of this Agreement and the other Note Financing Documents
         to which it is a party;

              (b) none of the Secured Parties has any fiduciary relationship
         with or duty to any Granting Party arising out of or in connection
         with this Agreement or any of the other Note Financing Documents, and
         the relationship between the Granting Parties, on the one hand, and
         the Secured Parties, on the other hand, in connection herewith or
         therewith is solely that of debtor and creditor; and

              (c) no joint venture is created hereby or by the other Note
         Financing Documents or otherwise exists by virtue of the transactions
         contemplated hereby among the Secured Parties or among the Granting
         Parties and the Secured Parties.

         8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER NOTE FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.

         8.15 Additional Granting Parties. Each Subsidiary of the Company that
is required to become a party to this Agreement pursuant to the Investment
Agreement shall become a Granting Party for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto, or in such other form as is in form and substance reasonably
satisfactory to the Secured Parties. Each existing Granting Party that is
required to become a Pledgor with respect to Capital Stock of any Subsidiary of
the Company pursuant to the Investment Agreement shall become a Pledgor with
respect thereto upon execution and delivery by such Granting Party of a
Supplemental Agreement in the form of Annex 2 hereto, or in such other form as
is in form and substance reasonably satisfactory to the Secured Parties.

         8.16 Releases. (a) At such time as the Notes and the other Obligations
then due and owing shall have been paid in full, all Security Collateral shall
be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the Secured Parties and each Granting Party hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Security Collateral shall revert to the Granting

                                       41



Parties. At the request and sole expense of any Granting Party following any
such termination, the Secured Parties or their agent shall deliver to such
Granting Party any Security Collateral held by the Secured Parties hereunder,
and execute and deliver to such Granting Party such documents (including without
limitation UCC termination statements) as such Granting Party shall reasonably
request to evidence such termination.

              (b) In connection with any sale or other disposition of Security
Collateral permitted by the Investment Agreement (and provided that such sale or
other disposition complies with the provisions of the Intercreditor Agreement,
including but not limited to Section 7 thereof), the Lien pursuant to this
Agreement on such sold or disposed of Security Collateral shall be automatically
released. In connection with the sale or other disposition of all of the Capital
Stock of any Guarantor that is a Subsidiary of the Company (other than to a
Controlled Affiliate of the Company) or of Security Collateral permitted under
the Investment Agreement (and provided that such sale or other disposition
complies with the provisions of the Intercreditor agreement, including but not
limited to Section 7 thereof), the Secured Parties or their agent shall, upon
receipt from the Company of a written request for the release of such Guarantor
from its Guarantee or the release of the Security Collateral subject to such
sale or other disposition, identifying such Guarantor or the relevant Security
Collateral and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Company stating that such transaction is in
compliance with the Investment Agreement and the other Note Financing Documents,
execute and deliver to the relevant Granting Party (at the sole cost and expense
of such Granting Party) all releases or other documents (including without
limitation UCC termination statements) necessary or reasonably desirable for the
release of such Guarantee or the Liens created hereby on such Security
Collateral, as applicable, as such Granting Party may reasonably request.

         8.17 Senior Indebtedness. Each Granting Party acknowledges and agrees
that (a) the Company Obligations are "Senior Indebtedness" (as defined in the
Senior Subordinated Note Indenture), (b) the Guarantor Obligations of the Parent
are "Parent Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture) and (c) the Guarantor Obligations of each other Guarantor that is a
"Note Guarantor" (as defined in the Senior Subordinated Note Indenture) are
"Guarantor Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture). The Company hereby specifically designates the Company Obligations
as "Designated Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture) for purposes of the Senior Subordinated Note Indenture. Each of the
Parent and each such other Guarantor hereby specifically designates its
Guarantor Obligations as "Guarantor Designated Senior Indebtedness" (as defined
in the Senior Subordinated Note Indenture) for purposes of the Senior
Subordinated Note Indenture.

                                       42



         8.18 Schedules. As soon as practicable after the date of this
Agreement, but in any event no later than five (5) Business Days prior to
Initial Closing Date, the Granting Parties shall deliver all Schedules to this
Agreement to the Investor, which Schedules shall be subject in all respects to
review and approval by the Investor. It is understood that it is a condition
precedent to the Closing that all such Schedules shall be in form and substance
reasonably satisfactory to the Investor. Unless the context otherwise requires,
if the Closing shall occur, all references to any "Schedule" herein shall be
deemed to be a reference to a Schedule hereto delivered pursuant this Section
8.18, as if such Schedule had been delivered on the date hereof. Notwithstanding
anything to the contrary herein, from and after the Initial Closing Date, this
Agreement shall be construed as if all such Schedules hereto delivered pursuant
to this Section 8.18 had been delivered on the date hereof.

                                       43



         IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.

                                       ACTERNA CORPORATION


                                       By:______________________________
                                           Name:
                                           Title:


                                       ACTERNA LLC


                                       By:______________________________
                                           Name:
                                           Title:


                                       ACTERNA BUSINESS TRUST

                                       By:______________________________
                                           Name:
                                           Title:


                                       APPLIED DIGITAL ACCESS, INC.


                                       By:______________________________
                                           Name:
                                           Title:


                                       DA VINCI SYSTEMS, INC.


                                       By:______________________________
                                           Name:
                                           Title:

                                       44



                                       ITRONIX CORPORATION


                                       By:______________________________
                                           Name:
                                           Title:

                                       45



Acknowledged and Agreed to as
of the date hereof by:

CD&R VI (BARBADOS), LTD.
By:  Corporate Services Limited,
     Secretary
    By:______________________________
       Name:
       Title:

                                       46




                                                                      Annex 1 to
                                              Guarantee and Collateral Agreement

         ASSUMPTION AGREEMENT, dated as of _________ __, ____, made by
______________________________, a ______________ corporation (the "Additional
Granting Party"), in favor of [___________________], as Investor (the "Investor"
and "Secured Party") under the Investment Agreement referred to below. All
capitalized terms not defined herein shall have the meaning ascribed to them in
such the Guarantee and Collateral Agreement referred to below, or if not defined
therein, in the Investment Agreement.

                              W I T N E S S E T H :


         WHEREAS, Acterna Corporation, a Delaware corporation (the "Parent"),
Acterna LLC, a Delaware limited liability company wholly owned by the Parent
(the "Company") and the Investor, are parties to an Investment Agreement, dated
as of August 5, 2002 (as amended, supplemented or otherwise modified from time
to time, the "Investment Agreement");

         WHEREAS, in connection with the Investment Agreement, the Parent, the
Company and certain of its Subsidiaries are, or are to become, parties to the
Guarantee and Collateral Agreement, dated as of August 7, 2002 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
Collateral Agreement") in favor of the Investor and other Secured Parties;

         WHEREAS, the Additional Granting Party is a member of an affiliated
group of companies that includes the Company and each other Granting Party; the
Company and the other Granting Parties (including the Additional Granting Party)
are engaged in related businesses, and each such Granting Party (including the
Additional Granting Party) will derive substantial direct and indirect benefit
from the purchase of the Initial Notes under the Investment Agreement;

         WHEREAS, the Investment Agreement requires the Additional Granting
Party to become a party to the Guarantee and Collateral Agreement; and

         WHEREAS, the Additional Granting Party has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;

                                       1



         NOW, THEREFORE, IT IS AGREED:

         1. Guarantee and Collateral Agreement. By executing and delivering this
Assumption Agreement, the Additional Granting Party, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Granting Party thereunder with the same
force and effect as if originally named therein as a Guarantor [, Grantor and
Pledgor] [and Grantor] [and Pledgor]/1/ and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]/2/ thereunder. The
information set forth in Annex 1-A hereto is hereby added to the information set
forth in Schedules ____________ to the Guarantee and Collateral Agreement, and
such Schedules are hereby amended and modified to include such information. The
Additional Granting Party hereby represents and warrants that each of the
representations and warranties of such Additional Grantor, in its capacities as
a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor],/3/ contained in
Section 4 of the Guarantee and Collateral Agreement is true and correct in all
material respects on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.

         2. GOVERNING LAW.  THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

         IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                       [ADDITIONAL GRANTING PARTY]


                                       By:_______________________________
                                           Name:
                                           Title:

- --------

/1/  Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.

/2/  Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.

/3/  Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.

                                       2



Acknowledged and Agreed to as of the date hereof by:


[________________________],
as Investor


By:_____________________________
    Name:
    Title:

                                       3



                                                                      Annex 2 to
                                              Guarantee and Collateral Agreement

             SUPPLEMENTAL AGREEMENT, dated as of __________ __, ____, made by
_____________________, a ___________ corporation [(the "Additional
Pledgor")][(the "Company")]/4/, in favor of [___________________], as Investor
(the "Investor" and "Secured Party") under the Investment Agreement below. All
capitalized terms not defined herein shall have the meaning ascribed to them in
the Guarantee and Collateral Agreement referred to below, or if not defined
therein, in the Investment Agreement.

                              W I T N E S S E T H:

         WHEREAS, Acterna Corporation, a Delaware corporation (the "Parent"),
Acterna LLC, a Delaware limited liability company wholly owned by the Parent
(the "Company") and the Investor, are parties to an Investment Agreement, dated
as of August 5, 2002 (as amended, supplemented or otherwise modified from time
to time, the "Investment Agreement") under the Investment Agreement referred to
below;

         WHEREAS, in connection with the Investment Agreement, the Parent, the
Company and certain of its Subsidiaries are parties to the Guarantee and
Collateral Agreement, dated as of August 7, 2002 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee and Collateral Agreement")
in favor of the Investor and other Secured Parties;

         WHEREAS, the Investment Agreement requires the [Additional Pledgor]
[Company] to become a Pledgor under the Guarantee and Collateral Agreement with
respect to Capital Stock of a new Subsidiary of the Company; and

         WHEREAS, the [Additional Pledgor][Company] has agreed to execute and
deliver this Supplemental Agreement in order to [supplement/become such a
Pledgor to] the Guarantee and Collateral Agreement;

         NOW, THEREFORE, IT IS AGREED:

         1. Guarantee and Collateral Agreement.  By executing and delivering
this Supplemental Agreement, the [Additional Pledgor][Company], as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a Pledgor
under the

- --------
/4/  Use "Additional Pledgor" if other than the Company, and "Company" if the
Company.


                                       1



Guarantee and Collateral Agreement with respect to the shares of Capital Stock
of the Subsidiary of the Company listed in Annex 2-A hereto, as a Granting Party
thereunder. The information set forth in Annex 2-A hereto is hereby added to the
information set forth in Schedule 2 to the Guarantee and Collateral Agreement,
and such Schedule 2 is hereby amended and modified to include such information.
The [Additional Pledgor][Company] hereby represents and warrants that each of
the representations and warranties of such Pledgor contained in Section 4 of the
Guarantee and Collateral Agreement is true and correct in all material respects
on and as the date hereof (after giving effect to this Supplemental Agreement)
as if made on and as of such date.

         2. GOVERNING LAW. THIS SUPPLEMENTAL AGREEMENT AND RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

         IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                       [ADDITIONAL PLEDGOR]


                                       By:_______________________________
                                           Name:
                                           Title:


Acknowledged and Agreed to as of the date hereof by:

[________________________],
as Investor

By:___________________________
    Name:
    Title:

                                       2

EX-10.27

                                                                   Exhibit 10.27

                              ASSUMPTION AGREEMENT

                  ASSUMPTION AGREEMENT, dated as of August 7, 2002, made by CD&R
VI (Barbados), Ltd., a company organized under the laws of Barbados ("CD&R
Barbados" and, solely in its capacity as holder of Convertible Notes (as defined
in the Intercreditor Agreement referred to below) and beneficiary of the
security interest created by the Convertible Note Documents, and its successors
and assigns in such capacity, the "Additional Second Priority Noteholder"), as
holder of the Convertible Notes issued by the Primary Borrower pursuant to the
Additional Investment Agreement referred to below (such Convertible Notes as
amended, supplemented or otherwise modified from time to time, the "Additional
Convertible Notes"), in favor of JPMORGAN CHASE BANK (as successor by merger to
Morgan Guaranty Trust Company of New York), as administrative agent (in such
capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement
referred to below (as defined below). All capitalized terms not defined herein
shall have the meaning ascribed to them in the Intercreditor Agreement referred
to below, or if not defined therein, in the Credit Agreement.

                              W I T N E S S E T H :

                  WHEREAS, Acterna LLC (f/k/a Dynatech LLC), a Delaware limited
liability company (the "Primary Borrower"), the German Borrowers named therein,
the Lenders, the Administrative Agent, JPMorgan Chase Bank (as successor by
merger to Morgan Guaranty Trust Company of New York), as German Term Loan
Servicing Bank, Credit Suisse First Boston, as Syndication Agent, and JPMorgan
Chase Bank (f/k/a The Chase Manhattan Bank) and Bankers Trust Company, each in
its capacity as documentation agent, are parties to a Credit Agreement, dated as
of May 23, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement");

                  WHEREAS, in connection with the Credit Agreement, the
Administrative Agent, Clayton, Dubilier & Rice Fund VI Limited Partnership (as
more particularly defined in the Intercreditor Agreement referred to below, the
"Second Priority Noteholder"), Acterna Corporation (f/k/a Dynatech Corporation),
a Delaware corporation, the Primary Borrower and certain of its Subsidiaries are
parties to the Intercreditor Agreement, dated as of December 27, 2001 (as
amended, supplemented or otherwise modified from time to time, the
"Intercreditor Agreement");

                  WHEREAS, pursuant to the Additional Convertible Notes and the
Investment Agreement, dated as of August 5, 2002, among the Primary Borrower,
the Parent Guarantor and the Additional Second Priority Noteholder, providing
for the issuance of Additional Convertible Notes to the Additional Second
Priority Noteholder by the Primary Borrower (as the same may be amended,
supplemented or otherwise modified from time to time (but only



such amendments, supplements or other modifications permitted by the Credit
Agreement), the "Additional Investment Agreement") (i) the Primary Borrower has
agreed to incur indebtedness to the Additional Second Priority Noteholder, (ii)
the Parent Guarantor, the Primary Borrower and certain of its subsidiaries have
executed the Guarantee and Collateral Agreement, dated as of August 7, 2002 (as
amended, supplemented or otherwise modified from time to time, the "Additional
Convertible Note Guarantee and Collateral Agreement"), pursuant to which the
Parent Guarantor and certain subsidiaries of the Primary Borrower have
guaranteed (the "Additional Noteholder Guarantees") the obligations of the
Primary Borrower under the Additional Convertible Notes and certain other
obligations, and the Parent Guarantor, the Primary Borrower and certain
subsidiaries of the Primary Borrower have created security interests in certain
collateral and (iii) the Parent Guarantor, the Primary Borrower and certain
subsidiaries of the Primary Borrower may have executed and delivered, and may
from time to time in the future execute and deliver, other security documents
(the Additional Convertible Note Guarantee and Collateral Agreement and any
other security documents referred to in the Additional Investment Agreement, as
any thereof may from time to time be amended, supplemented or otherwise
modified, collectively, the "Additional Convertible Note Security Documents");

                  WHEREAS, the Credit Agreement and the Intercreditor Agreement
require that the Additional Second Priority Noteholder become a party to the
Intercreditor Agreement;

                  WHEREAS, the Additional Second Priority Noteholder has agreed
to execute and deliver this Assumption Agreement in order to become a party to
the Intercreditor Agreement;

                  NOW THEREFORE, IT IS AGREED:

                  1. Intercreditor Agreement. By executing and delivering this
Assumption Agreement, the Additional Second Priority Noteholder, as provided in
Section 18 of the Intercreditor Agreement, hereby becomes a party to the
Intercreditor Agreement as a Second Priority Noteholder thereunder with the same
force and effect as if originally named therein as a Second Priority Noteholder
and, without limiting the generality of the foregoing, hereby expressly assumes
all obligations and liabilities of a Second Priority Noteholder.

                  2. Additional Convertible Note Obligations; Convertible Note
Security Documents, etc. Each of the Administrative Agent, the Second Priority
Noteholder and the Additional Second Priority Noteholder hereby agrees and
acknowledges that, for all purposes under the Intercreditor Agreement, (i) the
"Obligations" as defined in the Additional Convertible Note Guarantee and
Collateral Agreement shall constitute "Convertible Note Obligations" under the
Intercreditor Agreement, (ii) the Additional Convertible Note Security Documents
shall constitute "Convertible Note Security Documents" under the Intercreditor
Agreement, (iii) "Indebtedness" as defined in the Additional Investment
Agreement shall constitute "Indebtedness" under the Intercreditor Agreement and
(iv) the Additional Noteholder Guarantees shall constitute "Noteholder
Guarantees" under the Intercreditor Agreement.



                  3. Capacity of Additional Second Priority Noteholder, etc.
Notwithstanding any other provision hereof or of the Intercreditor Agreement,
(a) neither this Assumption Agreement nor the Intercreditor Agreement shall
affect or impair in any respect any right, power, privilege or remedy of CD&R
Barbados in any capacity other than solely as a holder of the Convertible Notes
and beneficiary of the security interests granted by the Additional Convertible
Note Security Documents, including without limitation in any capacity as an
equity holder, or in any other capacity as a creditor, of any of the Primary
Borrower, the Parent Guarantor or any of their respective Subsidiaries and (b)
it is acknowledged and agreed that the "Obligations" as defined in the
Additional Convertible Note Guarantee and Collateral Agreement of each
Convertible Note Credit Party are senior obligations of such Convertible Note
Credit Party that are pari passu in right of payment with the Credit Agreement
Obligations of such Convertible Note Credit Party.

                  4. GOVERNING LAW. THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                  5. Counterparts. This agreement may be executed by one or more
of the parties to this agreement on any number of separate counterparts
(including by facsimile), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.



                  IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                        CD&R VI (BARBADOS), LTD.

                                        By:  Corporate Services Limited,
                                             Secretary

                                          By:______________________________
                                             Name:
                                             Title:

Agreed and Acknowledged:

JPMORGAN CHASE BANK,
as Administrative Agent

By: ______________________________________
Name:
Title:


CLAYTON, DUBILIER & RICE FUND VI
LIMITED PARTNERSHIP
as Second Priority Noteholder

By:  CD&R Associates VI Limited Partnership,
  its general partner

By:  CD&R Investment Associates VI, Inc.,
  its managing general partner


By: ______________________________________
Name:
Title:

ACTERNA LLC

By: ______________________________________
Name:
Title: