10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 27, 2000

OR

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

For the transition period from              to             

Commission file number 1-6357

ESTERLINE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-2595091 (I.R.S. Employer Identification No.)
10800 NE 8th Street Bellevue, Washington (Address of principal executive offices)	98004 (Zip code)

Registrant's telephone number, including area code 425/453-9400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock ($.20 par value) Preferred Stock Purchase Rights	New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

As of January 2, 2001, 17,427,301 shares of the Registrant's common stock were outstanding. The aggregate market value of such common stock held by non-affiliates at such date was $431,325,700 (based upon the closing sales price of $24.75 per share).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Annual Report to Shareholders for Fiscal Year ended October 27, 2000—Parts I, II and IV.

Portions of Definitive Proxy Statement relating to the 2001 Annual Meeting of Shareholders, to be held on March 7, 2001—Part III.

PART I

This Report includes a number of forward-looking statements that reflect the Company's current views with respect to future events and financial performance. Please refer to the section addressing forward-looking information on page 7 for further discussion.

Item 1. Business

(a) General Development of Business.

Esterline, a Delaware corporation formed in 1967, is a specialized manufacturing company principally serving aerospace and defense customers and electronic equipment manufacturers. We design, manufacture and market highly engineered products and systems for applications within the industries we serve. Our strategic growth plan revolves around the development of three key technologies—sensors and controls, illuminated displays and specialized high-performance materials.

As part of our long-term strategic direction, we strive to anticipate the global needs of our customers and to respond with comprehensive solutions worldwide. This effort has resulted in establishing strategic realignments of operations providing the capability to offer a more extensive product line to each customer through a single contact. As part of our strategy, during the past fiscal year, we acquired a manufacturer of custom keyboard and other multi-function data input subsystems, Advanced Input Devices Co., A.I.D. This acquisition expanded our high-end illuminated displays and custom panels operations.

We view and operate our business in three different segments: Aerospace, Advanced Materials and Automation. We primarily serve aerospace and defense customers with manufactured products such as high-end components for avionics, propulsion and guidance systems, and high-performance elastomers and other complex materials in the Aerospace and Advanced Materials segments. The Automation segment serves electronic equipment customers with printed circuit board, PCB, drilling equipment and heavy equipment manufacturing customers with automated machine tools for cutting and punching plate metal.

(b) Financial Information about Industry Segments.

A summary of net sales to unaffiliated customers, operating earnings and identifiable assets attributable to the Company's business segments for fiscal years 1998, 1999, and 2000 is incorporated herein by reference to Note 11 to the Company's Consolidated Financial Statements (pages 46-49) of the Annual Report to Shareholders for the fiscal year ended October 27, 2000.

(c) Narrative Description of Business.

Specific comments covering all of the Company's segments and operations are set forth below.

Aerospace.  Principal operations for our Aerospace business segment are conducted through Auxitrol which specializes in the development and manufacture of sensors and controls, and Korry which specializes in cockpit components.

Sensors & Controls

We have important market positions in both the United States and Europe in the manufacture of high-precision temperature and pressure sensing devices, hydraulic controls, micro-motors and motion control sensors used primarily in aerospace applications. In addition, we are the sole source supplier of exhaust gas temperature probes for use on all versions of the GE/Snecma CFM 56 jet engines (over 10,000 of which are currently in use on all new generation Boeing 737 aircraft and most Airbus models). The principal customers for our sensors and controls are jet engine manufacturers, airframe

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manufacturers, shipbuilders, petroleum companies and electric utilities. Customers for our products include Aerospatiale, Airbus, Aircraft Braking Systems, British Ministry of Defence, General Electric, Honeywell, Parker Hannifin and Snecma.

Cockpit Components

We are a market leader in the development, marketing and manufacturing of sophisticated high reliability components and subsystems. These products include illuminated push button switches, indicators, panels and keyboards that are used in a broad variety of control and display applications. They have been integrated into many existing aircraft designs, including every Boeing commercial aircraft currently in production. This large installed base provides us with a significant spare parts and retrofit business. In addition, we manufacture control sticks, grips and wheels, as well as specialized switching systems. In this area, we primarily serve commercial and military aviation, and airborne and ground-based military equipment manufacturing markets.

Our proprietary products provide customers with significant technological advantages in such areas as night vision, a critical operational requirement, and backlighting for active-matrix liquid-crystal displays, a technology enabling pilots to read display screens in a variety of light conditions as well as from extreme angles. Our products are incorporated in a wide variety of programs including the Apache and Black Hawk helicopters and the F-117 Stealth, C-17, F-14, F-15, F-16 and F-18 fixed wing military aircraft, as well as Canadair, Cessna, Gulfstream and Saab business jets. Customers for our products include Boeing, Bombardier, Embraer Aircraft, Honeywell, Lockheed Martin, Raytheon Aircraft, Rockwell, Sikorsky, Smiths Industries and the US Department of Defense, DoD.

Advanced Materials.  Principal operations for our Advanced Materials business segment are conducted through Kirkhill-TA which specializes in the design and manufacture of high-performance elastomer products, and Armtec which specializes in the manufacture of molded fiber cartridge cases, mortar increments, igniter tubes and other combustible ammunition components.

Specialized High-Performance Applications

We specialize in the development of proprietary formulations for silicon rubber and other elastomer products. Our elastomer products are engineered to address specific customer problems where superior performance in high temperature, high pressure, caustic, abrasive and other difficult environments is critical. These products include specialty clamps, seals, tubing and coverings, which are designed in custom molded shapes. Our primary customers for these products are jet and rocket engine manufacturers, commercial and military airframe manufacturers, as well as commercial airlines. Some of the products include proprietary elastomers that are specifically designed for use on or near a jet engine. Customers for our products include BF Goodrich, Boeing, General Electric, Honeywell, Kapco, Pratt & Whitney and Thiokol.

Other Defense Applications

We manufacture molded fiber cartridge cases, mortar increments, igniter tubes and other combustible ammunition components for the US Armed Forces, in addition to licensing such technology to foreign defense contractors and governments. Through sales to prime contractors, Alliant Techsystems and General Dynamics, we are currently the only supplier of combustible casings utilized by the US Army. These products include the 120mm combustible case used with the main armament system on the US Army's M-1A1 and M-1A2 tanks and the 60mm, 81mm and 120mm combustible mortar increments. As the sole source supplier of combustible casings, we recently received the initial production order for the US Army's new generation 155mm Modular Artillery Charge System.

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Automation.  Principal operations for our Automation business segment are conducted through Excellon which manufactures automated drilling systems for fabrication of PCBs, and W.A. Whitney which designs and builds automated machine tools for cutting and punching plate and structural steel.

Printed Circuit Board Applications

We are a leading manufacturer of highly efficient automated drilling systems for the PCB manufacturing industry. Our advanced mechanical drilling technology addresses the unique requirements for circuit boards and multi-chip modules used in, among other things, internet infrastructure and wireless communications equipment. We recently introduced laser technology to respond to customer requirements for increasingly higher specification PCBs. Our state-of-the-art lasers are able to produce holes as small as 2 mils in diameter and at speeds of up to 60,000 holes per minute. Customers for our products include Litton, Multeck, Sanmina, Tyco and ViaSystems.

Precision Metal Cutting and Punching Applications

We are a leading manufacturer of high precision, computer controlled machine tools for cutting and punching plate and structural steel ranging from approximately three-eighths of an inch to one and a quarter inches in thickness for construction, transportation, agricultural and mining equipment manufacturers and independent steel fabrication centers. Our products are specifically designed for mid- to heavy-plate metal that enables manufacturers to meet rigid cut quality and accuracy standards. In recent years, we have introduced laser technology into our line of products which increases the accuracy of cuts and reduces the number of required finishing operations. In this niche market, we are a leading supplier in the United States, in addition to serving markets in both Europe and Asia. Customers for our products include Caterpillar, Case New Holland, Deere, FMC, Genie Industries, Heil and Thrall Rail Car.

Marketing and Distribution

As businesses globalize, we believe that a key to continued success is our ability to meet customer requirements worldwide. In order to accomplish this, we have and will continue to optimize our operations in order to provide a wider variety of products through single business segments. These adjustments include combining sales and marketing forces where appropriate, cross-training our sales representatives on multiple product lines, and cross-stocking our spare parts and components. For example, our sensors and controls platform operations, previously three independent organizations in the United States, England and France, are being integrated to provide a single point of contact for global sales of temperature and pressure sensors, fluid regulating devices and motion control components.

In the technical and highly engineered product segments in which we compete, relationship selling is particularly appropriate in targeted marketing segments where customer and supplier design and engineering inputs need to be tightly integrated. Participation in industry trade shows is an effective method of meeting customers, introducing new products and exchanging technical specifications. In addition to technical and industry conferences, our products are supported through direct internal global sales efforts, particularly important in the Automation segment, as well as through manufacturer representatives and selected distributors. Currently, we have 186 sales people, 222 representatives and 27 distributors supporting our operations globally.

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Backlog

Backlog at the end of fiscal 2000 was $228.3 million compared with $183.2 million at the end of fiscal 1999. Approximately $46.1 million of backlog is scheduled to be shipped after fiscal 2001.

Our backlog provides us with a useful tool to project sales and plan our business on an on-going basis; however, since it is subject to cancellation until delivered, we cannot be assured that the backlog will be converted into revenue in any particular period or at all. Backlog does not include the total contract value of cost-plus reimbursable contracts, which are funded as we incur the costs. Backlog also does not include fixed-price multi-year contracts, except for the released portion.

Competition

Our products and services are affected by varying degrees of competition. We compete with other companies in most markets we serve, many of which have far greater sales volumes and financial resources. The principal competitive factors in the commercial markets in which we participate are product performance, service and price. The market for many of our products may be affected by rapid and significant technological changes and new product introduction. Therefore, part of product performance requires expenditures in research and development that lead to rapid product improvement. Our principal competitors include: Ametek, BF Goodrich-Rosemount, Eaton-MSC and ECE in our Aerospace segment; Adel, Burke Industries, Dunlop and Meggitt in our Advanced Materials segment; and Amada America, ESI, Hitachi, Pluritec Italia, Mazak, Schmoll Maschinen, Tanaka and Trumpf in our Automation segment.

Research and Development

Currently, our product development and design programs utilize an extensive base of professional engineers, technicians and support personnel, supplemented by outside engineering and consulting firms when needed. In fiscal 2000, approximately $20.8 million was expended for research, development and engineering, compared with $24.0 million in fiscal 1999 and $20.8 million in fiscal 1998. As we believe that continued product development is key to our long-term growth, we consistently invest in research and development, as well as participating in customer funded research and development programs, including flight controls and instrumentation on the Joint Strike Fighter and Eurofighter, Gulfstream V flight controls, deicing probes for next generation GE engines, ice detectors for the Rafale fighter, smoke and pollution concentration measurement devices and LED lighted cockpit switches for Airbus.

Foreign Operations

Our principal foreign operations consist of manufacturing facilities located in France and the United Kingdom. We also maintain offices in the United Kingdom, France, Germany, Hong Kong, Japan and Spain that provide a variety of functions including sales, service, distribution and/or purchasing. For further information regarding foreign operations, reference is made to the Consolidated Financial Statements incorporated by reference into this report.

Employees

We had approximately 4,300 employees at October 27, 2000, of which 3,500 were based in the United States and 800 were in our United Kingdom and European operations. Fewer than 3.0% of the US-based employees were represented by a labor union. In addition, the European operations are subject to national trade union agreements and to local regulations governing employment.

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Government Contracts and Subcontracts

As a contractor and subcontractor to the US Government, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors. Although only 5.0% of our sales were made directly to the US Government in fiscal 2000, we estimate that our subcontracting activities accounted for an additional 15.0% of sales. Therefore, approximately 20.0% of our sales during that fiscal year were governed by rules favoring the government's contractual position. As a consequence, such contracts may be subject to termination, reduction or modification in the event of changes in government requirements, reductions in federal spending and other factors. Although our fixed-price contracts generally permit us to keep profits if costs are less than projected, we do bear the risk that increased or unexpected costs may reduce profits or cause us to sustain losses on the contracts. Generally, firm fixed-price contracts offer higher margins than cost-plus type contracts. The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the US Government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the DoD. The contracts and subcontracts to which we are a party are also subject to profit and cost controls and standard provisions for termination at the convenience of the US Government. Upon termination, other than for our default, we will normally be entitled to reimbursement for allowable costs and to an allowance for profit. To date, none of our significant fixed-price contracts have been terminated.

Patents and Licenses

Although we hold a number of patents and licenses, we do not believe that our operations are dependent on our patents and licenses. In general, we rely on technical superiority, continual product improvement, exclusive product features, superior lead time, on-time delivery performance and quality and customer relationships to maintain competitive advantage.

Sources and Availability of Raw Materials and Components

Due to our diversification, the sources and availability of raw materials and components are not nearly as important as they would be for a company that manufactures a single product. However, certain components, supplies and raw materials for other operations are purchased from single sources. In such instances, we strive to develop alternative sources and design modifications to minimize the effect of business interruptions.

Seasonality

The timing of our revenues is impacted by the purchasing patterns of our customers and as a result we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday and vacation periods in both Europe and North America. This leads to decreased order and shipment activity, consequently first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

Environmental Matters

We are subject to extensive, evolving and increasingly stringent federal, state, local and foreign laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges of hazardous materials to air and water, as well as handling and disposal practices for solid and hazardous materials, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous materials.

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From time to time, our operations have resulted or may result in noncompliance with environmental laws or liability for the costs of investigating and cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous materials. As a result, we have been, and may become, subject to orders from environmental agencies to investigate and cleanup potential contamination at certain of our facilities. We believe that we have adequately accrued for the estimated costs associated with such matters.

In addition, we have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, CERCLA, and analogous state environmental laws, for the cleanup of contamination resulting from past disposals of hazardous materials at certain sites to which we, among others, sent wastes in the past. CERCLA requires potentially responsible parties to pay for cleanup of sites from which there has been a release or threatened release of hazardous materials. Courts have interpreted CERCLA to impose strict, and under certain circumstances, joint and several liability upon all parties liable for cleanup costs. As a practical matter, however, at sites where there are multiple potentially responsible parties, the costs of cleanup typically are allocated among the parties according to a volumetric or other standard. Although there can be no assurance, we believe, based on, among other things, a review of the data currently available to us regarding each such site, including, where relevant, the minor volumes of waste which we are alleged to have contributed at multi-party sites, and a comparison of our liability at each such site to settlements we have previously reached in similar cases, that we have adequately accrued for the estimated costs associated with such matters.

Liabilities have been accrued for environmental cleanup costs expected to be incurred in connection with the disposition of manufacturing facilities. No provision has been recorded for environmental cleanup costs that could result from changes in laws or other circumstances we have not currently contemplated.

(d) Financial Information About Foreign and Domestic Operations and Export Sales.

See Note 11 to the Consolidated Financial Statements, pages 46-49 of the Annual Report to Shareholders.

Forward-Looking Statements and Risk Factors

This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will" or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined below, that may cause our or our industry's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements.

Business Risks

Our operating results are subject to fluctuations that may cause our stock price to decline.

Our business is susceptible to economic cycles and therefore our operating results have fluctuated widely in the past and are likely to continue to do so. Our revenue is unpredictable and tends to fluctuate based on a number of factors, including domestic and foreign economic conditions and developments affecting the specific industries and customers served. Certain products sold represent

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capital investment or support for capital investment by either the initial customer or the ultimate end-user. Also, a significant portion of the sales and profitability of some of our businesses is derived from the aerospace, defense, telecommunications, computer and heavy equipment markets as well as government contracts. It is possible that in the future our operating results in a particular quarter or quarters will not meet the expectations of securities analysts or investors, causing the market price of our common stock to decline. We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance and should not be relied upon to predict the future performance of our stock price.

The loss of a significant customer or defense program could have a material adverse effect on our operating results.

Certain segments of our operations are dependent on a relatively small number of customers and defense programs, which change from time to time. Our most significant customers in fiscal 2000, of which sales to any such customer was less than 10.0%, included Boeing, General Dynamics, Snecma and the US Army. There can be no assurance that our current significant customers will continue to buy products at their current levels. Moreover, orders included in backlog are generally subject to cancellation by our customers. The loss of a significant customer or defense program could have a material adverse effect on our operating results if we were unable to replace the related sales.

Our manufacturing operations in California may be adversely affected by power outages in that state.

We have substantial manufacturing operations in California principally related to our Advanced Materials segment, and to a lesser extent to our Automation segment. Recently, our plants have experienced electric power outages due to the difficulties being experienced by the electric utility industry in California. If our California operations were to shut down due to the lack of electric power for extended periods, they might be unable to meet customers' delivery schedules, thereby adversely affecting our revenue. In addition, it is likely that these operations will incur increased electrical power costs when they do operate. We are unable to predict how long the difficulties faced by the electric utility industry in California will continue or how such difficulties will be resolved. To the extent they do continue and our plants experience additional power outages and/or increases in their cost of electrical power, our business could be adversely affected.

Political and economic instability in foreign markets may have a material adverse effect on our operating results.

Foreign sales represented approximately 31.8% of our total sales in fiscal 2000. Foreign sales are subject to numerous risks, including political and economic instability in foreign markets, restrictive trade policies of foreign governments, economic conditions in local markets, inconsistent product regulation by foreign agencies or governments, the imposition of product tariffs and the burdens of complying with a wide variety of international and US export laws and differing regulatory requirements. To the extent that foreign sales are transacted in a foreign currency, we are subject to the risk of losses due to foreign currency fluctuations. In addition, we have substantial assets denominated in foreign currencies that are not offset by liabilities denominated in such foreign currencies. These net foreign currency investments are subject to material changes in the event of fluctuations in foreign currencies against the US dollar.

The unsuccessful integration of a business or business segment we acquire could have a material adverse effect on our operating results.

One of our key operating strategies is to pursue selective acquisitions. We are reviewing and actively pursuing many possible acquisitions, including some outside our current markets. We do not currently have any commitments, agreements or understandings to acquire any specific businesses or other material assets. Our acquisition strategy will require additional debt or equity financing, resulting in additional leverage and dilution of ownership. We may not be able to finance acquisitions on terms that are satisfactory to us. We cannot assure you that any future acquisition will be consummated, or that if consummated, that we will be able to integrate such acquisition successfully without a material adverse effect on our financial condition or results of operations.

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If we are unable to protect our intellectual property rights adequately, the value of our products could be diminished.

Our success is dependent in part on obtaining, maintaining and enforcing our patents and other proprietary rights and our ability to avoid infringing on the proprietary rights of others. While we take precautionary steps to protect our technological advantages and intellectual property and rely in part on patent, trademark, trade secret and copyright laws, we cannot assure you that the precautionary steps we have taken will completely protect our intellectual property rights. Because patent applications in the United States are maintained in secrecy until a patent is issued, there may be third-party patents, patent applications and other intellectual property relevant to our potential products that may block or compete with our products and processes. In the event a competitor successfully challenges our patents or licenses, we could incur substantial litigation costs that could have a material adverse effect on our operating results and financial condition.

In addition to our patent rights, we also rely on unpatented technology, trade secrets and confidential information. Others may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We may not be able to protect our rights in unpatented technology, trade secrets and confidential information effectively. We require our new employees, consultants and corporate partners to execute a confidentiality agreement at the commencement of their employment or consulting relationship with us. However, these agreements may not provide effective protection of our information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

The market for our products may be affected by our ability to adapt to technological change.

The rapid change of technology continually affects our product applications and may directly impact the performance of any particular product. To succeed in the future, we will need to design, develop, manufacture, assemble, test, market and support new products, and enhancements to our existing products, in a timely and cost-effective manner. Historically, our technology has been developed through both internal research and development expenditures, as well as customer funded research and development programs. There is no guarantee that we will continue to maintain, or benefit from, comparable levels of research and development in the future. We can give you no assurances that our existing products will not require significant modifications in the future in order to maintain their effectiveness, nor can we assure you that we will successfully identify new opportunities and continue to have the needed financial resources to develop new products in a timely or cost-effective manner.

Fixed-price contracts are common in some of our markets and may increase risks of cost overruns or losses on our contracts.

Our customers set demanding specifications for product performance, reliability and cost. Some of our government contracts and subcontracts are firm, fixed-price contracts providing for a predetermined fixed price for the products we make regardless of the costs we incur. Thus, we must make pricing commitments to our customers based on our expectation that we will achieve more cost-effective product designs and automate more of our manufacturing operations. The manufacture of our products requires a complex integration of demanding processes involving unique technical skill sets. We face risks of cost overruns or order cancellations if we fail to achieve forecasted product design and manufacturing efficiencies or if products cost more to produce than expected. The expense of producing products can rise due to increased costs of materials, components, labor, capital equipment or other factors. We may have cost overruns or problems with the performance or reliability of our products in the future, which could result in us incurring losses on contracts which we would have otherwise expected to be profitable.

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We depend on the continued contributions of our executive officers and other key management, each of whom would be difficult to replace.

The loss of any of our executive officers or key management personnel would disrupt our operations and divert the time and attention of our remaining personnel. We do not have employment contracts with our key executives nor have we purchased "key-person" insurance on the lives of any of our executive officers or key management personnel to reduce the impact to our company that the loss of any of them would cause.

Our charter documents contain certain provisions that could make a merger, tender offer or proxy contest difficult.

Our Restated Certificate of Incorporation, as amended, and Bylaws, as amended, provide for a classified board of directors and restrict the ability of shareholders to call special meetings. These provisions could delay or impede the removal of incumbent directors and could make it more difficult to effect a merger, tender offer or proxy contest, even if such events might be favorable to our shareholders. In addition, certain agreements to which we are a party, including loan and executive officer agreements, contain provisions that impose increased costs in the event of a change of control.

We are party to a Shareholder Rights Plan designed to cause substantial dilution to any "Acquiring Person" that attempts to merge or consolidate with us, or that takes certain other actions affecting us on terms that are not approved by our board of directors. We are also subject to the "business combination" statute of the Delaware General Corporation Law, that generally prohibits a publicly held Delaware corporation from engaging in various "business combination" transactions with any "interested stockholder" for a period of three years after the date of the transaction in which such person became an "interested stockholder," unless the business combination is approved in a specific manner. These provisions could discourage or make it more difficult to effect a merger, tender offer or other similar transaction, even if it were favorable to our shareholders.

Industry Risks

Our business is subject to various laws and regulations that are more restrictive because we are a contractor and subcontractor to the US Government.

As a contractor and subcontractor to the US Government, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors. Although only 5.0% of our sales were made directly to the US Government in fiscal 2000, we estimate that our subcontracting activities accounted for an additional 15.0% of sales. Therefore, approximately 20.0% of our sales during that fiscal year were governed by rules favoring the government's contractual position. As a consequence, such contracts may be subject to protest or challenge by unsuccessful bidders or to termination, reduction or modification in the event of changes in government requirements, reductions in federal spending or other factors. The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the US Government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the DoD. Responding to governmental audits, inquiries or investigations may involve significant expense and divert management attention. Also, an adverse finding in any such audit, inquiry or investigation could involve fines, injunctions or other sanctions.

Rapid changes in technology and industry standards could render certain of our products obsolete or noncompetitive.

We are engaged in a field characterized by product performance, which requires extensive research efforts, rapid technological development and service. New developments and product improvements in our field are accelerating. Our competitors may develop technologies and products that are more effective than any we develop or that render our technology and products obsolete or noncompetitive.

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In addition, our products could become unmarketable if new industry standards emerge. To be successful, we will need to enhance our products and design, develop and market new and improved products that keep pace with new technological and industry developments; however, we cannot assure you that we will be successful in competing against new technologies and keeping up with industry developments.

A downturn in the aircraft market could adversely affect our business.

The aircraft industry is cyclical in nature and affected by many factors beyond our control which could have a material adverse effect on our business, financial condition and operating results.

The principal markets for manufacturers of commercial aircraft are the commercial and regional airlines which are cyclical and adversely affected by a number of factors, including increased fuel and labor costs and intense price competition, all of which can be volatile and are outside our control. Commercial aircraft production may increase or decrease in response to changes in customer demand caused by general economic conditions.

The military aircraft industry is dependent upon the level of equipment expenditures by the armed forces of countries throughout the world, and especially those of the United States. In recent years, this industry has been adversely affected by a number of factors, including the reduction in military spending since the end of the Cold War. Additional decreases in military spending could further depress demand for military aircraft.

Any decrease in demand for new aircraft will likely result in a decrease in demand of our products and services, and correspondingly, our revenues, thereby adversely affecting our business, financial condition and results of operations.

Our business is subject to governmental authorizations and approvals.

Governmental agencies throughout the world, including the US Federal Aviation Administration, FAA, highly regulate the repair and overhaul of aircraft engines. Guidelines established by OEMs supplement governmental regulation and generally require that aircraft operators overhaul engines and replace specified engine parts after a certain number of flight hours or cycles (take-offs and landings).

We include with the replacement parts that we sell to our customers documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations. In addition, new and more stringent government regulations, if adopted and enacted, could have a material adverse effect on our business, financial condition and results of operations.

Intense competition among technology companies for experienced engineers and other personnel may affect our ability to sustain our growth expectations.

We depend on, and must attract and retain, competent personnel in all areas of our business, including management, engineering, manufacturing, quality assurance, finance, marketing and support. Our development efforts especially depend on hiring and retaining qualified engineers, that we believe are in high demand. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. If we are unable to hire a sufficient number of engineering personnel, we may be unable to support the growth of our business, and as a result, our sales may suffer.

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We may be required to defend lawsuits or pay damages in connection with the alleged or actual harm caused by our products.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in harm to others or to property. Although we maintain general liability and product liability insurance, we may incur significant liability if product liability lawsuits against us are successful. We cannot assure you that such coverage will be adequate to cover all claims that may arise or that it will continue to be available to us on acceptable terms.

We may incur substantial environmental liability arising from our activities involving the use of hazardous materials.

Our business is subject to certain federal, state, local and foreign laws, regulations and ordinances governing the use, manufacture, storage, handling and disposal of hazardous materials and certain waste products. From time to time, our operations have resulted or may result in noncompliance with environmental laws or liability for the costs of investigating and cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous materials. In addition, we have been identified as a potentially responsible party pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or under analogous state environmental laws, for the cleanup of contamination resulting from past disposals of hazardous materials at certain sites where we, with others, sent waste in the past. We cannot assure you that such matters, or any similar liabilities that arise in the future, will not exceed our resources, nor can we completely eliminate the risk of accidental contamination or injury from these materials.

Item 2. Properties

The following table summarizes our principal properties that are greater than 50,000 square feet, including identification of the business segment, as of October 27, 2000:

Location	Type of Facility	Business Segment	Approximate Square Footage	Owned or Leased
Brea, CA	Office, Plant & Warehouse	Advanced Materials	429,000	Owned
Rockford, IL	Office & Plant	Automation	294,000	Owned
Seattle, WA	Office & Plant	Aerospace	152,000	Leased
Torrance, CA	Office & Plant	Automation	150,000	Leased
Coachella, CA	Office & Plant	Advanced Materials	111,000	Owned
Bourges, France	Plant	Aerospace	102,000	Leased
Kent, WA	Office & Plant	Advanced Materials	93,000	Owned
Joplin, MO	Office & Plant	Aerospace	92,000	Owned
Valencia, CA	Office & Plant	Advanced Materials	88,000	Owned
Coeur d'Alene, ID	Office & Plant	Aerospace	85,000	Leased
London, England	Office & Plant	Aerospace	70,000	Leased
San Fernando, CA	Office & Plant	Aerospace	50,000	Leased
Painesville, OH	Office & Plant	Aerospace	50,000	Owned

In total, we own approximately 1,400,000 square feet and lease approximately 700,000 square feet of manufacturing facilities and properties.

Item 3. Legal Proceedings

From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe we have adequately reserved for these liabilities and that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.

12

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

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year ended October 27, 2000.

PART II

Item 5. Market For Registrant's Common Equity and Related Stockholder Matters

The following information that appears in the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000 is hereby incorporated by reference:

(a)

The high and low market sales prices of the Company's Common Stock for each quarterly period during fiscal years 2000 and 1999, respectively, (page 24 of the Annual Report to Shareholders).



(b)

Restrictions on the ability to pay future cash dividends (Note 6 to the Consolidated Financial Statements, pages 39-40 of the Annual Report to Shareholders).

No cash dividends were declared or paid during fiscal years 2000 and 1999. The Company currently intends to retain all future earnings for use to expand our business and retire debt. We are restricted from paying dividends under our current credit facility and do not anticipate paying any dividends in the foreseeable future.

On January 2, 2001, there were approximately 778 record holders of the Company's common stock.

The principal market for the Company's Common Stock is the New York Stock Exchange.

Item 6. Selected Financial Data

The Company hereby incorporates by reference the Selected Financial Data of the Company that appears on page 23 of the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company hereby incorporates by reference Management's Discussion and Analysis of Results of Operations and Financial Condition which is set forth on pages 15-22 of the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company hereby incorporates by reference the narrative discussion regarding market risk appearing on page 21 of the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000.

Item 8. Financial Statements and Supplementary Data

The report of Ernst & Young LLP, independent auditors and the consolidated financial statements included on pages 25 through 51 of the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000 and are incorporated herein by reference. The report of Deloitte & Touche LLP, independent advisors, as of October 31, 1999 and for each of the two years in the period then ended is included in this filing under Exhibit 23.3. Quarterly results of operations on page 50 of the Company's Annual Report to Shareholders for the fiscal year ended October 27, 2000 is incorporated herein by reference.

14

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On April 19, 2000, the Board of Directors of the Company, on the recommendation of the Audit Committee and management, approved the appointment of Ernst & Young LLP as the Company's independent auditors to audit its consolidated financial statements for the fiscal year ending October 27, 2000. The Company's auditors for the fiscal years ending October 31, 1999 and October 31, 1998 were Deloitte & Touche LLP.

During the two most recent fiscal years and the subsequent interim period preceding the change in independent auditors, there were no reportable events within the meaning of Item 304(a)(v) of Regulation S-K. There were no disagreements between the Company and Deloitte & Touche LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused such firm to make a reference to the subject matter of the disagreements in connection with its reports. Also, during the last two fiscal years, reports from Deloitte & Touche LLP on the financial statements contained no adverse opinions or disclaimers of opinion and have not been qualified or modified as to uncertainty, audit scope, or accounting principles.

The Company provided Deloitte & Touche LLP and Ernst & Young LLP with a copy of this disclosure. Deloitte & Touche LLP furnished a letter addressed to the Commission stating that Deloitte & Touche LLP agrees with the above statements.

PART III

Item 10. Directors and Executive Officers of the Registrant

(a) Directors.

The Company hereby incorporates by reference the information set forth under "Election of Directors" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 7, 2001, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 19, 2001.

(b) Executive Officers.

The names and ages of all executive officers of the Company and the positions and offices held by such persons as of January 19, 2001 are as follows:

Name	Position with the Company	Age
Robert W. Cremin	Chairman, President and Chief Executive Officer	60
James J. Cich, Jr.	Group Vice President	39
Robert D. George	Vice President and Chief Financial Officer	44
Marcia J. M. Greenberg	Vice President, Human Relations	48
Larry A. Kring	Group Vice President	60
Stephen R. Larson	Vice President, Strategy & Technology	56

Mr. Cremin became Chairman as of January 19, 2001. He has been Chief Executive Officer since January 1999 and President since September 1997. From January 1991 to September 1997, he served in various executive positions including Chief Operating Officer, Executive Vice President, Senior Vice President and Group Executive. He is also the Chairman of the President's Council of Manufacturers Alliance/MAPI. Mr. Cremin has an M.B.A. from the Harvard Business School and a B.S. degree in Metallurgical Engineering from Polytechnic Institute of Brooklyn.

Mr. Cich has been Group Vice President since March 1998. Previously, he was Group Executive from February 1997 to February 1998. From June 1995 to February 1997, he was President, Chief Executive Officer and a director for WFI Industries, Ltd. From June 1988 to May 1995, he was President of

15

Patton Electric Company, Inc. Mr. Cich has an M.B.A. from the Harvard Business School and a B.S. degree in Industrial Engineering from the University of Washington.

Mr. George has been Vice President, Chief Financial Officer and Secretary since July 1999 and Treasurer and Controller since June 1997. From October 1995 to June 1997, he was Group Vice President Finance for Zurn Power Systems Group. Previously, he served as Vice President Finance for the Energy Division of Zurn Industries from March 1989 until October 1995. Mr. George has an M.B.A. from the Fuqua School of Business at Duke University and a B.A. degree in Economics from Drew University.

Ms. Greenberg has been Vice President, Human Resources since March 1993. Previously, she was a Partner at the law firm of Bogle & Gates from January 1992 through February 1993 and an associate attorney from August 1984 through December 1991. Ms. Greenberg has a J.D. degree from Northwestern University School of Law and a B.A. degree in Political Science from Portland State University.

Mr. Kring has been Group Vice President since August 1993. From November 1978 to July 1993, he was President and Chief Executive Officer of Heath Tecna Aerospace Co., a unit of Ciba Composites Division, Anaheim, California. He is a director of Everlast Worldwide, Inc. Mr. Kring has an M.B.A. from California State University at Northridge and a B.S. degree in Aeronautical Engineering from Purdue University.

Mr. Larson has been Vice President, Strategy & Technology since January 2000. Previously, he was Group Vice President from April 1991 through December 1999. From February 1978 to March 1991, he held various executive positions with Korry Electronics, a subsidiary of the Company, including President and Executive Vice President, Marketing. Mr. Larson has an M.B.A. from the University of Chicago and a B.S. degree in Electrical Engineering from Northwestern University.

Item 11. Executive Compensation

The Company hereby incorporates by reference the information set forth under "Executive Compensation" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 7, 2001, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 19, 2001.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The Company hereby incorporates by reference the information with respect to stock ownership set forth under "Security Ownership of Certain Beneficial Owners and Management" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 7, 2001, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 19, 2001.

Item 13. Certain Relationships and Related Transactions

None.

16

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) Financial Statements.

The following consolidated financial statements, together with the report thereon of Ernst & Young LLP, dated December 6, 2000, appearing on pages 25-51 of the Company's Annual Report to Shareholders for the year ended October 27, 2000 are hereby incorporated by reference:

	Annual Report Page Number
Consolidated Statement of Operations—Fiscal years 2000, 1999, and 1998	25
Consolidated Balance Sheet—October 27, 2000 and October 31, 1999	26 – 27
Consolidated Statement of Cash Flows—Fiscal years 2000, 1999, and 1998	28 – 29
Consolidated Statement of Shareholders' Equity and Comprehensive Loss— Fiscal years 2000, 1999, and 1998	30
Notes to Consolidated Financial Statements—October 27, 2000	31 – 50
Report of Ernst & Young LLP, Independent Auditors	51

Refer also to Part II, Item 8—Financial Statements and Supplementary Data for additional information.

(a)(2) Financial Statement Schedules.

The following consolidated financial statement schedule of Esterline Technologies Corporation and subsidiaries is included in Item 14(d) as follows:

Schedule II—Valuation and Qualifying Accounts and Reserves, see page 24.

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3) Exhibits.

See Exhibits Index on Pages 19-22.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the fourth quarter of fiscal 2000.

17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ESTERLINE TECHNOLOGIES CORPORATION (Registrant)
By	/s/ ROBERT D. GEORGE Robert D. George Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)

Dated: January 19, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ ROBERT W. CREMIN (Robert W. Cremin)	Chairman, President and Chief Executive Officer (Principal Executive Officer)	January 19, 2001 Date
/s/ ROBERT D. GEORGE (Robert D. George)	Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)	January 19, 2001 Date
/s/ RICHARD R. ALBRECHT (Richard R. Albrecht)	Director	January 19, 2001 Date
/s/ ROSS J. CENTANNI (Ross J. Centanni)	Director	January 19, 2001 Date
/s/ JOHN F. CLEARMAN (John F. Clearman)	Director	January 19, 2001 Date
/s/ ROBERT S. CLINE (Robert S. Cline)	Director	January 19, 2001 Date

18

/s/ E. JOHN FINN (E. John Finn)	Director	January 19, 2001 Date
/s/ ROBERT F. GOLDHAMMER (Robert F. Goldhammer)	Director	January 19, 2001 Date
/s/ WENDELL P. HURLBUT (Wendell P. Hurlbut)	Director	January 19, 2001 Date
/s/ JERRY D. LEITMAN (Jerry D. Leitman)	Director	January 19, 2001 Date
/s/ PAUL G. SCHLOEMER (Paul G. Schloemer)	Director	January 19, 2001 Date

19

Exhibit Number	Exhibit
3.1	Composite Restated Certificate of Incorporation of the Company as amended by Certificate of Amendment dated March 14, 1990. (Incorporated by reference to Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1990 (Commission File Number 1-6357).)
3.2	By-laws of the Company, as amended and restated June 8, 2000. (Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2000 (Commission File Number 1-6357).)
4.2	Form of Rights Agreement, dated as of December 9, 1992, between the Company and Chemical Bank, which includes as Exhibit A thereto the form of Certificate of Designation, Preferences and Rights of Series A Serial Preferred Stock and as Exhibit B thereto the form of Rights Certificate. (Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A filed December 17, 1992 (Commission File Number 1-6357).)
10.1	Amendment of Lease and Agreement, dated March 11, 1959, between the City of Torrance, California, and Longren Aircraft Company, Inc., as original lessee; Lease, dated July 1, 1959, between the City of Torrance and Aeronca Manufacturing Corporation, as original lessee; and Assignment of Ground Lease, dated September 26, 1985, from Robert G. Harris, as successor lessee under the foregoing leases, to Excellon Industries, Inc., relating to principal manufacturing facility of Excellon at 24751 Crenshaw Boulevard, Torrance, California. (Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1986 (Commission File Number 1-6357).)
10.4	Industrial Lease dated July 17, 1984, between 901 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 901 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1991 (Commission File Number 1-6357).)
10.4a	Fourth Amendment dated July 27, 1994, to Industrial Lease dated July 17, 1984 between Houg Family Partnership, as successor to 901 Dexter Associates, and Korry Electronics Co. (Incorporated by reference to Exhibit 10.4a to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 (Commission File Number 1-6357).)
10.5	Industrial Lease dated July 17, 1984, between 801 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 801 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1991 (Commission File Number 1-6357).)
10.5a	Fourth Amendment dated March 28, 1994, to Industrial Lease dated July 17, 1984, between Michael Maloney and the Bancroft & Maloney general partnership, as successor to 801 Dexter Associates, and Korry Electronics Co. (Incorporated by reference to Exhibit 10.5a to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 (Commission File Number 1-6357).)

20

10.9	Note Agreement, dated as of July 15, 1992 ("1992 Note Agreement"), among Esterline Technologies Corporation, certain of its subsidiaries, The Northwestern Mutual Life Insurance Company and New England Mutual Life Insurance Company relating to 8.75% Senior Notes due July 30, 2002 of Esterline Technologies Corporation and certain of its subsidiaries. (Incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1992 (Commission File Number 1-6357).)
10.9a	Amendment to Note Agreement, executed as of October 31, 1993, to the 1992 Note Agreement. (Incorporated by reference to Exhibit 10.9a to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1993 (Commission File Number 1-6357).)
10.9b	Amendment No. 1 to Note Agreement, effective September 30, 1998, to the 1992 Note Agreement. (Incorporated by reference to Exhibit 10.9b to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 (Commission File Number 1-6357).)
10.10	Compensation of Directors. (Incorporated by reference to first paragraph under "Other Information as to Directors" in the definitive form of the Company's Proxy Statement, relating to its 2001 Annual Meeting of Shareholders to be held on March 7, 2001, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 19, 2001.)
10.11	Esterline Technologies Corporation Non-Employee Directors' Stock Compensation Plan. (Incorporated by reference to Exhibit 10 to Registration Statement on Form S-8 (No. 33-58375) filed March 31, 1995.)
10.13	Amended and Restated 1987 Stock Option Plan. (Incorporated by reference to Exhibit 10 to Registration Statement of Form S-8 (No. 33-52851) filed March 28, 1994.)
10.15	Esterline Corporation Supplemental Retirement Income Plan for Key Executives. (Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1989 (Commission File Number 1-6357).)
10.16h	Esterline Technologies Corporation Long-Term Incentive Compensation Plan, fiscal years 2000-2002. (Incorporated by reference to Exhibit 10.16h to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (Commission File Number 1-6357).)
10.19	Executive Officer Termination Protection Agreement. (Incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 (Commission File Number 1-6357).)
10.19a	Amendment A to the Executive Officer Termination Protection Agreement, effective June 8, 2000.
10.20g	Esterline Technologies Corporation Corporate Management Incentive Compensation Plan for fiscal year 2001.
10.22	Real Property Lease and Sublease, dated June 28, 1996, between 810 Dexter L.L.C. and Korry Electronics Co. (Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 (Commission File Number 1-6357).)
10.23	Single Tenant Industrial Lease, dated April 1, 1994, between G&G 8th Street Partners, Ltd., James and Loralee Cassidy and Mason Electric Co. (Incorporated by reference to Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1997 (Commission File Number 1-6357).)

21

10.23a	Single Tenant Industrial Sublease, dated August 1, 1996, between Mason Electric Company, Inc. and ME Acquisition Co. (Incorporated by reference to Exhibit 10.23a to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1997 (Commission File Number 1-6357).)
10.23b	Amendment of Lease, Estoppel, and Consent to Sublease, dated August 6, 1996, between G&G 8th Street Partners, Ltd., Mason Electric Company, Inc. and ME Acquisition Co. (Incorporated by reference to Exhibit 10.23b to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1997 (Commission File Number 1-6357).)
10.24	Esterline Technologies Corporation 1997 Stock Option Plan. (Incorporated by reference to Exhibit A in the definitive form of the Company's Proxy Statement, relating to its 1997 Annual Meeting of Shareholders held on March 5, 1997, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 17, 1997 (Commission File Number 1-6357).)
10.25	Property lease between Slibail Immobilier and Norbail Immobilier and Auxitrol S.A., dated April 29, 1997, relating to the manufacturing facility of Auxitrol at 5, allée Charles Pathé, 18941 Bourges Cedex 9, France, effective on the construction completed date (December 5, 1997). (Incorporated by reference to Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1998 (Commission File Number 1-6357).)
10.26	Industrial and build-to-suit purchase and sale agreement between The Newhall Land and Farming Company, Esterline Technologies Corporation and TA Mfg. Co., dated February 13, 1997 include Amendments. The agreement is for land and building located at 28065 West Franklin Parkway, Valencia, CA 91384, effective upon acceptance of construction completion (May 12, 1998). (Incorporated by reference to Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1998 (Commission File Number 1-6357).)
10.27	Note Purchase Agreement between Esterline Technologies Corporation and various life insurance companies for Senior Notes maturing from 2003-2008. (Incorporated by reference to Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1999 (Commission File Number 1-6357).)
10.28	Executive Retirement Agreement between Esterline Technologies Corporation and Wendell P. Hurlbut dated January 19, 1999. (Incorporated by reference to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1999 (Commission File Number 1-6357).)
10.30	Counterpart Underlease, dated January 4, 1993, between Openmen Limited and Muirhead Vactric Components Limited, relating to premises located at Oakfield Road, Penge in the London Borough of Bromley.
10.31	Lease Agreement, dated as of February 27, 1998, between Glacier Partners and Advanced Input Devices, Inc., Lease Amendment #1, dated November 2, 1998.
10.32	Credit Agreement, dated as of September 13, 2000, among Esterline Technologies Corporation and Certain of its Subsidiaries that are a Party Hereto, Bank of America, National Association, as Agent, and the Other Financial Institutions Party Hereto, arranged by Banc of America Securities LLC.

22

11	Schedule setting forth computation of earnings per share for the five fiscal years ended October 27, 2000.
13	Portions of the Annual Report to Shareholders for the fiscal year ended October 27, 2000, incorporated by reference herein.
21	List of subsidiaries.
23.1	Consent of Ernst & Young LLP.
23.2	Consent of Deloitte & Touche LLP.
23.3	Report of Deloitte & Touche LLP.

23

ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Description	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions			Balance at End of Year
Reserve for Doubtful Accounts Receivable
Fiscal Years
2000	$	2,233	$	1,019	$	(829	)	$	2,423
1999	$	2,987	$	744	$	(1,498	)	$	2,233
1998	$	2,860	$	584	$	(457	)	$	2,987
Inventory Valuation Reserves
Fiscal Years
2000	$	500	$	—	$	500		$	—
1999	$	500	$	—	$	—		$	500
1998	$	500	$	—	$	—		$	500

24

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PART I
PART II
PART III
PART IV
SIGNATURES
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (in thousands)

EX-10.19A

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Exhibit 10.19a

Amendment A

to the

Termination Protection Agreement

between

[Executive Officer] and Esterline Technologies Corporation

    Pursuant to a resolution by the Board of Directors at its June 8, 2000 meeting, Section 5.2 of the Termination Protection Agreement between [Executive Officer] and Esterline Technologies Corporation, dated [date], shall be remove and replaced with the following provision:

    5.2  In addition, the Company shall pay to Employee a lump sum cash amount equal to the greater of: (a) three (3) times the Minimum Total Compensation; or, (b) the maximum amount of such payment that can be made without any portion of such payment being characterized as an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). The comparison shall be made by determining which of (a) or (b) results in the higher after tax payment to Employee, including any excise tax due under Code Section 4999. "Base Amount" is defined in Code Section 280G.

    All other terms and conditions of the Agreement shall remain in full force and effect.

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Amendment A to the Termination Protection Agreement between [Executive Officer] and Esterline Technologies Corporation

EX-10.20G

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EXHIBIT 10.20g

ESTERLINE TECHNOLOGIES CORPORATION

CORPORATE MANAGEMENT INCENTIVE COMPENSATION PLAN

FISCAL YEAR 2001

PURPOSE OF PLAN

    This Plan is intended to reward eligible officers and key employees of Esterline's corporate staff for successful management in fiscal year 2001. It is believed that the Plan will provide incentives to put forth maximum efforts to employ Esterline's assets effectively.

MEMBERSHIP IN PLAN

    Officers and key employees of the Esterline corporate staff shall be eligible for membership in the Plan after appointment and return of a signed acceptance of the appointment letter.

    The Plan may be modified, amended or terminated at any time; but any such modification, amendment or termination shall not, without a member's written consent, affect his/her incentive compensation accrued prior to such modification, amendment or termination of the Plan. Nothing in this Plan limits Esterline from exercising the right to terminate an employee at any time for any reason.

TERMS AND CONDITIONS

1.	Individual participants payouts will vary from 5% to 60%, as stipulated in his/her appointment letter, of fiscal year-end 2001 salary. These target nomination awards will be earned at the earnings per share target as established by the Compensation Committee and approved by the full Board of Directors.
2.	Actual earnings per share will be as audited before extraordinary items for fiscal year 2001.
3.	Awards will be pro-rated for performance and will be interpolated on the following basis:

EPS	Award
Below targeted level At targeted level Above 120% of targeted level	Pro-rata share of target award 100% of target award 150% of target award

4.	Actual individual payouts earned from earnings per share computations are limited to 150% of target nomination.
5.	If directed, computed awards may be further adjusted, up or down, by the Compensation & Stock Option Committee of the Board of Directors by an amount not to exceed greater than 25% of the computed award or target award for the Plan, whichever is greater.
6.	Payout of awards will be no later than March 1, 2002 if the auditors have issued an opinion; otherwise payout is delayed until an opinion is issued for FY 2001.
7.	If a Plan member is terminated for any reason other than retirement, or death or disability prior to the end of fiscal 2001, he/she shall not receive the benefits provided by the Plan. (However, Esterline retains the right to grant a pro-rata award to a terminated employee, based upon salary earned prior to termination, except those terminated for cause.)
	a.  If the company in its sole discretion specifically determines that the employment of a Plan member has been terminated prior to the end of such fiscal year because of retirement or disability, the Plan member will be paid a pro-rata amount based on the time he/she was a Plan member prior to his/her termination for disability.

	b.  For any Plan member who dies prior to the end of Esterline's fiscal 2001, a pro-rata amount based on the time he/she was a Plan member prior to the date of death will be paid to his/her estate.
8.	An employee who becomes a Plan member as of a date after the beginning of Esterline's fiscal 2001 will be paid a pro-rata amount based on the time the employee participates in the Plan.

/s/ ROBERT W. CREMIN

Robert W. Cremin
President and Chief Executive Officer

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ESTERLINE TECHNOLOGIES CORPORATION CORPORATE MANAGEMENT INCENTIVE COMPENSATION PLAN FISCAL YEAR 2001

EX-10.30

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DATED 4th January 1993

OPENMEN LIMITED

–to–

MUIRHEAD VACTRIC COMPONENTS LIMITED

COUNTERPART UNDERLEASE

of premises at Oakfield Road, Penge
in the London Borough of Bromley

COUNTERPART UNDERLEASE: DATED 4th January 1993

     [Illegible SEAL]

1	Particulars
1.1	Parties:
1.1.1	the Landlord	OPENMEN LIMITED (registered in England and Wales No. 2124564 whose registered office is at Pentagon House Sir Frank Whittle Road Derov DE2 4XA
1.1.2	the Tenant	MUIRHEAD VACTRIC COMPONENTS LIMITED (registered in England and Wales Number 560015) whose registered office is at Oakfield Road Penge London SE20 8EW
1.2	the Premises	ALL THAT land and buildings situate at Oakfield Road Penge in the London Borough of Bromley demised by the Headlease
1.3	Contractual Term	15 years from and including the first day of December 1992
1.4	Rent Commencement Date	the first day of December 1992
1.5	Initial Rent	£200,000 (two hundred thousand pounds) per year
1.6	Interest Rate	Four percent per year above the base lending rate ("Base Rate") of Barclays Bank PLC or such other bank (being a member of the Committee of London and Scottish Bankers) as the Landlord may from time to time nominate in writing
1.7	Permitted User	Use as a factory and workshop and offices with ancillary storage within Classes III and IV of the Town and Country Planning (Use Classes) Order 1972 or such other use as the Landlord may from time to time in its absolute discretion approve
1.8	Review Dates	1st December 1997 and 1st December 2003 and 'Review Date' means any one of the Review Dates
2	Definitions
2.1	For all purposes of this lease the terms defined in clauses 1 and 2 have the meanings specified
2.2	'Additional Rent' means sums equal to the amounts paid from time to time during the term of this lease by the Landlord to the Superior Landlord pursuant to sub-clauses 2(iii) 2(x) 2(xi) and 2(xii) of the Headlease
2.3	'Building' means the building or buildings now or at any time during the Term erected on the whole or part of the Premises
2.4	'the Headlease' means the superior lease under which the Landlord holds the Premises made the 28th day of September 1976 between (1) Real Estate and Commercial Trust Limited ('the Superior Landlord') and (2) Londex Limited for a term of 125 years less the last 3 days thereof from the 5th May 1975 (the interest of Londex Limited being now vested in the Landlord) and any lease or leases superior to the Headlease

1

2.5	'the Insurance Rent' means the sums which the Landlord shall from time to time pay by way of premium:
	2.5.1	for insuring the Premises in accordance with its obligations contained in this lease
	2.5.2	and for insuring in such reasonable amount and on such terms as the Landlord shall consider appropriate against all liability of the Landlord to third parties arising out of or in connection with any matter including or relating to the Premises
2.6	'Insured Risks' means fire and such other risks as the Landlord from time to time in its absolute discretion may think fit to insure against
2.7	'Interest' means interest during the period from the date on which the payment is due to the date of payment both before and after any judgment at the Interest Rate then prevailing or should the Base Rate cease to exist such other rate of interest as is most closely comparable with the Interest Rate to be agreed between the parties or in default of agreement to be determined by the Surveyor acting as an expert and not as an arbitrator
2.8	'the 1954 Act' means the Landlord and Tenant Act 1954
2.9	'Pipes' means all pipes sewers drains mains ducts conduits gutters watercourses wires cables channels flues and all other conducting media and includes any fixings louvres cowls and any other ancillary apparatus which are in on or under or which serve the Premises
2.10	'the Plan' means the plan annexed to this lease
2.11	'the Planning Acts' means the Town and Country Planning Act 1990
2.12	'Rent' means the Initial Rent and rent ascertained in accordance with the second schedule and such term does not include the Insurance Rent or the Additional Rent but the term 'rents' includes both the Rent the Insurance Rent and the Additional Rent
2.13	'Surveyor' means any person or firm appointed by the Landlord to perform any of the functions of the Surveyor under this lease (including an employee of the Landlord or a company that is a member of the same group as the Landlord within the meaning of Section 42 of the 1954 Act and including also the person or firm appointed by the Landlord to collect the rents)
2.14	'VAT' means Value Added Tax or any tax of a similar nature that may be substituted for it or levied in addition to it
2.15	'this lease' means this underlease
3	Interpretation
3.1	The expressions 'the Landlord' and 'the Tenant' wherever the context so admits include the person for the time being entitled to the reversion immediately expectant on the determination of the Term and the Tenant's successors in title respectively
3.2	References to the Superior Landlord shall include its successors in title and shall include all superior landlords however remote
3.3	Where the Landlord the Tenant or the Guarantor for the time being are two or more persons obligations expressed or implied to be made by or with such party are deemed to be made by or with such persons jointly and severally
3.4	Words importing one gender include all other genders and words importing the singular include the plural and vice versa

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3.5	The expression 'Guarantor' includes not only the person referred to in clause 1.1.3 (if any) but also any person who enters into the Guarantor's covenants with the Landlord pursuant to the provisions of this lease
3.6	The expression 'the Premises' includes:
	3.6.1	the Building
	3.6.2	all additions and improvements to the Premises
	3.6.3	all the Landlord's fixtures and fittings and fixtures of every kind which shall from time to time be in or upon the Premises (whether originally affixed or fastened to or upon the Premises or otherwise) except any such fixtures installed by the Tenant that can be removed from the Premises without defacing the Premises and
	3.6.4	all Pipes in on under or over the Premises
	and references to 'the Premises' in the absence of any provision to the contrary include any part of the Premises
3.7	The expression 'the Term' includes the Contractual Term and any period of holding-over or continuance of the Contractual Term whether by statute or common law
3.8	References to 'the last year of the Term' include the last year of the Term if the Term shall determine otherwise than by effluxion of time and references to "the expiration of the Term" include such other determination of the Term
3.9	References to any right of the Landlord to have access to the Premises shall be construed as extending to the Superior Landlord and any mortgagee of the Premises and to all persons authorised by the Landlord and the Superior Landlord or mortgagee (including agents professional advisers contractors workmen and others)
3.10	Any convenant by the Tenant not to do an act or thing shall be deemed to include an obligation not to permit or suffer such act or thing to be done by another person
3.11	Any provisions in this lease referring to the consent or approval of the Landlord shall be construed as also requiring the consent or approval of the Superior Landlord where such consent shall be required but nothing in this lease shall be construed as implying that any obligation is imposed upon the Superior Landlord not unreasonably to refuse any such consent or approval
3.12	References to 'consent of the Landlord' or words to similar effect mean a consent in writing signed by or on behalf of the Landlord and to 'approved' and 'authorised' or words to similar effect mean (as the case may be) approved or authorised in writing by or on behalf of the Landlord
3.13	The terms 'the parties' or 'party' mean the Landlord and/or the Tenant but except where there is an express indication to the contrary exclude the Guarantor
3.14	'Development' has the meaning given by Section 55 of the Planning Acts
3.15	With the exception of clause 1.7 any references to a specific statute include any statutory extension or modification amendment or re-enactment of such statute and any regulations or orders made under such statute and any general reference to 'statute' or 'statutes' includes any regulations or orders made under such statute or statutes
3.16	References in this lease to any clause sub-clause or schedule without further designation shall be construed as a reference to the clause sub-clause or schedule to this lease so numbered
3.17	The clause paragraph and schedule headings and any table of contents do not form part of this lease and shall not be taken into account in its construction or interpretation

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4	Demise
	The Landlord demises to the Tenant the Premises TOGETHER WITH the rights set out in Part 1 of the first schedule (but provided that as mentioned therein) EXCEPTING AND RESERVING to the Landlord the rights specified in Part 2 of the first schedule TO HOLD the Premises to the Tenant for the Contractual Term SUBJECT to all matters contained or referred to in the Property and Charges registers of Title Number SGL229515 at H M Land Registry as at the 12 October 1992 YIELDING AND PAYING to the Landlord:
4.1	The Rent payable without any deduction by equal quarterly payments in advance on the usual quarter days in every year and proportionately for any period of less than a year the first such payment being a proportionate sum in respect of the period from and including the Rent Commencement Date to and including the day before the quarter day next after the date of this lease to be paid on the date of this lease and
4.2	by way of further rent the Insurance Rent payable on demand in accordance with the Insurance Provisions and
4.3	by way of further rent payable on demand the Additional Rent
5	The Tenant's covenants
	The Tenant covenants with the Landlord:
5.1	Rent
	To pay the rents on the days and in the manner set out in this lease and not to exercise or seek to exercise any right or claim to withhold rent or any right or claim to legal or equitable set-off
5.2	Outgoings and VAT
	To pay and to indemnify the Landlord against
	5.2.1	all rates taxes assessments duties charges impositions and outgoings which are now or during the Term shall be charged assessed or imposed upon the Premises or upon the owner or occupier of them excluding (save in respect of VAT) any payable by the Landlord occasioned by receipt of the rents or by any interest reversionary to the interest created by this lease and if the landlord shall suffer any loss of rating relief which may be applicable to empty premises after the end of the Term by reason of such relief being allowed to the Tenant in respect of any period before the end of the Term to make good such loss to the Landlord and
	5.2.2	VAT chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease or in respect of any payment properly made by the Landlord where the Tenant agrees in this lease to reimburse the Landlord for such payment but where the Landlord is unable to recover the same
5.3	Electricity, gas and other services consumed
	To pay to the suppliers and to indemnify the Landlord against all charges for electricity gas and other services consumed or used at or in relation to the Premises (including meter rents)
5.4	Repair, cleaning, decoration etc
	5.4.1	To repair the Premises and keep them in repair excepting damage caused by an Insured Risk (other than where the insurance money is irrecoverable in consequence of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority)

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	5.4.2	To replace from time to time the Landlord's fixtures and fittings in the Premises which may be or become beyond repair at any time during or at the expiration of the Term
	5.4.3	To clean the Premises and keep them in a clean condition
	5.4.4	Not to cause any land roads or pavements abutting the Premises to be untidy or in a dirty condition and in particular (but without prejudice to the generality of the above) not to deposit on them refuse or other materials
	5.4.5	In every third year and in the last year of the Term to redecorate the exterior of the Building and in every fifth year and in the last year of the Term to redecorate the interior of the Building in both instances in a good and workmanlike manner and with appropriate materials of good quality any change in the tints colours and patterns of such external decoration to be approved by the Landlord provided that the covenants relating to the last year of the Term shall not apply where the Tenant shall have performed the obligation in question less than 18 months prior to the expiry of the Term
	5.4.6	Where the use of Pipes boundary structures or other things is common to the Premises and other property to be responsible for and to indemnify the Landlord against all sums due from and to undertake all work that is the responsibility of the owner lessee or occupier of the Premises in relation to those Pipes or other things
	5.4.7	To keep any part of the Premises which may not be built upon ('the Open Land') adequately surfaced in good condition and free from weeds
	5.4.8	Not to deposit or permit to be deposited any waste rubbish or refuse on the Open Land
	5.4.9	Not to keep or store on the Open Land any caravan or movable dwelling
	5.4.10	Without prejudice to the above provisions of this clause 5.4 to keep the Premises together with the fences marked 'T' on the Plan in such repair and condition as shall not in any way be a nuisance or cause damage to the Superior Landlord or its tenants or occupiers of any of the neighbouring property or which tend to depreciate or lessen the value of any of the Superior Landlord's land or properties in the neighbourhood
5.5	Waste and alterations
	5.5.1	Not to:
		5.5.1.1	commit any waste
		5.5.1.2	make any addition to the Premises
		5.5.1.3	unite the Premises with any adjoining premises
		5.5.1.4	make any external or structural alteration to the Premises save as permitted by the following provisions of this clause
	5.5.2	Not to make external or structural alterations to the Building without:
		5.5.2.1	obtaining and complying with all necessary consents of any competent authority and paying all charges of any such authority in respect of such consents
		5.5.2.2	making an application supported by drawings and where appropriate a specification in duplicate

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		5.5.2.3	paying the fees of the Landlord any superior landlord any mortgagee and their respective professional advisers and
		5.5.2.4	entering into such covenants as the Landlord may require as to the execution and reinstatement of the alterations
		and in the case of any works of a substantial nature the Landlord may require prior to the commencement of such works the provision by the Tenant of adequate security in the form of a deposit of money or the provision of a bond as assurance to the Landlord that any works which may from time to time be permitted by the Landlord shall be fully completed
	5.5.3	Subject to the provisions of clause 5.5.2 not to make any external or structural alterations to the Building without the consent of the Landlord which shall not unreasonably be withheld or delayed
	5.5.4	To remove any additional buildings additions alterations or improvements made to the Premises at the expiration of the Term if reasonably so requested by the Landlord and to make good any part or parts of the Premises which may be damaged by such removal
	5.5.5	Not to make connection with the Pipes that serve the Premises otherwise than in accordance with the plans and specifications approved by the Landlord subject to consent to make such connection having previously been obtained from the competent statutory authority or undertaker
5.6	Aerials, signs and advertisements
	5.6.1	Not to erect any pole mast or wire (whether in connection with telegraphic telephonic radio or television communication or otherwise) upon the Premises
	5.6.2	Not to affix to or exhibit on the outside of the Building or to or through any window of the Building nor display anywhere on the Premises any new placard sign notice fascia board or advertisement except any sign permitted by virtue of any consent given by the Landlord pursuant to a covenant contained in this lease (such consent not to be unreasonably withheld or delayed)
5.7	Statutory Obligations
	5.7.1	At the Tenant's own expense to execute all works and provide and maintain all arrangements upon or in respect of the Premises or the use to which the Premises are being put that are required in order to comply with the requirements of any statute (already or in the future to be passed) or any government department, local authority other public or competent authority or court of competent jurisdiction regardless of whether such requirements are imposed on the lessor the lessee or the occupier
	5.7.2	Not to do in or near the Premises any act or thing by reason of which the Landlord may under any statute incur have imposed upon it or become liable to pay any penalty damages compensation costs charges or expenses
	5.7.3	Without prejudice to the generality of the above to comply in all respects with the provisions of any statutes and any other obligations imposed by law or by any byelaws applicable to the Premises or in regard to carrying on the trade or business for the time being carried on on the Premises

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5.8	Access of Landlord and notice to repair
	5.8.1	To permit the Landlord:
		5.8.1.1	to enter upon the Premises for the purposes of ascertaining that the covenants and conditions of this lease have been observed and performed
		5.8.1.2	to view the state of repair and condition of the Premises and
		5.8.1.3	to give the Tenant (or leave upon the Premises) a notice specifying any repairs cleaning maintenance or painting that the Tenant has failed to execute in breach of the terms of this lease and to request the Tenant to immediately execute the same including the making good of such opening up (if any)
	5.8.2	As soon as reasonably practicable to repair cleanse maintain and paint the Premises as required by such notice
	5.8.3	If within one month of the service of such a notice the Tenant shall not have commenced and be proceeding diligently with the execution of the work referred to in the notice or shall fail to complete the work within three months or if in the Landlord's reasonable opinion the Tenant is unlikely to have completed the work within such period to permit the Landlord to enter the Premises to execute such work as may be necessary to comply with the notice and to pay to the Landlord the cost of so doing and all expenses incurred by the Landlord (including legal costs and surveyor's fees) within fourteen days of a written demand
5.9	Alienation
	Definitions
	5.9.1	'Permitted Part' means any part or parts of the Premises but so that there shall at no time be more than four separate occupancies of the Premises
	5.9.2	Not to hold on trust for another or (save pursuant to a transaction permitted by and effected in accordance with the provisions of this lease) part with the possession of the whole or any part of the Premises or permit another to occupy the whole or any part of the Premises
	5.9.3	Not to assign or charge part only of the Premises
	5.9.4	Not to assign charge or underlet the whole of the Premises without the prior consent of the Landlord such consent not to be unreasonably withheld or delayed
	5.9.5	Not to underlet any part of the Premises without the prior consent of the Landlord such consent not to be unreasonably withheld or delayed and otherwise than by means of an underlease of a Permitted Part
	5.9.6	Not any time during the Term to underlet the whole or any part of the Premises without having obtained and produced to the Landlord before the grant of such underlease an order of the court authorising an agreement between the parties to such underlease excluding the operation of sections 24 to 28 (inclusive) of the 1954 Act in relation to the tenancy created by such underlease and without recording such agreement in the provisions of the underlease
	5.9.7	Prior to any permitted assignment to procure that the assignee enters into direct covenants with the Landlord to perform and observe all the Tenant's covenants and all other provisions this lease during the residue of the Term

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5.9.8	On a permitted assignment to a private limited company and if the Landlord shall reasonably so require to procure that at least two directors of the company or some other guarantor or guarantors acceptable to the Landlord enter into direct covenants with the Landlord in the form of the Guarantor's covenants contained in this lease with 'the Assignee' substituted for 'the Tenant'
5.9.9	Not without the consent in writing of the Landlord to underlet the whole or any part of the Premises otherwise than by means of an underlease granted at a full open market rent without any fine or premium being taken and which complies with the following provisions:
	5.9.9.1	such underlease shall contain the same provisions as those contained in this lease with such amendments as may be approved in writing by the Landlord
	5.9.9.2	the rent reserved by such underlease shall be payable in advance on the days on which Rent is payable under this lease
	5.9.9.3	if the term of such underlease shall extend beyond a date upon which the Rent payable under this lease is to be reviewed such underlease shall contain provisions for the upwards only review of the rent reserved by such underlease to take effect at the same intervals on the same dates basis and terms as those provided in this lease for the review of the Rent
	5.9.9.4	such underlease shall provide provisions for the upwards only review of the rent reserved by such underlease on the basis and on the dates on which the Rent is to be reviewed in this lease
	5.9.9.5	such underlease shall contain provisions prohibiting the undertenant from doing or allowing any act or thing in relation to the underlet premises inconsistent with or in breach of the provisions of this lease
	5.9.9.6	such underlease shall contain a provision for reentry by the underlandlord on breach of any covenant by the undertenant
	5.9.9.7	such underlease shall contain provisions imposing an absolute prohibition against all dispositions of or other dealings whatever with the underlet premises other than an assignment or charge of the whole and prohibiting any assignment or charge of the whole without the prior consent of the Landlord under this lease
	5.9.9.8	such underlease shall contain provisions prohibiting the undertenant from permitting another to occupy the whole or any part of the underlet premises with similar exceptions to those in clause 5.9.13 and
	5.9.9.9	such underlease shall impose in relation to any permitted assignment or charge the same obligations for registration with the Landlord as are contained in this lease in relation to dispositions by the Tenant
5.9.10	Prior to any permitted underletting to procure that the undertenant enters into direct covenants with the Landlord that the undertenant shall:
	5.9.10.1	pay the rents and other sums reserved by and observe and perform the covenants on the lessee's part and conditions contained in the underlease and not suffer or permit at or in relation to the Premises any act or thing which would or might constitute a breach of such covenants or conditions

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		5.9.10.2	not to omit suffer of permit at or in relation to the Premises any act or thing which would or might cause the Tenant to be in breach of or which if done ommitted suffered or permitted by the Tenant would or might constitute a breach of the covenants on the lessee's part and the conditions contained in this lease
	5.9.11	To enforce the performance and observance by every such undertenant of the provisions of the underlease and not at any time either expressly or by implication to waive any breach of the covenants or conditions on the part of any undertenant or assignee of any underlease nor (without the consent of the Landlord such consent not to be unreasonably withheld or delayed) vary the terms or accept a surrender of any permitted underlease
	5.9.12	In relation to any permitted underlease:
		5.9.12.1	to ensure that the rent is reviewed in accordance with the terms of the underlease
		5.9.12.2	to give notice to the Landlord of the details of the determination of every rent review within twenty-eight days
	5.9.13	Notwithstanding clause 5.9.2 the Tenant may share the occupation of the whole or any part of the Premises with a company which is a member of the same group as the Tenant (within the meaning of Section 42 of the 1954 Act) for so long as both companies shall remain members of that group and otherwise than in a manner that transfers or creates a legal estate
	5.9.14	To give notice to the Landlord and Superior Landlord of all dispositions devolutions assignments underleases mortgages or charges of the Premises or any part thereof within one month thereafter such notice to contain the name and place of abode of the person or company to whom the same shall have devolved or been assigned or underlet and to produce the probate letters of administration or other instrument evidencing the devolution or assignment counterpart underlease mortgage charge or other disposition to the Landlord's solicitor and to the Superior Landlord's solicitor and deposit with him a copy and pay to him his registration fee with every such notice
5.10	Nuisance etc and residential restrictions
	5.10.1	Not to do nor allow to remain upon the Premises anything which may be or become or cause a nuisance annoyance disturbance inconvenience injury or damage to the Landlord or its tenants or the owners or occupiers of adjacent or neighbouring premises
	5.10.2	Not to use the Premises for a sale by auction or for any dangerous noxious noisy or offensive trade business manufacture or occupation nor for any illegal or immoral act or purpose
	5.10.3	Not to use the Premises as sleeping accommodation or for residential purposes nor keep any animal fish reptile or bird anywhere on the Premises
5.11	Landlord's costs
	To pay to the Landlord on an indemnity basis all costs fees charges disbursements and expenses (including without prejudice to the generality of the above those payable to counsel solicitors surveyors and bailiffs) incurred by the Landlord in relation to or incidental to:

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	5.11.1	every application made by the Tenant for a consent or licence required by the provisions of this lease whether such consent or licence is granted or refused or proffered subject to any qualification or condition or whether the application is withdrawn
	5.11.2	the preparation and service of a notice under the Law of Property Act 1925 Section 146 or incurred by or in contemplation of proceedings under Sections 146 or 147 of the Act nowithstanding that forfeiture is avoided otherwise than by relief granted by the court
	5.11.3	the recovery or attempted recovery of arrears of rent or other sums due from the Tenant and
	5.11.4	any steps taken in contemplation of or in connection with the preparation and service of a schedule of dilapidations during or within six months after the expiration of the Term (but in relation to dilapidations arising during the Term)
5.12	The Planning Acts
	5.12.1	Not to commit any breach of planning control (such term to be construed as it is used in the Planning Acts) and to comply with the provisions and requirements of the Planning Acts that affect the Premises whether as to the Permitted User or otherwise and to indemnify (both during or following the expiration of the Term) and keep the Landlord indemnified against all liability whatsoever including costs and expenses in respect of any contravention
	5.12.2	At the expense of the Tenant to obtain all planning permissions and to serve all such notices as may be required for the carrying out of any operations or user on the Premises which may constitute Development provided that no application for planning permission shall be made without the previous consent of the Landlord such consent not to be unreasonably withheld or delayed
	5.12.3	Subject only to any statutory direction to the contrary to pay and satisfy any charge or levy that may subsequently be imposed under the Planning Acts in respect of the carrying out or maintenance of any such operations or the commencement or continuance of any such user
	5.12.4	Notwithstanding any consent which may be granted by the Landlord under this lease not to carry out or make any alteration or addition to the Premises or any change of use until:
		5.12.4.1	all necessary notices under the Planning Acts have been served and copies produced to the Landlord
		5.12.4.2	all necessary permissions under the Planning Acts have been obtained and produced to the Landlord and
		5.12.4.3	the Landlord has acknowledged (such acknowledgement not to be unreasonably withheld or delayed) that every necessary planning permission is acceptable to it the Landlord being entitled to refuse to acknowledge its acceptance of a planning permission on the grounds that any condition contained in it or anything omitted from it or the period referred to in it would be (or be likely to be) prejudicial to the Landlord's interest in the Premises whether during or following the expiration of the Term

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	5.12.5	Unless the Landlord shall otherwise direct to carry out and complete before the expiration of the Term:
		5.12.5.1	any works stipulated to be carried out to the Premises by a date subsequent to such expiration as a condition of any planning permission granted for any Development begun before the expiration of the Term and
		5.12.5.2	any Development begun upon the Premises in respect of which the Landlord shall or may be or become liable for any charge or levy under the Planning Acts
	5.12.6	In any case where a planning permission is granted subject to conditions and if the Landlord reasonably so requires to provide security for the compliance with such conditions and not to implement the planning permission until security has been provided
	5.12.7	If reasonably required by the Landlord but at the cost of the Tenant to appeal against any refusal of planning permission or the imposition of any conditions on a planning permission relating to the Premises following an application by the Tenant
5.13	Plans, documents and information
	5.13.1	If called upon to do so to produce to the Landlord or the Surveyor all plans documents and other evidence as the Landlord may require in order to satisfy itself that the provisions of this lease have been complied with
	5.13.2	If called upon so to do to furnish to the Landlord or the Surveyor such information as may reasonably be requested in writing in relation to any pending or intended step under the 1954 Act
	5.13.3	If called upon to do so to furnish to the Landlord or the Surveyor or any person acting as the third party determining the Rent in default of agreement between the parties under any provisions for rent review contained in this lease such information as may reasonably be requested in writing in relation to the implementation of any provisions for rent review
5.14	Indemnities
	To be responsible for and to keep the Landlord fully indemnified against:—
	5.14.1	all damage damages losses costs expenses actions demands proceedings claims and liabilities made against or suffered or incurred by the Landlord arising directly or indirectly out of:—
		5.14.1.1	any act or omission or negligence of the Tenant or any persons at the Premises expressly or impliedly with the Tenant's authority or
		5.14.1.2	any breach or non-observance by the Tenant of the covenants conditions or other provisions of this lease or any of the matters to which this demise is subject
	5.14.2	any tax or imposition relating to the Premises which becomes payable either during the Term or after its ending by reason of any act or default of the Tenant or any person deriving title under the Tenant or their respective agents servants and licensees

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5.15	Reletting boards
	To permit the Landlord upon reasonable notice at any time during the Term to enter upon the Premises and affix and retain anywhere upon the Premises a notice for reletting the Premises and during such period to permit persons with the written authority of the Landlord or its agent at reasonable times of the day to view the Premises
5.16	Encroachments
	5.16.1	Not to stop up darken or obstruct any windows or light belonging to the Building
	5.16.2	To take all steps to prevent any new window light opening doorway path passage pipe or other encroachment or easement being made or acquired in against out of or upon the Premises and to notify the Landlord immediately if any such encroachment or easement shall be made or acquired (or attempted to be made or acquired) and at the request of the Landlord to adopt such means as shall be required to prevent such encroachment or the acquisition of any such easement
5.17	Yield up
	At the expiration of the Term:
	5.17.1	to yield up the Premises in repair and in accordance with the terms of this lease
	5.17.2	to give up all keys of the Premises to the Landlord and
	5.17.3	to remove all signs erected by the Tenant in upon or near the Premises and immediately to make good any damage caused by such removal
5.18	Interest on arrears
	5.18.1	If the Tenant shall fail to pay the rents or any other sum due under this lease whether formally demanded or not within 21 days of the date on which the same fall due for payment the Tenant shall pay to the Landlord Interest on the rents or other sum from the date when they were due to the date on which they are paid and such Interest shall be deemed to be rents due to the Landlord
	5.18.2	Nothing in the preceding clause shall entitle the Tenant to withhold or delay any payment of the rents or any other sum due under this lease after the date upon which they fall due or in any way prejudice affect or derogate from the rights of the Landlord in relation to such non-payment including (but without prejudice to the generality of the above) under the proviso for re-entry contained in this lease

5.19	Statutory notices etc
	To give full particulars to the Landlord of any notice direction order or proposal for the Premises made given or issued to the Tenant by any local or public authority within seven days of receipt and if so required by the Landlord to produce it to the Landlord and without delay to take all necessary steps to comply with the notice direction or order or at the request of the Landlord but at the cost of the Tenant to make or join with the Landlord in making such objection or representation against or in respect of any notice direction order or proposal as the Landlord shall deem expedient
5.20	Keyholders
	To ensure that at all times the Landlord has and the local Police force has written notice of the name home address and home telephone number of at least two keyholders of the Premises

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5.21	Sale of reversion etc
	To permit upon reasonable notice at any time during the Term prospective purchasers of or agents instructed in connection with the sale of the Landlord's reversion or of any other interest superior to the Term to view the Premises without interruption provided they are authorised in writing by the Landlord or its agents
5.22	Defective premises
	To give notice to the Landlord of any defect in the Premises which might give rise to an obligation on the Landlord to do or refrain from doing any act or thing in order to comply with the provisions of this lease or the duty of care imposed on the Landlord pursuant to the Defective Premises Act 1972 or otherwise and at all times to display and maintain all notices which the Landlord may from time to time reasonably require to be displayed at the Premises
5.23	New guarantor
	Within fourteen days of the death during the Term of any Guarantor or of such person becoming bankrupt having a receiving order made against him having an interim receiver appointed in respect of his property or having a receiver appointed under the Mental Health Act 1983 or being a company passing a resolution to wind up or entering into liquidation having a receiver appointed having an administration order made or upon any person becoming entitled to exercise in respect of it the powers of an administrative receiver to give notice of this fact to the Landlord and if so required by the Landlord at the expense of the Tenant within twenty-eight days to procure some other person acceptable to the Landlord to execute a guarantee in respect of the Tenant's obligations contained in this lease in the form of the Guarantor's covenants contained in this lease
5.24	Landlord's rights
	To permit the Landlord at all times during the Term to exercise without interruption or interference any of the rights granted to it by virtue of the provisions of this lease
5.25	User
	5.25.1	Not to use the Premises for any purpose other than the Permitted User and (without prejudice to the generality thereof) not to use any part of the Premises at any time for the purpose of an hotel club billiard saloon dance hall funfair or amusement arcade but so that this provision shall not be deemed to preclude the holding of dances for or the playing of billiards by the employees of the Tenant so long as no nuisance or annoyance is caused to the Superior Landlord its tenants or residents in the neighbourhood
	5.25.2	Not to cease carrying on business in the Premises or leave the Premises continuously unoccupied for more than one month without:
		5.25.2.1	notifying the Landlord and
		5.25.2.2	providing such caretaking or security arrangements as the Landlord shall require and the insurers shall require in order to protect the Premises from vandalism theft damage or unlawful occupation
5.26	Smoke abatement
	5.26.1	To ensure that every new furnace boiler or heater at the Premises (whether using solid liquid or gaseous fuel) is constructed and used so as substantially to consume or burn the smoke arising from it

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	5.26.2	Not to cause or permit any grit or noxious or offensive effluvia to be emitted from any engine furnace chimney or other apparatus on the Premises without using all reasonable means for preventing or counteracting such emission
	5.26.3	To comply with the provisions of the Clean Air Acts 1956 and 1968 the Control of Pollution Act 1974 and the Environmental Protection Act 1990 and with the requirements of any notice of the local authority served under them
5.27	Pollution
	Not to permit to be discharged into any Pipes serving the Premises:
	5.27.1	any oil or grease or any deleterious objectionable dangerous poisonous or explosive matter or substance and to take all measures to ensure that any effluent discharged into the Pipes will not be corrosive or otherwise harmful to the Pipes or cause obstruction or deposit in them or
	5.27.2	any fluid of a poisonous or noxious nature or of a kind likely to or that does in fact destroy sicken or injure the fish or contaminate or pollute the water of any stream or river
5.28	Roof and floor weighting
	5.28.1	Not to bring or permit to remain upon the Building any safes machinery goods or other articles which shall or may strain or damage the Building or any part of it
	5.28.2	Not without the consent of the Landlord to suspend any weight from the portal frames stanchions or roof purlins of the Building or use the same for the storage of goods or place any weight on them
	5.28.3	On any application by the Tenant for the Landlord's consent under this clause the Landlord shall be entitled to consult and obtain the advice of an engineer or other person in relation to the roof or floor loading proposed by the Tenant and the Tenant shall repay to the Landlord on demand the fee of such engineer or other person
5.29	Machinery
	5.29.1	To keep all landlords' plant apparatus and machinery (including any boilers and furnaces) upon the Premises properly maintained and in good working order and for that purpose to employ reputable contractors for the regular periodic inspection and maintenance of the same
	5.29.2	To renew all working and other parts as and when necessary or when recommended by such contractors
	5.29.3	To ensure by directions to the Tenant's staff and otherwise that such plant apparatus and machinery are properly operated and
	5.29.4	To avoid damage to the Premises by vibration or otherwise
5.30	Covenants and conditions contained in the Headlease
	Except for the obligation to pay the rent reserved by clause 2(i) thereof to observe and perform the covenants and conditions on the part of the lessee contained in the Headlease and to indemnify the Landlord from and against any actions proceedings claims damages costs expenses or losses arising from any breach non-observance or non-performance of such covenants and conditions

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5.31	Not to commit a breach of the terms of the Headlease
	Not to do omit suffer or permit in relation to the Premises any act or thing which would or might cause the Landlord to be in breach of the Headlease or which if done omitted or suffered or permitted by the Landlord would or might constitute a breach of the covenants on the part of the lessee and the conditions contained in the Headlease
5.32	To permit access
	To permit the Landlord and all persons authorised by the Landlord (including agents professional advisers contractors workmen and others) upon reasonable notice (except in the case of emergency) to enter upon the Premises for any purpose that is in the opinion of the Landlord necessary to enable it to comply with the covenants on the part of the lessee and the conditions contained in the Headlease
6	The Landlord's covenants
	The Landlord covenants with the Tenant:
6.1	Quiet enjoyment
	To permit the Tenant peaceably and quietly to hold and enjoy the Premises without any interruption or disturbance from or by the Landlord or any person claiming under or in trust for the Landlord or by title paramount
6.2	Headlease rent
	Provided that the Tenant shall have performed its obligations under this lease to pay the rent reserved by the Headlease and to perform the covenants and conditions on the part of the lessee contained in the Headlease
6.3	To obtain consents under the Headlease
	To take all reasonable steps at the Tenant's expense to obtain the consent of the Superior Landlord wherever the Tenant makes application for any consent required under this lease where the consent of both the Landlord and the Superior Landlord is needed by virtue of this Lease and the Headlease
7	Insurance
	The term "Insurance Provisions" shall mean the provisions contained in this clause
7.1	Landlord to insure
	The Landlord covenants with the Tenant to insure the Premises unless such insurance shall be vitiated by any act of the Tenant or by anyone at the Premises expressly or by implication with the Tenant's authority
7.2	Details of the insurance
	Insurance shall be effected:
	7.2.1	in such insurance office or with such underwriters and through such agency as the Landlord may from time to time decide

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	7.2.2	for the following sums:
		7.2.2.1	such sum as the Landlord shall from time to time be advised or the Tenant shall reasonably require as being the full cost of rebuilding and reinstatement including architects' surveyors' and other professional fees payable upon any applications for planning permission or other permits or consents that may be required in relation to the rebuilding or reinstatement of the Premises the cost of debris removal demolition site clearance accommodation works any works that may be required by statute and incidental expenses and
		7.2.2.2	the loss of Rent payable under this lease from time to time (having regard to any review of rent which may become due under this lease) for three years
	7.2.3	against damage or destruction by the Insured Risks to the extent that such insurance may ordinarily be arranged for properties such as the Premises with an insurer of repute and subject to such excesses exclusions or limitations as the insurer may require
7.3	Payment of Insurance Rent
	The Tenant shall pay the Insurance Rent on demand for the period from and including the Rent Commencement Date to the day before the next policy renewal date following the date of this lease and subsequently the Tenant shall pay the Insurance Rent on demand
7.4	Suspension of Rent
	7.4.1	If and whenever during the Term:
		7.4.1.1	the Premises or any part of them are damaged or destroyed by any of the Insured Risks (except one against which insurance may not ordinarily be arranged with an insurer of repute for properties such as the Premises unless the Landlord has in fact insured against that risk) so that the Premises or any part of them are unfit for occupation or use and
		7.4.1.2	payment of the insurance money is not refused in whole or in part
		the provisions of clause 7.4.2 shall have effect
	7.4.2	When the circumstances contemplated in clause 7.4.1 arise the Rent or a fair proportion of the Rent according to the nature and the extent of the damage sustained shall cease to be payable until the Premises or the affected parts shall have been rebuilt or reinstated so that the Premises or the affected part are made fit for occupation or use or until the expiration of three years from the destruction or damage whichever period is the shorter (the amount of such proportion and the period during which the Rent shall cease to be payable to be determined by the Surveyor acting as an expert and not as an arbitrator)
7.5	Reinstatement and termination if prevented
	7.5.1	If and whenever during the Term:
		7.5.1.1	the Premises or any part of them are damaged or destroyed by any of the Insured Risks (except one against which insurance may not ordinarily be arranged with an insurer of repute for properties such as the Premises unless the Landlord has in fact insured against that risk) and

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	7.5.1.2	the payment of the insurance money is not refused in whole or in part by reason of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority
	the Landlord shall use its best endeavours to obtain all planning permissions or other permits and consents that may be required under the Planning Acts or other statutes (if any) to enable the Landlord to rebuild and reinstate ("Permissions")
7.5.2	Subject to the provisions of clauses 7.5.3 and 7.5.4 the Landlord shall as soon as the Permissions have been obtained or immediately where no Permissions are required apply all money received in respect of such insurance (except sums in respect of loss of Rent) in rebuilding or reinstating the Premises so destroyed or damaged PROVIDED that in the event of substantial damage to or destruction of the Premises by an Insured Risk the above provisions shall have effect as if they obliged the Landlord (subject as provided above) to rebuild and reinstate the Premises either in the form in which they were immediately before the occurrence of the destruction or damage or with such modifications as:
	7.5.2.1	may be required by any competent authority as a condition of the grant of any of the Permissions and/or
	7.5.2.2	the Landlord may make to reflect then current good building practice and/or
	7.5.2.3	the Landlord may otherwise reasonably require
	but so that the Landlord shall in any event provide in the Premises as rebuilt and reinstated accommodation for the Tenant no less convenient and commodious than those which existed immediately before the occurrence of the destruction or damage
7.5.3	For the purposes of this clause the expression 'Supervening Events' means:
	7.5.3.1	the Landlord has failed despite using its best endeavours to obtain the Permissions
	7.5.3.2	any of the Permissions have been granted subject to a lawful condition with which in all the circumstances it would be unreasonable to expect the Landlord to comply
	7.5.3.3	some defect or deficiency in the site upon which the rebuilding or reinstatement is to take place would mean that the same could only be undertaken at a cost that would be unreasonable in all circumstances
	7.5.3.4	the Landlord is unable to obtain access to the site for the purposes of rebuilding or reinstating
	7.5.3.5	the cost of rebuilding or reinstating would exceed the amount received in respect of the insurance effected by the Landlord pursuant to this clause (except sums in respect of loss of Rent)
	7.5.3.6	the rebuilding or reinstating is prevented by war act of God Government action strike lock-out or
	7.5.3.7	any other circumstances reasonably beyond the control of the Landlord
7.5.4	the Landlord shall not be liable to rebuild or reinstate the Premises if and for so long as such rebuilding or reinstating is prevented by Supervening Events

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	7.5.5	If upon the expiry of a period of thirty months commencing on the date of the damage or destruction the Premises have not been rebuilt or reinstated so as to be fit for the Tenant's occupation and use either party may by notice served at any time within six months of the expiry of such period invoke the provisions of clause 7.5.6
	7.5.6	Upon service of a notice in accordance with clause 7.5.5:
		7.5.6.1	the Term will absolutely cease but without prejudice to any rights or remedies that may have accrued to either party against the other and
		7.5.6.2	all money received in respect of the insurance effected by the Landlord pursuant to this clause shall belong to the Landlord
7.6	Tenant's insurance covenants
	The Tenant covenants with the Landlord
	7.6.1	to comply with all the reasonable requirements and recommendations of the insurers
	7.6.2	not to do or omit anything that could cause any policy of insurance on or in relation to the Premises to become void or voidable wholly or in part nor (unless the Tenant shall have previously notified the Landlord and have agreed to pay the increased premium) anything by which additional insurance premiums may become payable
	7.6.3	to keep the Premises supplied with such fire fighting equipment as the insurers and the fire authority may require and as the Landlord may reasonably require and to maintain such equipment to their satisfaction and in efficient working order and at least once in every six months to cause any sprinkler system and other fire fighting equipment to be inspected by a competent person
	7.6.4	not to store or bring onto the Premises any article substance or liquid of a specially combustible inflammable or explosive nature and to comply with the requirements and recommendations of the fire authority and the reasonable requirements of the Landlord as to fire precautions relating to the Premises.
	7.6.5	not to obstruct the access to any fire equipment or the means of escape from the Premises nor to lock any fire door while the Premises are occupied
	7.6.6	to give notice to the Landlord immediately upon the happening of any event which might affect any insurance policy on or relating to the Premises or upon the happening of any event against which the Landlord may have insured under this lease
	7.6.7	immediately to inform the Landlord in writing of any conviction judgment or finding of any court or tribunal relating to the Tenant (or any director other officer or major shareholder of the Tenant) of such a nature as to be likely to affect the decision of any insurer or underwriter to grant or to continue any such insurance
	7.6.8	if at any time the Tenant shall be entitled to the benefit of any insurance on the Premises (which is not effected or maintained in pursuance of any obligation contained in this lease) to apply all money received by virtue of such insurance in making good the loss or damage in respect of which such money shall have been received

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	7.6.9	if and whenever during the Term the Premises or any part of them are damaged or destroyed by an Insured Risk and the insurance money under the policy of insurance effected by the Landlord pursuant to its obligations contained in this lease is by reason of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority wholly or partially irrecoverable immediately in every such case (at the option of the Landlord) either:
		7.6.9.1	to rebuild and reinstate at its own expense the Premises or the part destroyed or damaged to the reasonable satisfaction and under the supervision of the Surveyor the Tenant being allowed towards the expenses of so doing upon such rebuilding and reinstatement being completed the amount (if any) actually received in respect of such destruction or damage under any such insurance policy or
		7.6.9.2	to pay to the Landlord on demand with Interest the amount of such insurance money so irrecoverable in which event the provisions of clauses 7.4 and 7.5 shall apply
7.7	Landlord's insurance covenants
	The Landlord covenants with the Tenant in relation to the policy of insurance effected by the Landlord pursuant to its obligations contained in this lease to produce to the Tenant on demand reasonable evidence of the terms of the policy and the fact that the last premium has been paid.
8	The Guarantor's covenants
	The expression "the Guarantor's covenants" shall mean the following covenants by the Guarantor
	The Guarantor covenants with the person named in clause 1.1.1. and without the need for any express assignment with all its successors in title that:
8.1	To pay observe and perform
	During the Term the Tenant shall punctually pay the rents and observe and perform the covenants and other terms of this lease and if at any time during the Term the Tenant shall make any default in payment of the rents or in observing or performing any of the covenants or other terms of this lease the Guarantor will pay the rents and observe or perform the covenants or terms in respect of which the Tenant shall be in default and make good to the Landlord on demand and indemnify the Landlord against all losses damages costs and expenses arising or incurred by the Landlord as a result of such non-payment non-performance or non-observance notwithstanding:
	8.1.1	any time or indulgence granted by the Landlord to the Tenant or any neglect or forbearance of the Landlord in enforcing the payment of the rents or the observance or performance of the covenants or other terms of this lease or any refusal by the Landlord to accept rents tendered by or on behalf of the Tenant at a time when the Landlord was entitled (or would after service of a notice under the Law of Property Act 1925 Section 146 have been entitled) to re-enter the Premises
	8.1.2	that the terms of this lease may have been varied by agreement between the parties
	8.1.3	that the Tenant shall have surrendered part of the Premises in which event the liability of the Guarantor under this lease shall continue in respect of the part of the Premises not so surrendered after making any necessary apportionments under the Law of Property Act 1925 Section 140 and

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	8.1.4	any other act or thing by which but for this provision the Guarantor would have been released
8.2	To take lease following disclaimer
	If at any time during the Term the Tenant (being an individual) shall become bankrupt or (being a company) shall enter into liquidation and the trustee in bankruptcy or liquidator shall disclaim this lease the Guarantor shall if the Landlord shall by notice within sixty days after such disclaimer so require take from the Landlord a lease of the Premises for the residue of the Contractual Term which would have remained had there been no disclaimer at the Rent then being paid under this lease and subject to the same covenants and terms as in this lease (except that the Guarantor shall not be required to procure that any other person is made a party to that lease as guarantor) such new lease to take effect from the date of such disclaimer and in such case the Guarantor shall pay the costs of such new lease and execute and deliver to the Landlord a counterpart of it
8.3	To make payments following disclaimer
	If this lease shall be disclaimed and for any reason the Landlord does not require the Guarantor to accept a new lease of the Premises the Guarantor shall pay to the Landlord on demand an amount equal to the rents for the period commencing with the date of such disclaimer and ending on whichever is the earlier of the following dates:
	8.3.1	the date three months after such disclaimer and
	8.3.2	the date (if any) upon which the Premises are relet
9	Provisos
9.1	Re-entry
	If and whenever during the Term:
	9.1.1	the rents (or any of them or any part of them) under this lease are outstanding for 21 days after becoming due whether formally demanded or not or
	9.1.2	there is a breach by the Tenant or any Guarantor of any covenant or other term of this lease or any document supplemental to this lease or
	9.1.3	the Tenant or any Guarantor being an individual:
		9.1.3.1	becomes bankrupt or
		9.1.3.2	has an interim receiver appointed in respect of its property or
	9.1.4	the Tenant or any Guarantor being a company:
		9.1.4.1	enters into liquidation whether compulsory or voluntary (but not if the liquidation is for amalgamation or reconstruction of a solvent company) or
		9.1.4.2	has a receiver appointed or
		9.1.4.3	has an administration order made or
		9.1.4.4	any person becomes entitled to exercise in respect of it the powers of an administrative receiver or
	9.1.5	the Tenant enters into an arrangement for the benefit of its creditors

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	the Landlord may re-enter the Premises (or any part of them in the name of the whole) at any time (and even if any previous right of re-entry has been waived) and then the Term will absolutely cease but without prejudice to any rights or remedies which may have accrued to the Landlord against the Tenant or any Guarantor in respect of any breach of covenant or other term of this lease (including the breach in respect of which the re-entry is made)
9.2	Exclusion of use warranty
	Nothing in this lease or in any consent granted by the Landlord under this lease shall imply or warrant that the Premises may lawfully be used under the Planning Acts for the purpose authorised in this lease (or any purpose subsequently authorised)
9.3	Entire understanding
	This lease embodies the entire understanding of the parties relating to the Premises and to all the matters dealt with by any of the provisions of this lease
9.4	Representations
	The Tenant acknowledges that this lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the Landlord except any such statement or representation that is expressly set out in this lease
9.5	Licences etc under hand
	Whilst the Landlord is a limited company or other corporation all licences consents approvals and notices required to be given by the Landlord shall be sufficiently given if given under the hand of a director the secretary or other duly authorised officer of the Landlord
9.6	Tenant's property
	If after the Tenant has vacated the Premises on the expiry of the Term any property of the Tenant remains in or on the Premises and the Tenant fails to remove it within seven days after being requested in writing by the Landlord to do so or if after using its best endeavours the Landlord is unable to make such a request to the Tenant within fourteen days after the expiry of the Term:
	9.6.1	in so far as such property is annexed to the Premises the Landlord may treat it as having reverted to the Landlord or
	9.6.2	the Landlord may as the agent of the Tenant sell such property and the Tenant will indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the Landlord in the mistaken belief held in good faith (which shall be presumed unless the contrary is proved) that such property belonged to the Tenant and
	9.6.3	if the Landlord having made reasonable efforts is unable to locate the Tenant the Landlord shall be entitled to retain the net proceeds of sale of such property absolutely unless the Tenant shall claim them within six months of the date upon which the Tenant vacated the Premises and
	9.6.4	the Tenant shall indemnify the Landlord against any damage occasioned to the Premises and any actions claims proceedings costs expenses and demands made against the Landlord caused by or related to the presence of the property in or on the Premises

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9.7	Compensation on vacating
	Any statutory right of the Tenant to claim compensation from the Landlord on vacating the Premises shall be excluded to the extent that the law allows
9.8	Service of notices
	The provisions of the Law of Property Act 1925 Section 196 as amended by the Recorded Delivery Service Act 1962 shall apply to the giving and service of all notices and documents under or in connection with this lease except that Section 196 shall be deemed to be amended as follows:
	9.8.1	the final words of Section 196(4) .... "and that service ....... be delivered" shall be deleted and there shall be substituted ".... and that service shall be deemed to be made on the third Working Day after the registered letter has been posted "Working Day" meaning any day from Monday to Friday (inclusive) other than Christmas Day Good Friday and any statutory bank or public holiday and the day immediately following such statutory bank or public holiday"
	9.8.2	any notice or document shall also be sufficiently served on a party if served on solicitors who have acted for that party in relation to this lease or the Premises at any time within the year preceding the service of the notice or document
	9.8.3	any notice or document shall also be sufficiently served if sent by telex telephonic facsimile transmission or any other means of electronic transmission to the person to be served and that service shall be deemed to be made on the day of transmission if transmitted before 4pm on a Working Day but otherwise on the next following Working Day (as defined above)
	and in this clause 'party' includes any Guarantor
10	Tenant's option to purchase reversion
	10.1	If the Tenant wishes to purchase the leasehold reversion of the Premises as held by the Landlord at the date hereof pursuant to the terms of the superior lease dated 28th September 1976 ("the Landlord's Interest") then if the Tenant shall at any time during the first five years of the Contractual Term give to the Landlord notice in writing referring to this clause 10.1 ("the Tenant's Option Notice") of its desire to acquire the Landlord's Interest then the Landlord shall at the date specified in clause 10.4 and upon payment of the higher of
	10.1.1	£3,200,000 (three million two hundred thousand pounds) and

10.1.2

the Market Value to be ascertained in accordance with the provisions of clause 10.2

(the said higher sum in this clause 10 referred to as "the Sale Price") together with any Value Added Tax thereon and together also with the rents reserved by and all other sums payable under this Lease up to the date of actual completion transfer the Landlord's interest to the Tenant PROVIDED that until the sums payable in accordance with this clause shall have actually been paid this lease shall continue in full force and effect and provided also that no more than one Tenant's Option Notice may be served in any calendar year

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10.2	The Landlord and the Tenant shall attempt to reach agreement on the Market Value of the Landlord's interest as at the date of service of the Tenant's Option Notice and if such agreement has not been reached within two months from the service of the Tenant's Option Notice then an Expert shall be appointed (on the application of either party but not more than six months from the service of the Tenant's Option Notice) to determine the Market Value (as defined in clause 10.9) of the Premises and the Expert shall act in accordance with the terms of clause 10.8
10.3	If within one month of the agreement or determination of the Market Value in accordance with the above provisions of this Clause 10 the Tenant serves on the Landlord a further notice in writing ("the Tenant's Completion Notice") referring to this clause 10.3 of its desire to complete the purchase of the Landlord's Interest an unconditional binding contract for the sale of the Landlord's Interest an unconditional binding contract for the sale of the Landlord's Interest by the Landlord to the Tenant for the Sale Price (together with any Value Added Tax thereon) subject only to (and with the benefit of) this Lease but otherwise free from encumbrances (other than such as may exist on the date hereof) shall forthwith arise between the Landlord and the Tenant provided however that the sale of the Landlord's Interest shall be subject to all local land charges (if any) affecting the Premises whether registered or not
10.4	Completion of the sale of the Landlord's Interest by the Landlord to the Tenant shall take place on the first working day after the expiration of four weeks after the service on the Landlord of the Tenant's Completion Notice and on completion the Tenant shall pay to the Landlord the Sale Price together with any Value Added Tax thereon and also together with all rents and other sums due to the Landlord under the provisions of this lease up to the date of actual completion and the transfer to the Tenant shall provide that this lease shall forthwith merge and be extinguished in the Landlord's Interest
10.5	The Tenant having investigated the Landlord's title to the Landlord's Interest up to the date of this Lease shall be deemed to have accepted such title and shall not be entitled to raise objections and requisitions in respect thereof or in respect of any local land charges or to investigate the said title in respect of any period prior to the date hereof
10.6	The unconditional binding contract for the sale and purchase of the Landlord's Interest referred to in clause 10.3 shall incorporate the above provisions of this clause 10 and in all respects other than as mentioned in the above provisions of this clause 10 incorporate the conditions contained in the edition of the Standard Conditions of Sale current at the date such contract arises insofar as they are not inconsistent with the provisions of this clause 10 and the prescribed rate of interest for the purposes of such conditions shall be the Interest Rate
10.7	This option shall be of no effect if the Tenant fails to protect it by notice caution or other appropriate entry under the Land Registration Act 1925 within three months from the date of this Lease
10.8	Expert
	10.8.1	"Expert" means (for the purpose only of this clause 10) a chartered surveyor having the requisite experience appointed by agreement between the parties or in default of agreement within 14 days of one party giving notice to the other of its nomination or nominations nominated by the President of the Royal Institution of Chartered Surveyors on the application of either party

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	10.8.2	The Expert shall act in the following manner:
	10.8.3	he will be allowed reasonable facilities to inspect the Premises will be given all relevant information in the possession or under the control of either party and will allow each party to make representations to him and to make written counter-representations but will not in any way be fettered by the representations and counter-representations and will rely on his own judgment and inspection
	10.8.4	he shall be requested to use all reasonable endeavours to give his decision as speedily as possible
	10.8.5	he shall act as an expert and not as an arbitrator
	10.8.6	the decision of the Expert shall be final and binding on the parties hereto in respect of all matters referred to him hereunder
	10.8.7	the fees of the Expert and the costs of his appointment shall be payable by the Tenant
10.9	Market Value
	10.9.1	"Market Value" means the consideration for which the sale of the Landlord's Interest might be reasonably be expected to have been completed unconditionally for cash consideration on the date of valuation assuming:
	10.9.2	that the Premises are sold with vacant possession or (if such assumption would result in a higher valuation) that the Premises remain subject to this Lease
	10.9.3	that the Premises are not subject to any other contractual agreement between the Landlord and the Tenant
	10.9.4	that the Tenant will acquire the Landlord's fixtures and fittings and that the same are in reasonable repair at the date of valuation
	10.9.5	a willing seller and a willing purchaser
	10.9.6	that prior to the date of valuation there has been a reasonable period (having regard to the nature of the Premises and the state of the market) for the proper marketing of the Landlord's Interest for the agreement of price and terms and for the completion of the sale of the Landlord's Interest
	10.9.7	that the state of the market level of values and other circumstances were on any earlier assumed date of exchange of agreements for sale and purchase the same as on the date of valuation
	10.9.8	that no account is taken of any additional bid by a buyer or lessee with a special interest
	10.9.9	that no work has been carried out on the Premises by the Tenant its subtenants or their predecessors in title during the Term which has diminished the value of the Premises
	10.9.10	that the covenants contained in this lease on the part of the Tenant have been reasonably performed and observed
11	Tenant's Right of Pre-Emption
11.1	Except in accordance with the provisions of clause 11.2 the Landlord shall not during the Pre-Emption Period make any Disposal other than to the Tenant or the tenant's nominee

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11.2	The Landlord may make a Disposal during a Disposal Period on the Relevant Terms provided that no Disposal may be made:
	11.2.1	to a connected person (as determined in accordance with the provisions of the Income and Corporation Taxes Act 1988) of the Landlord or any directors or former directors of the Landlord or
	11.2.2	as part of a larger transaction or series of transactions
11.3	In this clause 11:
	11.3.1	"Pre-Emption Period" means the period commencing on the fifth anniversary of the commencement of the Contractual Term and expiring on the determination of the Term
	11.3.2	"Disposal" means the creation grant surrender or transfer of any legal or equitable estate right or interest in the Premises or any part of them
	11.3.3	"Relevant Terms" in respect of a Disposal has the meaning defined in sub-clause 11.4.2 which comprises (to the exclusion of any other) all material terms and (without prejudice to the generality of the above) all elements of any consideration and any other terms which might have an effect on such consideration
	11.3.4	"Disposal Period" means the period of six months commencing on a Rejection Date
	11.3.5	"Relevant Offer" means the service by the Landlord on the Tenant of a written notice that the Landlord proposes to effect a Disposal of the Landlord's Interest (as defined in clause 10.1) at a premium the amount of which is specified in such notice
	11.3.6	"Provisional Acceptance" means the service by the Tenant on the Landlord of a written notice that the Tenant is minded to acquire the Landlord's Interest on terms to be agreed
	11.3.7	the "Completion Provisions" are:
		11.3.7.1	the Landlord shall at the date specified in sub-clause 11.3.7.2 and upon payment by the Tenant to the Landlord of the Sale Price together with any Value Added Tax thereon and together also with the rents reserved by and all other sums payable under this lease up to the date of completion transfer the Landlord's Interest to the Tenant or (at the Tenant's request) the tenant's nominee provided that until the sums payable in accordance with this clause shall have actually been paid this lease shall continue in full force and effect
		11.3.7.2	completion of the sale of the Landlord's Interest by the Landlord so the Tenant or the tenant's nominee (as appropriate) shall take place on the tenth working day after the date of the Tenant's Completion Notice where clause 11.4.1.2.1 applies and on the tenth working day after the date of agreement between the Landlord and the Tenant of the Market Value where clause 11.4.1.2.2 applies and the transfer shall provide that this lease shall forthwith merge and be extinguished in the Landlord's Interest
	11.3.8	the "Acceptance Period" in respect of any notice of the Expert's decision served pursuant in the provisions of clause 11.4.1.2 or immediately following the date of the Relevant Offer referred to in clause 11.4 means the period of 20 working days commencing with the date on which the notice to which it relates is served or the date of the said Relevant Offer (as appropriate)

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	11.3.9	"Rejection Date" means the date of the day next following the last day of an Acceptance Period during which the Tenant has not given Provisional Acceptance or a Tenant's Completion Notice other than an Acceptance Period during which the Landlord has given a Landlord's Withdrawal Notice
	11.3.10	"Landlord's Withdrawal Notice" means a written notice by the Landlord to the Tenant that the Landlord wishes to withdraw the Relevant Offer
11.4	If the Landlord makes a Relevant Offer during the Pre-Emption Period then:—
	11.4.1	if the Tenant gives Provisional Acceptance during the Acceptance Period immediately following the date of the Relevant Offer then:—
		11.4.1.1	the Landlord and the Tenant shall attempt to reach agreement on the Market Value (as defined in clause 10.9) as at the date of the Relevant Offer and if such agreement has not been reached within 20 working days of the date of Provisional Acceptance then an Expert shall be appointed to determine the Market Value and the Expert shall act in accordance with the terms of clause 10.8
		11.4.1.2	forthwith upon the earlier of:—
			11.4.1.2.1	the service of notice ("Tenant's Completion Notice") by the Tenant upon the Landlord at any time during the Acceptance Period commencing with the date of receipt by the Tenant of notice of the Expert's decision as to the Market Value that the Tenant wishes to acquire the Landlord's Interest at the Market Value (provided that the Landlord does not at any time during the said Acceptance Period whether before or after the service of any Tenant's Completion Notice serve a Landlord's Withdrawal Notice) and
			11.4.1.2.2	the agreement by the Landlord and the Tenant in accordance with clause 11.4.1.1 of the Market Value
			the Landlord shall be deemed to have made a further offer specifying the said amount of the Market Value as the premium for the Landlord's Interest and an unconditional binding contract for the sale of the Landlord's Interest by the Landlord to the Tenant or the tenant's nominee as appropriate for a premium which shall be the Market Value ascertained pursuant to the provisions of sub clause 11.4.1.1 (in the Completion Provisions referred to as "the Sale Price") incorporating the Completion Provisions subject only to (and with the benefit of) this Lease but otherwise free from encumbrances (other than such as may exist on the date hereof) shall forthwith arise between the Landlord and the Tenant provided however that the sale of the Landlord's Interest shall be subject to all local land charges (if any) affecting the Premises at the date of completion whether registered or not
	11.4.2	If a Rejection Date immediately follows an Acceptance Period referred to in this sub clause 11.4 then the Relevant Terms during the Disposal Period commencing on the said Rejection Date shall be such terms as the Landlord shall in its absolute discretion decide

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11.4.3
If the Landlord has given a Landlord's Withdrawal Notice then notwithstanding any other provisions of this Clause 11 the Landlord shall not make a further Relevant Offer for a period of six months from the relevant Rejection Date

IN WITNESS whereof this Deed has been executed but remains undelivered until the day and year first before written

FIRST SCHEDULE

Part 1

Rights Granted

Full right and liberty for the Tenant its servants and licensees

1.	in common with the Landlord the Superior Landlord and all other persons having the like right with or without vehicles at all times for all purposes connected with the Premises but not for any other purpose to pass and repass to and from the Premises over and along the part of the roads or ways shown coloured brown on the Plan
2.	to the free right of passage and running of water soil gas and electricity to and from the demised premises through all sewers drains pipes cables and watercourses now or within 80 years hereafter to be made or passing under or along the adjoining land of the Superior Landlord
3.	at all reasonable times having given 7 days prior notice in writing (except in cases of emergency) to enter upon the adjoining and neighbouring land of the Superior Landlord to repair and maintain the Premises the works upon which shall not otherwise be reasonably practicable subject to making good all damage and disturbance so caused PROVIDED that in exercising such right the Tenant its agents servants lessees and licensees shall not impede the use and enjoyment of such land by the Superior Landlord or the tenants or other occupiers thereof

Part 2

Rights Reserved

1.	The right at any time during the Term at reasonable times having (except in cases of emergency) given 7 days prior notice in writing to enter the Premises
1.1	to inspect the condition and state of repair of the Premises
1.2	to take schedules or inventories of fixtures and other items to be yielded up on the expiry of the Term and

1.3	to exercise any of the rights granted to the Landlord elsewhere in this lease
2	The right with the Surveyor and the third party determining the Rent in default of agreement between the parties under any provisions for rent review contained in this lease on reasonable prior notice to enter and inspect and measure the Premises for all purposes connected with any pending or intended step under the 1954 Act or the implementation of any provisions for rent review

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3	Full right and liberty (in common with all other persons granted the like right by the Superior Landlord or its successors in title or other persons so entitled to grant the right) with or without vehicles at all times for all purposes (subject as hereinafter provided) to pass and repass over the part of the roads or ways shown coloured blue and hatched green on the Plan but in the case of the roads or ways hatched green for the purposes of the Electricity Company only
4	to the Superior Landlord the free right of passage and running of water and soil gas and electricity from the adjoining and neighbouring land and the buildings now or within the period of 80 years from the date of the Headlease erected thereon through the sewers drains pipes channels mains and cables laid or within the like period hereafter to be laid upon or under the Premises with power to enter upon the same having given 7 days prior notice in writing (except in cases of emergency) and in such positions as they may reasonably choose to lay and make connections with such sewers drains pipes channels mains and cables or any of them for the purpose of exercising the said right of passage aforementioned
5	to the Superior Landlord full right and liberty at any time hereafter and from time to time to execute works and erections upon the Superior Landlord's adjoining and neighbouring land and to use the said adjoining and neighbouring land and buildings in such manner as it may think fit notwithstanding that the access of light and air to the Premises may thereby be interfered with
6	to the Superior Landlord full right and liberty at all reasonable times to enter upon the Premises having given 7 days prior notice in writing (except in cases of emergency) to view the state and condition of and to repair and maintain adjoining premises or adjoining roadways the works upon which shall not otherwise be reasonably practicable subject to making good all damage and disturbance so caused

PROVIDED that in exercising such rights the Superior Landlord its agents servants lessees and licensees shall not impede the Tenants use and enjoyment of the Premises

SECOND SCHEDULE

Rent and Rent Review

1	Definitions
1.1	The terms defined in this paragraph shall for all purposes of this schedule have the meanings specified
1.2	'Review Period' means the period between any Review Date and the day prior to the next Review Date (inclusive) or between the last Review Date and the expiry of the Term (inclusive)
1.3	'the Assumptions' means the following assumptions at the relevant Review Date:
	1.3.1	that no work has been carried out on the Premises by the Tenant its subtenants or their predecessors in title during the Term which has diminished the rental value of the Premises
	1.3.2	that if the Premises have been destroyed or damaged by any of the Insured Risks they have been fully restored
	1.3.3	that the covenants contained in this lease on the part of the Tenant have been fully performed and observed

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	1.3.4	that the Premises are available to let by a willing landlord to a willing tenant by one lease ('the Hypothetical Lease') without a premium being paid by either party and with vacant possession
	1.3.5	that the Premises are ready for immediate occupation and use for the purpose or purposes required by the willing tenant referred to in the previous provisions of this schedule and that all the services required for such occupation and use are connected to the Premises
	1.3.6	that the Hypothetical Lease contains the same terms as this lease including the provisions for rent review on the Review Dates and at similar intervals after the last Review Date but except:
		1.3.6.1	the amount of the Initial Rent
		1.3.6.2	that the term of the Hypothetical Lease is ten years
		1.3.6.3	that such term begins on the relevant Review Date and
		1.3.6.4	that the rent shall commence to be payable from that date and
		1.3.6.5	the provisions relating to VAT contained in this schedule and
		1.3.6.6	that the years during which the tenant covenants to decorate the Premises are at similar intervals after the beginning of the term of the Hypothetical Lease as those specified in this lease
	1.3.7	that the Hypothetical Lease will be renewed at the expiry of its term under the provisions of the 1954 Act
	1.3.8	that the Tenant is entitled by reason of the Tenant's own supplies to recover the full amount of all VAT chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease or in respect of any payment made by the Landlord where the Tenant agrees in this Lease to reimburse the Landlord for such payment
1.4	'the Disregarded Matters' means:
	1.4.1	any effect on rent of the fact that the Tenant its subtenants or their respective predecessors in title have been in occupation of the Premises
	1.4.2	any goodwill attached to the Premises by reason of the carrying on at the Premises of the business of the Tenant its subtenants or their predecessors in title in their respective businesses
	1.4.3	any increase in rental value of the Premises attributable to the existence at the relevant Review Date of any improvement to the Premises carried out with consent where required by the Tenant during the Term otherwise than in pursuance of an obligation to the Landlord or its predecessors in title
	1.4.4	any effect on rent of the fact that VAT is or may be chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease
	1.4.5	the existence of the Second Rent and the amount thereof
1.5	'the President' means the President for the time being of the Royal Institution of Chartered Surveyors the duly appointed deputy of the President or any person authorised by the President to make appointments on his behalf

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1.6	'the Arbitrator' means a person appointed by agreement between the parties or in the absence of agreement within fourteen days of one party giving notice to the other of its nomination or nominations nominated by the President on the application of either party made not earlier than six months before the relevant Review Date or at any time afterwards and any person appointed by the President in his place
2	Ascertaining the Rent
2.1	The Rent shall be:
	2.1.1	until and including 30 November 1993 the Initial Rent and thereafter
	2.1.2	until but excluding the first Review Date the sum of £315,000 (three hundred and fifteen thousand pounds) per year ("the Second Rent") and thereafter
	2.1.3	during each successive Review Period a rent equal to the greater of:
		2.1.3.1	the Rent payable immediately prior to the relevant Review Date or if payment of Rent has been suspended pursuant to the proviso to that effect contained in this lease the Rent which would have been payable had there been no such suspension or
		2.1.3.2	such Rent as may be ascertained in accordance with this schedule
2.2	Such revised Rent for any Review Period may be agreed in writing at any time between the parties or (in the absence of agreement) will be determined not earlier than the relevant Review Date by the Arbitrator
2.3	The revised Rent to be determined by the Arbitrator shall be such as he shall decide acting as an arbitrator and not as an expert to be the rent at which the Premises might reasonably be expected to be let on the open market at the relevant Review Date making the Assumptions but disregarding the Disregarded Matters
2.4	The arbitration shall be conducted in accordance with the Arbitration Acts 1950 to 1979 except that if the Arbitrator shall die or decline to act the President may on the application of either party discharge the Arbitrator and appoint another in his place
2.5	Whenever the Rent shall have been ascertained in accordance with this schedule memoranda to this effect shall be signed by or on behalf of the parties and annexed to this lease and its counterpart and the parties shall bear their own costs in this respect and for any period VAT is chargeable in respect of the rents under this lease the amount of the Rent referred to in such memorandum shall be exclusive of VAT unless the contrary is expressly stated therein
3	Arrangements pending ascertainment of revised Rent
3.1	If the revised Rent payable during any Review Period has not been ascertained by the relevant Review Date Rent shall continue to be payable at the rate previously payable such payments being on account of the Rent for that Review Period
3.2	If one party shall upon publication of the Arbitrator's award pay all the Arbitrator's fees and expenses such party shall be entitled to recover (in default of payment within twenty-one days of a demand to that effect in the case of the Landlord as Rent in arrears or in the case of the Tenant by deduction from Rent) such proportion of them (if any) as the Arbitrator shall award against the other party

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4	Payment of revised Rent
4.1	If the revised Rent shall be ascertained on or before the relevant Review Date and that date is not a quarter day the Tenant shall on that Review Date pay to the Landlord the amount by which one quarter's Rent at the rate payable on the immediately preceding quarter day is less than one quarter's Rent at the rate of the revised rent apportioned on a daily basis for that part of the quarter during which the revised Rent is payable
4.2	If the revised Rent payable during any Review Period has not been ascertained by the relevant Review Date then immediately after the date when the same has been agreed between the parties or the date upon which the Arbitrator's award shall be received by one party the Tenant shall pay to the Landlord:
	4.2.1	any shortfall between the rent which would have been paid on the Review Date and on any subsequent quarter days had the revised rent been ascertained on or before the relevant Review Date and the payments made by the Tenant on account and
	4.2.2	interest at Base Rate prevailing on the day upon which the shortfall is paid in respect of each instalment of Rent due on or after the Review Date on the amount by which the instalment of revised Rent which would have been paid on the relevant Review Date or such quarter day exceeds the amount paid on account and such interest shall be payable for the period from the date upon which the instalment was due up to the date of payment of the shortfall
5	Arrangements when increasing Rent prevented etc
5.1	If at any of the Review Dates there shall be in force a statute which shall prevent restrict or modify the Landlord's right to review the Rent in accordance with this lease and/or to recover any increase in the Rent the Landlord shall when such restriction or modification is removed relaxed or modified be entitled (but without prejudice to its rights (if any) to recover any Rent the payment of which has only been deferred by law) on giving not less than one month's nor more than three months' notice in writing to the Tenant to invoke the provisions of paragraph 5.2
5.2	Upon the service of a notice pursuant to paragraph 5.1 the Landlord shall be entitled:
	5.2.1	to proceed with any review of the Rent which may have been prevented or further to review the Rent in respect of any review where the Landlord's right was restricted or modified and the date of expiry of such notice shall be deemed for the purposes of this lease to be a Review Date (provided that without prejudice to the operation of this paragraph nothing in this paragraph shall be construed as varying any subsequent Review Dates)
	5.2.2	to recover any increase in Rent with effect from the earliest date permitted by law

THE COMMON SEAL of MUIRHEAD VACTRIC
COMPONENTS LIMITED was hereunto affixed in
the presence of:—

[SEAL]

/s/ [ILLEGIBLE]
Director

/s/ [ILLEGIBLE]
Director/Secretary

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[DIAGRAM OMITTED]

32

[OPENMEN LETTERHEAD]

Our ref: MW/ns/5334

5 July 1996

Muirhead Vactric Components Ltd
33 Oakfield Road
Penge
London
SE20 8EW

Dear Sirs

OPENMEN LIMITED

Please note that with effect from 2 July 1996, Openmen Limited has changed its name to Williams Properties Limited (a copy of the Change of Name Certificate is enclosed), therefore all future rent and other demands will be sent in the new name of the company.

Yours faithfully
/s/ Martin Way
M Way BA (Hons) Dip Surv
Group Property Administrator

[SEAL]

CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME

Company No. 2124564

The Registrar of Companies for England and Wales hereby certifies that

OPENMEN LIMITED

having by special resolution changed its name, is now incorporated under the name of

WILLIAMS PROPERTIES LIMITED

Given at Companies House, Cardiff, the 2nd July 1996

/s/ A.F. Fletcher
A.F. FLETCHER
For the Registrar of Companies

[LOGO]
COMPANIES HOUSE

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COUNTERPART UNDERLEASE: DATED 4th January 1993
FIRST SCHEDULE Part 1 Rights Granted
Part 2 Rights Reserved
SECOND SCHEDULE Rent and Rent Review
[DIAGRAM OMITTED]

EX-10.31

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LEASE AGREEMENT
Advanced Input Devices/Glacier Partners

TABLE OF CONTENTS

1.	Demised Premises	1 - 2
2.	Term	2 - 4
3.	Rental; Development Budget	4 - 6
4.	Holdover	6
5.	Use	6
6.	Services, Utilities and Taxes	6 - 7
7.	Repairs and Maintenance	7 - 8
8.	Lessee's Default and Lessor Remedies	8 - 9
9.	Lessor's Default and Lessee's Remedies	9 - 10
10.	Right to Access	10
11.	Duties of Lessee Upon Termination	10
12.	Assignment	11
13.	Subordination	11
14.	Insurance	11 - 12
15.	Destruction or Damage of Premises	12 - 13
16.	Taking of Demised Premises	13
17.	Indemnification	13 - 14
18.	Sale of Property by Lessor	14
19.	Estoppel Certificate	14
20.	Trade Fixtures	14
21.	Remodeling or Alterations	14 - 15
22.	Quiet Enjoyment by Lessee	15
23.	Notices	15
24.	Attorney's Fees	15
25.	Successors and Assigns	16
26.	Hazardous Substances	16
27.	Signage	16
28.	Compliance with Laws	16
29.	No Waiver	17
30.	Memorandum	17
31.	Time; Termination Option	17
32.	Change Orders	17
33.	Future Improvements	17
34.	Reimbursement of certain development costs to Lessee	18
35.	Arbitration of Construction Disputes	18
36.	Entire Agreement	18
Signatures		19
	Exhibit A—Legal Description
	Exhibit B—Building Standards and Specifications
	Exhibit C—Site Plan
	Exhibit D—Development Budget
	Exhibit D-1—Development Cost Report Form
	Exhibit D-2—Rental Increase Schedule
	Exhibit E—Form of Commencement Date Letter
	Exhibit F—Project Schedule

LEASE

    THIS LEASE, made this 27 day of Feb, 1998, by and between Glacier Partners, an Idaho general partnership, hereinafter referred to as "Lessor", and Advanced Input Devices, Inc., a Delaware corporation, hereinafter referred to as "Lessee."

Background

    Lessor and Lessee are desirous of entering into a lease agreement for a new building located on approximately 13 acres of real estate situated near the SW corner of U.S. 95 and Wilbur Ave. (assessors parcel #C-0000-026-8200) Kootenai County, Idaho. The proposed construction contemplates a complete "turn key" facility that includes the site improvements, building, and street revisions as set forth in the specifications attached hereto. It is anticipated that quality of the improvements will be similar to that used in new Class A buildings in the Coeur d'Alene marketplace, such as the Cd'A Tech Center Buildings on U.S. 95.

    It is also anticipated that improvements by Lessee will include the furnishing of all office furniture and partitions, all telephone and data wiring and equipment and all interior identification signage (except as required by codes).

    The initial building area will be approximately 85,000 square feet divided into 20,000 square feet of office space and 65,000 square feet of manufacturing/production/processing/assembly space.

WITNESSETH:

1.   Demised Premises:

    1.1  Demised Premises.  The Demised Premises hereby leased by Lessor to Lessee are approximately 13 acres of real property, including a building and improvements (collectively, "Building") to be built by Lessor of initially 85,000 square feet, and possible expansion space of approximately 40,000 square feet, all as set forth on Exhibit "B". The legal description for the Demised Premises is attached as Exhibit "A" and incorporated by this reference. The general specifications for the Building to be constructed and leased are attached as Exhibit "B" and incorporated by this reference and are generally depicted on the Site Plan ("Site Plan") attached as Exhibit "C."

    1.2  Work of Improvement.  The Building and Demised Premises shall be improved and delivered by Lessor to Lessee according to the building standards and specifications of Exhibit "B" and the Site Plan ("Lessor's Work"). Lessee shall have the right to review and approve the design and specifications for Lessor's Work at all stages of development, including (a) the initial design and schematic plans and (b) final plans and specifications and construction drawings ("Construction Documents"). As used herein, Lessor's Work shall include the access road work described in Paragraph 1.6.

    Lessor and Lessee shall each proceed with all necessary due diligence and in good faith, exerting their best efforts to complete such matters as require action or approval on the part of Lessor and Lessee in accordance with the development schedule contained in this Lease and during the course of construction anticipated under this Lease; and Lessor and Lessee agree to promptly and diligently respond to all questions and concerns raised by the architect, engineers and other consultants. Throughout the period of design, development and construction of the Building, Lessor shall hold weekly meetings with the project development team consisting of Lessee and/or Lessee's authorized representative, the architect, the general contractor, and engineers and other consultants as necessary, to discuss the scheduling and progress of the Building; and, after Substantial Completion (as defined in Paragraph 2.1) of the Building, shall hold such meetings with Lessee and/or Lessee's authorized representative as are mutually determined to be necessary with respect to completion of the punchlist items determined under the punchlist inspection process described in Paragraph 2.1, and the matters and conditions for issuance by the City of Coeur d'Alene of the final certificate of occupancy.

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    Lessor agrees that in the selection of the general contractor and the negotiation of the general contract, the fee to be paid to the general contractor and the general conditions will be competitive with the market. Lessee shall have the right to review and approve the selection of the general contractor and the form of construction contract to be entered into between Lessor and the general contractor, such approval not to be unreasonably withheld. Lessor also agrees that all subcontracts will be competitively bid, unless otherwise agreed between Lessor and Lessee. All subcontracts shall be subject to the review and approval of Lessee, such approval not to be unreasonably withheld.

    1.3  Parking.  Lessor shall provide Lessee approximately 475 parking stalls as described and shown on Exhibit "C".

    1.4  Public Areas.  Lessor also grants to Lessee the rights of 24-hour a day ingress and egress to and from the Demised Premises to adjoining public streets.

    1.5  Expansion of Demised Premises.  Upon election by the Lessee, the Lessor shall build an additional 40,000 square feet of building improvements as shown as "expansion space" on Exhibit C, together with an additional 225 parking spaces in the location shown on Exhibit C (collectively, "Expansion"). Lessee may elect to require Lessor to build the Expansion by written notice ("Expansion Notice") to Lessor, which notice shall also set forth Lessee's desired occupancy date for the Expansion. Promptly after delivery of an Expansion Notice, Lessor and Lessee shall work together to agree upon plans and specifications for the Expansion. Lessor, at its sole and expense, will construct and improve the Expansion with tenant improvements consistent with and equivalent in quality and character to the tenant improvements then-existing in the Building.

    All of the terms and conditions of this Lease (including, but not limited to, Paragraph 2.7) shall be applicable to the design, construction and leasing of the Expansion; provided, however, that if Lessor does not Substantially Complete the Expansion on or before the date which is five (5) months after the design and permitting for the Expansion has been completed (but if such five (5) month period would require construction to occur during the months of October through March, the five (5) month period shall be extended to seven (7) months), then the amount of the liquidated damages which shall be paid under Paragraph 2.4 shall be $500.00 per day; and provided, further, that the Lease term shall not be extended by reason of construction of the Expansion.

    1.6  Access Road.  The site access road shown on Wilbur St. across from Mineral Drive shall be built as a part of this project. If the Lessors and Lessees mutually agree to use to use this access point to serve the adjacent 7 acres at some time in the future, the Lessors shall reimburse the Lessee one half of the construction cost in cash, and the leased premises shall be revised to show the property line in the center of the access roadway with a cross-use easement running to the benefit of both parties.

2.   Term:

    2.1  Term.  The initial Lease term ("Initial Term") shall be eighteen (18) years, commencing upon Substantial Completion (as hereinafter defined) of all improvements called for in Paragraph 1.2 (hereinafter the "Commencement Date") and ending eighteen (18) years thereafter. As used herein, "Substantial Completion" shall mean the date when (a) the Building is accessible and fully usable by Lessee for its normal business operations and the access road work described in Paragraph 1.6 is completed and open for use, (b) a certificate of occupancy permitting the use of the Building for Lessee's intended use has been issued by the City of Coeur d'Alene, and (c) the project architect has executed a certificate certifying that Lessor's Work has been substantially completed in accordance with the plans and specifications approved by Lessor and Lessee. At the time of Substantial Completion, Lessor and Lessee shall conduct a joint inspection of the work in order to develop a punch list of additional work to be completed by Lessor. Lessor shall promptly and diligently complete all items on the punch list, and if such work is not completed within thirty (30) days of the date of Substantial Completion, Lessee may, but shall not be required to, complete such punch list work and offset the

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cost to complete against its monetary obligations under this Lease. Rent for any fractional calendar month shall be the prorated portion of the annual rent computed on a daily basis. The Commencement Date, when determined, and the annual rental rate, when determined pursuant to Paragraph 3.1 below, shall be confirmed in writing by the parties promptly upon such commencement and thereupon shall be inserted, together with the expiration date, in the form of commencement letter attached hereto as Exhibit E.

    2.2  Early Occupancy.  Lessee may, barring any reasonable objections from Lessor, have access to the Demised Premises prior to the Commencement Date for purposes of installing equipment, furniture, partitions and wiring. Such access shall be coordinated with Lessor's general contractor ("General Contractor") and shall fall under the same work rules, safety precautions and overall supervision of the General Contractor but the General Contractor shall have no responsibility for the Lessee's equipment installation.

    2.3  Options to Extend Term.  If Lessee is not in default under the terms and conditions of this Lease beyond applicable notice and grace periods at the end of the Initial Term or any term to be extended, Lessee shall have options to extend the term of this Lease for two (2) consecutive five (5) year terms upon the same terms and conditions as herein specified except at an adjusted rental amount as described in Paragraph 3.3 below.

    Lessee must irrevocably exercise each option by providing written notice to Lessor not later than twelve (12) months prior to expiration of the Lease term to be extended.

    2.4  Lessor's Delay in Delivery of Demised Premises.  In the event Lessor is unable to deliver the Demised Premises Substantially Completed to Lessee on or before March 31, 1999 because of failure of Lessor, Lessor's employees, agents or subcontractors to complete construction other than for reasons beyond the reasonable control of Lessor, including extreme and abnormal weather conditions (but excluding financial or economic reasons), Lessor shall reimburse Lessee for any and all increased moving costs, any and all rent differential and all other actual damages incurred by Lessee as a result of the failure to deliver the Demised Premises on the due date. The parties acknowledge that such damages are difficult to estimate or determine; therefore Lessor, in lieu of requiring Lessee to assess such costs, hereby agrees to pay Lessee as liquidated damages and not as a penalty in the amount of $2,000 per day for each day of non-delivery of any or all of the Demised Premises beyond March 31, 1999.

    2.5  Force Majeure.  Lessor's failure to perform its obligations under this Lease shall be excused if due to causes beyond the control and without the fault or negligence of Lessor, including acts of God, acts of the public enemy, fires, floods, epidemics and strikes, but Lessor's failure to perform shall not be excused if due to financial or economic reasons.

    2.6  Lessee's Delay.  It is the intent of the parties that the Commencement of Construction (as defined in Paragraph 31) shall occur on or before July 1, 1998. The Lessee has hired Eixenberger Architect to design and complete the Construction Documents. Lessor shall deliver construction documents to Lessee by May 15, 1998. Lessee shall approve the Construction Documents for the project by May 22, 1998. Any delay in the Lessee approvals that is the sole cause of an extension of the commencement of construction date shall also adjust any compensatory adjustment referenced in Paragraph 2.4. Lessee agrees that Lessor shall not be liable for any liquidated damages, or costs to Lessee associated with or resulting from unreasonable delays in Lessee's information and/or approvals, but Lessor shall first give Lessee reasonable written notice of such alleged delays and a reasonable opportunity to provide such information and/or approvals. Should Lessee be responsible for a delay in milestone approvals (as indicated on Exhibit "F") such that Commencement of Construction occurs after July 1, 1998, any additional winter construction cost premium shall be Lessee's responsibility.

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    2.7  Termination of Lease.  If for any reason whatsoever the Demised Premises have not been Substantially Completed and delivered within 13 months after approval of the Construction Documents by the Lessee, Lessee may, but shall not be obligated to, terminate this Lease and have no further obligations to Lessor.

3.   Rental; Development Budget:

    3.1  Rental: Development Budget.  Subject to all terms and conditions of this Lease, Lessee shall pay Lessor monthly, in advance, beginning on the Commencement Date, and continuing thereafter on or before each monthly anniversary of the Commencement Date of the term hereof, the Base Monthly Rental as determined by the formula below. The Base Monthly Rental is based upon the construction of the Demised Premises as set forth in the Exhibits hereto and as subsequently modified in writing by the parties. The "Base Monthly Rental" will be one twelfth (1/12) of the amount determined by the product of the "Annual Rent Multiplier" (as defined below) times the revised development budget as described below.

    The current project development budget ("Development Budget") is shown in Exhibit D. The budget categories of Land, Building architectural and engineering, Construction Site and Financing are under the control of the Lessor. Lessor shall be responsible, at its sole cost and expense, for any costs incurred under such budget categories in excess of the amounts shown on Exhibit D. Cost allowances for the budget categories of Miscellaneous, Project Administration and the Contingency are shown on Exhibit D and may only be revised with the written concurrence of Lessor and the Lessee.

    Prior to the Commencement of Construction, the parties shall agree on the final Development Budget ("Final Development Budget"). After the Final Development Budget has been determined and agreed upon, the risk of any increased costs thereunder shall be borne by the Lessor and the Total Development Costs shall not exceed the amount shown on the Final Development Budget (except with respect to any design change orders initiated by Lessee which increase the cost of the project as described in Paragraph 32). Any cost savings which result in the final actual development costs being less than the Total Development Costs in the Final Development Budget shall accrue to the benefit of Lessee. Lessee shall have the right to receive the benefit of such cost savings as a reduction in rental payments, and the parties shall within thirty (30) days make an appropriate reconciliation and reimbursement if Lessee shall have previously paid Base Monthly Rental in a higher amount. Once the entire construction contract is fully executed and a notice to proceed has been issued, the actual cost of construction will change only with change orders agreed to in writing by both parties.

    The annual rent will be determined by multiplying the Total Development Cost in the Final Development Budget times the Annual Rent Multiplier; provided, however, that should Lessee on its own initiative make design change orders as described in Paragraph 32 which increase the cost of the project such that the Final Development Budget is increased after the Commencement of Construction, then the annual rent will be adjusted in accordance with this formula.

    As used herein, "Annual Rent Multiplier" shall mean 0.09825.

    From and after March 1, 1998, Lessor shall deliver to Lessee, no less than once every month, a Development Cost Report with respect to the Development Budget, which shall contain the line items shown in the Development Budget and shall otherwise be in substantially in the form attached hereto as Exhibit D-1 and containing the information requested by Lessee (e.g., specifying "approved revision", "amounts requested", "balance to complete", "current revised budget", and "variances to budget"). Throughout the design and construction process Lessor shall make available to Lessee for inspection all books and records, as well as contracts, bills, vouchers, and checks, and such other documents as are necessary to properly audit all development costs.

    3.2  Rental Increases.  During the initial three years of this Lease, there shall be no increase in the rent. Commencing with year four (4) of the Lease and thereafter each year until the end of the

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eighteen year Initial Term, the rental will be subject to increase 1.35% annually, as shown on the rental schedule attached hereto as Exhibit D-2.

    3.3  Rent during extension option periods.  The rental rate during each extension term shall be 94% of the fair market rental value as of the commencement of the applicable extension term, determined as provided in this Paragraph 3.3. Lessor and Lessee shall seek to agree as to the fair market rental value within thirty (30) days after Lessee gives Lessor notice of its election to renew this Lease. If Lessor and Lessee do not agree as to the fair market rental value within such thirty (30) day period, the following provisions shall apply:

    (a) Within fifteen (15) days after the expiration of the above-mentioned thirty (30) day period, Lessor and Lessee shall each identify an impartial person to act as a valuation expert and notify the other thereof. The expert specified in each such notice must be a commercial real estate M.A.I. appraiser conducting business in Kootenai County area. If either party fails to appoint an expert within such fifteen (15) day period, then the determination of the expert first appointed shall be final, conclusive and binding on both parties.

    (b) The named experts shall together determine the fair market rental value for the extended term. In making such determination, the experts shall consider the rentals at which leases are being concluded for comparable space in Kootenai County. If the experts fail to agree on the fair market rental value within thirty (30) days of their appointment and the difference in their conclusions about fair market rental value is ten percent (10%) or less of the lower of the two determinations, fair market rental value shall be the average of the two determinations.

    (c) If the two experts fail to agree on fair market rental value and the difference between the two determinations exceeds ten percent (10%) of the lower of the two determinations, then the experts shall appoint a third M.A.I. appraiser, similarly impartial and qualified, to determine the fair market rental value. Such third expert shall determine the fair market rental value within thirty (30) days of his or her appointment, and the average of the determinations of the two closest experts is final, conclusive and binding on Lessor and Lessee. Lessor and Lessee shall each execute and deliver an agreement confirming annual rent for the extension term.

    (d) Lessor and Lessee shall each pay the fees of any expert appointed by Lessor and Lessee, respectively, and Lessor and Lessee shall each pay one-half (1/2) of the fees of the third expert, if any.

    3.4  Rent for Expansion Space.  The actual construction costs of the Expansion shall be actively managed by both the Lessor and the Lessee. The actual costs shall be made up of:

•

the actual cost of hard construction costs, plus



•

the actual cost of the design, engineering, financing and miscellaneous costs.

The total cost of the Expansion shall be increased by a fee of 6% for the Lessor. The rent shall be calculated without additional margin for the Lessor by utilizing an interest rate of prime plus two percent amortized over the remaining term of the Lease; provided, however, that the foregoing interest rate of prime plus two percent shall be reduced if Lessee, at Lessee's option, provides financing to Lessor for purposes of construction of the Expansion, in which case the interest rate used in the foregoing calculation shall be the interest rate provided by Lessee to Lessor in connection with such financing.

    3.5  Refund of Rent.  If this Lease terminates before the expiration date of the Initial Term or any extension term for reasons other than Lessee's default, Base Monthly Rental shall be prorated to the date of termination and Lessor shall immediately repay to Lessee all Base Monthly Rental then prepaid and unearned. Lessee's rights under this Paragraph 3.5 are in addition to, and not a limitation of, any other rights Lessee may have under this Lease, in equity or in law.

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    3.6  Deposit.  Lessee shall, simultaneously herewith, deposit $15,000 with the Lessor as a security deposit that shall be held by the Lessor as security for full performance of Lessee's obligations for default in payment of rent, repairs, damages or cleaning expenses as the result of Lessee's occupancy. The security deposit shall be held in a separate interest-bearing account, as reasonably directed by Lessee, and the interest shall be shared equally by Lessor and Lessee and shall be disbursed and paid to the parties at least annually. The deposit shall be refunded to Lessee, less any applicable charges, but together with Lessee's one-half share of any accrued and unpaid interest, at the end of the Lease term or the earlier termination of the Lease.

4.  Holdover:

    If Lessee holds possession of the Demised Premises after the expiration of the Lease term, Lessee shall be deemed to be a month-to-month tenant upon the same terms and conditions as contained herein. Any such tenancy may be terminated as provided by Idaho law. During such tenancy, Lessee agrees to pay Lessor rental at an increased rate of 25% of the then Base Monthly Rental applicable during the last year of the Lease term preceding any such holding over.

5.  Use:

    Lessee agrees to use the Demised Premises for an office and manufacturing/production/processing/assembly building (and Lessor represents and warrants to Lessee that all such uses are allowed as of right under applicable zoning), and shall conduct no other business on or make any other use of the Demised Premises without the written consent of Lessor, which consent shall not be unreasonably withheld. Lessee recognizes that Industrial Revenue Bond financing in which the interest is intended to be exempt from federal income taxes ("IRB Financing") is being used for this project and the use of the Building is limited to manufacturing/production/processing/assembly purposes with no more than 25% office space. If the Lessee (a) increases the amount of office use in the Demised Premises to more than 25% of the total space, or (b) incurs more than $7,000,000 in "Capital Costs" (as hereinafter defined) in Kootenai County, Idaho during the Capital Cost Restriction Period (as hereinafter defined), and if either such occurrence is the sole reason which causes the loss of the tax exemption for the IRB Financing bonds and requires Lessor to refinance with conventional taxable financing or taxable bonds, the rent shall be increased in order to allow Lessor to recover over the remaining Lease term the actual increase in costs of refinancing the project with conventional taxable financing or taxable bonds. As used herein, "Capital Costs" shall mean those costs characterized as "capital" under generally accepted accounting principles. As used herein, "Capital Cost Restriction Period" shall mean the six (6) year period which commenced three (3) years prior to issuance of the bonds constituting the IRB Financing for the Building and which expires three (3) years after issuance of such bonds. Lessee shall not use or permit the Demised Premises to be used for any illegal purpose and shall be responsible to determine that Lessee's operations comply with all applicable laws, ordinances, regulations and requirements.

6.  Services, Utilities and Taxes:

    Except as expressly set forth in this Lease, this Lease shall be absolutely net to the Lessor, and all property and other taxes, operating costs, insurance premiums, utilities of every sort, maintenance and each and every other cost (other than debt service) shall be the responsibility of the Lessee.

    6.1  Utilities.  Throughout the term of the Lease, and throughout any extension or option term, Lessee shall pay all charges for heat, lights, water and sewer and any other public utilities. Lessee shall make any deposits necessary for utility services and Lessee shall promptly pay all utility bills and shall not allow any liens to be placed on the property by utility providers.

    6.2  Taxes.  Beginning with the Commencement Date of the Lease term, Lessee shall pay all real property taxes and assessments which at any time during the term of this Lease shall be assessed against the Demised Premises. The tax parcel number will be provided after it is obtained from the County Assessor.

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    Lessee reserves the right, at the sole expense of Lessee, to contest in good faith the amount of or legality of any tax or assessment so long as such contest shall not subject Lessor to any criminal or civil penalty or to any potential loss of ownership or use or occupancy of the Building or the Demised Premises. If Lessee elects to so contest any such tax or assessment, and pending the outcome of any such contest, Lessee may defer the payment thereof, provided that Lessee shall, in any event, pay the tax or assessment before delinquency, and Lessee may in such event pay the tax or assessment under protest. If requested by Lessee, Lessor shall, at no cost to Lessor, execute or join in the execution of any instrument or document necessary in connection with any such contest. In the event Lessee elects to so contest any such tax or assessment, Lessee shall give Lessor written notice of Lessee's intention to make such contest, Lessee shall indemnify and hold Lessor harmless from any costs, expenses, penalties or fees (including reasonable attorneys' fees) arising out of or in connection with such contest, and upon termination of the contest Lessee shall pay all amounts, including without limitation interest and penalties, due by reason of such contest.

7.  Repairs and Maintenance:

    7.1  Lessee's Responsibilities; Lessor's Warranty.  Lessee shall be responsible for all interior and exterior maintenance of the Building, specifically including but not limited to repairs to the heating and cooling systems, plumbing systems, electrical system and drainage system. Lessee shall keep the inside of the Demised Premises and improvements thereon in the same order and condition as of the date it takes possession thereof, damage by the elements and reasonable wear and tear excepted, and permitted alterations and modifications excepted, and shall also keep the Demised Premises in a clean and sanitary condition according to the applicable state, city and county health and sanitary laws and ordinances. Except as provided in paragraph 7.2, Lessee shall specifically be responsible for all repairs to and maintenance of the Demised Premises, ground and parking, including but not limited to:

    a.  Maintenance of and repairs to the roof on the Demised Premises;

    b.  Maintenance of and repairs to, including cost of replacement of all or any portion of, the mechanical and electrical, heating and cooling, security and fire, plumbing and drainage systems and fixtures and all of the Building systems to keep such systems in good order, condition and repair;

    c.  Maintenance of and repairs to lavatories;

    d.  Replacement lamps, bulbs, starters and ballasts;

    e.  Interior painting;

    f.  Exterior and common area maintenance and repairs including, but not limited to, exterior painting; exterior cleaning including window washing; gutter cleaning and repair; sidewalks; curb repair; parking lots and parking stripage; signage; snow removal and landscape maintenance and repair;

    g.  Repairs, changes or alterations in or on the Demised Premises as required by the codes or regulations of any governmental body exercising jurisdiction over the Demised Premises.

    In consideration of Lessee assuming the repairs and maintenance set forth herein, Lessor covenants and agrees to pass through the benefit of all warranties of whatever nature that accrue to the benefit of the Owner as Lessor. Lessor agrees to purchase the manufacturer's ten (10) year warranty in connection with the roof of the Demised Premises. The electrical and HVAC equipment is warranted by the Lessor for a period of two years from the Commencement Date. The HVAC warrantee is for premature equipment failure. All normal maintenance shall be the responsibility of the Lessee.

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    Notwithstanding anything to the contrary contained in this Lease, Lessor shall promptly correct all defects in Lessor's Work and failures of Lessor's Work to conform to the plans and specifications for such work which had had been agreed upon by Lessor and Lessee, which defects or nonconformities are discovered before or within one (1) year after the date upon which Lessee first occupies the Demised Premises. Lessor shall bear all costs of correcting Lessor's Work. Lessor and Lessee shall each give the other prompt written notice after discovering the existence of any such defects or nonconformities in Lessor's Work.

    7.2  Lessor's Responsibilities.  Lessor, at its own cost and expense, is responsible for all repairs and maintenance of the structural portions of the Demised Premises, the foundation, exterior walls, bearing walls, and roof structure.

8.  Lessee's Default and Lessor Remedies:

    8.1  Lessee's Default.  The following events shall be deemed to be events of default by Lessee under the Lease:

    a.  Lessee shall fail to pay any installment of the rent herein reserved when due, or any payment with respect to taxes hereunder when due, or any other payment or reimbursement to Lessor required herein when due, and such failure shall continue for a period of ten (10) days after written notice from Lessor that such payment was overdue.

    b.  Lessee shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors.

    c.  Lessee shall file a petition under any section or chapter of the Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof; or Lessee shall be adjudged bankrupt or insolvent in proceedings filed against Lessee thereunder.

    d.  A receiver or trustee shall be appointed for all or substantially all of the assets of Lessee and not discharged in thirty (30) days.

    e.  Lessee shall fail to comply with any term, provision or covenant of this Lease (other than the foregoing in this Paragraph 8.1), and shall not cure such failure within thirty (30) days after written notice thereof to Lessee. Said written notice of default shall specify the matter in default; provided, however, that if the nature of Lessee's obligations are such that more than thirty (30) days are required for performance, then Lessee shall not be in default if Lessee commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.

    8.2  Lessor's Remedies.  Upon the occurrence of any of such events of default described in Paragraph 8.1 hereof, Lessor shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever except as required by law:

    a.  Terminate this Lease, in which event Lessee shall immediately surrender the Demised Premises to Lessor, and if Lessee fails so to do, Lessor may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Demised Premises and expel or remove Lessee and any other person who may be occupying such Demised Premises or any part thereof. Lessee agrees to pay Lessor on demand the amount of all loss and damage which Lessor may suffer by reason of such termination, whether through inability to relet the Demised Premises on satisfactory terms or otherwise.

    b.  Enter upon and take possession of the Demised Premises and expel or remove Lessee and any other person who may be occupying such Demised Premises or any part thereof, and relet the Demised Premises for such terms ending before, on or after the expiration date of the Lease Term at such rental and upon such other conditions as are reasonable, and receive the rent therefor, and

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Lessee agrees to pay to the Lessor on demand any deficiency that may arise by reason of such reletting. In the event Lessor is successful in reletting the Demised Premises at a rental in excess of that agreed to be paid by Lessee pursuant to the terms of this Lease, Lessor and Lessee each mutually agree that Lessee shall not be entitled under any circumstances to such excess rental, and Lessee does hereby specifically waive any claim to such excess rental.

    c.  Enter upon the Demised Premises, and do whatever Lessee is obligated to do under the terms of this Lease, and Lessee agrees to reimburse Lessor on demand for any expenses which Lessor may incur in thus effecting compliance with Lessee's obligations under this Lease, together with interest thereon at the rate of twelve percent (12%) per annum.

    d.  Whether or not Lessor retakes possession or relets the Demised Premises, Lessor shall have the right to recover unpaid rent and all damages caused by Lessee's default, including attorney's fees. Damage shall include, without limitation: all rentals lost, all legal expenses and other related costs incurred by Lessor following Lessee's default, all costs incurred by Lessor in restoring the Demised Premises to good order and condition, or in remodeling, renovating or otherwise preparing the Demised Premises for reletting, and all brokerage commissions incurred by Lessor in reletting the Demised Premises.

    e.  In the event Lessee fails to pay any installment of rent, additional rent or other charges hereunder within ten (10) days after such installment is due, to help defray the additional cost to Lessor for processing such late payments, Lessee shall pay to Lessor on demand a late charge of five (5%) percent of the Base Monthly Rental. The provision for such late charge shall be in addition to all of Lessor's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Lessor's remedies in any manner. However, the first time annually that the rental is paid late, the late charge shall be limited to two hundred fifty dollars ($250.00).

    f.  Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, such remedies being cumulative and non-exclusive, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Lessor hereunder or of any damages accruing to Lessor by reason of the violation of any other terms, provisions and covenants herein contained. No act or thing done by the Lessor during the Lease term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Demised Premises and no agreement to terminate this Lease or accept surrender of said Demised Premises shall be valid unless in writing signed by the parties hereto. No waiver by Lessor of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Forbearance by Lessor to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Lessor's right to enforce any such remedies with respect to such default or any subsequent default. If, on account of any breach or default by Lessee in Lessee's obligations under the terms and conditions of this Lease, it shall become necessary for Lessor to employ an attorney to send a notice of default and pursue other default remedies, Lessee agrees to pay any reasonable attorneys fees so incurred.

9.  Lessor's Default and Lessee's Remedies:

    9.1  Lessor's Default.  Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor (including those set forth in the Exhibits) within a reasonable time, but in no event later than thirty (30) days after written notice by Lessee to Lessor, specifying wherein Lessor has failed to perform such obligations; provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance, then Lessor shall not be in default if Lessor

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commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.

    9.2  Lessee's Remedies:

    a.  Should Lessor default in the performance of any covenants and/or conditions on the Lessor's part herein contained, and if such default is not cured within thirty (30) days after written notice by the Lessee to Lessor hereof, except in case of an emergency in which no notice shall be necessary, or if such default cannot be cured within thirty (30) days, then, if the Lessor does not commence within such thirty (30) days to cure said default and cure the same with all reasonable dispatch, Lessor shall, upon demand, reimburse Lessee for Lessee's costs and expenses incurred in connection therewith, together with interest thereon at the rate of twelve (12%) percent per annum. Lessee may, but shall not be required to, offset such costs, expenses and interest against its monetary obligations under this Lease. Nothing contained in this Paragraph shall be construed so as to abridge any rights otherwise available to Lessee at law or in equity.

    b.  After the Building and improvements to be constructed by Lessor are Substantially Completed, Lessor and Lessee will inspect the Demised Premises together and prepare a 'punch list' of items to be completed before the Commencement Date. The Lessor shall have thirty (30) days to complete the punch list items. In the event Lessor does not complete the punch-list within thirty (30) days to the reasonable satisfaction of Lessee, then Lessee shall be permitted to complete the punch-list at its cost and expense and deduct or offset said cost and expense from the Base Monthly Rental reserved herein. If a punchlist item reasonably requires more than thirty (30) days to complete then Lessor shall commence correction within thirty (30) days and diligently pursue its timely completion. If the improvements to be constructed by the Lessor do not substantially meet the plans and specifications set forth in the attachments hereto and the Construction Documents, or as subsequently developed or amended by Change Order, and Lessor does not cure any such defect within sixty (60) days after notice from Lessee, Lessee may, but shall not be required to, cure such defect and offset the cost against its monetary obligations under this Lease.

10.  Right to Access:

    10.1  Lessor's.  Upon at least 24 hour notice (except in an emergency), Lessee will allow Lessor or Lessor's agent free access at all reasonable times to the Demised Premises for the purpose of review and inspection of the Demised Premises or any property owned by or under the control of Lessor. Lessor shall have the right, at any time within six (6) months prior to the expiration of the Lease term, option term, or any option extension or renewal thereof, but not before, to place upon the Demised Premises any usual "To Let" or "For Lease" signs.

    10.2  Lessee's.  Lessee shall have twenty-four (24) hours per day, 365 days per year access to the Demised Premises and all parking.

11.  Duties of Lessee Upon Termination:

    Upon termination of this Lease by expiration of its term or otherwise, Lessee shall quietly and peaceably quit and surrender possession of the Demised Premises to Lessor, in as good condition as when received, reasonable wear and tear excepted, together with all alterations, additions and improvements to the Demised Premises permitted under the provisions hereof to remain upon the said Demised Premises, and such possession shall be so surrendered without the necessity for any notice of demand therefore on the part of the Lessor.

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12.  Assignment:

    Lessee shall not assign, mortgage, or pledge any interest in the Demised Premises, without the prior approval of Lessor, expressed in writing, which said approval shall not be unreasonably withheld or delayed. Notwithstanding the above, any transfer by Lessee by merger, consolidation or liquidation or change in the ownership of Lessee, and any assignment by Lessee to a wholly-owned subsidiary or affiliate corporation, shall not constitute an assignment for the purposes of this Paragraph 12, but shall not release Lessee from liability hereunder, and Lessee will continue to be liable until released by Lessor or upon termination of this Lease. Lessor hereby consents to an assignment of this Lease to any entity to whom Lessee sells all or substantially all of its assets, provided that such entity expressly assumes all of Lessee's obligations hereunder, and provided further that Lessee shall not be released from liability hereunder in such event unless Lessor otherwise agrees in writing. Lessor further agrees that Lessee shall be entitled to sublease all or portions of the Demised Premises with Lessor's prior written consent (which consent shall not be unreasonably withheld or delayed), provided that such subletting is subject to the terms and provisions of this Lease and provided, further, that Lessee will continue to be liable until released by Lessor or upon termination of this Lease.

13.  Subordination:

    Lessor represents and warrants to Lessee that Lessor is, or will be prior to the Commencement of Construction (as defined in Paragraph 31) of the Building, the sole owner in fee simple of the Demised Premises, and that on the date of Lessor's acquisition of title to the Demised Premises there are no mortgages or deeds of trust which encumber the Demised Premises. This Lease is subordinated at all times to the lien of any mortgages or deeds of trust hereafter placed upon Lessor's interest in the Demised Premises and upon the land or Demised Premises of which the Demised Premises are a part, or upon any other building hereafter placed on the property. Lessee covenants and agrees to execute and deliver, upon request of the Lessor, such further instruments evidencing such subordination as may be reasonably required by any such mortgagee or lender, title company or Lessor's counsel. This agreement to subordinate is expressly conditioned upon Lessor first obtaining from any such mortgagee or lender a written agreement that provides substantially the following:

    a.  As long as Lessee performs its obligations under this Lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under the encumbrance, and no steps or procedures taken under the encumbrance, shall affect Lessee's rights under this Lease. Lessee, as a condition of subordination, will receive from Lender an attornment and non-disturbance agreement in a form reasonably acceptable to Lessee.

    b.  The provisions of this Lease concerning the disposition of any condemnation award, shall prevail over any conflicting provisions in the encumbrance.

    c.  Lessee shall attorn to any purchaser at any foreclosure sale, or to any grantee or transferee designated in any deed given in lieu of foreclosure.

14.  Insurance:

    14.1  General Requirements.  At all times during the term of this Lease, Lessee, at Lessee's sole expense, shall maintain on the Building and improvements in which the Demised Premises are located, policies of insurance as referenced herein. All insurance coverage shall comply with the reasonable requirements of Lessor's lenders. All insurance policies maintained pursuant to this Paragraph shall be carried in favor of the Lessor, the Lessee, and any mortgagee or other secured party of the Demised Premises as their interests may appear. All insurance policies required herein shall be at the sole expense of the Lessee. All proceeds of any such insurance necessary to restore the Demised Premises shall be payable to Lessor and shall be applied to the restoration of said Building and Demised Premises to Lessee's satisfaction and to the extent provided in Paragraph 15, and any proceeds of such insurance remaining after such restorations shall belong to Lessee. All insurance shall be placed with

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companies that are mutually acceptable to Lessor, Lessee and Lessor's lender. Lessee shall provide Lessor with a certificate of insurance and provide Lessor with thirty (30) days' notice prior to making any significant changes in insurance with respect to the Demised Premises.

    14.2  Lessor's Physical Loss Insurance.  Lessee, at Lessee's sole expense, shall maintain on the Building and improvements in which the Demised Premises are located, a policy of insurance in an amount equal to at least 100% of the full replacement value thereof. Insurance coverage shall insure against the risks commonly covered by an "All Risk" or "Special Form" insurance contract. Earthquake and flood coverage will be provided only if required by Lessor's lender. Coverage will be provided for loss of rents sufficient to cover a period of twelve (12) months.

    14.3  Liability Insurance.  Lessor and Lessee shall each indemnify and hold the other harmless against all claims, demands and judgment for loss, damage or injury to property or persons resulting or accruing by reason of the use and occupancy of the Demised Premises and the sidewalks, parking areas, streets and ways in and/or adjacent thereto. Lessee shall procure and maintain, at Lessee's sole expense, a general broad form liability insurance policy, naming both the Lessor and the Lessee, against claims for injuries and/or damage to persons or property occurring in, upon, or about the Demised Premises. Such policy shall have a combined single limit coverage of not less than two million dollars ($2,000,000) during the first ten (10) years of the Initial Term and three million dollars ($3,000,000) thereafter.

    14.4  Combination Coverage.  Should Lessee desire to carry the coverage specified herein in combination with insurance on other property owned or controlled by Lessee, Lessee shall deliver certificates of insurance from a mutually agreeable insurance company, naming Lessee as insured, with Lessor and Lessor's lender named as additional insureds. Any coverage under this Paragraph must be acceptable to Lessor's lenders. All proceeds of any such insurance shall be applied to restoration of said Building and Demised Premises to Lessee's satisfaction, and any proceeds of such insurance remaining after such restoration shall belong to Lessee. In the event Lessee elects to provide insurance coverage as set forth in this Paragraph, Lessee shall provide Lessor with an appropriate assignment of proceeds certificate.

    14.5  Waiver of Subrogation Rights.  Lessor and Lessee do each release and relieve the other and their agents or employees from responsibility for and waive their entire claim of recovery for (i) any loss or damage to the real or personal property of either located anywhere upon the Demised Premises, arising out of or incident to the occurrence of any of the perils which may be covered by their respective casualty insurance policies, with extended coverage endorsements; or (ii) any loss resulting from business interruption insurance policy or by any loss of rental income insurance policy held by Lessor or Lessee. Each party shall cause its insurance carriers to consent to the waiver of all rights of subrogation against the other party.

15.  Destruction or Damage of Premises:

    In the event the Demised Premises is destroyed or damaged by fire, earthquake or other casualty covered by the insurance required to be carried by Lessee pursuant to Paragraph 14 above, then Lessor shall proceed with reasonable diligence to rebuild and restore the Demised Premises or such part thereof as may be damaged. In the event the Demised Premises are destroyed or injured by casualty not covered by insurance and Lessee has not agreed to finance or locate financing for the amount not covered by insurance, or in the event the Demised Premises is damaged in excess of 50% of the full replacement value thereof, Lessor may, within sixty (60) days after such destruction or damage, notify Lessee in writing of its election to terminate this Lease, in which event this Lease shall terminate as of the date of such damage (to the extent Lessee shall have already paid rent for any time after the date of such termination, Lessor shall promptly refund such amount to Lessee). Notwithstanding any other provision to the contrary, in the event the Demised Premises are damaged to such an extent so as to require in excess of 270 days to rebuild or restore or are damaged during the last year of the term of

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this Lease, Lessee may, by notice to Lessor within sixty (60) days after determination of the extent of the damage, terminate this Lease as of the date of damage (to the extent Lessee shall have already paid rent for any time after the date of such termination, Lessor shall promptly refund such amount to Lessee). In the event this Lease is not terminated pursuant to the provisions of this Section 15, Lessor shall diligently pursue reconstruction and during the period of such rebuilding and restoration, rent hereunder shall be abated in the same ratio as the portion of the Demised Premises rendered for the time being unfit for occupancy shall bear to the entire Demised Premises, provided that in the event more than fifty percent (50%) of the Demised Premises is rendered untenantable, all rent hereunder shall be abated in full.

16.  Taking of Demised Premises:

    If all of the Demised Premises shall be taken or appropriated for public or quasi-public use by right of eminent domain with or without litigation or transferred by agreement in connection with such public or quasi-public use, this Lease shall terminate as of the date possession is taken by the condemning authority. If any part (but less than all) of the Demised Premises shall be taken or appropriated for public or quasi-public use by right of eminent domain with or without litigation or transferred by agreement in connection with such public or quasi-public use, Lessee shall have the right at its option exercisable within thirty (30) days of receipt of notice of such taking to terminate this Lease as of the date possession is taken by the condemning authority; provided, however, that before Lessee may terminate this Lease by reason of any partial taking or appropriation as provided hereinabove, such taking or appropriation shall be of such an extent and nature as to materially impair Lessee's use of the Demised Premises. No award for any partial or entire taking shall be apportioned; provided, however, that nothing contained herein shall be deemed to give Lessor any interest in or to require Lessee to assign to Lessor any award made to Lessee for: (i) the taking of personal property and fixtures belonging to Lessee; (ii) interruption of or damage to Lessee's business; or (iii) Lessee's unamortized cost of leasehold improvements. In the event of a partial taking which does not result in a termination of this Lease, upon the date possession is taken by the condemning authority rent shall be abated in the proportion which the part of the Demised Premises so made unusable bears to the area of the Demised Premises immediately prior to the taking.

17.  Indemnification:

    17.1  Lessee's Indemnification.  Lessor, its agents, employees, contractors and invitees, shall not be liable to Lessee or its agents, employees, contractors or invitees or to any third party for any damage to person or property caused by or arising from or in connection with any act, omission or negligence of Lessee. Lessee agrees to indemnify, hold harmless and defend Lessor, its agents, employees, contractor and invitees, from and against any and all liability claims, causes of action, damages, costs and expenses (including, without limitation, reasonable attorney's fees) arising from or in connection with any act, omission or neglect of Lessee or its agents, employees, contractors or invitees, or any breach or default under this Lease by Lessee, provided that the foregoing provision shall not be construed to make Lessee responsible for loss, damage, liability claims, causes of action or expenses resulting from injuries to third parties caused by the negligence or deliberate and intentional acts of Lessor or its officers, contractors, licensees, agents, employees or invitees.

    17.2  Lessor's Indemnification.  Lessee, its agents, shareholders, officers, employees, contractors and invitees, shall not be liable to Lessor or its agents, employees, contractors or invitees or to any third party for any damage to person or Demised Premises caused by or arising from or in connection with any act, omission or negligence of Lessor. Lessor agrees to indemnify, hold harmless and defend Lessee, its agents, shareholders, officers, employees, contractors and invitees from and against any and all liability claims, causes or action, damages, costs and expenses (including, without limitation, reasonable attorney's fees) arising from or in connection with any act, omission or neglect of Lessor or its agents, employees, contractors or invitees or any breach or default under this Lease by Lessor;

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provided that the foregoing provision shall not be construed to make Lessor responsible for loss, damage, liability claims, causes of action or expenses resulting from injuries to third parties caused by the negligence or deliberate and intentional acts of Lessee or its officers, contractors, licensees, agents, employees or invitees.

    17.3  Survival of Obligation.  Lessor's and Lessee's obligations under this Paragraph 17 shall survive any expiration or termination of this Lease or any extension thereof.

18.  Sale of Property by Lessor:

    Lessor reserves the right, at its sole option, to sell the property on which the Demised Premises leased hereunder is situated, or any portion thereof, subject to the provisions of this Lease and the rights of Lessee hereunder, and subject to Lessor's compliance with this Paragraph 18. In the event Lessor decides to sell the Demised Premises, Lessor shall advise Lessee in writing of the sale price and terms. Lessee shall have 60 days within which to respond and negotiate, and Lessor agrees to negotiate in good faith with Lessee during such 60 day period. If agreement is not reached, Lessor may sell to a third party within the following 12 months so long as the price is not more than 5% below Lessor's initial offer price, but if such sale is not closed within such 12 month period, or if such sale is at a price more than 5% below Lessor's initial offer price or is concluded on terms materially more favorable than the terms set forth in Lessor's initial offer, Lessee's rights under this Paragraph 18 shall remain in full force and effect. Provided Lessor complies with this Paragraph 18, Lessee agrees to recognize the purchaser of such Demised Premises as Lessor hereunder following any such sale, as if said party had executed this Lease as Lessor in the first instance.

19.  Estoppel Certificate:

    Upon request by Lessor, Lessee shall execute and deliver to Lessor (or any purchaser, lender or other interested party designated by Lessor) an estoppel certificate which shall provide the following information and such other information as Lessor shall reasonably request: (a) the date on which this Lease was executed and the date on which the term of this Lease expires; (b) the amount of the minimum monthly rent; (c) the date to which rent has been paid; (d) the fact that this Lease is in full force and effect (or if not, stating the reasons therefor); (e) that all required contributions by Lessor for improvements to the Demised Premises have been made (or if not made, the nature of any outstanding required contributions by Lessor); (f) that Lessor is not known to be in default under the Lease (or if Lessor is in default, the nature of the default); and (g) that Lessee is not entitled to any offset or deduction with respect to rent payable pursuant to this Lease or, if Lessee is so entitled, the amount and nature of such right of offset or deduction.

20.  Trade Fixtures:

    Lessee may install such trade fixtures and equipment as it deems appropriate for its business, and at the termination of this Lease may remove same, provided such removal may be accomplished without material injury to the Demised Premises and further provided that Lessee shall repair all damages resulting from any such removal, excepting normal wear and tear. All fixtures not removed within fourteen (14) days of the termination date of this Lease shall, at Lessor's option, become the property of Lessor or, at Lessor's option, Lessor may cause the same to be removed to storage at any public or private place of storage at the cost of and at the risk of the Lessee.

21.  Remodeling or Alterations:

    Lessee may make any non-structural alterations or improvements in, or additions to, the Demised Premises as may be required for its business purposes without consent of Lessor if such alterations cost less than $25,000 in any one instance. Any such alterations which will cost more than $25,000 in any one instance, and any structural alterations, shall require the prior written consent of the Lessor. Such consent shall not be unreasonably withheld or delayed.

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    Alterations and improvements made by Lessee shall become the property of the Lessor at the termination of this Lease, except those alterations and improvements as may be removed by Lessee without material damage to the Demised Premises. In the event of any such removals, Lessee shall, at its expense, repair all damage. All remodeling and alterations shall be in accordance with all applicable fire, safety, zoning and building codes and regulations, and Lessee shall, at its expense, secure all necessary permits and inspections in connection therewith. All work to be performed pursuant to this Paragraph shall be done in a good and workmanlike manner, and when completed shall be free and clear of all claims or liens. Nothing herein contained shall be construed to authorize or empower Lessee to encumber the Demised Premises with any kind or form of lien. If any liens or other priority claims shall be filed against the premises or any part thereof (except liens or priority claims incurred by Lessor), Lessee will at its own cost and expense within thirty (30) days after the same are filed, secure the Lessor against the same by payment, bonding, or otherwise, provided, however, that nothing herein contained shall prejudice the rights of Lessee to contest to a final judgment or decree respecting any such lien.

22.  Quiet Enjoyment by Lessee:

    Upon performing all of its duties and obligations hereunder in accordance with the terms and conditions of this Lease, Lessee shall be entitled to quietly and peaceably have, hold, occupy, possess, and enjoy the Demised Premises during the term hereof, without hindrance or ejection by persons lawfully claiming under Lessor.

23.  Notices:

    All notices hereunder shall be in writing and deemed given when personally delivered to the receiving party or five (5) business days after deposited in the United States Mail, postage fully prepaid, by certified mail, return receipt requested, addressed to such other party as follows:

Notices to Lessor:	Glacier Partners Suite 300 700 Ironwood Drive Coeur d'Alene, Idaho 83814 Attn: Stephen Meyer and Charles Nipp
Notices to Lessee:	Prior to Commencement Date:
	Advanced Input Devices, Inc. Attn: Chief Financial Officer W. 250 AID Drive Coeur d'Alene, Idaho 83814
	After Commencement Date:
	[To the Address of the Demised Premises] Attn: Chief Financial Officer

24.  Attorney's Fees:

    Should either party commence an action or arbitration against the other to enforce any obligation hereunder, the prevailing party shall be entitled to recover actual costs and a reasonable attorney's fee from the other.

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25.  Successors and Assigns:

    Subject to the provisions of Paragraph 12 hereof pertaining to assignments and subletting, all terms, conditions, covenants and agreements of this Lease shall extend to and be binding upon the Lessor, Lessee and their respective successors and assigns, and upon any person or persons coming into ownership or possession of any interest in said Demised Premises by operation of law or otherwise.

26.  Hazardous Substances:

    26.1  Lessor's and Lessee's Obligations.  Lessor shall indemnify, hold harmless and defend Lessee, its shareholders, officers, employees, agents, contractors and invitees from and against any and all claims, liabilities, losses, damages, cleanup costs, and expenses (including reasonable attorney's fees) arising out of or in any way related to the keeping or release of, existence or claim of existence of, or claim of injury or damage resulting from, Hazardous Materials (as defined below) in, on or under the Demised Premises as of the date of initial occupancy by Lessee under this Lease or any extension thereof.

    Lessee shall not use the Demised Premises to generate, manufacture, treat, store, release or dispose of any Hazardous Material, except as may be necessary for Lessee's business operations. Lessor agrees that Lessee may so use Hazardous Materials, provided that all such materials shall be used, kept and stored in compliance with applicable law and in a manner that minimizes the likelihood of releases on, in, above, under or from the Demised Premises.

    The term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste, including, but not limited to, those substances, materials and wastes listed in the United States Department of Transportation Hazardous Materials Table (45 CFR 172.101) or by the United States Environmental Protection Agency as hazardous substances (40 CFR Part 302 and amendments thereto), petroleum products and their derivatives and such other substances, materials and wastes as become regulated or subject to clean-up authority under any state, federal and local statutes, regulations and ordinances relating to the protection of human health and the environment.

    Lessee shall indemnify, hold harmless and defend Lessor regarding all Hazardous Material problems which occur or arise in, on or under the Demised Premises after the date of initial occupancy by Lessee under this Lease to the extent that Lessee is the cause of the Hazardous Material problem. For the purposes of this Paragraph, Hazardous Material problems shall be deemed to occur on the date of the activity giving rise to such problems and not the date of discovery.

    26.2  Survival of Obligation.  The provisions of this Paragraph 26 shall survive the expiration or termination of this Lease with respect to any event occurring prior to such expiration or termination.

27.  Signage:

    Lessor hereby approves the installation of architecturally reasonable exterior signs. Final design of any such signs are subject to prior approval by Lessor prior to installation, such approval not to be unreasonably withheld. Upon termination or expiration of this Lease agreement, Lessee shall be permitted to remove the signage.

28.  Compliance with Laws:

    Lessor and Lessee agree that each shall be in compliance with all applicable federal, state and local laws and regulations relating to the Lease of the Demised Premises. Lessor shall provide Lessee with a facility that complies with and incorporates all building-related access and other requirements of the Americans with Disabilities Act and all regulations promulgated thereunder (the "ADA"). Subject to Lessor's compliance with the preceding sentence, during the term of this Lease Lessee agrees to promptly meet all requirements of the ADA at its sole expense.

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29.  No Waiver:

    A failure by either party to promptly enforce any right or remedy arising from a breach or event of default shall not be deemed a waiver of such right or remedy or of any subsequent breach or event of default.

30.  Memorandum:

    At the request of either of the parties hereto, the parties shall execute a memorandum of this Lease to be recorded in the public records of the county where the Demised Premises is situate, disclosing the parties to this agreement, its term, and a reference to the purchase rights of Lessee hereunder, and such other information as the parties may deem appropriate for disclosure in the public records.

31.  Time; Termination Option:

    Time is of the essence in this Lease. Lessee and Lessor shall provide in a timely manner all Lessee information and decisions required for the completion of the schematic design phase by March 4, 1998 and completion of the Construction Documents by the Project Architect on or before May 15, 1998. Lessee shall have five (5) business days after receipt of said plans for review and approval.

    Attached hereto as Exhibit F is a schedule and timeline summarizing the milestones and major activities to be undertaken by the parties under this Lease; provided, however, that in the event of a conflict between Exhibit F and the terms of this Lease, the terms of this Lease shall control.

32.  Change Orders:

    The Base Monthly Rental set forth in Paragraph 3.1 is based on construction costs of the Demised Premises pursuant to the plans and specifications attached and Exhibit "D," the Development Budget.

    Should Lessee on its own initiative make changes to the plans and specifications during the design phase without an offsetting cost reduction, the Development Budget shall be changed by mutual agreement of Lessor and Lessee and the rent changed accordingly.

    Should Lessee on its own initiative make changes to the plans and specifications after the Construction Documents, Lessor's construction financing and the construction contracts are complete without an offsetting cost reduction, the Development Budget shall not be changed, and any increased costs arising out of such changes shall be financed by Lessee.

    All Change Orders shall be in writing and signed by both Lessor and Lessee before they become effective. Change Order charges will be based upon the actual purchase cost of Lessor plus 11% of the purchase cost, representing six (6%) percent contractor's fees (based on purchase cost) and Five (5%) percent Idaho State sales tax (computed on purchase cost plus contractor's fee). If a Change Order initiated by Lessee extends the time of completion of the project, Lessor and Lessee shall negotiate in good faith with respect to any corresponding increase in compensation due to the General Contractor arising out of an increase in the General Contractor's general conditions.

33.  Future Improvements:

    Should Lessee desire to construct improvements at its expense, Lessee shall be permitted to select a contractor of its choice to make said improvements, subject to the consent of Lessor, said consent not to be unreasonably withheld or delayed. All provisions regarding codes, permits and liens referenced in Paragraph 21 shall apply to improvements constructed by Lessee.

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34.  Reimbursement of certain development costs to Lessee:

    By March 1, 1998, the Lessee will assign its contracts with the project architect to the Lessor. After March 1, 1998, Lessor is obligated to fund all development costs in accordance with this Lease and the Development Budget. Onor before March 27, 1998, the Lessor will reimburse the Lessee the actual amounts spent by Lessee with respect to the period prior March 1, 1998 in connection with this Lease and this project, including but not limited to architectural, industrial design, legal and project management to date. Lessee will contract directly for industrial engineering and project management services. After March 1, 1998 lessor shall reimburse Lessee for such costs. The amounts to be reimbursed are part of the budget line items shown on the Development Budget.

35.  Arbitration of Construction Disputes:

    (a) If a dispute arises between the parties with respect to construction of the Building, and if such dispute is not resolved between the parties within 30 days, the dispute shall be subject to and decided by arbitration in accordance with the Construction Arbitration Rules of the American Arbitration Association. A party may bring no arbitration on a construction dispute against the other unless the dispute has been properly raised and the parties have attempted in good faith to resolve the dispute during such 30 day period.

    (b) Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the dispute has arisen. In no event shall the demand for arbitration be made after the date when the applicable statute of limitations would bar institution of a legal or equitable proceeding based on such claim, dispute or other matter in question.

    (c) Unless the parties agree otherwise, the arbitration hearing shall be conducted in Coeur d'Alene, Idaho, before a panel of three arbitrators selected in accordance with the above rules. The arbitrators shall not be empowered to grant exemplary or punitive damages. The parties shall apply to the arbitrators for relevant discovery under the Idaho Civil Rules, which the arbitrators shall be authorized to order. Upon request of either party, the arbitrators' written decision shall include an explanation of the factual and legal grounds for the decision.

    (d) Within 15 days of receipt of the written opinion, a party will have the right to file with the arbitrators and serve on the other parties a written motion to reconsider. The arbitrators may request the non-moving or responding party to file a written response within 10 days after receipt of that request, and the arbitrators thereupon will reconsider the issues raised by the motion and response (if any) and either confirm or alter their decision, which will then be final, binding and conclusive upon the parties. The costs of such a motion for reconsideration and written opinion of the arbitrators, including attorneys' fees, will be awarded against the moving party if it does not prevail.

    (e) The award rendered by the arbitrators shall be final, and judgement may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

    (f)  Any arbitration arising out of or related to this Lease shall, upon demand of any party, include by consolidation, joinder, or third-party claim, any other party involved in a common question of law or fact, whose presence is required if complete relief is to be accorded in arbitration, or who is alleged to be liable to a party for all or part of a claim in the arbitration.

36.  Entire Agreement

    This Lease and all exhibits, addenda and attachments hereto represents the entire agreement between the parties, supersedes all prior discussions and agreements between the parties, and may be modified or amended only by written instrument signed by both parties. This Lease shall not be construed or interpreted as if drafted by either of the parties, it being negotiated in an arm lengths transaction.

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    DATED this 6th day of MARCH, 1998.

LESSOR: Glacier Partners
By:	/s/ STEPHEN F. MEYER Stephen F. Meyer General Partner
By:	/s/ CHARLES R. NIPP Charles R. Nipp General Partner
LESSEE: Advanced Input Devices, Inc.
By:	/s/ MICHAEL P. WILSON Michael P. Wilson Vice President—Finance

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Exhibit A

Legal Description

The description below covers the whole 20+ acre parcel. The AID site is the western 13 acres. A new exact Legal Description will be added to the Lease by Amendment when it is available.

The Southeast quarter of Section 26, Township 51 North, Range 4 West, Boise Meridian, Kootenai County, Idaho, lying West of the West right of way of Highway 95, taken by condemnation recorded in Book 72 of Miscellaneous Records, page 749, recorded October 5, 1979;

EXCEPT that portion conveyed and dedicated for a public roadway by Right of Way Deed recorded May 4, 1992, as Instrument No. 1257175, Kootenai County, Idaho records;

AND EXCEPT that portion thereof which lies within the Plat of SILVER PARK, according to the Plat recorded in Book "G" of Plats, page 23, records of Kootenai County, Idaho.

Exhibit B

Building Standards and Specifications

The base rent includes the building site, site improvements, building of approximately 100,000 square feet and interior improvements.

Scope of Work

    In general, Lessor will provide a complete usable, code-approved, mutually acceptable facility, ready for Lessee's business use.

Earthwork

    Excavate and grade for the building, roadways, parking areas, walks, etc. to achieve the results shown on the Site Plan. All structural fill compaction shall be tested by a Civil Engineering Consultant to assure compaction to the design requirements. Positive drainage shall be maintained for the entire lot area. Grassy swales conforming to the 208 aquifer rules will be required.

Foundation Work

    All footing and foundation work shall consist of poured-in-place reinforced concrete with a minimum 28-day strength of 3,000 psi and poured with a maximum slump of 4". All footings must rest on undisturbed virgin soil or, on engineered structural fill, and be a minimum of 2'-6" below finished grades. Exterior foundation pad as required for nitrogen tank.

Structural System

    The building structural system shall be 5-1/2" concrete tilt-up walls, 23' maximum height from finished floor with steel columns and bar joists.

Floor Construction

    All floors that are slab on grade shall be 4" poured-in-place concrete placed over a well-compacted and properly drained base as recommended by soils engineer. Control joints shall be placed as required. Provide an eight inch (8") thickened slab with isolation control joints under stamping equipment; total of two (2) 10' x 10' areas.

Roof Construction

    The roof will be steel bar joists and joist girders designed for a deflection of L/360. The BC is L/240. Steel deck with 40 psf live load.

Roofing

    The roofing shall be a single ply membrane J. P. Stevens EP product or equal. Ship ladder access from below to roof shall be provided. Provide $6,000 allowance for walkway surface around roof-top equipment.

Exterior Walls

    All exterior walls will be concrete with elastomeric paint.

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Windows and Storefronts

    Commercial windows equal to N.W.A. 1500 Series with thermal break with 1" insulated glass. Interior window opening will be wrapped in sheetrock on three sides with a plastic laminate sill. No operable windows. Glass shall have a blue/green tint. Double glass entrance doors with vestibule at main entrance. Windows will be located around perimeter of the building. The budget is based on 500 lf of windows 5' high and 100 lf curtain wall at 9' high.

Window Coverings

    Levelor window coverings are to be provided at west and south side windows and eight executive offices.

Doors

    Standard interior doors shall be 1 ³/4" x 3' x 7' flush, solid-core with a stain and lacquer finish in the office area and same size painted hollow metal in the lab/manufacturing areas. Vision panels shall be included in 2/3 of the hollow metal doors. Six (6) conference rooms shall each have one 1'-0" x 7' relite next to the door.

    Doors will be hung in hollow-metal steel frames.

    Hardware shall be "Schlage" S-series or equal, commercial grade with a brushed stainless steel finish #626, or equal. Closures, "Norton 1603", or equal, shall be installed where required by building regulations or use requirements.

Walls

    Standard interior walls constructed of steel studs @24" o.c and 5/8" taped, light-textured, and painted gypsum board. Smooth wall finish may be specified where desired and the extra cost added to the budget.

    Sound attenuation batts in all office interior walls and ceiling.

    No demountable partitions are included

Upgraded Allowances—interior

    The budget has an upgrade allowance of $10,800.00 for the conference/boardroom which includes ceiling, wall finishes, carpet, lighting and cabinets. The budget has an upgrade allowance of $30,000.00 for the reception area which includes ceiling, wall finishes, carpet, lighting and cabinets.

Insulation

    Fiberglass insulation shall be installed to form a complete thermal envelope around all conditioned space. Thermal characteristics shall meet code and at a minimum equal the following:

Roof Areas	R-30
Exterior Walls	R-11
Acoustical @ Walls	3"

Restrooms

    Restrooms in the office and lab/manufacturing area shall have ceramic tile four feet high on all exposed walls and floors. Toilet room partitions shall be plastic laminate "Advantage" or equal. Each restroom shall have a floor drain.

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Floor Coverings

    Office: 28 oz level loop nylon with 4" rubber base. Allowance of $14/sq. yd. plus install and trim.

    Lab/mfg areas: Armstrong Standard Excelon VCT or equal, or sealed concrete specified. ESD tile is not in the present thinking. The tile selection is subject to AID's approval.

    Restrooms: Ceramic tile with tile base.

Ceilings

    Acoustical 2 x 4 in a t-bar grid with flat Armstrong "Cortega" or equal tile. 15,000 sf of area will have vinyl coated 2' x 4' ceiling tile. Lobby and Briefing Center shall use 2' x 2' tegular tile which is included in the upgrade allowance for the reception area.

Painting

    Painting materials shall be equal to "Pratt & Lambert", "Benjamin Moore", "Columbia" or "Olympic". All interior gypsum board shall be given two (2) coats; a primer and a finish coat of latex eggshell finish. Final coat shall "cover" completely. Painted structure in open stockroom/storage area. Enamel paint on hollow metal doors and frames.

    Interior doors shall be finished to a smooth surface with stain and lacquer.

Electrical

    All electrical work shall be designed and built in accordance with the latest revisions of the National Electrical Code using materials approved by the National Board of Fire Underwriters.

    120/208 and 277/480 three phase power will be supplied as required. Standard is three outlets per room for offices and conference rooms. Any special outlets for the offices and conference rooms must be identified during the interior design phase; there will be no additional cost for special outlets identified during the design phase. Service entrance panel shall be 2000 Amp., 277/480 - 3 phase, Siemens ITE or equal. Approximately twenty four (24) 200 Amp sub panels will be located throughout the manufacturing area. An allowance of $65,000 is included in the budget for additional electrical distribution and wiring or hook up of Lessee's equipment.

Lighting

    2 x 4 recessed fixtures in the ceiling grid. Standard will be 3 tube flat lens fixtures (Columbia 2J340-8 EXA-120W EQ4) assembly or equivalent. In addition, there will be parabolic reflector fixtures and indirect lighting fixtures in some manufacturing and office areas. The budget includes an upgrade allowance of $150,000.00 for lighting. This $150,000.00 is included in the line item in the Development Budget under Special Construction—Clean Room—ESD Tile, which totals $550,000.00.

    The parking area shall be lighted with pole-mounted shoe box type fixtures yielding between 1 and 2 footcandles minimum.

Plumbing Work

    All plumbing work shall be installed in compliance with the applicable ordinances of the State of Idaho. The water and sewer services shall be connected to the municipal mains. The water service line shall be located a minimum of 4' below finished grade. Waste and vent lines shall be PVC or ABS.

    Interior water piping shall be copper and shall be sized to provide adequate pressure at all points.

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    Plumbing fixtures shall be equal to the following:

Water closets: China, wall mounted w/ flush valve tank-type,
Lavatory: China, oval, Briggs 6505 or equal
Urinal: Briggs Lawton 7550 or equal
Sink: Stainless steel, Moen or Polar, size per plans
Drinking Fountains: Refrigerated wall mount
Exterior hose bibs, key type, frost free
3 Janitor sinks
Floor drains with trap primers in the restrooms

Heating & Air Conditioning

    All building areas shall be heated and air conditioned with roof-top equipment. These systems shall meet, or exceed, the following criteria:

    a.  General

1.

Maintain uniform indoor temperature of 72 degrees, plus or minus 1-1/2 degrees in the conference rooms and plus or minus 2 degrees in the rest of the building.



2.

Provide economizers for outside fresh air mix.



3.

Provide controls and timeclocks, provide continuous air circulation during business hours and night setbacks as required.



4.

All equipment shall be "Carrier" or equal. The systems shall be properly engineered and installed to meet all ASHRAE standards and the UBC.



5.

Fire extinguishers, of number and size as required, shall be mounted where directed by local Fire Department officials.

    b.  Thermal Zoning

    All occupied spaces shall be provided with enough control zones to assure uniform space temperature and occupant comfort. Perimeter zones at the exterior walls of the building shall be separated according to their respective exposure. Perimeter spaces shall not be combined with interior spaces into the same control zone. Provide separate zone(s) for up to three corner offices. The floor plan of the office and conference rooms shall be centralized to maximize the efficiency of control zones.

    c.  HVAC Acoustical Design Guidelines

    The HVAC systems shall perform to the following Noise Criteria:

Executive Offices	NC35
Conference Rooms	NC35
General Office Areas	NC40
Restrooms	NC45
Manufacturing	NC45

    HVAC equipment shall be located next to columns of structural steel system to minimize vibration on occupied floors. Equipment vibration, as measured at bearing locations, shall not exceed manufacturers recommendations or limits.

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    d.  Filtration

    All HVAC systems shall be filtered using a filter efficiency of not less than 30%, based upon ASHRAE Standard 52-76.

    e.  Ductboard and Duct Liner

    Ductboard and Duct Liner will be utilized for about 10' on both the supply and returns for noise reduction in non-critical areas. Ductboard and Duct Liner will not be used in elastomer, screen shop and membrane; a total of 11,500 sf.

    f.  Clean room allowance

    The budget includes an allowance of $300,000 for special HVAC for the Elastomer shop, Screen shop, Fab shop, Membrane shop and UV clean room. This $300,000 is included in the line item of the Development Budget under "Special Construction—clean room and esd tile—$550,000". Lessor and Lessee will work diligently to accomplish the target specifications shown in exhibit "B-1".

    g.  Record Documents

    At the end of Project, provide two sets of "as-built" prints, one set of reproducible "as-built" drawings and AutoCAD.DWG files on electronic media. Also provide three complete sets of operating and maintenance, and parts lists for all equipment, bound in three-ring binders. Also provide a "Valve Tag List" indicating all shutoff valves; provide brass or plastic valve tags at all shut-off valves on the "Valve Tag List".

    Operating sequences for all systems are required to be provided in written form as a part of the operating instructions for the Project.

    g.  Maintenance

    All mechanical systems shall be readily accessible and designed for ease of maintenance.

Parking Areas

    Parking shall be provided as described in the lease agreement.

Phase 1: 85,000 sf of building with 475 carparks
Phase 2: 40,000 sf of building with 225 carparks

    All parking areas shall be surfaced with 2" asphalt paving laid over 4" of compacted grade rock, or as mutually agreed to by Lessor, Lessee and Soils Engineer. Drain to grassy swales.

    Mark individual parking spaces with 4" wide painted lines. Provide parking spaces for the handicapped as required by Codes.

Landscaping

    All areas of the property shall be attractively landscaped—either natural or created. The office entrance area shall have a plaza of approximately 500 square feet with adjacent planting.

    Certain spaces, including all areas immediately surrounding the building, shall be provided with irrigation, grass and shrubbery. Other areas, including those containing existing trees and rock formations, shall remain in the natural state with the trees trimmed and fallen branches removed. Care shall be taken to retain existing trees where possible.

    Some small areas shall be designed for flower beds for seasonal planting.

5

Irrigation

    A clock-operated, automatic underground sprinkler system shall be installed to adequately irrigate all sod areas and flower beds. Pop-up heads shall be provided to place water uniformly and to avoid overspray.

    The time clock shall be exterior in a weather tight steel enclosure.

Signing

    The Development budget includes a $12,000 allowance for exterior signage.

Fire Sprinkler System

    The entire building shall be fire sprinklered at ordinary hazard densities.

Fire Alarm System

    The fire alarm, burglar and access control systems are yet to be specified. A $25,000 allowance is in the Development Budget for fire, burglar or access control (card key) systems.

Security System

    Card key system at each exterior entrance plus two internal doors. System shall be adequate for 500 - 600 cards.

6

Exhibit B-1

Elastomer Shop, Screen Shop, Fab Shop and Membrane Shop (13,500 sf)

Temperature range	70F +/- 2F
Humidity range	45% +/- 5% RH
Noise level	NC 40 to 45
Occupant ventilation	50 cfm per person (due to potential room contaminants)

    The HVAC units shall supply a minimum of 15 air charges per hour to maintain room cleanliness. Provide a minimum of one low wall return grille on two opposite sides of each shop (i.e. total of two return grilles per shop). Filtration in the HVAC unit shall consist of four inch thick Farr 30/30 filters. No duct liner is allowed in the supply or return duct for these spaces. Maintain a positive pressure relationship between the corridor and the shop.

    The base system for each shop shall include an air-side economizer. Humidification shall be achieved with duct mounted or wall mounted humidifiers. The humidifier must be sized to maintain humidity levels with the economizer in use.

    An alternate system for each shop would be with no air-side economizer and smaller humidifiers provided that calculations show this as a lower operating cost. Low ambient control on the HVAC units would be required for this option.

UV Clean Room (700 sf)
Temperature range	70F +/- 2F
Humidity range	45% +/- 5% RH
Noise level	NC 55
Occupant ventilation	50 cfm per person (due to potential room contaminants)

    The HVAC system shall provide 50% ceiling coverage with 99.99% HEPA filters to maintain room cleanliness. HEPA filter airflow's shall be 90 feet per minute (+ 10% or - 5%). Provide continuous low wall return openings on two opposite sides of the room (preferably with a room dimension not more than 20 feet wide placing the return openings not more than 20 feet apart). Filtration of outside air at the HVAC unit shall be with 30% pre-filters and 95% filters prior to having this air pass through the HEPA filters. No duct liner is allowed in the supply or return duct for these spaces. Maintain a positive pressure relationship of 0.05 in. w.c. between this room and any adjacent space. No air-side economizer is allowed for this system. Provide low ambient control on the HVAC unit(s). Humidification shall be accomplished with a duct mounted humidifier(s). The humidifier(s) shall be direct steam injection via self-contained canister or a boiler and insertion tube. A pan type humidifier shall not be used and no chemicals shall be allowed to enter the air stream (to eliminate airborne contaminants).

    The gowning room shall meet the above criteria except that the ceiling filter coverage shall be at 20% and humidification is not required (verify that humidity may be deleted).

Exhibit C

Site Plan

[DIAGRAM OMITTED]

Exhibit D

Development Budget

ADVANCED INPUT DEVICES

New facility development budget
Revised 3/14/97, 5/22/97, 9/17/9, 1/24/98, 2/23/98
Phase one - 85,000 sf, 475 carparks

				Cd'A Tech Center
				Cost		Totals
Land—13 ac				$	1,236,585	$	1,236,585
ARCHITECTURAL & ENGINEERING
	Building architectural, structural, & fire			$	92,970
	Civil			$	20,000
	Mechanical and Electrical			$	15,000
	Landscape Design			$	4,000
	Reimbursables			$	8,000
		Subtotal building arch & engr		$	139,970
	Programming			$	28,000
	Office space planning			$	0
	Manufacturing/assembly design			$	35,000
		Subtotal AID internal layout		$	63,000
			Subtotal Design			$	202,970
CONSTRUCTION SITE
	Site Work—cut & fill			$	0
	Mineral Dr. revision (if req'd)			$	50,000
	Construction			$	4,216,020
	Special construction—clean rm, esd tile			$	550,000
	5/17 add: walkway, elect, sign, security			$	86,130
	Building permit			$	15,660
	Testing, Insp. & Utility Connections			$	25,000
			Subtotal—construction hard costs			$	4,942,810
FINANCING
	Const & permanent costs & fees			$	191,446
	Construction Period Interest			$	189,660
			Subtotal			$	381,106
MISCELLANEOUS
	Title Insurance			$	6,960
	Construction Bond			$	0
	Sewer cap fee & misc. Conn. Fees			$	35,000
	Builder's Risk Insurance			$	13,050
	Legal and Accounting			$	25,000
			Subtotal			$	80,010
PROJECT ADMINISTRATION
	Developers office OH allocation			$	50,000
	Project Management			$	265,000
	Reimbursables			$	11,000
			Subtotal			$	326,000
CONTINGENCY
	Construction & design Contingency			$	100,000	$	100,000
TOTAL DEVELOPMENT COST						$	7,269,481

Exhibit D-1

Development Cost Report

ADVANCED INPUT DEVICES

Cost Report

				Original Budget	Approved Revisions	Approved Revised Budget	Amount Previously Requested	Current Request	Total Request To Date	Balance to Complete	Current Revised Estimate	Variance to Approved Revised Budget
LAND
		Subtotal		0	0	0	0	0	0	0	0	0
ARCHITECTURAL & ENGINEERING
	Building Architectural, Structural and Fire
	Civil
	Mechanical and Electrical
	Landscape Design
		Subtotal Building Architectural & Engr.		0	0	0	0	0	0	0	0	0
	Programming
	Office Space Planning
		Subtotal A.I.D. Internal Layout		0	0	0	0	0	0	0	0	0
			Subtotal Design	0	0	0	0	0	0	0	0	0
CONSTRUCTION SITE
	Site Work—Cut & Fill
	Clearwater Loop Revisions
	Construction
	Special Construction—Clean Room, esd tile
	Building Permit
	Testing, Inspections and Utility Connections
		Subtotal		0	0	0	0	0	0	0	0	0
FINANCING
	Construction and Permanent Costs and Fees
	Construction Period Interest
		Subtotal		0	0	0	0	0	0	0	0	0
MISCELLANEOUS
	Title Insurance
	Construction Bond
	Sewer Cap Fee and Miscellaneous Connection Fees
	Builder's Risk Insurance
	Legal and Accounting
		Subtotal		0	0	0	0	0	0	0	0	0
PROJECT ADMINISTRATION
	Developers Office OH Allocation
	Project Management
	Reimbursables
		Subtotal		0	0	0	0	0	0	0	0	0
CONTINGENCY
	Construction & Design Contingency
		Subtotal		0	0	0	0	0	0	0	0	0
TOTAL DEVELOPMENT COST				0	0	0	0	0	0	0	0	0

Exhibit D-2

Rental Increase Schedule

Lease Year	Development Budget(1)		Initial Annual Rent Multiplier	Rent Escalation Factor(2)		Adjusted Annual Rent Multiplier(3)		Annual Rent(4)	Monthly Rent
1	$	7,269,481.00	0.09825	1.0000	=	0.098250000	=	714,226.51	59,518.88
2	$	7,269,481.00	0.09825	1.0000	=	0.098250000	=	714,226.51	59,518.88
3	$	7,269,481.00	0.09825	1.0000	=	0.098250000	=	714,226.51	59,518.88
4	$	7,269,481.00		1.0135	=	0.099576375	=	723,868.57	60,322.38
5	$	7,269,481.00		1.0135	=	0.100920656	=	733,640.79	61,136.73
6	$	7,269,481.00		1.0135	=	0.102283085	=	743,544.94	61,962.08
7	$	7,269,481.00		1.0135	=	0.103663907	=	753,582.80	62,798.57
8	$	7,269,481.00		1.0135	=	0.105063369	=	763,756.17	63,646.35
9	$	7,269,481.00		1.0135	=	0.106481725	=	774,066.88	64,505.57
10	$	7,269,481.00		1.0135	=	0.107919228	=	784,516.78	65,376.40
11	$	7,269,481.00		1.0135	=	0.109376138	=	795,107.75	66,258.98
12	$	7,269,481.00		1.0135	=	0.110852716	=	805,841.71	67,153.48
13	$	7,269,481.00		1.0135	=	0.112349227	=	816,720.57	68,060.05
14	$	7,269,481.00		1.0135	=	0.113865942	=	827,746.30	68,978.86
15	$	7,269,481.00		1.0135	=	0.115403132	=	838,920.88	69,910.07
16	$	7,269,481.00		1.0135	=	0.116961074	=	850,246.31	70,853.86
17	$	7,269,481.00		1.0135	=	0.118540049	=	861,724.63	71,810.39
18	$	7,269,481.00		1.0135	=	0.120140339	=	873,357.91	72,779.83

(1)

Development Budget may be adjusted per Sections 3.1 of the Lease.

(2)

Rental increases are per Section 3.2 of the Lease.

(3)

Adjusted Annual Rent Multiplier is the product of the prior year Adj. Annual Rent Multiplier times 1.0135

(4)

Annual rent is the product of the Adjusted Annual Rent Multiplier times the Development Budget.

Exhibit E

Form of Commencement Date Letter

     THIS COMMENCEMENT DATE LETTER is made on            between GLACIER PARTNERS ("Landlord") and ADVANCED INPUT DEVICES, INC. ("Tenant"), who entered into a Lease dated             , 199  ("Lease"), covering certain premises located at                    , Coeur d'Alene, Idaho, as more particularly described in the Lease. All capitalized terms, if not defined herein, shall be defined as they are defined in the Lease.

The parties to this letter hereby agree to confirm the Commencement Date, the expiration date and the initial annual rental rate of the Lease term as follows:

    (a) The Commencement Date of the Lease is               , 199 ;

    (b) The expiration date of the initial term of the Lease is                    ; and

    (c) The initial annual rental rate determined under Section 3.1 of the Lease is $          per year, and the initial Base Monthly Rental payments shall be $          per month.

LANDLORD:	TENANT:
GLACIER PARTNERS	ADVANCED INPUT DEVICES, INC.
By	By
Print Name	Print Name
Its	Its

Exhibit F   

LEASE AMENDMENT #1

The Parties:	Advanced Input Devices, Inc., hereafter called the LESSEE, and Glacier Partners, hereafter called the LESSOR.
The Lease:	The lease dated February 27, 1998
The Premises:	Approximately 13 acres of real property, including a building and improvements to be built by Lessor of approx 85,000 square feet situated U.S. 95 & Wilbur Ave., Kootenai County, Idaho
This Amendment:	This amendment #1 changes the name of the lessor, replaces the legal description in Exhibit A, adds a new version of Exhibit D—construction budget, and adds a cross-use easement on the east side of the property.
The Changes:	1) The lessor has changed business form from Glacier Partners to Glacier 600, LLC.
	2) The legal description in Exhibit A is replaced by the new one attached.
	3) The current construction budget is amended to $6,815,523 and shown in the revised Exhibit D—Development Budget.
	4) The development budget cost report format is changed and shown in revised Exhibit D-1.
	5) A cross use easement is added as Exhibit G.

All other terms and conditions of the lease remain the same.

for the LESSEE: ADVANCED INPUT DEVICES		for the previous LESSOR: GLACIER PARTNERS
/s/ MICHAEL P. WILSON Michael P. Wilson Vice President—Finance	11/2/98 date	/s/ STEPHEN F. MEYER Stephen F. Meyer General Partner	10/30/98 date
for the new LESSOR: Glacier 600, LLC
/s/ STEPHEN F. MEYER Stephen F. Meyer Managing Member	10/30/98 date

Exhibit A
(Revised with Amendment #1)

Legal Description

That portion of the Southeast Quarter of Section 26, Township 51 North, Range 4 West Boise Meridian, Kootenai County, Idaho.

COMMENCING at the Center Quarter corner of said Section 26 (from which the East Quarter corner bears South 88° 49' 45" East 2,658.41 feet); thence

along the Westerly line of the East half of the Southeast Quarter of said Section 26, South 00° 43' 40" West 30.00 feet to a point on the Southerly line of Wilbur Avenue, said point being the REAL POINT OF BEGINNING; thence

leaving said Westerly line along said Southerly line South 88° 49' 45" East, 534.32 feet; thence

leaving said Southerly line South 00° 43' 40" West, 157.81 feet; thence

South 34° 26' 27" East, 423.52 feet; thence

South 29° 08' 16" West, 317.58 feet; thence

South 00° 16' 02" West, 107.47 feet to a point on the Northerly line of the plat of Silver Park (a recorded subdivision on fiel in Book "G" of Plats at Page 23, records of Kootenai County, Idaho.); thence

along said Northerly line North 88° 50' 56" West, 628.03 feet to a point on the Westerly line of the East half of the Southeast Quarter of said Section 26; thence

leaving said Northerly line along said Westerly line North 00° 43' 40" East, 890.35 feet to the REAL POINT OF BEGINNING.

EXCEPTING THEREFROM that portion conveyed to The City of Coeur d'Alene, by Instrument recorded August 7, 1998, as Instrument No. 1549342, records of Kootenai County, Idaho.

ALSO EXCEPTING THEREFROM that portion conveyed to The City of Coeur d'Alene by Instrument recorded August 7, 1998, as Instrument No. 1549344, records of Kootenai County, Idaho.

Exhibit D
(Revised with Amendment #1)

Development Budget

ADVANCED INPUT DEVICES
New facility development budget

     Revised 3/14/97, 5/22/97, 9/17/9, 1/24/98, 2/23/98, 5/11/98, 6/15/98, 6/29/98, 7/02/98, 8/17/98
Phase one—86,000 sf, 475 carparks

				Rev. August 17, 1998
				Cost			Totals
Land—13 ac				$	1,236,585		$	1,236,585
ARCHITECTURAL & ENGINEERING
	Building architectural, structural, & fire			$	92,970
	Civil			$	30,000
	Mechanical and Electrical			$	15,000
	Landscape Design			$	4,000
	Reimbursables			$	8,000
		Subtotal building arch & engr		$	149,970
	Programming—Pinnacle			$	37,710
	Office space planning			$	0
		Subtotal AID internal layout		$	37,710
			Subtotal Design				$	187,680
CONSTRUCTION SITE
	Construction			$	4,548,000
	Log Sales (revenue to project)			$	(22,000	)
	Building permit			$	16,550
	Testing & Special Inspections			$	10,000
			Subtotal—construction hard costs				$	4,552,550
FINANCING
	Const & permanent costs & fees			$	223,440
	Construction Period Interest			$	189,660
			Subtotal				$	413,100
MISCELLANEOUS
	Title Insurance			$	6,960
	City of Cd'A impact fee			$	8,953
	Sewer cap fee & misc. Conn. Fees			$	59,695
	Legal and Accounting			$	25,000
			Subtotal				$	100,608
PROJECT ADMINISTRATION
	Developers office OH allocation			$	50,000
	Project Management			$	175,000
			Subtotal				$	225,000
CONTINGENCY
	Construction & design Contingency			$	0		$	100,000
TOTAL DEVELOPMENT COST							$	6,815,523

Exhibit D-1
(Revised with Amendment #1)

Development Cost Report

This sheet is protected! Do not alter! Please make any changes on "Data" page	ADVANCED INPUT DEVICES 600 Wilbur St. CDA ID 83815
	Phase One—86,000 sf, 465 car parks

		8/1 Budget			Spent to date			Remaining in budget			Current month Sept.
Land—13 acres		$	1,236,585		$	1,236,585		$	0		$	0
Architectural and Engineering
Building, architectural, structural and fire		$	92,995		$	84,883		$	8,112		$	1,241
Civil		$	30,000		$	28,464		$	1,536		$	0
Mechanical and Electrical		$	15,000		$	0		$	15,000		$	0
Landscape design		$	4,000		$	0		$	4,000		$	0
Reimbursables—printing		$	8,000		$	1,287		$	6,713		$	179
	Subtotal bldg. arch. + eng.	$	149,995		$	114,634		$	35,361		$	1,420
Programming—Pinnacle		$	37,710		$	37,710		$	0		$	0
	Subtotal design	$	187,705		$	152,345		$	35,361		$	1,420
Construction Site
Construction contract		$	4,548,000		$	477,224		$	4,070,776		$	320,175
Log Sales (revenue to project)		$	(22,000	)	$	(23,791	)	$	1,791		$	0
Building permit		$	16,550		$	17,125		$	(575	)	$	0
Testing and inspections (Strata)		$	10,000		$	3,299		$	6,702		$	425
	Subtotal—construction hard costs	$	4,552,550		$	473,857		$	4,078,693		$	320,600
Financing
Const & permanent loan costs and fees.		$	223,440		$	1,000		$	222,440		$	0
Construction period interest		$	189,660		$	0		$	189,660		$	0
	Subtotal—financing	$	413,100		$	1,000		$	412,100		$	0
Miscellaneous
Title insurance		$	6,960		$	0		$	6,960		$	0
City of CDA impact fee		$	8,954		$	8,953		$	0		$	0
Sewer and water cap fees		$	59,695		$	59,695		$	0		$	0
Legal and accounting		$	25,000		$	17,515		$	7,485		$	0
	Subtotal—misc.	$	100,608		$	86,163		$	14,445		$	0
Project Administration
Developer's office and OH allocation		$	50,000		$	421		$	49,579		$	0
Project Management (Seneca)		$	175,000		$	171,628		$	3,372		$	0
	Subtotal—project admin.	$	225,000		$	172,049		$	52,951		$	0
Contingency
Construction and design contingency		$	100,000		$	0		$	100,000		$	0
Total Development Cost:		$	6,815,548		$	2,121,999		$	4,693,549		$	322,020

Exhibit G

Cross Use Easement Agreement

THIS AGREEMENT, made and entered into this        day of          , 199  , by and between Glacier Partners III (hereinafter called "Grantor"), and Glacier 600, LLC (hereinafter called "Grantee").

W I T N E S S E T H:

WHEREAS, Grantor is the record owner of that certain real property in Kootenai County, State of Idaho, described in Schedule "I", attached hereto and incorporated herein by reference ("the Grantor's Property");

WHEREAS, Grantee is the record owner of that certain real property in Kootenai County, State of Idaho, described in Schedule "II", attached hereto and incorporated herein by reference ("the Grantee's Property");

WHEREAS, The parties hereto require the use of a 60-foot wide easement with the common boundary between the parcels as its centerline.

NOW, THEREFORE, the parties hereto agree as follows:

Grantor hereby creates a Cross Use Easement for the benefit of parcel A and parcel B (shown on the attached Schedule III), the respective tenants and employees, agents, customers, contractors and invitees of such tenants, which grant shall be appurtenant to and running with the benefited Property, a perpetual, nonexclusive easement for underground utilities, ingress and egress by vehicular and pedestrian traffic upon, over and across the respective parcels.

    Easement width: The easement area shall be sixty (60) feet wide with the common boundary between the parcels as its centerline.

    Each user of each parcel further agrees to grant such additional easements as are reasonable required by any public or private utility for the propose of providing underground utility services to the users.

    Each party shall maintain the underground and surface facilities on its side of the property line. The cost of paving repair and maintenance shall be borne equally by each parcel. The users shall mutually agree on a program of maintenance.

    Notwithstanding the provisions above, each party is solely responsible for any particular damage caused by the offending party, the party's employees, agents, contractors or invitees and shall proceed with due diligence to make any necessary repairs.

    This easement and the obligations of each parcel owner shall exist in perpetuity, except as provided below.

    Both the burden and benefit of this agreement shall extend to the heirs, successors and assigns of the ownership of each parcel. It is the intent of this grant of easement to create a continuing obligation

of the part of each landowner, present and future, including any additional parties resulting for any further division of the existing sites comprising the property.

Grantor:
Glacier Partners III

/s/ STEPHEN F. MEYER Stephen F. Meyer, General Partner

Grantee:
Glacier 600, LLC

/s/ STEPHEN F. MEYER Stephen F. Meyer, Member

STATE OF IDAHO	)
	)ss.
COUNTY OF KOOTENAI	)

    On this 30th day of October, 1998, before my, the undersigned, a Notary Public in and for said State, personally appeared Stephen F. Meyer, known or identified to me to be the person whose name is subscribed to the foregoing instrument on behalf of Glacier Partners III as Grantor, and acknowledges to me that he/she executed the same on behalf of the Grantor.

    IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

/s/ HELEN L. BULLION Commission expires on 2/14/03
Residing at Coeur d'Alene

STATE OF IDAHO	)
	)ss.
COUNTY OF KOOTENAI	)

    On this 30th day of October, 1998, before my, the undersigned, a Notary Public in and for said State, personally appeared Stephen F. Meyer, known or identified to me to be the person whose name is subscribed to the foregoing instrument on behalf of Glacier 600, LLC as Grantee, and acknowledges to me that he/she executed the same on behalf of the Grantee.

    IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

/s/ HELEN L. BULLION Commission expires on 2/14/03
Residing at Coeur d'Alene

Schedule 1

Legal Description
(Grantor's Property)

That portion of the Southeast ¹/4 of Section 26, Township 51 North, Range 4 West, Boise Meridian, Kootenai County, Idaho described as follows:

Commencing at the Center ¹/4 Corner of said Section 26 (from which the East ¹/4 Corner bears South 88°49'45" East 2658.41 feet); thence along the westerly line of the East ¹/2 of the Southeast ¹/4 of said Section 26 South 00°43'40" West 30.00 feet to a point on the southerly line of Wilbur Avenue; thence leaving said westerly line along said southerly line South 88°49'45" East 534.32 to a point, said point being the REAL POINT OF BEGINNING.

thence South 88°49'45" East 527.72 feet to a point on the westerly line of U. S. Highway 95;
thence leaving said southerly line along said westerly line, southerly 907.82 feet along the arc of a non-tangent circular curve concave to the southeast, said curve having a radius of 28,757.90 feet, a central angle of 01°48'31" and a long chord the bears South 00°45'51" West 907.78 feet;
thence leaving said westerly line along the northerly line of SILVER PARK (Book G of Plats, Page 23, records of Kootenai County, Idaho) the following courses and distances:
North 88°52'35" West 403.39 feet;
thence northerly 17.99 feet along the arc of a non-tangent circular curve concave to the northwest, said curve having a radius of 1530.00 feet, a central angle of 00°40'26" and a long chord that bears North 00°37'17" East 17.99 feet;
thence North 88°50'56" West 30.00 feet;
thence leaving said northerly line North 00°16'02" East 107.47 feet;
thence North 29°08'16" East 317.58 feet;
thence North 34°26'27" West 423.52 feet;
thence North 00°43'40" East 157.81 feet to the REAL POINT OF BEGINNING.

Schedule II

Legal Description
(Grantee's Property)

That portion of the Southeast Quarter of Section 26, Township 51 North, Range 4 West Boise Meridian, Kootenai County, Idaho.

COMMENCING at the Center Quarter corner of said Section 26 (from which the East Quarter corner bears South 88°49'45" East 2,658.41 feet); thence

along the Westerly line of the East half of the Southeast Quarter of said Section 26, South 00°43'40" West 30.00 feet to a point on the Southerly line of Wilbur Avenue, said point being the REAL POINT OF BEGINNING; thence

leaving said Westerly line along said Southerly line South 88°49'45" East, 534.32 feet; thence

leaving said Southerly line South 00°43'40" West, 157.81 feet; thence

South 34°26'27" East, 423.52 feet; thence

South 29°08'16" West, 317.58 feet; thence

South 00°16'02" West, 107.47 feet to a point on the Northerly line of the plat of Silver Park (a recorded subdivision on fiel in Book "G" of Plats at Page 23, records of Kootenai County, Idaho.); thence

along said Northerly line North 88°50'56" West, 628.03 feet to a point on the Westerly line of the East half of the Southeast Quarter of said Section 26; thence

leaving said Northerly line along said Westerly line North 00°43'40" East, 890.35 feet to the REAL POINT OF BEGINNING.

EXCEPTING THEREFROM that portion conveyed to The City of Coeur d'Alene, by Instrument recorded August 7, 1998, as Instrument No. 1549342, records of Kootenai County, Idaho.

ALSO EXCEPTING THEREFROM that portion conveyed to The City of Coeur d'Alene by Instrument recorded August 7, 1998, as Instrument No. 1549344, records of Kootenai County, Idaho.

Schedule III

Parcel Map

[DIAGRAM OMITTED]

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LEASE AGREEMENT Advanced Input Devices/Glacier Partners
TABLE OF CONTENTS
LEASE
Background
Exhibit A
Legal Description
Exhibit B
Building Standards and Specifications
Exhibit B-1
Exhibit C
Site Plan [DIAGRAM OMITTED]
Exhibit D
Development Budget ADVANCED INPUT DEVICES New facility development budget Revised 3/14/97, 5/22/97, 9/17/9, 1/24/98, 2/23/98 Phase one - 85,000 sf, 475 carparks
Exhibit D-1
Development Cost Report ADVANCED INPUT DEVICES Cost Report
Exhibit D-2
Rental Increase Schedule
Exhibit E
Form of Commencement Date Letter
LEASE AMENDMENT #1
Exhibit A (Revised with Amendment #1) Legal Description
Exhibit D (Revised with Amendment #1) Development Budget
Exhibit D-1 (Revised with Amendment #1) Development Cost Report
Exhibit G Cross Use Easement Agreement
Schedule 1 Legal Description (Grantor's Property)
Schedule II Legal Description (Grantee's Property)
Schedule III Parcel Map

EX-10.32

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CREDIT AGREEMENT

dated as of September 13, 2000

among

ESTERLINE TECHNOLOGIES CORPORATION

and

CERTAIN OF ITS SUBSIDIARIES THAT ARE PARTY HERETO,

BANK OF AMERICA, NATIONAL ASSOCIATION,

as Agent,

and

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

Arranged by

BANC OF AMERICA SECURITIES LLC

TABLE OF CONTENTS

Section		Page
ARTICLE I	DEFINITIONS	1
1.01	Certain Defined Terms	1
1.02	Other Interpretive Provisions	13
1.03	Accounting Principles	14
ARTICLE II	THE CREDITS	15
2.01	The Revolving Credit	15
2.02	Loan Accounts	15
2.03	Procedure for Borrowing	15
2.04	Conversion and Continuation Elections	16
2.05	Voluntary Termination or Reduction of Commitments	17
2.06	Optional Prepayments	17
2.07	Cash Collateralization; Mandatory Prepayments of Loans	18
2.08	Repayment	18
2.09	Interest	18
2.10	Fees	19
2.11	Computation of Fees and Interest	19
2.12	Payments by the Companies	19
2.13	Payments by the Banks to the Agent	20
2.14	Sharing of Payments, etc.	20
ARTICLE III	THE LETTERS OF CREDIT	21
3.01	The Letter of Credit Subfacility	21
3.02	Issuance, Amendment and Renewal of Letters of Credit	22
3.03	Existing Letters of Credit; Risk Participations, Drawings and Reimbursements	23
3.04	Repayment of Participations	25
3.05	Role of the Issuing Bank	25
3.06	Obligations Absolute	26
3.07	Cash Collateral Pledge	27
3.08	Letter of Credit Fees	27
3.09	Uniform Customs and Practice	27
ARTICLE IV	TAXES, YIELD PROTECTION AND ILLEGALITY	28
4.01	Taxes	28
4.02	Illegality	28
4.03	Increased Costs and Reduction of Return	29
4.04	Funding Losses	29
4.05	Inability to Determine Rates	30
4.06	Reserves on Offshore Rate Loans	30
4.07	Certificates of Banks	30
4.08	Survival	31
ARTICLE V	CONDITIONS PRECEDENT	31
5.01	Conditions of Initial Credit Extension	31
5.02	Conditions to All Credit Extensions	32

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ARTICLE VI	REPRESENTATIONS AND WARRANTIES	33
6.01	Corporate Existence and Power	33
6.02	Corporate Authorization; No Contravention	33
6.03	Governmental Authorization	33
6.04	Binding Effect	33
6.05	Litigation	33
6.06	No Default	34
6.07	ERISA Compliance	34
6.08	Use of Proceeds; Margin Regulations	34
6.09	Title to Properties	34
6.10	Taxes	34
6.11	Financial Condition	35
6.12	Environmental Matters	35
6.13	Regulated Entities	35
6.14	No Burdensome Restrictions	35
6.15	Copyrights, Patents, Trademarks and Licenses, etc.	35
6.16	Subsidiaries	36
6.17	Insurance	36
6.18	Swap Obligations	36
6.19	Full Disclosure	36
ARTICLE VII	AFFIRMATIVE COVENANTS	36
7.01	Financial Statements	36
7.02	Certificates; Other Information	37
7.03	Notices	37
7.04	Preservation of Corporate and Partnership Existence, etc.	38
7.05	Maintenance of Property	39
7.06	Insurance	39
7.07	Payment of Obligations	39
7.08	Compliance with Laws; Joinder Agreements	39
7.09	Inspection of Property and Books and Records	40
7.10	Environmental Laws	40
7.11	Use of Proceeds	40
ARTICLE VIII	NEGATIVE COVENANTS	41
8.01	Limitation on Liens	41
8.02	Disposition of Assets	42
8.03	Consolidations and Mergers	43
8.04	Loans and Investments	43
8.05	Limitation on Indebtedness	44
8.06	Transactions with Affiliates	45
8.07	Use of Proceeds	45
8.08	Contingent Obligations	45
8.09	Restricted Payments	45
8.10	ERISA	46
8.11	Change in Business	46
8.12	Minimum Consolidated Net Worth	46
8.13	Maximum Leverage Ratio	47
8.14	Minimum Fixed Charge Coverage Ratio	47

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ARTICLE IX	EVENTS OF DEFAULT	47
9.01	Event of Default	47
9.02	Remedies	49
9.03	Rights Not Exclusive	49
9.04	Certain Financial Covenant Defaults	50
ARTICLE X	THE AGENT	50
10.01	Appointment and Authorization; "Agent"	50
10.02	Delegation of Duties	51
10.03	Liability of Agent	51
10.04	Reliance by Agent	51
10.05	Notice of Default	51
10.06	Credit Decision	52
10.07	Indemnification of Agent	52
10.08	Agent in Individual Capacity	52
10.09	Successor Agent	53
10.10	Withholding Tax	53
ARTICLE XI	MISCELLANEOUS	54
11.01	Amendments and Waivers	54
11.02	Notices	55
11.03	No Waiver; Cumulative Remedies	55
11.04	Costs and Expenses	55
11.05	Indemnity	56
11.06	Payments Set Aside	57
11.07	Successors and Assigns	57
11.08	Assignments, Participations, etc.	57
11.09	Confidentiality	59
11.10	Set-off	59
11.11	Notification of Addresses, Lending Offices, etc.	59
11.12	Termination of the Facility A Commitment under Existing Facility	59
11.13	Counterparts	60
11.14	Severability	60
11.15	No Third Parties Benefited	60
11.16	Governing Law and Jurisdiction	60
11.17	Waiver of Jury Trial	60
11.18	Guaranty	61
11.19	Entire Agreement	66

iii

SCHEDULES
A	Pricing Matrix
2.01	Commitments
3.03	Existing Letters of Credit
6.05	Litigation
6.11	Financial Condition
6.12	Environmental Matters
6.16	Subsidiaries and Minority Interests
6.17	Insurance Matters
8.01(a)	Certain Permitted Liens
8.05(b)	Certain Permitted Indebtedness
8.08(c)	Contingent Obligations
11.02	Lending Offices; Addresses for Notices
EXHIBITS
A	Form of Notice of Borrowing
B	Form of Notice of Conversion/Continuation
C	Form of Compliance Certificate
D	Form of Legal Opinion of Companies' Counsel
E	Form of Assignment and Acceptance
F	Form of Promissory Note
G	Form of Joinder Agreement

iv

CREDIT AGREEMENT

    This CREDIT AGREEMENT, dated as of September 13, 2000, is among ESTERLINE TECHNOLOGIES CORPORATION, a Delaware corporation ("Esterline"), the Borrower Subsidiaries (as hereinafter defined) (together with Esterline, collectively, the "Companies" and each, individually, a "Company"), the several financial institutions party to this Agreement (collectively, the "Banks" and individually called a "Bank"), and BANK OF AMERICA, NATIONAL ASSOCIATION, as the Issuing Bank (as defined below) and as agent for itself, the Banks and the Issuing Bank (in such capacity, the "Agent").

    WHEREAS each of the Companies (a) has requested that the Banks make available to it Loans (as hereinafter defined) on a committed revolving loan basis from time to time in an aggregate principal amount for all of the Companies not to exceed at any time outstanding the aggregate total of the Commitments (as hereinafter defined) as in effect from time to time, and (b) has requested that the Issuing Bank issue Letters of Credit (as hereinafter defined) for its account in an aggregate amount for all of the Companies not to exceed at any time the L/C Commitment (as hereinafter defined); and

    WHEREAS the Banks have agreed severally to make available to the Companies a revolving credit facility and the Issuing Bank has agreed to issue Letters of Credit, in each case upon the terms and conditions set forth in this Agreement;

    NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.01  Certain Defined Terms.

    As used herein:

    "1999 Senior Notes" means the "1999 Senior Notes" (as that term is defined in Esterline's 1999 Annual Report), as such notes are in effect as of the date hereof (without regard to any subsequent amendments, modifications or supplements thereto).

    "Acquisition" means any transaction or series of related transactions for the purpose of or resulting in, directly or indirectly: (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person; (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary; (c) the power to elect, appoint, or cause the election or appointment of at least a majority of the members of the board of directors or similar governing body of such Person; or (d) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary), provided that any Company or its Subsidiary is the surviving entity.

    "Affiliate" means, as to any Person, any other Person who, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, partnership interests, by contract, or otherwise.

    "Agent" has the meaning specified in the introduction hereto and includes any successor agent arising under Section 10.09.

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    "Agent-Related Persons" means Bank of America and any successor agent arising under Section 10.09, together with their respective Affiliates (including, in the case of Bank of America, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

    "Agent's Payment Office" means the address for payments set forth on Schedule 11.02 or such other address as the Agent may from time to time specify.

    "Agreement" means this Amended and Restated Credit Agreement.

    "Applicable Commitment Fee Percentage" means, on any date, the per annum commitment fee percentage (expressed in basis points) set forth on Schedule A, which is based upon the ratio of Consolidated Funded Debt to EBITDA as set forth in Esterline's quarterly or annual financial statements most recently delivered to the Agent under Section 7.01. The Applicable Commitment Fee Percentage will be determined and adjusted (if necessary), with any adjustment becoming effective, quarterly on the date that is two (2) Business Days after the last date by which the Companies are otherwise required to deliver a Compliance Certificate in accordance with Section 7.02(a) with reference to Section 7.01 (each such date, a "Calculation Date"); provided that, if any Compliance Certificate is not delivered to the Agent on or before the related Calculation Date, then the Applicable Commitment Fee Percentage will be that specified for "Level 5" on Schedule A, effective on the related Calculation Date until two (2) Business Days after such Compliance Certificate is received by the Agent; provided further that, notwithstanding the foregoing, the Applicable Commitment Percentage for and during the fiscal quarters of Esterline ending October 31, 2000 and January 31, 2001 will be that specified for "Level 3" on Schedule A.

    "Applicable Margin" means, on any date, with respect to each Base Rate Loan and each Offshore Rate Loan outstanding on such date, the applicable margin (on a per annum basis expressed in basis points) therefor as set forth on Schedule A, which is based on the ratio of Consolidated Funded Debt to EBITDA as set forth in Esterline's quarterly or annual financial statements most recently delivered to the Agent under Section 7.01. The Applicable Margins will be determined and adjusted (if necessary), with any adjustment becoming effective, quarterly on the related Calculation Date; provided that, if any Compliance Certificate is not delivered to the Agent on or before the related Calculation Date, then the Applicable Margins will be those specified for "Level 5" on Schedule A, effective on the related Calculation Date until two (2) Business Days after such Compliance Certificate is received by the Agent; provided further that, notwithstanding the foregoing, the Applicable Margins for and during the fiscal quarters of Esterline ending October 31, 2000 and January 31, 2001 will be those specified for "Level 3" on Schedule A.

    "Applicable Utilization Premium Percentage" means, on any date, the per annum utilization premium percentage (expressed in basis points) set forth on Schedule A, which is based upon the ratio of Consolidated Funded Debt to EBITDA as set forth in Esterline's quarterly or annual financial statements most recently delivered to the Agent under Section 7.01. The Applicable Utilization Premium Percentage will be determined and adjusted (if necessary), with any adjustment becoming effective, quarterly on the related Calculation Date; provided that, if such Compliance Certificate is not delivered to the Agent on or before the related Calculation Date, then the Applicable Utilization Premium Percentage will be that specified for "Level 5" on Schedule A, effective on the related Calculation Date until two (2) Business Days after such Compliance Certificate is received by the Agent; provided further that, notwithstanding the foregoing, the Applicable Utilization Premium Percentage for and during the fiscal quarters of Esterline ending October 31, 2000 and January 31, 2001 will be that specified for "Level 3" on Schedule A.

    "Arranger" means Banc of America Securities LLC, a Delaware limited liability company.

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    "Assignee" has the meaning specified in Section 11.08(a).

    "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel.

    "Bank" has the meaning specified in the introduction hereto. References to the "Banks" shall include the Issuing Bank in its capacity as such unless the context otherwise requires. For purposes of clarification only, to the extent that the Issuing Bank may have any rights or obligations in addition to those of the Banks due to its status as Issuing Bank, its status as such will be specifically referenced.

    "Bank of America" means Bank of America, National Association, a national banking association.

    "Bankruptcy Code" means the federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101 et seq.).

    "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the most recently announced Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America at its headquarters office as its "prime rate." (The "prime rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the "prime rate" rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

    "Base Rate Loan" means a Loan that bears interest based on the Base Rate.

    "Borrower Subsidiaries" means, in all cases subject to the effect of Sections 8.02(d), each of the Subsidiaries of Esterline listed on the signature pages hereof and any Subsidiary of Esterline that has executed a Joinder Agreement pursuant to Section 7.08(b) or Section 8.04(e).

    "Borrowing" means a borrowing hereunder consisting of Loans of the same Type made to any Company on the same day by the Banks under Article II (including any drawings under Letters of Credit converted into Loans in accordance with Article III) and (other than in the case of Base Rate Loans) having the same Interest Period.

    "Borrowing Date" means any date on which a Borrowing occurs under Section 2.03.

    "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.

    "Calculation Date" has the meaning specified in the definition of "Applicable Commitment Fee Percentage" contained herein.

    "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

    "Cash Collateralize" means to pledge and deposit with or deliver to the Agent, for the benefit of the Agent, the Issuing Bank and the Banks, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the

3

Agent and the Issuing Bank (which documents are hereby consented to by the Banks). Derivatives of such term shall have a corresponding meaning.

    "Change of Control" means the occurrence of either of the following: (a) any "person" or "group" (as such terms are used in subsections 13(d) and 14(d) of the Exchange Act and the regulations thereunder) is or becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the then outstanding voting capital stock of Esterline, or (b) the Continuing Directors shall cease to constitute at least a majority of the directors constituting the board of directors of Esterline.

    "Closing Date" means the date on which all conditions precedent set forth in Section 5.01 are satisfied, made conditions subsequent or waived by all Banks.

    "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder.

    "Commitment," as to each Bank, has the meaning specified in Section 2.01.

    "Company" and "Companies" have the respective meaning specified in the introduction hereto.

    "Compliance Certificate" means a certificate substantially in the form of Exhibit C.

    "Consolidated Funded Debt" means all Funded Debt of Esterline and its Subsidiaries, determined on a consolidated basis eliminating intercompany items.

    "Consolidated Net Income" and "Consolidated Net Loss" mean, respectively, for any period, the aggregate net income or loss for such period of Esterline and its Subsidiaries on a consolidated basis.

    "Consolidated Net Worth" means, as of any date of determination, Consolidated Total Assets minus Consolidated Total Liabilities.

    "Consolidated Total Assets" means, as of any date of determination, the total assets of Esterline and its Subsidiaries on a consolidated basis.

    "Consolidated Total Liabilities" means, as of any date of determination, the total liabilities of Esterline and its Subsidiaries on a consolidated basis.

    "Contingent Obligation" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition 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 holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be

4

made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations other than in respect of Swap Contracts, shall be equal to the maximum reasonably anticipated liability in respect thereof and, in the case of Contingent Obligations in respect of Swap Contracts, shall be equal to the Swap Termination Value.

    "Continuing Directors" means, as of any date, the collective reference to all members of the board of directors of Esterline who assumed office after such date and whose appointment or nomination for election by Esterline's shareholders was approved by a vote of at least 50% of the Continuing Directors in office immediately prior to such appointment or nomination.

    "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound.

    "Conversion/Continuation Date" means any date on which, under Section 2.04, any Company (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.

    "Credit Extension" means and includes (a) the making of any Loans hereunder, and (b) the Issuance of any Letters of Credit hereunder (including the Existing Letters of Credit).

    "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.

    "Dollars," "dollars" and "$" each mean lawful money of the United States.

    "EBITDA" means, for any period, (a) Consolidated Net Income or Consolidated Net Loss, as the case may be, for such period, plus (b) the sum of (i)  interest expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense and (v) noncash items, in each case, which were deductible in determining Consolidated Net Income or Consolidated Net Loss of Esterline and its Subsidiaries on a consolidated basis for such period.

    "Effective Amount" means: (a) with respect to any Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and prepayments or repayments occurring on such date; and (b) with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Issuances of Letters of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.

    "Eligible Assignee" means: (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States or the Cayman Islands; (c) a Person that is primarily engaged in the business of commercial

5

banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.

    "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility of any of the Companies or their Subsidiaries for violation of any Environmental Law, or for release or injury to the environment.

    "Environmental Laws" means all federal, state, local or foreign laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters.

    "ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder.

    "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with any Company within the meaning of subsection 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

    "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Company or any ERISA Affiliate.

    "Esterline" has the meaning set forth in the introduction hereto.

    "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate" contained herein.

    "Event of Default" means any of the events or circumstances specified in Section 9.01.

    "Exchange Act" means the Securities Exchange Act of 1934, and regulations promulgated thereunder.

    "Existing Facility" means the Credit Agreement, dated as of October 31, 1996, among Esterline and certain of its Subsidiaries, the several financial institutions party thereto, and Bank of America, as "agent" for such financial institutions, as amended from time to time in accordance with its terms.

    "Existing Letters of Credit" means the letters of credit described on Schedule 3.03.

    "FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions.

    "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the

6

caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent.

    "Fee Letter" has the meaning specified in Section 2.10(a).

    "Fixed Charge Coverage Ratio" has the meaning specified in Section 8.14.

    "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.

    "Funded Debt" of any Person means, as of the end of each fiscal quarter of such Person, (a) all Indebtedness of such Person (including with respect to any Loans hereunder) for borrowed money; (b) all noncontingent reimbursement or payment obligations of such Person with respect to Surety Instruments; (c) all obligations with respect to capital leases; (d) the current portion of all obligations of such Person arising with respect to preferred stock that is mandatorily redeemable by such Person; (e) all indebtedness referred to in clauses (a) through (d) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (f) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (d).

    "Further Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges (including, without limitation, net income taxes and franchise taxes), and all liabilities with respect thereto, imposed by any jurisdiction on account of amounts payable or paid pursuant to Section 4.01.

    "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances and consistently applied.

    "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

    "Guarantor" means each of the Companies in its capacity as a "guarantor" under Section 11.18 or under any separate agreement executed by it pursuant to which it guarantees the Obligations.

    "Guaranteed Obligations" has the meaning specified in Section 11.18.

    "Guaranty Obligation" has the meaning specified in the definition of "Contingent Obligation" contained herein.

    "Honor Date" has the meaning specified in Section 3.03(c).

    "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all non-contingent reimbursement or payment obligations with respect to

7

Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) all indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (h) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. For all purposes of this Agreement, the "Indebtedness" of any Person shall include all recourse "Indebtedness" of any partnership or joint venture or limited liability company in which such Person is a general partner, a joint venturer or a member.

    "Indemnified Liabilities" has the meaning specified in Section 11.05.

    "Indemnified Person" has the meaning specified in Section 11.05.

    "Independent Auditor" has the meaning specified in Section 7.01(a).

    "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in either event undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code.

    "Interest Payment Date" means, as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided that, if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.

    "Interest Period" means, as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which a Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by a Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that:

    (a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;

    (b) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

    (c) no Interest Period for any Loan shall extend beyond August 31, 2005.

    "Investments" has the meaning specified in Section 8.04.

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    "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code.

    "Issuance Date" has the meaning specified in Section 3.01(a).

    "Issue" means, with respect to any Letter of Credit: (a) to incorporate the Existing Letters of Credit into this Agreement; or (b) to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.

    "Issuing Bank" means Bank of America in its capacity as issuer of one or more Letters of Credit hereunder, together with any replacement letter of credit issuer arising under Section 10.01(b) or Section 10.09, and any other Bank which, if required for legal or credit reasons, is willing to issue letters of credit hereunder.

    "Joinder Agreement" means a joinder agreement substantially the form of Exhibit G.

    "Joint Venture" means a single-purpose corporation, partnership, limited liability company, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity) now or hereafter formed by any Company or any of its Subsidiaries with another Person in order to conduct a common venture or enterprise with such Person.

    "L/C Advance" means each Bank's participation in any L/C Borrowing in accordance with its Pro Rata Share.

    "L/C Amendment Application" means an application form for amendment of outstanding standby or commercial documentary letters of credit as shall at any time be in use at the Issuing Bank, as the Issuing Bank shall request.

    "L/C Application" means an application form for issuances of standby or commercial documentary letters of credit as shall at any time be in use at the Issuing Bank, as the Issuing Bank shall request.

    "L/C Borrower" means any Company for whose account a Letter of Credit is Issued pursuant to Article III.

    "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made nor converted into a Borrowing under Section 3.03(c).

    "L/C Commitment" means the commitment of the Issuing Bank to Issue, and the commitment of the Banks severally to participate in, Letters of Credit (including the Existing Letters of Credit) from time to time Issued or outstanding under Article III, in an aggregate amount not to exceed on any date $15,000,000. The L/C Commitment is a part of the combined Commitments, rather than a separate, independent commitment.

    "L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit, including all outstanding L/C Borrowings.

    "L/C-Related Documents" means the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit, including any of the Issuing Bank's standard form documents for letter of credit issuances.

    "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office," as the case may

9

be, on Schedule 11.02, or such other office or offices as such Bank may from time to time notify the Companies and the Agent.

    "Letters of Credit" means the Existing Letters of Credit and any letters of credit (whether standby letters of credit or commercial documentary letters of credit) Issued by the Issuing Bank pursuant to Article III.

    "Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Funded Debt to (b) the sum of Consolidated Funded Debt plus Consolidated Net Worth.

    "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease.

    "Loan" means an extension of credit by a Bank to any Company under Article II or Article III, and may be a Base Rate Loan, an Offshore Rate Loan or an L/C Advance (each, a "Type" of Loan).

    "Loan Documents" means this Agreement, any Notes, any Joinder Agreements, the Fee Letter, the L/C Related Documents and all other documents delivered to the Agent or any Bank in connection herewith.

    "Majority Banks" means at any time Banks then holding at least 66²/3% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, Banks then having at least 66²/3% of the Commitments.

    "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the FRB.

    "Material Adverse Effect" means: (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) of Esterline (considering all of its assets), or of the Companies and their Subsidiaries taken as a whole, which would be expected to result in a material impairment of the ability of Esterline (considering all of its assets), or of Esterline and the other Companies taken as a whole, to perform under any Loan Document and to avoid any Default or Event of Default; or (b) a material adverse effect upon the legality, validity, binding effect or enforceability against any Company or any Guarantor of any Loan Document.

    "Multiemployer Plan" means a "multiple employer plan" or a "multiemployer plan," within the meaning of Sections 4064(a) and 4001(a)(3) of ERISA, to which any Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions.

    "Note" means a promissory note executed by the Companies in favor of a Bank pursuant to Section 2.02, in substantially the form of Exhibit F.

    "Notice of Borrowing" means a notice in substantially the form of Exhibit A.

    "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit B.

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    "Obligations" means all advances, debts, liabilities, obligations, covenants and duties and other Indebtedness arising under any Loan Document owing by any Company to any Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising.

    "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Agent as follows:

Offshore Rate = IBOR 1.00 - Eurodollar Reserve Percentage

    Where,

    "Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and

    "IBOR" means the rate of interest per annum determined by the Agent as the rate at which dollar deposits in the approximate amount of Bank of America's Offshore Rate Loan for such Interest Period would be offered by Bank of America's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be designated for such purpose by Bank of America), to major banks in the offshore dollar interbank market at their request at approximately 11:00 a.m. (New York City time) two Business Days prior to the commencement of such Interest Period.

    The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.

    "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate.

    "Organization Documents" means: (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation; (b) for any partnership, the partnership agreement, any other agreements or instruments relating to the rights or the partners of such partnership or limiting or authorizing the activities of such partnership, and all applicable resolutions of such partnership; (c) for any limited liability company, the articles of organization or certificate of formation of such Person, the limited liability company agreement or operating agreement of such Person, any other agreements or instruments relating to the rights of the members or mangers of such Person or limiting or authorizing the activities of such Person, and all applicable resolutions of such Person and such Person's managers; or (d) for any other entity, the organizational and operating documents of such entity, any other agreements or instruments related to the rights of the investors, members or participants therein or limiting or authorizing the activities of such Person, and all applicable resolutions of such Person.

    "Other Taxes" means any present or future stamp, court or documentary taxes or any other excise or property taxes (except for the present excise tax imposed by the State of Washington known as the business and occupations tax to the extent that it is imposed upon the gross receipts of any Bank), charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.

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    "Participant" has the meaning specified in Section 11.08(d).

    "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.

    "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Company or any ERISA Affiliate sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years.

    "Permitted Liens" has the meaning specified in Section 8.01.

    "Permitted Swap Obligations" means all obligations (contingent or otherwise) of any Company or any Subsidiary existing or arising under Swap Contracts, provided that each of the following criteria is satisfied: (a) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or assets held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person in conjunction with a securities repurchase program not otherwise prohibited hereunder, and not for purposes of speculation or taking a "market view"; and (b) such Swap Contracts do not contain (i) any provision ("walk-away" provision) exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party, or (ii) any provision creating or permitting the declaration of an event of default, termination event or similar event upon the occurrence of an Event of Default hereunder (other than an Event of Default under Section 9.01(a).

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

    "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which any Company sponsors or maintains or to which any Company makes, is making, or is obligated to make contributions and includes any Pension Plan.

    "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks.

    "Reportable Event" means, any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC.

    "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.

    "Responsible Officer" means, with respect to any Company, the chief executive officer, the president or a vice president of such Company; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of such Company, or any other officer (including a vice president) having substantially the same authority and responsibility or otherwise familiar with the compliance by such Company with financial covenants.

    "Revolving Termination Date" means the earlier to occur of: (a) August 31, 2005; and (b) the date on which all of the Commitments terminate in accordance with the provisions of this Agreement.

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    "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

    "Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of a Company.

    "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.

    "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing.

    "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank).

    "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, respectively, taxes imposed on or measured by its net income or gross receipts by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office.

    "Type" has the meaning specified in the definition of "Loan" contained herein.

    "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

    "United States" and "U.S." each means the United States of America.

    "Wholly Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by any Company, or by one or more of the other Wholly Owned Subsidiaries, or both.

1.02  Other Interpretive Provisions.

    (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

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    (b) The words "hereof," "herein," "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

    (c)  (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

    (ii) The term "including" is not limiting and means "including without limitation."

    (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including."

    (d) Unless otherwise expressly provided herein: (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document; and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

    (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

    (f)  This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided, any reference to any action of the Agent or the Banks by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion."

    (g) This Agreement and the other Loan Documents are the result of negotiations among, and have been reviewed by counsel to, the Agent, the Companies, the Banks, the Issuing Bank and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks, the Issuing Bank or the Agent merely because of the Agent's or the Banks' or the Issuing Bank's involvement in their preparation.

1.03  Accounting Principles.

    (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP; provided that, if any change in GAAP results in a change in the operation or calculation of any of Sections 8.12, 8.13, or 8.14 or any of the defined terms used therein, the Companies shall promptly notify the Agent thereof and, upon notice to Esterline by the Agent on behalf of the Majority Banks, compliance with any such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn upon instruction from the Majority Banks or such covenant is amended in a manner satisfactory to the Companies and the Majority Banks.

    (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Companies.

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ARTICLE II

THE CREDITS

2.01  The Revolving Credit.

    Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Companies from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth on Schedule 2.01 (such amount as the same may be reduced under Section 2.05 or as a result of one or more assignments under Section 11.08, the Bank's "Commitment"); provided that, after giving effect to any Credit Extension: (a) the Effective Amount of all outstanding Loans and L/C Obligations together shall not at any time exceed the combined Commitments; and (b) the participation of any Bank in the Effective Amount of all L/C Obligations plus the Effective Amount of the Loans of such Bank shall not at any time exceed such Bank's Commitment. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, any Company may borrow under this Section 2.01, prepay under Section 2.06 and reborrow under this Section 2.01.

    Each of the Companies understands and agrees that the commitments of the "Banks" under the Existing Facility to make advances under the Existing Facility terminate, without necessity of further act of the parties, upon execution of this Agreement by the Companies. Each of the Companies confirms and acknowledges its obligations to pay all amounts due under the Existing Facility, and each covenants and agrees that the proceeds of the initial borrowings under this Agreement shall be used to pay all principal and accrued interest (if any) and other amounts due under the Existing Facility.

2.02  Loan Accounts.

    The Loans made by each Bank and the Letters of Credit Issued by the Issuing Bank shall be evidenced by one or more accounts or records maintained by such Bank or the Issuing Bank, as the case may be, in the ordinary course of business. The accounts or records maintained by the Agent, each Bank and the Issuing Bank, shall be conclusive absent manifest error of the amount of the Loans made by the Banks to any Company and the Letters of Credit Issued for the account of any Company, and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of any Company hereunder to pay any amount owing with respect to the Loans or any Letter of Credit. Upon the reasonable request of any Bank made through the Agent, the Loans made by such Bank may be evidenced by one or more Notes (instead of or in addition to loan accounts). Each such Bank shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by any Company with respect thereto. The Companies irrevocably authorize each Bank to endorse its Note(s), and each Bank's record shall be conclusive absent manifest error; provided that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of any Company hereunder or under any such Note to such Bank.

2.03  Procedure for Borrowing.

    (a) Each Borrowing shall be made upon any Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 9:00 a.m. (San Francisco time) (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans; and (ii) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans, specifying:

    (1) the amount of the Borrowing, which shall be in an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;

15

    (2) the requested Borrowing Date, which shall be a Business Day;

    (3) the Type of Loans comprising the Borrowing; and

    (4) with respect to Offshore Rate Loans, the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of Offshore Rate Loans, such Interest Period shall be three months.

provided that, with respect to any Borrowing to be made on the Closing Date, the Notice of Borrowing shall be delivered to the Agent not later than 11:00 a.m. (San Francisco time) at least one Business Day before the Closing Date and such Borrowing will consist of Base Rate Loans only; and provided further that if so requested by the Agent, all Borrowings during the first 60 days following the Closing Date shall have the same Interest Period and shall be Base Rate Loans or Offshore Rate Loans for Interest Periods no longer than one month.

    (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Borrowing.

    (c) Each Bank will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Companies at the Agent's Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date requested by the applicable Company in funds immediately available to the Agent. The proceeds of all such Loans will then be made available to the applicable Company by the Agent at such office by crediting the account of the Company requesting such Borrowing on the books of Bank of America with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent, or if requested by such Company, by wire transfer in accordance with written instructions provided to the Agent by such Company of such funds as received by the Agent, less customary fees for such wire transfer.

    (d) After giving effect to any Borrowing, unless the Agent shall otherwise consent, there may not be more than five (5) different Interest Periods in effect.

2.04  Conversion and Continuation Elections.

    (a) Any Company may, upon irrevocable written notice to the Agent in accordance with Section 2.04(b):

    (1) elect to convert, as of any Business Day, any Base Rate Loans (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Offshore Rate Loans;

    (2) elect to convert, as of the last day of the applicable Interest Period, any Offshore Rate Loans expiring on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Base Rate Loans; or

    (3) elect to continue, as of the last day of the applicable Interest Period, any Offshore Rate Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof);

provided that, if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, then such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of any Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate.

    (b) Any applicable Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 9:00 a.m. (San Francisco time) at least (i) three Business Days in advance of

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the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) one Business Day in advance of the Conversion/ Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying:

    (1) the proposed Conversion/Continuation Date;

    (2) the aggregate amount of Loans to be converted or continued;

    (3) the Type of Loans resulting from the proposed conversion or continuation; and

    (4) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period.

    (c) If, upon the expiration of any Interest Period applicable to any Company's outstanding Offshore Rate Loans, any Company shall have failed to select timely a new Interest Period to be applicable to such Company's outstanding Offshore Rate Loans, as the case may be, or if any Default or Event of Default then exists, then the Companies shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period, and all conditions to such conversion shall be deemed to have been satisfied.

    (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if a timely notice is not provided by any Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank.

    (e) Unless the Majority Banks otherwise consent, during the existence of a Default or Event of Default, no Company may elect to have a Loan converted into or continued as an Offshore Rate Loan.

    (f)  After giving effect to any conversion or continuation of Loans, unless the Agent shall otherwise consent, there may not be more than five (5) different Interest Periods in effect.

2.05  Voluntary Termination or Reduction of Commitments.

    Any Company may, upon five Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the then-outstanding principal amount of the Loans would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section 2.05, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued commitment fees to the effective date of any reduction or termination of Commitments shall be paid on the effective date of such reduction or termination.

2.06  Optional Prepayments.

    Subject to Section 4.04, any Company may, at any time or from time to time, upon irrevocable notice received by the Agent, in the case of Offshore Rate Loans, not less than three Business Days prior to the requested prepayment date, and, in the case of Base Rate Loans, not less than one Business Day prior to the requested prepayment date, ratably prepay Loans in whole or in part, in minimum amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is given by any Company, such Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04.

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2.07  Cash Collateralization; Mandatory Prepayments of Loans.

    If on any date the Effective Amount of L/C Obligations exceeds the L/C Commitment, the Companies shall Cash Collateralize on such date the outstanding Letters of Credit in an amount equal to the excess of the maximum amount then available to be drawn under the Letters of Credit over the L/C Commitment. Subject to Section 4.04, if on any date after giving effect to any Cash Collateralization made on such date pursuant to the preceding sentence, the Effective Amount of all Loans and L/C Obligations together exceeds the combined Commitments, the Companies shall immediately, and without notice or demand, prepay the outstanding principal amount of the Loans and L/C Advances by an amount equal to the applicable excess.

2.08  Repayment.

    The Companies shall repay to the Banks on the Revolving Termination Date the aggregate principal amount of all Loans outstanding on such date.

2.09  Interest.

    (a) Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to a Company's right to convert to other Types of Loans under Section 2.04), plus the Applicable Margin.

    (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 2.06 or 2.07 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Majority Banks.

    (c) Notwithstanding subsection (a) of this Section, during the existence of any Event of Default under Section 9.01(a), or 9.01(e), 9.01(k), 9.01(m), or under 9.01(c) as a consequence of the failure of the any of the Companies to observe or perform or cause to be observed or performed any term, covenant or agreement contained in Section 7.11 or Article VIII, or after acceleration, the Companies shall pay interest (after as well as before any entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Obligations, at a rate per annum which is determined by adding two and one-half percent (2.50%) per annum to the Applicable Margin then in effect for such Loans and, in the case of Obligations not subject to an Applicable Margin, at a rate per annum equal to the Base Rate plus two and one-half percent (2.50%); provided that, on and after the expiration of any Interest Period applicable to any Offshore Rate Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Loan shall, during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Base Rate plus two and one-half percent (2.50%). All such interest shall be payable upon demand.

    (d) Anything herein to the contrary notwithstanding, the obligations of any Company to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the Companies shall pay such Bank interest at the highest rate permitted by applicable law.

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2.10  Fees.

    (a)  Agency Fees.  The Companies shall pay an agency fee to the Agent for the Agent's own account, as required by the letter agreement between the Companies and the Agent dated as of July 19, 2000 (the "Fee Letter").

    (b)  Commitment Fees.  The Companies shall pay to the Agent for the account of each Bank a commitment fee on the average daily unused portion of such Bank's Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Agent, equal to such unused portion as so calculated multiplied by the Applicable Commitment Fee Percentage for such period. Such commitment fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on October 31, 2000 through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments under Section 2.05, the accrued and unpaid commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The commitment fees provided in this Section shall accrue at all times after the Closing Date, including at any time during which one or more conditions in Article V are not met.

    (c)  Utilization Premium.  For each day on which the Effective Amount of all L/C Obligations and Loans together exceeds thirty-three percent (33%) of the combined Commitments, the Companies shall pay to the Agent for the account of each Bank a utilization premium calculated by multiplying the Effective Amount of all L/C Obligations and Loans together on such day by the Applicable Utilization Premium Percentage. Such utilization premium shall accrue and be payable for all periods from the Closing Date until all Obligations are repaid in full (including at any time during which one or more conditions in Article V are not met) and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on October 31, 2000 through the Revolving Termination Date (and thereafter, if the Obligations are not repaid in full on the Revolving Termination Date, upon demand); provided that, in connection with any reduction or termination of Commitments under Section 2.05, the accrued and unpaid utilization premium calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date.

2.11  Computation of Fees and Interest.

    (a) All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.

    (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Companies and the Banks in the absence of manifest error.

2.12  Payments by the Companies.

    (a) All payments to be made by the Companies shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Companies shall be made to the Agent for the account of the Banks at the Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 11:00 a.m. (San Francisco time) on the date

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specified herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 11:00 a.m. (San Francisco time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.

    (b) Subject to the provisions set forth in the definition of "Interest Period" contained herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

    (c) Unless the Agent receives notice from a Company prior to the date on which any payment is due to the Banks that the Companies will not make such payment in full as and when required, the Agent may assume that the Companies have made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Companies have not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.

2.13  Payments by the Banks to the Agent.

    (a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account of the Companies the amount of that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the applicable Company or Companies on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the applicable Company or Companies such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Companies of such failure to fund and, upon demand by the Agent, the Companies shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.

    (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date.

2.14  Sharing of Payments, etc.

    If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans or L/C Advances made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share (or other share contemplated hereunder), such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase from the

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other Banks such participations in the Loans or L/C Advances made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. Each Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 11.10) with respect to such participation as fully as if such Bank were the direct creditor of each Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments.

ARTICLE III

THE LETTERS OF CREDIT

3.01  The Letter of Credit Subfacility.

    (a) On the terms and conditions set forth herein (i) the Issuing Bank agrees, (A) from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date to issue Letters of Credit for the account of an L/C Borrower, and to amend or renew Letters of Credit previously issued by it, in accordance with Sections 3.02(c) and 3.02(d), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks severally agree to participate in Letters of Credit Issued for the account of each L/C Borrower; provided that the Issuing Bank shall not be obligated to Issue, and no Bank shall be obligated to participate in, any Letter of Credit if as of the date of and after giving effect to the Issuance of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all L/C Obligations exceeds (or would exceed) the L/C Commitment, (2) the Effective Amount of all L/C Obligations and Loans together exceeds (or would exceed) the combined Commitments, or (3) the participation of any Bank in the Effective Amount of all L/C Obligations plus the Effective Amount of the Loans of such Bank exceeds (or would exceed) such Bank's Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, each L/C Borrower's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, each L/C Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed.

    (b) The Issuing Bank is under no obligation to Issue any Letter of Credit if:

    (1) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it;

    (2) the Issuing Bank has received written notice from any Bank, the Agent or any Company, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article V is not then satisfied;

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    (3) the expiry date of any requested Letter of Credit is (A) more than 360 days after the date of Issuance, or (B) after the Revolving Termination Date, unless all of the Banks have approved such expiry date in writing;

    (4) the expiry date of any requested Letter of Credit is prior to the maturity date of any financial obligation to be supported by the requested Letter of Credit;

    (5) any requested Letter of Credit does not provide for drafts, or is not otherwise in form and substance acceptable to the Issuing Bank, or the Issuance of a Letter of Credit shall violate any applicable policies of the Issuing Bank;

    (6) any standby Letter of Credit is for the purpose of supporting the issuance of any letter of credit by any other Person;

    (7) such Letter of Credit is in a face amount less than $50,000 (other than the Existing Letters of Credit that are in a face amount less than $50,000 and any renewals thereof) or to be denominated in a currency other than Dollars; or

    (8) the Issuing Bank is also the Agent and the Agent shall have for any reason ceased to be the Agent pursuant to Section 11.09, in which case any other Bank may, upon the request or with the consent of Esterline, act as Issuing Bank.

3.02  Issuance, Amendment and Renewal of Letters of Credit.

    (a) Each Letter of Credit shall be issued upon the irrevocable written request of an L/C Borrower received by the Issuing Bank (with a copy sent by the related L/C Borrower to the Agent) at least four days (or such shorter time as the Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of issuance. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed immediately in an original writing, in the form of an L/C Application, and shall specify in form and detail satisfactory to the Issuing Bank: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the documents to be presented by the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vii) such other matters as the Issuing Bank may require.

    (b) At least two Business Days prior to the Issuance of any Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the L/C Application or L/C Amendment Application from an L/C Borrower and, if not, the Issuing Bank will provide the Agent with a copy thereof. Unless the Issuing Bank has received notice on or before the Business Day immediately preceding the date the Issuing Bank is to issue a requested Letter of Credit from the Agent (A) directing the Issuing Bank not to issue such Letter of Credit because such issuance is not then permitted under Section 3.01(a) as a result of the limitations set forth in clauses (1) through (3) thereof or Section 3.01(b)(ii); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of such L/C Borrower in accordance with the Issuing Bank's usual and customary business practices.

    (c) From time to time while a Letter of Credit is outstanding and prior to the Revolving Termination Date, the Issuing Bank will, upon the written request of an L/C Borrower received by the Issuing Bank (with a copy sent by the related L/C Borrower to the Agent) at least four (4) days (or such shorter time as the Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of amendment, amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, made in the form of an L/C Amendment Application and shall specify in form and detail

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satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of the Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as the Issuing Bank may require. The Issuing Bank shall be under no obligation to amend any Letter of Credit if: (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed amendment to the Letter of Credit. The Agent will promptly notify the Banks of the receipt by it of any L/C Application or L/C Amendment Application.

    (d) The Issuing Bank and the Banks agree that, while a Letter of Credit is outstanding and prior to the Revolving Termination Date, at the option of an L/C Borrower and upon the written request of an L/C Borrower received by the Issuing Bank (with a copy sent by the related L/C Borrower to the Agent) at least five days (or such shorter time as the Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of notification of renewal, the Issuing Bank shall be entitled to authorize the renewal of any Letter of Credit issued by it. Each such request for renewal of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, in the form of an L/C Amendment Application, and shall specify in form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date of notification of renewal of the Letter of Credit (which shall be a Business Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other matters as the Issuing Bank may require. The Issuing Bank shall be under no obligation to renew any Letter of Credit if: (A) the Issuing Bank would have no obligation at such time to issue or amend such Letter of Credit in its renewed form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed renewal of the Letter of Credit. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from the Issuing Bank that such Letter of Credit shall not be renewed, and if at the time of renewal the Issuing Bank would be entitled to authorize the automatic renewal of such Letter of Credit in accordance with this Section 3.02(d) upon the request of an L/C Borrower but the Issuing Bank shall not have received any L/C Amendment Application from such L/C Borrower with respect to such renewal or other written direction by such L/C Borrower with respect thereto, the Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to renew, and the Companies and the Banks hereby authorize such renewal, and, accordingly, the Issuing Bank shall be deemed to have received an L/C Amendment Application from such L/C Borrower requesting such renewal.

    (e) The Issuing Bank may, at its election (or as required by the Agent at the direction of the Majority Banks), deliver any notices of termination or other communications to any Letter of Credit beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Revolving Termination Date.

    (f)  This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit).

    (g) The Issuing Bank will also deliver to the Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit.

3.03  Existing Letters of Credit; Risk Participations, Drawings and Reimbursements.

    (a) On and after the Closing Date, the Existing Letters of Credit shall be deemed for all purposes, including for purposes of the fees to be collected pursuant to Sections 3.08(a) and 3.08(c), and reimbursement of costs and expenses to the extent provided herein, Letters of Credit outstanding

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under this Agreement and entitled to the benefits of this Agreement and the other Loan Documents, and shall be governed by the applications and agreements pertaining thereto and by this Agreement. Each Bank acknowledges and agrees that the Existing Letters of Credit constitute Letters of Credit outstanding under this Agreement on and as of the Closing Date. Each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank on the Closing Date a participation in each such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) such Bank's Pro Rata Share times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Section 2.01 and Section 2.10(b), the Existing Letters of Credit shall be deemed to utilize pro rata the Commitment of each Bank.

    (b) Immediately upon the Issuance of each Letter of Credit in addition to those described in Section 3.03(a), each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Section 2.01, each Issuance of a Letter of Credit shall be deemed to utilize the Commitment of each Bank by an amount equal to the amount of such participation.

    (c) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly notify the related L/C Borrower. Such L/C Borrower shall reimburse the Issuing Bank prior to 10:00 a.m. (San Francisco time), on each date that any amount is paid by the Issuing Bank under any such Letter of Credit (each such date, an "Honor Date"), in an amount equal to the amount so paid by the Issuing Bank. In the event any L/C Borrower fails to reimburse the Issuing Bank for the full amount of any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, the Issuing Bank will promptly notify the Agent and the Agent will promptly notify each Bank thereof, and the Companies shall be deemed to have requested that Base Rate Loans be made by each of the Banks to be disbursed on the Honor Date under such Letter of Credit, subject to the amount of the unutilized portion of the aggregate Commitments and subject to the conditions set forth in Section 5.02. Any notice given by the Issuing Bank or the Agent pursuant to this Section 3.03(c) may be oral if immediately confirmed in writing (including by facsimile), provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

    (d) Each Bank shall upon any notice pursuant to Section 3.03(c) make available to the Agent for the account of the Issuing Bank an amount in Dollars and in immediately available funds equal to its Pro Rata Share of the amount of the drawing, whereupon the participating Banks shall (subject to Section 3.03(e)) each be deemed to have made a Loan consisting of a Base Rate Loan to the Companies in that amount. If any Bank so notified fails to make available to the Agent for the account of the Issuing Bank the amount of such Bank's Pro Rata Share of the amount of the drawing by no later than 2:00 p.m. (San Francisco time) on the Honor Date, then interest shall accrue on such Bank's obligation to make such payment, from the Honor Date to the date such Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in effect from time to time during such period. The Agent will promptly give notice of the occurrence of the Honor Date, but failure of the Agent to give any such notice on the Honor Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligations under this Section 3.03.

    (e) With respect to any unreimbursed drawing that is not converted into Loans consisting of Base Rate Loans to the Companies in whole or in part because of any Company's failure to satisfy the conditions set forth in Section 5.02 or for any other reason, the Companies shall be deemed to have incurred from the Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus two and one-half percent (2.50%), and each Bank's payment to

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the Issuing Bank pursuant to Section 3.03(d) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of its participation obligation under this Section 3.03.

    (f)  Each Bank's obligation in accordance with this Agreement to make the Loans or L/C Advances, as contemplated by this Section 3.03, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the Issuing Bank and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Issuing Bank, any Company, any guarantor or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that, without limiting any Bank's obligation to make L/C Advances hereunder, each Bank's obligation to make Loans under this Section 3.03 is subject to the conditions set forth in Section 5.02.

3.04  Repayment of Participations.

    (a) Upon (and only upon) receipt by the Agent for the account of the Issuing Bank of immediately available funds from any Company (i) in reimbursement of any payment made by the Issuing Bank under the Letter of Credit with respect to which any Bank has paid the Agent for the account of the Issuing Bank for such Bank's participation in the Letter of Credit pursuant to Section 3.03 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in like funds as those received by the Agent for the account of the Issuing Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing Bank shall receive and retain the amount of the Pro Rata Share of such funds of any Bank that did not so pay the Agent for the account of the Issuing Bank.

    (b) If the Agent or the Issuing Bank is required at any time to return to any Company, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by any Company (or any other Person) to the Agent for the account of the Issuing Bank pursuant to Section 3.04(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any amounts so returned by the Agent or the Issuing Bank plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect from time to time.

3.05  Role of the Issuing Bank.

    (a) Each Bank and each L/C Borrower agree that, in paying any drawing under a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.

    (b) No Agent-Related Person nor any of the respective correspondents, participants or assignees of the Issuing Bank shall be liable to any Bank for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Banks (including the Majority Banks, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any L/C-Related Document.

    (c) Each L/C Borrower jointly and severally hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit, provided that this assumption is not intended to, and shall not, preclude any L/C Borrower's pursuit of such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No

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Agent-Related Person, nor any of the respective correspondents, participants or assignees of the Issuing Bank, shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 3.06; provided that, anything in such clauses to the contrary notwithstanding, an L/C Borrower may have a claim against the Issuing Bank, and the Issuing Bank may be liable to an L/C Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by such L/C Borrower which such L/C Borrower proves were caused by the Issuing Bank's willful misconduct or gross negligence or the Issuing Bank's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) the Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

3.06  Obligations Absolute.

    The obligations of each L/C Borrower under this Agreement and any L/C-Related Document to reimburse the Issuing Bank for a drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing under a Letter of Credit converted into Loans, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following:

    (a) any lack of validity or enforceability of this Agreement, any L/C-Related Document or other Loan Document;

    (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of an L/C Borrower in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the L/C-Related Documents;

    (c) the existence of any claim, set-off, defense or other right that an L/C Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C-Related Documents or any unrelated transaction;

    (d) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit;

    (e) any payment by the Issuing Bank under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any Letter of Credit; or any payment made by the Issuing Bank under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding;

    (f)  any exchange, release or non perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the obligations of any L/C Borrower in respect of any Letter of Credit;

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    (g) any misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; or

    (h) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any L/C Borrower.

3.07  Cash Collateral Pledge.

    Upon (a) the request of the Agent, (i) if the Issuing Bank has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (ii) if, as of the Revolving Termination Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (b) the occurrence of the circumstances described in Section 2.07 requiring any L/C Borrower to Cash Collateralize Letters of Credit, then such L/C Borrower shall immediately Cash Collateralize or cause to be Cash Collateralized the L/C Obligations in an amount equal to such L/C Obligations. Such amount, when received by the Agent, shall be held by the Agent and maintained in blocked deposit accounts at Bank of America as Cash Collateral for reimbursement obligations of any and all of the L/C Borrowers in respect of the L/C Obligations and for the other Obligations. Each of the Companies and each of the L/C Borrowers hereby grant to the Agent, for the benefit of the Agent, the Issuing Bank and the Banks, a security interest in all such cash, deposit accounts and deposit account balances. After payment in full of all L/C Obligations and the expiry of all Letters of Credit, the proceeds of any Cash Collateral shall be used to satisfy any other Obligations then outstanding. Each of the L/C Borrowers shall execute and cause to be executed such further agreements, documents and instruments and shall take and cause to be taken such further actions in connection with such Cash Collateralization as the Agent may reasonably request.

3.08  Letter of Credit Fees.

    (a) The Companies shall pay to the Agent for the account of each of the Banks a letter of credit fee based on the average daily maximum amount available to be drawn on outstanding Letters of Credit at a rate equal to the Applicable Margin for Offshore Rate Loans, adjusted as provided in the definition of "Applicable Margin," which fee shall be computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter as calculated by the Agent. Such letter of credit fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date, if any).

    (b) The Companies shall pay to the Issuing Bank a letter of credit fronting fee for each Letter of Credit Issued by the Issuing Bank equal to 0.125% per annum of the face amount (or increased face amount, as the case may be) of such Letter of Credit. Such Letter of Credit fronting fee shall be due and payable on each date of Issuance of a Letter of Credit.

    (c) Each L/C Borrower shall pay to the Issuing Bank from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Issuing Bank relating to letters of credit as from time to time in effect.

3.09  Uniform Customs and Practice.

    Unless otherwise expressly provided in any Letter of Credit, (a) the Uniform Customs and Practices for Documentary Credits as most recently published by the International Chamber of Commerce at the time of Issuance of any documentary Letter of Credit shall apply to such Letter of Credit and (b) the International Standby Practices 1998 most recently published by the Institute of

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International Banking Law & Practice, Inc. (or such later version thereof as may be then be in effect) at the time of Issuance of any standby Letter of Credit shall apply to such Letter of Credit.

ARTICLE IV

TAXES, YIELD PROTECTION AND ILLEGALITY

4.01  Taxes.

    (a) Any and all payments by any Company to each Bank or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Companies shall pay all Other Taxes.

    (b) If any Company shall be required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then:

     (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Bank or the Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made;

    (ii) the Companies shall make such deductions and withholdings;

    (iii) the Companies shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

    (iv) the Companies shall also pay to each Bank or the Agent for the account of such Bank, at the time interest is paid, Further Taxes in the amount that the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes, Other Taxes or Further Taxes had not been imposed.

    (c) The Companies agree to indemnify and hold harmless each Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes in the amount that the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes, Other Taxes or Further Taxes had not been imposed, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor.

    (d) Within 30 days after the date of any payment by any Company of Taxes, Other Taxes or Further Taxes, the Companies shall furnish to each Bank or the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to such Bank or the Agent.

    (e) If any Company is required to pay any amount to any Bank or the Agent pursuant to subsection (b) or (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Companies which may thereafter accrue, if such change in the sole and absolute judgment of such Bank is not otherwise disadvantageous to such Bank.

4.02  Illegality.

    (a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice

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thereof by the Bank to the Companies through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Agent and the Companies that the circumstances giving rise to such determination no longer exist.

    (b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the Companies shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 4.04, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If any Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Companies shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan.

    (c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Companies may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.

4.03  Increased Costs and Reduction or Return.

    (a) If any Bank determines that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Loans or participating in Letters of Credit, or, in the case of the Issuing Bank, any increase in the cost to the Issuing Bank of agreeing to Issue, Issuing or maintaining any Letter of Credit or of agreeing to make or making, funding or maintaining any unpaid drawing under any Letter of Credit, then the Companies shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank or the Issuing Bank, additional amounts as are sufficient to compensate such Bank or such Issuing Bank for such increased costs.

    (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Companies through the Agent, the Companies shall immediately pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase.

4.04  Funding Losses.

    The Companies shall reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of:

    (a) the failure of any Company to make on a timely basis any payment of principal of any Offshore Rate Loan (including after any acceleration thereof);

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    (b) the failure of any Company to borrow, continue or convert a Loan after such Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;

    (c) the failure of any Company to make any prepayment in accordance with any notice delivered under Section 2.06;

    (d) the prepayment (including pursuant to Section 2.07) or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or

    (e) the conversion of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period;

including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Companies to the Banks under this Section and under Section 4.03(a), each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded.

4.05  Inability to Determine Rates.

    If the Agent determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to Section 2.09(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks of funding such Loan, the Agent will promptly so notify the Companies and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall be suspended until the Agent upon the instruction of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Companies may revoke any Notice of Borrowing or Notice of Conversion/ Continuation then submitted by it. If the Companies do not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by the Companies, in the amount specified in the applicable notice submitted by the Companies, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans.

4.06  Reserves on Offshore Rate Loans.

    The Companies shall pay to each Bank, as long as such Bank shall be required under regulations of the FRB to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional costs on the unpaid principal amount of each Offshore Rate Loan equal to the actual costs of such reserves allocated to such Loan by the Bank (as determined by the Bank in good faith, which determination shall be conclusive), payable on each date on which interest is payable on such Loan, provided the Companies shall have received at least 15 days prior written notice (with a copy to the Agent) of such additional costs from the Bank. If a Bank fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice.

4.07  Certificates of Banks.

    Any Bank claiming reimbursement or compensation under this Article IV shall deliver to the Companies (with a copy to the Agent) a certificate setting forth in reasonable detail the amount

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payable to the Bank hereunder and such certificate shall be conclusive and binding on the Companies in the absence of manifest error.

4.08  Survival.

    The agreements and obligations of the Companies in this Article IV shall survive the payment of all other Obligations.

ARTICLE V

CONDITIONS PRECEDENT

5.01  Conditions of Initial Credit Extension.

    The obligation of each Bank (including the Issuing Bank) to make its initial Credit Extension hereunder is subject to the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank:

    (a)  Credit Agreement; Notes.  This Agreement and, if requested by any Bank, the Notes, each executed by each party thereto;

    (b)  Resolutions; Incumbency.

     (i) Copies of the resolutions of the respective boards of directors, partners, members or managers (as applicable) of the Companies authorizing the transactions contemplated hereby, certified as of the Closing Date by the each Company's Secretary or an Assistant Secretary, respectively; and

    (ii) A certificate of the Secretary or Assistant Secretary of each of the Companies, certifying the names and true signatures of the officers of each such Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder;

    (c)  Organization Documents; Good Standing.  Each of the following documents:

     (i) the articles or certificate of incorporation and the bylaws of each of the Companies or, if applicable, the partnership agreement, limited liability company agreement or operating agreement, each as in effect on the Closing Date, certified by the Secretary or Assistant Secretary or general partner or member/manger of each such Company as of the Closing Date; and

    (ii) a good standing certificate from the Secretary of State (or similar, applicable Governmental Authority) as of a recent date, and, if requested by the Agent or any Bank, a bring-down certificate by facsimile dated on or about the Closing Date and tax good standing certificate, (A) for Esterline, of its state of incorporation and the State of Washington, and (B) for each Company other than Esterline, of its state of incorporation;

    (d)  Legal Opinion.  An opinion of Perkins Coie LLP, counsel to the Companies and the Guarantors, addressed to the Agent and the Banks, substantially in the form of Exhibit D;

    (e)  Certificate.  A certificate signed by a Responsible Officer of each Company, dated as of the Closing Date, stating that:

     (i) the representations and warranties contained in Article VI are true and correct on and as of such date, as though made on and as of such date;

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    (ii) no Default or Event of Default exists or would result from the initial Credit Extension; and

    (iii) there has occurred since October 31, 1999, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and

    (f)  Termination of Existing Facility.  Evidence satisfactory to the Agent confirming that, if any principal, interest, fees, costs or other amounts are outstanding under the Existing Facility, all such amounts have been paid in full by the Closing Date or that the Loans borrowed by the Companies on the Closing Date will be used to repay such outstanding amounts, and that the Existing Facility and the Commitments (as that term is defined in the Existing Facility) of the "Banks" thereunder shall thereby terminate on the Closing Date, together with evidence satisfactory to Bank of America, as agent under the Existing Facility, of satisfaction or waiver by such Banks of any prior notice of such termination as required under the Existing Facility; and

    (g)  Other Documents.  Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request;

provided that this Agreement shall not become effective or be binding on any party hereto unless each of the foregoing conditions is satisfied on or before September 15, 2000. The Agent shall promptly notify the Companies and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. The opinion referenced in Section 5.01(d) shall be dated as of the Closing Date; all other documents shall be dated as of a date reasonably near the Closing Date unless otherwise specified or the Agent shall otherwise agree.

5.02  Conditions to All Credit Extensions.

    The obligation of each Bank to make any Loan to be made by it (including its initial Loan) or to continue or convert any Loan under Section 2.04 (other than pursuant to Section 2.04(c)) and the obligation of the Issuing Bank to Issue any Letter of Credit (including the initial Letter of Credit) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date, Conversion/Continuation Date or Issuance Date:

    (a)  Notice; Application.  In the case of any Borrowing or Continuation/ Conversion (other than pursuant to Section 2.04(b)), the Agent shall have received (with, in the case of the initial Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable, and in the case of any Issuance of any Letter of Credit, the Issuing Bank and the Agent shall have received an L/C Application or L/C Amendment Application, as required under Section 3.02;

    (b)  Continuation of Representations and Warranties.  The representations and warranties in Article VI shall be true and correct on and as of such Borrowing Date, Conversion/ Continuation Date or Issuance Date with the same effect as if made on and as of such Borrowing Date, Conversion/Continuation Date or Issuance Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and

    (c)  No Existing Default.  No Default or Event of Default shall exist or shall result from such Credit Extension or continuation or conversion.

Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application or L/C Amendment Application submitted by any Company hereunder shall constitute a representation and warranty by each of the Companies hereunder, as of the date of each such notice and as of each Borrowing Date, Conversion/Continuation Date or Issuance Date, as applicable, that the conditions in this Section 5.02 are satisfied.

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES

    Each Company represents and warrants to the Agent and each Bank that:

6.01  Corporate Existence and Power.

    Each Company and each of its Subsidiaries: (a) is a corporation or partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation; (b) has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation or partnership and is licensed 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 or license except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (d) is in compliance with all Requirements of Law except to the extent to which the failure to comply would not reasonably be expected to have a Material Adverse Effect.

6.02  Corporate Authorization; No Contravention.

    The execution, delivery and performance by each Company of this Agreement and each other Loan Document to which each Company is party, have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of such Company's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which any Company is a party or any order, injunction, writ or decree of any Governmental Authority to which any Company or its property is subject; or (c) violate any Requirement of Law.

6.03  Governmental Authorization.

    No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Company or any of its Subsidiaries of this Agreement or any other Loan Document.

6.04  Binding Effect.

    This Agreement and each other Loan Document to which any of the Companies is a party constitute the legal, valid and binding obligations of such Company, enforceable against such Company in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability.

6.05  Litigation.

    Except as specifically disclosed on Schedule 6.05, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Companies, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Companies, or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) if determined adversely to any Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or

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performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.

6.06  No Default.

    No Default or Event of Default exists or would result from the incurring of any Obligations by any Company. As of the Closing Date, none of the Companies nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under Section 9.01(e).

6.07  ERISA Compliance.

    (a) As of the Closing Date, each Plan is in compliance with the applicable provisions of ERISA, the Code and other federal or state law except to the extent to which the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Plan which is intended to qualify under subsection 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of each Company, nothing has occurred which would cause the loss of such qualification. As of the Closing Date, each Company and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

    (b) As of the Closing Date, there are no pending or, to the best knowledge of each Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. As of the Closing Date, there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.

    (c) As of the Closing Date, (i) no ERISA Event has occurred or is reasonably expected to occur; and (ii) no event or circumstance has occurred or exists that, if such event or circumstance had occurred or arisen after the Closing Date, would create an Event of Default under Section 9.01(h).

6.08  Use of Proceeds; Margin Regulations.

    The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 7.11 and Section 8.07. None of the Companies nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

6.09  Title to Properties.

    Each Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. As of the Closing Date, the property of the Companies and their respective Subsidiaries is subject to no Liens other than Permitted Liens.

6.10  Taxes.

    The Companies and their respective Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties,

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income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against any Company or any Subsidiary that would, if made, have a Material Adverse Effect.

6.11  Financial Condition.

    (a) The audited consolidated financial statements of Esterline and its Subsidiaries dated October 31, 1999, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal year ended on that date: (i) were prepared in accordance with GAAP; (ii) fairly present the financial condition of Esterline and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) except as specifically disclosed on Schedule 6.11, show all material indebtedness and other liabilities, direct or contingent, of Esterline and its consolidated Subsidiaries as of the date hereof, including liabilities for taxes, material commitments and Contingent Obligations required to be disclosed in accordance with GAAP.

    (b) Since October 31, 1999 (assuming that this Agreement were in effect on such date and thereafter), there has been no Material Adverse Effect.

6.12  Environmental Matters.

    Each Company conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof each Company has reasonably concluded that, except as specifically disclosed on Schedule 6.12, such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

6.13  Regulated Entities.

    None of the Companies, nor any Person controlling any Company, nor any Subsidiary is an "Investment Company" within the meaning of the Investment Company Act of 1940. No Company is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness.

6.14  No Burdensome Restrictions.

    None of the Companies or any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect.

6.15  Copyrights, Patents, Trademarks and Licenses, etc.

    To the best of each Company's knowledge, each Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of each Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Company or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed on Schedule 6.05, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of each Company, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

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6.16  Subsidiaries.

    As of the Closing Date, no Company has any Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.16 hereto, which shows the form of organization and ownership of each such Corporation, and has no equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 6.16. Each Company other than Esterline is a Wholly Owned Subsidiary of Esterline.

6.17  Insurance.

    Except as specifically disclosed on Schedule 6.17, the properties of the Companies and their respective Subsidiaries are insured with financially sound and reputable insurance companies that are not Affiliates of any Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where any Company or such Subsidiary operates.

6.18  Swap Obligations.

    None of the Companies or any Subsidiary has incurred any outstanding obligations under any Swap Contracts, other than Permitted Swap Obligations. Each Company has voluntarily entered into each Swap Contract to which it is a party based upon its own independent assessment of its consolidated assets, liabilities and commitments, in each case as an appropriate means of mitigating and managing risks associated with such matters, and has not relied on any swap counterparty or any Affiliate of any swap counterparty in determining whether to enter into any Swap Contract.

6.19  Full Disclosure.

    To the best knowledge after due inquiry of any Responsible Officer of any of the Companies, none of the representations or warranties made by any Company or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of any Company or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of any Company to the Banks prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.

ARTICLE VII

AFFIRMATIVE COVENANTS

    So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:

7.01  Financial Statements.

    The Companies shall deliver to the Agent, in form and detail satisfactory to the Agent and the Majority Banks, with sufficient copies for each Bank:

    (a) as soon as available, but not later than one hundred days following the end of each fiscal year of Esterline: (i) a copy of the audited consolidated balance sheet of Esterline and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Ernst & Young LLP or another nationally recognized independent public accounting firm

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("Independent Auditor") which report shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years, and together with SEC Form 10-Ks for each Company required to file such form with the SEC; and (ii) a copy of an unaudited consolidating balance sheet of Esterline and its Subsidiaries as at the end of such year and the related consolidating statements of income, shareholders' equity and cash flows for such year, certified by a Responsible Officer as having been developed and used in connection with the preparation of the financial statements referred to in the immediately preceding clause (i). The Independent Auditor's opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of any Company's or any Subsidiary's records; and

    (b) as soon as available, but not later than forty-five (45) days following the end of each of the first three fiscal quarters of each fiscal year of Esterline, a copy for the immediately preceding fiscal quarter of the unaudited consolidated and consolidating balance sheets of Esterline and its Subsidiaries as of the end of such quarter and the related consolidated and consolidating statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of each Company and the Subsidiaries, together with SEC Form 10-Qs for each Company required to file such form with the SEC.

7.02  Certificates; Other Information.

    The Companies shall furnish to the Agent, with sufficient copies for each Bank:

    (a) concurrently with the delivery of the financial statements referred to in Sections 7.01(a) and (b), a Compliance Certificate executed by a Responsible Officer;

    (b) except for SEC Forms 10-K and 10-Q to be delivered pursuant to Sections 7.01(a) and (c), promptly, and in any event no later than 10 days after the same is made available to any Company's shareholders or is filed with the SEC, copies of all financial statements and reports that each Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports that each Company or any Subsidiary may make to, or file with, the SEC;

    (c) concurrently with the delivery of the financial statements referred to in Section 7.01(a), a copy of an annual business plan and cash budget for Esterline, together with an annual business forecast for the succeeding twelve month period, presented on a quarterly basis, in such form and in such detail as the Agent or the Majority Banks may require;

    (d) upon the request from time to time of the Agent, the Swap Termination Values, together with a description of the method by which such values were determined, relating to any then-outstanding Swap Contracts to which any Company or any of its Subsidiaries is party; and

    (e) promptly, such additional information regarding the business, financial or corporate affairs of each Company or any Subsidiary as the Agent, at the request of any Bank, may from time to time reasonably request.

7.03  Notices.

    The Companies shall promptly notify the Agent and each Bank of:

    (a) the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default;

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    (b) any matter that has resulted or could reasonably result in a Material Adverse Effect, including: (i) breach or non-performance of, or any default under, a Contractual Obligation of any Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between any Company or any Subsidiary and any Governmental Authority; (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Company or any Subsidiary; including pursuant to any applicable Environmental Laws; or (iv) the imposition of any fine or penalty by any Governmental Authority against or with respect to any facility or plants of any Company or any Subsidiary;

    (c) the occurrence of any of the following events affecting any Company or any ERISA Affiliate (but in no event more than 10 days after such event), and deliver to the Agent and each Bank a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to any Company or any ERISA Affiliate with respect to such event:

     (i) an ERISA Event;

    (ii) an increase in the Unfunded Pension Liability of any Pension Plan, including as a result of the adoption of any amendment to a Plan subject to Section 412 of the Code, that could reasonably be likely to cause or result in an Event of Default under Section 9.01(h); or

    (iii) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by any Company or any ERISA Affiliate other than any such Plan in effect and receiving contributions as of the Closing Date.

    (d) any Acquisition, or incurring any Contractual Obligations with respect to any Acquisition, by any Company or any Subsidiary of any Company, if the aggregate cash and noncash consideration (including assumption of liabilities and including all Contingent Obligations) in connection with such Acquisition is (or could reasonably be expected to become) $10,000,000 or more; and

    (e) any Change in Control or any event or circumstance that is reasonably likely to result in any Change in Control.

    Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action any Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under Section 7.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated.

7.04  Preservation of Corporate and Partnership Existence, etc.

    Each Company shall, and shall cause each Subsidiary to:

    (a) (i) preserve and maintain in full force and effect (A) its corporate or partnership existence, as the case may be, and good standing under the laws of its state or jurisdiction of incorporation or organization, and (B) all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business; and (ii) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; provided that the foregoing shall not prevent any transaction permitted by Section 8.02 or 8.03, or the termination of the existence of any Subsidiary (other than a Company) if, in the opinion of the Board of Directors of Esterline, such termination is in the best interest of Esterline and is not otherwise prohibited by this Agreement; and

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    (b) preserve or renew and maintain all of its registered patents, trademarks, trade names and service marks and other intellectual property assets, the nonpreservation or nonmaintenance of which could reasonably be expected to have a Material Adverse Effect.

7.05  Maintenance of Property.

    Each Company shall maintain, and shall cause each Subsidiary to maintain, and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Each Company and each Subsidiary shall use the standard of care typical in the industry in the operation and maintenance of its facilities.

7.06  Insurance.

    Each Company shall maintain, and shall cause each Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons.

7.07  Payment of Obligations.

    Each Company shall, and shall cause each Subsidiary to, pay and discharge as the same shall become due and payable, all their respective material obligations and liabilities, including: (a) all material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by each Company or such Subsidiary; (b) all lawful material claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable (but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness), unless contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by each Company or such Subsidiary, except to the extent that the nonpayment thereof would not result in or reasonable be expected to result in a Material Adverse Effect.

7.08  Compliance with Laws; Joinder Agreements.

    (a) Each Company shall comply, and shall cause each Subsidiary to comply, in all respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business or properties (including the Federal Fair Labor Standards Act), unless such noncompliance is being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by each Company or such Subsidiary with respect thereto, except to the extent any such noncompliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

    (b) If, at any time, the aggregate sales revenue of all Subsidiaries which are not Borrower Subsidiaries for the twelve consecutive calendar month period most recently ended exceeds ten percent (10%) of Esterline's consolidated sales revenue for its fiscal year immediately preceding such twelve consecutive calendar month period, then the Companies shall cause that number of such Persons to execute Joinder Agreements as is necessary so that, following the execution of such Joinder Agreements, the aggregate sales revenue of all Subsidiaries which are not Borrower Subsidiaries for the twelve consecutive calendar month period most recently ended is less than or equal to ten percent (10%) of Esterline's consolidated sales revenue for its fiscal year immediately preceding such twelve

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consecutive calendar month period. Any Joinder Agreement required pursuant to this Section 7.08(b) shall be executed and delivered to the Agent within fifteen (15) calendar days following the end of any such twelve month period.

    (c) If a Joinder Agreement is required to be executed and delivered pursuant to Section 7.08(b) or Section 8.04(e), each Company shall: (i) execute and cause the subject Person(s) to execute and deliver to the Agent a Joinder Agreement within the time period required by such Sections; and (ii) deliver or cause to be delivered, concurrently upon the delivery of such Joinder Agreement, such other documentation as the Agent may reasonably request in connection with the foregoing, which documentation may include certified resolutions and other organizational and authorizing documents of such Person(s) and a favorable opinion of counsel to such Person(s) which shall cover the legality, validity, binding effect and enforceability against such Person(s) of such Joinder Agreement and the other Loan Documents to which such Person(s) become(s) a party by virtue of such Joinder Agreement.

7.09  Inspection of Property and Books and Records.

    Each Company shall maintain, and shall cause each Subsidiary to maintain, proper books of record and account, in which full, true and correct entries in conformity with GAAP shall be made of all financial transactions and matters involving the assets and business of each Company and such Subsidiary. Each Company shall permit, and shall cause each Subsidiary to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Companies; provided that, when an Event of Default exists, the Agent or any Bank may do any of the foregoing at the expense of the Companies at any time during normal business hours and without advance notice.

7.10  Environmental Laws.

    Each Company shall, and shall cause each Subsidiary to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws, if any noncompliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

7.11  Use of Proceeds.

    The Companies shall use the proceeds of the Loans for working capital, other general corporate purposes and for non-hostile Acquisitions, in each case not in contravention of any Requirement of Law or of any Loan Document; provided that no Company shall directly or indirectly use the proceeds of the Loans for any Acquisition of any Person if such Acquisition has not been approved by the board of directors (or other body exercising similar authority) of such Person.

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ARTICLE VIII

NEGATIVE COVENANTS

    So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:

8.01  Limitation on Liens.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"):

    (a) any Lien existing on property of any of the Companies or any of their respective Subsidiaries on the Closing Date securing Indebtedness outstanding on the Closing Date; provided that, if all such Indebtedness so secured by such Liens exceeds $1,000,000 in the aggregate on the Closing Date, then no such Liens shall be permitted under this Section 8.01(a) except for those disclosed on Schedule 8.01(a);

    (b) any Lien created under any Loan Document;

    (c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 7.07(a), provided that no notice of lien has been filed or recorded under the Code;

    (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

    (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation;

    (f)  Liens on the property of any Company or its Subsidiaries securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business;

    (g) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such liens in the aggregate at any time outstanding for the Companies and their respective Subsidiaries do not exceed $2,500,000;

    (h) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Companies and their respective Subsidiaries;

    (i)  Liens on assets of corporations which become Subsidiaries after the date of this Agreement, provided that such Liens existed at the time the respective corporations became Subsidiaries and were not created in anticipation thereof;

    (j)  purchase money security interests on any property acquired or held by any of the Companies or their respective Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so

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acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the principal amount of the Indebtedness secured by any and all such purchase money security interests shall not at any time exceed, together with Indebtedness permitted under Section 8.05(c), $10,000,000;

    (k) Liens securing obligations in respect of capital leases on assets subject to such leases, provided that such capital leases are otherwise permitted hereunder;

    (l)  Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by any of the Companies in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by any of the Companies or any of their respective Subsidiaries to provide collateral to the depository institution; and

    (m) Liens arising pursuant to Section 412(n) of the Code or Section 4069(a) of ERISA if (i) the delinquent payments to which the Lien relates are made within ten (10) days after the Company or any Subsidiary learns of the failure to make payment or (ii) the obligation to make such payments is being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Companies, in accordance with GAAP.

8.02  Disposition of Assets.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except:

    (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business;

    (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment;

    (c) the sale or other disposition by any Subsidiary (other than a Company) of all or substantially all of its assets (upon voluntary liquidation or otherwise) to any of the Companies;

    (d) dispositions not otherwise permitted hereunder which are made for fair market value; provided that (i) at the time of any disposition, no Default or Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from such disposition shall be paid in cash, and (iii) the aggregate value (without duplication) of (A) all assets so sold by the Companies and their respective Subsidiaries, together, and (B) all assets of all Subsidiaries of the Company merged with another Person in accordance with Section 8.03(b), together, shall not exceed, in the aggregate, in any 12-month period fifteen percent (15%) of Consolidated Total Assets as of the end of the immediately preceding fiscal year; provided further that, to the extent the stock of any Company is sold, conveyed, transferred or otherwise disposed of in accordance with the provisions of this Agreement (including this Section 8.02) to a Person not a Company or a Subsidiary of Esterline, then such Company shall automatically and without further action cease to be a party to or be bound by the Loan Agreements (including in its capacity as a Guarantor).

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8.03  Consolidations and Mergers.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, liquidate, wind up or dissolve, or enter into any consolidation, merger or other combination, or agree to do any of the foregoing, except:

    (a) any Subsidiary (other than a Company) may merge with any of the Companies (so long as a Company shall be the continuing or surviving Person) or with any one or more Subsidiaries, provided that, if any transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving Person; and

    (b) any Subsidiary (other than a Company) may merge with any other Person, whether or not such Subsidiary shall be the surviving corporation, if the aggregate value (without duplication) of (i) the assets of all Subsidiaries involved in such transaction or transactions, together and (ii) all assets sold by the Companies and their respective Subsidiaries, together, in accordance with Section 8.03(c) does not exceed in the aggregate in any 12-month period fifteen percent (15%) of Consolidated Total Assets as of the end of the immediately preceding fiscal year.

8.04  Loans and Investments.

    The Companies shall not purchase or acquire, or suffer or permit any Subsidiary to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, or joint venture with, any Person including any Affiliate of any of the Companies (together, "Investments"), except for:

    (a) Investments held by any of the Companies or their respective Subsidiaries in the form of cash equivalents or short term marketable securities;

    (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business of the Companies and their Subsidiaries;

    (c) Investments not otherwise prohibited by this Agreement or any of the other Loan Documents by any Company in any other Company;

    (d) extensions of credit by any of the Companies to any of their respective Wholly Owned Subsidiaries that are not Companies, or by any of such Wholly Owned Subsidiaries to another such Wholly Owned Subsidiary, in an aggregate principal amount at any time outstanding for all such extensions of credit to such Persons not in excess of ten percent (10%) of Consolidated Net Worth;

    (e) Investments not otherwise permitted pursuant to subsections (a), (b), (c) or (d) of this Section in (including Acquisitions of) Persons engaged in general industrial manufacturing or other lines of business substantially similar to the lines of business of Esterline or its Subsidiaries, provided that all of the following are true at the time of any such Investment (including any Acquisition) and, except as set forth below, at the time that any of the Companies or any Subsidiary incurs any Contractual Obligation with respect to any such Investment (including any Acquisition):

     (i) the amount of all Investments permitted pursuant to this Section 8.04(e), including all Indebtedness incurred or assumed in connection with any such Investment, does not exceed in the aggregate $125,000,000 for the most recent twelve consecutive calendar month period;

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    (ii) no Default or Event of Default shall have occurred and be continuing or result therefrom; and

    (iii) with respect to Acquisitions of any Person with annual sales revenue for the immediately preceding consecutive 12 months in excess of ten percent (10%) of Esterline's consolidated sales revenue for its immediately preceding fiscal year (or, at the discretion of the Majority Banks, the immediately preceding four fiscal quarters): (A) Esterline has presented to the Agent and the Banks pro forma financial projections, using the most recent audited historical results of the Person subject to such Acquisition and using the most recent historical results of the of the Companies and their Subsidiaries delivered to the Agent and the Banks pursuant to Section 7.01, which demonstrate to the satisfaction of the Agent and the Majority Banks that for the 12-month period following the consummation of such Acquisition, the Companies will remain in compliance with Sections 8.12, 8.13 and 8.14 of this Agreement; and (B) the Person the subject of such Acquisition and the Companies shall have executed and delivered to the Agent a Joinder Agreement upon the making or consummation of such Acquisition; and

    (f)  Investments constituting Permitted Swap Obligations or payments or advances under Swap Contracts relating to Permitted Swap Obligations.

8.05  Limitation on Indebtedness.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

    (a) Indebtedness incurred pursuant to this Agreement;

    (b) Indebtedness existing on the Closing Date and set forth on Schedule 8.05(b) and any extensions and renewals of such Indebtedness on terms otherwise permitted pursuant to this Agreement, so long as the principal amount is not increased, additional collateral is not given and unsecured Indebtedness is not made secured Indebtedness;

    (c) Indebtedness secured by Liens permitted by Section 8.01(j) in an aggregate amount outstanding not to exceed $10,000,000;

    (d) Indebtedness owing by any Company to any other Company that is not otherwise prohibited by this Agreement or any of the other Loan Documents;

    (e) Indebtedness arising as a consequence of Investments permitted pursuant to Section 8.04(d);

    (f)  Indebtedness owing by a Subsidiary of Esterline that is not a Company to a Person other than Esterline or any Subsidiary of Esterline, provided that the aggregate amount of all such Indebtedness outstanding at any time does not exceed ten percent (10%) of Consolidated Net Worth as set forth in Esterline's quarterly or annual consolidated financial statements most recently delivered to the Agent pursuant to Section 7.01; and

    (g) Indebtedness not otherwise permitted pursuant to subsection (a) through (f) of this Section, if (i) such Indebtedness is incurred or arises with respect to a transaction not otherwise prohibited by this Agreement and (ii) immediately prior to and upon becoming obligated with respect to such Indebtedness, no Default or Event of Default shall exist.

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8.06  Transactions with Affiliates.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, enter into any transaction with any Affiliate of the Companies, except upon fair and reasonable terms no less favorable to such Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Companies or such Subsidiary.

8.07  Use of Proceeds.

    (a) The Companies shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Companies or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act.

    (b) The Companies shall not, directly or indirectly, use any portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities from the Arranger during any period in which the Arranger makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by the Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of any of the Companies or any Affiliate of the Companies. The Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities"means securities that may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. §24, Seventh), as amended.

8.08  Contingent Obligations.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any Contingent Obligations except:

    (a) endorsements for collection or deposit in the ordinary course of business;

    (b) Permitted Swap Obligations;

    (c) Contingent Obligations of the Companies and their respective Subsidiaries existing as of the Closing Date and listed on Schedule 8.08(c);

    (d) Contingent Obligations with respect to Surety Instruments incurred in the ordinary course of business and which otherwise constitute Indebtedness permitted pursuant to Section 8.05; and

    (e) Guaranty Obligations incurred in the ordinary course of business which otherwise constitute Indebtedness permitted pursuant to Section 8.05 and which in the aggregate do not exceed ten percent (10%) of Consolidated Net Worth.

8.09  Restricted Payments.

    The Companies shall not, and shall not suffer or permit any Subsidiary to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding; except that any of the Companies may:

    (a) declare and make dividend payments or other distributions payable solely in its common stock;

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    (b) purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock; and

    (c) declare or pay cash dividends to its stockholders and purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to acquire any such shares for cash solely out of 50% of net income of such Company and its Subsidiaries in any fiscal year and computed on a cumulative consolidated basis, provided that, immediately after giving effect to such proposed action, no Default or Event of Default would exist.

8.10  ERISA.

    The Companies shall not, and shall not suffer or permit any of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan; (b) cause or permit any Plan which is qualified under subsection 401(a) of the Code to lose such qualification; or (c) fail to make all required contributions to any Plan subject to subsection 412 of the Code; but only to the extent that any such act or failure to act, separately or together with all other such acts or failures to act, in any of the foregoing clauses (a), (b) or (c) has resulted or could reasonably expected to result in liability of the Companies in an aggregate amount in excess of $1,000,000; or (d) engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA

8.11  Change in Business.

    Except as permitted pursuant to Section 8.04, the Companies shall not, and shall not suffer or permit any Subsidiary to, engage in any material line of business substantially different from those lines of business carried on by the Companies and their respective Subsidiaries on the date hereof, including as a consequence of any Acquisition.

8.12  Minimum Consolidated Net Worth.

    The Companies shall not permit, as of the last day of any fiscal quarter, Consolidated Net Worth to be less than the sum of the following:

    (a) $198,000,000; plus

    (b) 50% of Consolidated Net Income from April 30, 2000 through the end of each fiscal quarter thereafter, determined quarterly on a consolidated basis and not reduced by any Consolidated Net Loss, plus

    (c) 75% of Net Securities Proceeds arising on or after the Closing Date to the date of determination.

As used herein, "Net Securities Proceeds" means, with respect to any sale or issuance of equity securities (whether common or preferred, options, warrant or capital appreciation rights, but excluding any sales or issuances of stock pursuant to employee stock purchase plans, employee stock option plans or other employee benefit plans), the excess of (i) the gross cash and, to the extent acceptable to the Agent and the Majority Banks, noncash proceeds received or receivable by Esterline or any Subsidiary from such disposition minus (ii) the sum of (A) all reasonable Attorney Costs and underwriting and accounting fees and disbursements and government fees actually paid (or reasonably expected to be paid during the fiscal year in which such sale or issuance occurs) in connection with such sale or issuance which are not payable to Esterline or to any Affiliate of Esterline or any Subsidiary; (B) all taxes actually paid in connection with such sale or issuance; and (C) the value of such acceptable noncash proceeds.

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8.13  Maximum Leverage Ratio.

    The Companies shall not permit, as of the last day of any fiscal quarter, the Leverage Ratio to exceed 0.60 to 1.00.

8.14  Minimum Fixed Charge Coverage Ratio.

    The Companies shall not permit, as of the last day of any fiscal quarter, the ratio of (a) the sum of (i) EBITDA, measured for the period consisting of the four consecutive fiscal quarters ending on such day, minus (ii) all taxes actually paid by the Companies (determined on a consolidated basis) in cash during such period, minus (iii) all Capital Expenditures actually made by the Companies (determined on a consolidated basis) during such period to (b) the sum of (i) interest expense, measured for the period consisting of the four consecutive fiscal quarters ending on such day, which was deductible in determining the Consolidated Net Income or Consolidated Net Loss, as applicable, for such period, plus the current portion (determined in accordance with GAAP) of Consolidated Funded Debt (such ratio, the "Fixed Charge Coverage Ratio"), to be less than: (A) on or prior to October 31, 2002, 1.75 to 1.00; and (B) thereafter, 2.00 to 1.00; provided that, if, as of the last day of any fiscal quarter, the Leverage Ratio is less than or equal to 0.50 to 1.00, then the Companies may exclude, for purposes of calculating the denominator of the Fixed Charge Coverage Ratio as of the last day of such fiscal quarter, the current portion (determined in accordance with GAAP) of the Consolidated Funded Debt of the Companies evidenced by the 1999 Senior Notes.

ARTICLE IX

EVENTS OF DEFAULT

9.01  Event of Default.

    Any of the following shall constitute an "Event of Default":

    (a)  Non-Payment.  Any Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) days after the same becomes due, any interest, fee or any other amount payable hereunder or under any other Loan Document; or

    (b)  Representation or Warranty.  Any representation or warranty by any of the Companies or any of their respective Subsidiaries made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by any of the Companies, any of their respective Subsidiaries, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or

    (c)  Specific Defaults.  The of the Companies fails to perform or observe any term, covenant or agreement contained in Article VII (other than any of Sections 7.06, 7.07, 7.08 or 7.10) or in Article VIII; or

    (d)  Other Defaults.  Any of the Companies fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such failure or (ii) the date upon which written notice thereof is given to such Company by the Agent or any Bank; or

    (e)  Cross-Default.  (i) Any Company or any Subsidiary (A) fails to make any payment in respect of any Indebtedness or Contingent Obligation (other than in respect of Swap Contracts), having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $2,500,000 when due (whether by scheduled maturity, required prepayment,

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acceleration, demand, or otherwise); or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (2) any Termination Event (as so defined) as to which any Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by such Company or such Subsidiary as a result thereof is greater than $250,000; or

    (f)  Insolvency; Voluntary Proceedings.  Any Company or any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or

    (g)  Involuntary Proceedings.  (i) Any involuntary Insolvency Proceeding is commenced or filed against any Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of any Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) any Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) any Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or

    (h)  ERISA.  (i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Companies under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC; (ii) any Unfunded Pension Liability with respect to any or all Pension Plans shall exist; or (iii) the Companies or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; but only to the extent that any of the foregoing, separately or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect; or

    (i)  Monetary Judgments.  One or more noninterlocutory judgments, noninterlocutory orders, decrees or arbitration awards is entered against any of the Companies or any of their respective Subsidiaries involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after the entry thereof; or

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    (j)  Non-Monetary Judgments.  Any non-monetary judgment, order or decree is entered against any of the Companies or any of their respective Subsidiaries which does or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

    (k)  Change of Control.  There occurs any Change of Control; or

    (l)  Loss of Licenses.  Any Governmental Authority revokes or fails to renew any material license, permit or franchise any of the Companies or any of their Subsidiaries, or any of the Companies or any of their respective Subsidiaries for any reason loses any material license, permit or franchise, or any of the Companies or any of their Subsidiaries suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise; or

    (m)  Adverse Change.  There occurs a Material Adverse Effect; or

    (n)  Guarantor Defaults.  Any Guarantor fails in any material respect to perform or observe any term, covenant or agreement as a guarantor of the Obligations pursuant to Section 11.18, or the guaranty set forth therein is for any reason partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or any Company as a guarantor (or any other Person) contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder; or any event described at subsections (f) or (g) of this Section occurs with respect to any Guarantor.

9.02  Remedies.

    If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks,

    (a) declare the commitment of each Bank to make Loans to be terminated, whereupon such commitments shall be terminated;

    (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each of the Companies; and

    (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law;

provided that, upon the occurrence of any event specified in subsection (f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank.

9.03  Rights Not Exclusive.

    The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

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9.04  Certain Financial Covenant Defaults.

    In the event that, after taking into account any extraordinary charge to earnings taken or to be taken as of the end of any fiscal period of any Company (a "Charge"), and if solely by virtue of such Charge, there would exist an Event of Default due to the breach of any of Sections 8.12, 8.13 or 8.14 as of such fiscal period end date, such Event of Default shall be deemed to arise upon the earlier of (a) the date after such fiscal period end date on which such Company announces publicly it will take, is taking or has taken such Charge (including an announcement in the form of a statement in a report filed with the SEC) or, if such announcement is made prior to such fiscal period end date, the date that is such fiscal period end date, and (b) the date such Company delivers to the Agent its audited annual or unaudited quarterly financial statements in respect of such fiscal period reflecting such Charge as taken.

ARTICLE X

THE AGENT

10.01  Appointment and Authorization; "Agent."

    (a) Each Bank hereby irrevocably (subject to Section 10.09) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

    (b) The Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Agent may agree at the request of the Majority Banks to act for such Issuing Bank with respect thereto; provided that the Issuing Bank shall have all of the benefits and immunities (i) provided to the Agent in this Article X with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit Issued by it (including the Existing Letters of Credit) or proposed to be Issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Agent," as used in this Article X, included the Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Bank.

    (c) Without limiting the generality of the foregoing subsections, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

    (d) The provisions of this Article X shall survive the payment of all Obligations hereunder and inure to the benefit of Bank of America, including after its resignation or replacement as the Agent, as to any actions taken or omitted to be taken by Bank of America while it was the Agent.

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10.02  Delegation of Duties.

    The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

10.03  Liability of Agent.

    None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by any of the Companies or any Subsidiary or Affiliate of the Companies, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Companies or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Companies or any of their Subsidiaries or Affiliates.

10.04  Reliance by Agent.

    (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Companies), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks.

    (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank.

10.05  Notice of Default.

    The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or a Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Agent will notify the Banks of its

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receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article IX; provided that, unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks.

10.06  Credit Decision.

    Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Companies and their respective Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and credit worthiness of the Companies and their respective Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Companies hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and credit worthiness of the Companies and their respective Subsidiaries. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or credit worthiness of the Companies which may come into the possession of any of the Agent-Related Persons.

10.07  Indemnification of Agent.

    Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Companies and without limiting the obligation of the Companies to do so), pro rata, from and against any and all Indemnified Liabilities; provided that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Companies. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

10.08  Agent in Individual Capacity.

    Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Companies and their respective Subsidiaries and Affiliates as though Bank of America were not the Agent hereunder and without notice to or

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consent of the Banks. The Banks acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any of the Companies or their Affiliates (including information that may be subject to confidentiality obligations in favor of such Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" include Bank of America in its individual capacity.

10.09  Successor Agent.

    The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Companies, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above.

10.10  Withholding Tax.

    (a) If any Bank is a "foreign corporation, partnership or trust" within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to the Agent:

     (i) if such Bank claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, two properly completed and executed copies of IRS Form 1001 (or any successor applicable form, including Form W-8BEN) or Form 4224 (or any successor applicable form, including Form W-8ECI) before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement;

    (ii) if such Bank claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Bank, two properly completed and executed copies of IRS Form 4224 (or any successor applicable form, including Form W-8ECI) before the payment of any interest is due in the first taxable year of such Bank and in each succeeding taxable year of such Bank during which interest may be paid under this Agreement; and

    (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.

Such Bank agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

    (b) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 (or any successor applicable form, including Form W-8BEN) and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of

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the Companies to such Bank, such Bank agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Companies to such Bank. To the extent of such percentage amount, the Agent will treat such Bank's IRS Form 1001 (or any successor applicable form, including Form W-8BEN) as no longer valid.

    (c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 (or any successor applicable form, including Form W-8ECI) with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Companies to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

    (d) If any Bank is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. However, if the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction.

    (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered or was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

ARTICLE XI

MISCELLANEOUS

11.01  Amendments and Waivers.

    No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Companies or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Companies and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and Companies and acknowledged by the Agent, do any of the following:

    (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.02);

    (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document;

    (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document;

    (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder;

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    (e) amend this Section, or Section 2.14, or any provision herein providing for consent or other action by all Banks; or

    (f)  except as otherwise provided under Section 8.02(d), release any Guarantor or terminate any Guarantor's guaranty hereunder;

provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto.

11.02  Notices.

    (a) All notices, requests, consents, approvals, waivers and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Companies by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 11.02, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 11.02; or, as directed to the Companies or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Companies and the Agent.

    (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or X to the Agent shall not be effective until actually received by the Agent.

    (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Companies. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by any of the Companies to give such notice and the Agent and the Banks shall not have any liability to any of the Companies or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Companies to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice.

11.03  No Waiver; Cumulative Remedies.

    No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; 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.

11.04  Costs and Expenses.

    The Companies shall:

    (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse Bank of America (including in its capacity as Agent) and the Arranger within five Business Days after demand for all costs and expenses incurred by Bank of America (including in its capacity as Agent) or the Arranger in connection with the development, preparation, delivery, administration

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and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by Bank of America (including in its capacity as Agent) with respect thereto; and

    (b) pay or reimburse the Agent, the Arranger and each Bank within five Business Days after demand for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding).

11.05  Indemnity.

    (a)  General Indemnity.  Whether or not the transactions contemplated hereby are consummated, the Companies shall indemnify, defend and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that the Companies shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

    (b)  Environmental Indemnity.

     (i) The Companies hereby agree to indemnify, defend and hold harmless each Indemnified Person, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs and the allocated cost of internal environmental audit or review services), which may be incurred by or asserted against such Indemnified Person in connection with or arising out of any pending or threatened investigation, litigation or proceeding, or any action taken by any Person, with respect to any Environmental Claim arising out of or related to any Property of any of the Companies or any of their respective Subsidiaries. No action taken by legal counsel chosen by the Agent or any Bank in defending against any such investigation, litigation or proceeding or requested remedial, removal or response action shall vitiate or any way impair the Companies' obligation and duty hereunder to indemnify and hold harmless the Agent and each Bank.

    (ii) In no event shall any site visit, observation, or testing by the Agent or any Bank be deemed a representation or warranty that Hazardous Materials are or are not present in, on, or under the site, or that there has been or shall be compliance with any Environmental Law. Neither the Companies nor any other Person is entitled to rely on any site visit, observation, or testing by the Agent or any Bank. Neither the Agent nor any Bank owes any duty of care to protect the Companies or any other Person against, or to inform the Companies or any other party of, any

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Hazardous Materials or any other adverse condition affecting any site or Property. Neither the Agent nor any Bank shall be obligated to disclose to the Companies or any other Person any report or findings made as a result of, or in connection with, any site visit, observation, or testing by the Agent or any Bank.

    (c)  Survival; Defense.  The obligations in this Section 11.05 shall survive payment of all other Obligations. At the election of any Indemnified Person, each of the Companies shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person's sole discretion, at the sole cost and expense of the Companies.

    (d)  Existing Indemnification Rights.  All rights of the Agent and the Banks in respect of any indemnification and otherwise for reimbursement or payment of any losses, costs, charges, expenses or disbursements (including Attorney Costs) under or in respect of the Existing Facility shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

11.06  Payments Set Aside.

    To the extent that any of the Companies makes a payment to the Agent or the Banks, or the Agent or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent.

11.07  Successors and Assigns.

    The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that none of the Companies may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank.

11.08  Assignments, Participations, etc.

    (a) Any Bank may, with the written consent of the Agent and with the written consent of Esterline at all times other than during the existence of an Event of Default, which consent of Esterline, if required, shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of Esterline or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000; provided that the Companies and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to Esterline and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to Esterline and the Agent an Assignment and Acceptance in the form of Exhibit E ("Assignment and Acceptance") together with any Note or Notes subject to such assignment and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500. If the consent of the Agent and of Esterline shall be required for any such assignment, the Bank

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proposing to make such assignment shall give the Agent and Esterline no less than 20 calendar days notice of such requested consent.

    (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents.

    (c) Within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee and requesting new Notes (and provided that it consents to such assignment in accordance with Section 11.08(a)), the Companies shall execute and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto.

    (d) Any Bank may, with the written consent of Esterline at all times other than during the existence of an Event of Default, which consent of Esterline, if required, shall not be unreasonably withheld, at any time sell to one or more commercial banks or other Persons not Affiliates of the Companies (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Companies and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as pursuant to subsections (a), (b) or (c) of the first proviso to Section 11.01, in which event such Participant shall (if agreed by the originating Bank) be entitled to vote with respect to such amendment, consent or waiver. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 4.01, 4.03 and 11.05 as though it were also a Bank hereunder, and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. If the consent of the Esterline shall be required for any such participation, the Bank proposing to make such participation shall give the Agent and Esterline no less than 20 calendar days notice of such requested consent.

    (e) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

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11.09  Confidentiality.

    Each Bank agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Companies and provided to it by any of the Companies or any of their respective Subsidiaries, or by the Agent on such Company's or such Subsidiary's behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with any of the Companies or any of their respective Subsidiaries; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank, or (ii) was or becomes available on a nonconfidential basis from a source other than the Companies, so long as such source is not bound by a confidentiality agreement with the Companies known to the Bank; provided that any Bank may disclose such information (A)  at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's independent auditors and other professional advisors; (G) to any Participant or Assignee, actual or potential so long as such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which any of the Companies or any of their respective Subsidiaries is party to or is deemed party with such Bank or such Affiliate; and (I) to its Affiliates.

11.10  Set-off.

    In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Companies, any such notice being waived by the Companies to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Companies against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Companies and the Agent after any such set-off and application made by such Bank; provided that the failure to give such notice shall not affect the validity of such set-off and application.

11.11  Notification of Addresses, Lending Offices, etc.

    Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request.

11.12  Termination of the Facility A Commitment under Existing Facility.

    Pursuant to Section 2.05 of the Existing Facility, the Companies hereby terminate the Commitments (as that term is defined in the Existing Facility) as of the Closing Date, and the Banks that are "Banks" under the Existing Facility hereby waive the prior notice requirement in Section 2.05

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for such termination. The Company agrees to pay, on the date hereof, all accrued and unpaid commitment fees under the Existing Facility to the Closing Date.

11.13  Counterparts.

    This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.

11.14  Severability.

    The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

11.15  No Third Parties Benefited.

    This Agreement is made and entered into for the sole protection and legal benefit of the Companies, the Banks, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.

11.16  Governing Law and Jurisdiction.

    (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

    (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANIES, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANIES, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANIES, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.

11.17  Waiver of Jury Trial.

    THE COMPANIES, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR

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OTHERWISE. THE COMPANIES, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

11.18  Guaranty.

    (a)  Guaranty.  Each of the Companies, in its capacity as a Guarantor, unconditionally and irrevocably guarantees to the Agent, the Issuing Bank and the Banks, and their respective successors, endorsees, transferees and assigns, the full and prompt payment when due (whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) and performance of the Obligations of each Company (other than such Guarantor) to the Agent, the Issuing Bank and the Banks (the "Guaranteed Obligations"). The Guaranteed Obligations do not include any of the direct obligations or indebtedness of the Guarantor as a borrower (or an L/C Borrower) under the Credit Agreement to the Issuing Bank, any of the Banks or the Agent. The Guaranteed Obligations include interest which, but for an Insolvency Proceeding, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against any Company for such interest in any such Insolvency Proceeding.

    (b)  Separate Obligation.  Each Guarantor acknowledges and agrees (i) that the Guaranteed Obligations are separate and distinct from any indebtedness, obligations or liabilities arising under or in connection with any other agreement, instrument or guaranty, including under any provision of this Agreement other than this Section 11.18, executed at any time by the Guarantor in favor of the Agent, the Issuing Bank or any of the Banks, and (ii) the Guarantor shall pay and perform all of the Guaranteed Obligations as required under this Section 11.18, and the Agent, the Issuing Bank and the Banks may enforce any and all of their rights and remedies hereunder, without regard to any other agreement, instrument or guaranty, including any provision of this Agreement other than this Section 11.18, at any time executed by the Guarantor in favor of the Agent, the Issuing Bank or any of the Banks, regardless of whether or not any such other agreement, instrument or guaranty, or any provision thereof or hereof, shall for any reason become unenforceable or any of the indebtedness, obligations or liabilities thereunder shall have been discharged, whether by performance, avoidance or otherwise. Each Guarantor acknowledges that in providing benefits to the Companies and the Guarantor, the Agent, the Issuing Bank and the Banks are relying upon the enforceability of this Section 11.18 and the Guaranteed Obligations as separate and distinct indebtedness, obligations and liabilities of the Guarantor, and each Guarantor agrees that the Agent, the Issuing Bank and the Banks would be denied the full benefit of their bargain if at any time this Section 11.18 or the Guaranteed Obligations were treated any differently. The fact that the guaranty is set forth in this Agreement rather than in a separate guaranty document is for the convenience of the Companies and the Guarantors and shall in no way impair or adversely affect the rights or benefits of the Banks, the L/C Bank or the Agent under this Section 11.18. Each Guarantor agrees to execute and deliver a separate agreement, immediately upon request at any time of the Agent or any Bank, evidencing such Guarantor's obligations under this Section 11.18. Upon the occurrence of any Event of Default, a separate action or actions may be brought against the Guarantor, whether or not any other Company or any other guarantor or Person is joined therein or a separate action or actions are brought against any Company or any such other guarantor or Person.

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    (c)  Limitation of Guaranty.  To the extent that any court of competent jurisdiction shall impose by final judgment under applicable law (including the California Uniform Fraudulent Transfer Act and §§544 and 548 of the Bankruptcy Code) any limitations on the amount of the Guarantor's liability with respect to the Guaranteed Obligations which the Agent, the Issuing Bank or the Banks can enforce under this Section 11.18, the Agent, the Issuing Bank and the Banks by their acceptance hereof accept such limitation on the amount of the Guarantor's liability hereunder to the extent needed to make this Section 11.18 fully enforceable and nonavoidable.

    (d)  Liability of Guarantor.  The liability of the Guarantor under this Section 11.18 shall be irrevocable, absolute, independent and unconditional, and shall not be affected by any circumstance which might constitute a discharge of a surety or guarantor other than the indefeasible payment and performance in full of all Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:

     (i) each Guarantor's liability hereunder shall be the immediate, direct, and primary obligation of the Guarantor and shall not be contingent upon the Agent's, the Issuing Bank's or any Bank's exercise or enforcement of any remedy it may have against any of the other Companies or any other Person, or against any collateral or other security for any Guaranteed Obligations;

    (ii) this Guaranty is a guaranty of payment when due and not merely of collectibility;

    (iii) the Agent, the Issuing Bank and the Banks may enforce this Section 11.18 upon the occurrence of an Event of Default notwithstanding the existence of any dispute among the Agent, the Issuing Bank and the Banks and any Company with respect to the existence of such Event of Default;

    (iv) the Guarantor's payment of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge the Guarantor's liability for any portion of the Guaranteed Obligations remaining unsatisfied; and

    (v) the Guarantor's liability with respect to the Guaranteed Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, nor shall the Guarantor be exonerated or discharged by, any of the following events:

    (A) any Insolvency Proceeding;

    (B) any limitation, discharge, or cessation of the liability of the any Company or any other guarantor or Person for any Guaranteed Obligations due to any statute, regulation or rule of law, or any invalidity or unenforceability in whole or in part of any of the Guaranteed Obligations or the Loan Documents;

    (C) any merger, acquisition, consolidation or change in structure of any Company or any other guarantor or Person, or any sale, lease, transfer or other disposition of any or all of the assets or shares of any Company or any other guarantor or other Person;

    (D) any assignment or other transfer, in whole or in part, of the Agent's, the Issuing Bank's or any Bank's interests in and rights under this Guaranty or the other Loan Documents;

    (E) any claim, defense, counterclaim or setoff, other than that of prior performance, that any Company, the Guarantor, any other guarantor or other Person may have or assert, including any defense of incapacity or lack of corporate or other authority to execute any of the Loan Documents;

    (F) the Agent's, the Issuing Bank's or any Bank's amendment, modification, renewal, extension, cancellation or surrender of any Loan Document or any Guaranteed Obligations;

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    (G) the Agent's, the Issuing Bank's or any Bank's exercise or nonexercise of any power, right or remedy with respect to any Guaranteed Obligations or any collateral;

    (H) the Agent's, the Issuing Bank's or any Bank's vote, claim, distribution, election, acceptance, action or inaction in any Insolvency Proceeding; or

    (I) any other guaranty, whether by the Guarantor or any other Person, of all or any part of the Guaranteed Obligations or any other indebtedness, obligations or liabilities of any Company to the Agent or the Banks.

    (e)  Consents of Guarantor.  Each Guarantor hereby unconditionally consents and agrees that, without notice to or further assent from the Guarantor:

     (i) the principal amount of the Guaranteed Obligations may be increased or decreased and additional indebtedness or obligations of any Company under the Loan Documents may be incurred and the time, manner, place or terms of any payment under any Loan Document may be extended or changed, by one or more amendments, modifications, renewals or extensions of any Loan Document or otherwise;

    (ii) the time for any Company's (or any other Person's) performance of or compliance with any term, covenant or agreement on its part to be performed or observed under any Loan Document may be extended, or such performance or compliance waived, or failure in or departure from such performance or compliance consented to, all in such manner and upon such terms as the Agent, the Issuing Bank and the Banks may deem proper;

    (iii) the Agent, the Issuing Bank and the Banks may request and accept other guaranties and may take and hold other security as collateral for the Guaranteed Obligations, and may, from time to time, in whole or in part, exchange, sell, surrender, release, subordinate, modify, waive, rescind, compromise or extend such other guaranties or security and may permit or consent to any such action or the result of any such action, and may apply such security and direct the order or manner of sale thereof; and

    (iv) the Agent, the Issuing Bank and the Banks may exercise, or waive or otherwise refrain from exercising, any other right, remedy, power or privilege even if the exercise thereof affects or eliminates any right of subrogation or any other right of the Guarantor against any Company.

    (f)  Guarantor's Waivers.  Each Guarantor waives and agrees not to assert:

     (i) any right to require the Agent, the Issuing Bank or any Bank to proceed against any Company, any other guarantor or any other Person, or to pursue any other right, remedy, power or privilege of the Agent, the Issuing Bank or any Bank whatsoever;

    (ii) the defense of the statute of limitations in any action hereunder or for the collection or performance of the Guaranteed Obligations;

    (iii) any defense arising by reason of any lack of corporate or other authority or any other defense of any Company, the Guarantor or any other Person;

    (iv) any defense based upon the Agent's, the Issuing Bank's or any Bank's errors or omissions in the administration of the Guaranteed Obligations;

    (v) any rights to set-offs and counterclaims;

    (vi) without limiting the generality of the foregoing, to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties, or which may conflict with the terms of this Section 11.18, including any and all benefits that otherwise might be available to the Guarantor under California

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Civil Code §§1432, 2809, 2810, 2815, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure §§580a, 580b, 580d and 726; and

   (vii) any and all notice of the acceptance of this guaranty, and any and all notice of the creation, renewal, modification, extension or accrual of the Guaranteed Obligations, or the reliance by the Agent, the Issuing Bank and the Banks upon this guaranty, or the exercise of any right, power or privilege hereunder. The Guaranteed Obligations shall conclusively be deemed to have been created, contracted, incurred and permitted to exist in reliance upon this guaranty. Each Guarantor waives promptness, diligence, presentment, protest, demand for payment, notice of default, dishonor or nonpayment and all other notices to or upon any Company, each Guarantor or any other Person with respect to the Guaranteed Obligations.

    (g)  Financial Condition of Borrower.  No Guarantor shall have any right to require the Agent, the Issuing Bank or the Banks to obtain or disclose any information with respect to: the financial condition or character of any Company or the ability of any Company to pay and perform the Guaranteed Obligations; the Guaranteed Obligations; any collateral or other security for any or all of the Guaranteed Obligations; the existence or nonexistence of any other guarantees of all or any part of the Guaranteed Obligations; any action or inaction on the part of the Agent, the Issuing Bank or the Banks or any other Person; or any other matter, fact or occurrence whatsoever. Each Guarantor hereby acknowledges that it has undertaken its own independent investigation of the financial condition of any Company and all other matters pertaining to this guaranty and further acknowledges that it is not relying in any manner upon any representation or statement of the Agent, the Issuing Bank or any Bank with respect thereto.

    (h)  Subrogation.  Until the Guaranteed Obligations shall be satisfied in full and the Commitments shall be terminated, the Guarantor shall not have, and shall not directly or indirectly exercise, (i) any rights that it may acquire by way of subrogation under this Section 11.18, by any payment hereunder or otherwise, (ii) any rights of contribution, indemnification, reimbursement or similar suretyship claims arising out of this Section 11.18 or (iii) any other right which it might otherwise have or acquire (in any way whatsoever) which could entitle it at any time to share or participate in any right, remedy or security of the Banks, the Issuing Bank or the Agent as against any Company or other guarantors, whether in connection with this Section 11.18, any of the other Loan Documents or otherwise. If any amount shall be paid to the Guarantor on account of the foregoing rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Agent, the Issuing Bank and the Banks and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.

    (i)  Subordination.  All payments on account of all indebtedness, liabilities and other obligations of any of the Companies to the Guarantor, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined (the "Subordinated Debt") shall be subject, subordinate and junior in right of payment and exercise of remedies, to the extent and in the manner set forth herein, to the prior payment in full in cash or cash equivalents of the Guaranteed Obligations. As long as any of the Guaranteed Obligations shall remain outstanding and unpaid, the Guarantor shall not accept or receive any payment or distribution by or on behalf of any Company, directly or indirectly, or assets of any Company, of any kind or character, whether in cash, property or securities, including on account of the purchase, redemption or other acquisition of Subordinated Debt, as a result of any collection, sale or other disposition of collateral, or by setoff, exchange or in any other manner, for or on account of the Subordinated Debt ("Subordinated Debt Payments"), except that prior to the occurrence of any Default, the Guarantor shall be entitled to accept and receive regularly scheduled payments on the Subordinated Debt, in accordance with past business practices of the Guarantor and the Companies and not in contravention of the terms of the Loan Documents.

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In the event that any Subordinated Debt Payments shall be received in contravention of this Section, such Subordinated Debt Payments shall be held in trust for the benefit of the Agent, the Issuing Bank and the Banks and shall be paid over or delivered to the Agent for application to the payment in full in cash or cash equivalents of all Guaranteed Obligations remaining unpaid to the extent necessary to give effect to this Section after giving effect to any concurrent payments or distributions to the Agent, the Issuing Bank and the Banks in respect of the Guaranteed Obligations.

    (j)  Continuing Guaranty.  This Guaranty is a continuing guaranty and agreement of subordination and shall continue in effect and be binding upon each Guarantor until termination of the Commitments and payment and performance in full of the Guaranteed Obligations, including Guaranteed Obligations which may exist continuously or which may arise from time to time under successive transactions, and each Guarantor expressly acknowledges that this Guaranty shall remain in full force and effect notwithstanding that there may be periods in which no Guaranteed Obligations exist. This Guaranty shall continue in effect and be binding upon each Guarantor until actual receipt by the Agent of written notice from such Guarantor of its intention to discontinue this Guaranty as to future transactions (which notice shall not be effective until noon on the day five Business Days following such receipt); provided that no revocation or termination of this Guaranty shall affect in any way any rights of the Agent, the Issuing Bank and the Banks hereunder with respect to any Guaranteed Obligations arising or outstanding on the date of receipt of such notice, including any subsequent continuation, extension, or renewal thereof, or change in the terms or conditions thereof, or any Guaranteed Obligations made or created after such date to the extent made or created pursuant to a legally binding commitment of any of the Issuing Bank or the Banks in existence as of the date of such revocation (collectively, "Existing Guaranteed Obligations"), and the sole effect of such notice shall be to exclude from this Guaranty Guaranteed Obligations thereafter arising which are unconnected to any Existing Guaranteed Obligations.

    (k)  Reinstatement.  This Guaranty shall continue to be effective or shall be reinstated and revived, as the case may be, if, for any reason, any payment of the Guaranteed Obligations by or on behalf of any Company (or receipt of any proceeds of collateral) shall be rescinded, invalidated, declared to be fraudulent or preferential, set aside, voided or otherwise required to be repaid to any Company, its estate, trustee, receiver or any other Person (including under the Bankruptcy Code or other state or federal law), or must otherwise be restored by the Agent, the Issuing Bank or any Bank, whether as a result of Insolvency Proceedings or otherwise. All losses, damages, costs and expenses that the Agent, the Issuing Bank or the Banks may suffer or incur as a result of any voided or otherwise set aside payments shall be specifically covered by the indemnity in favor of the Banks, the Issuing Bank and the Agent contained in Section 11.05.

    (l)  Substantial Benefits.  The funds that have been borrowed from the Banks by the Companies, and the Issuance of any Letter of Credit by the Issuing Bank, have been and are to be contemporaneously used for the benefit of the Companies and the Guarantor. It is the position, intent and expectation of the parties that the Companies and the Guarantor have derived and will derive significant and substantial benefits from the accommodations that have been made by the Banks and the Issuing Bank under the Loan Documents. The Guarantor has received at least "reasonably equivalent value" (as such phrase is used in §548 of the Bankruptcy Code, in §3439.04 of the California Uniform Fraudulent Transfer Act and in comparable provisions of other applicable law) and more than sufficient consideration to support its obligations hereunder in respect of the Guaranteed Obligations and under any of the Loan Documents to which it is a party. Immediately prior to and after and giving effect to the incurrence of the Guarantor's obligations under this Guaranty the Guarantor will be solvent.

    (m)  Knowing and Explicit Waivers.  EACH GUARANTOR ACKNOWLEDGES THAT IT EITHER HAS OBTAINED THE ADVICE OF LEGAL COUNSEL OR HAS HAD THE OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND

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PROVISIONS OF THIS SECTION 11.18. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT EACH OF THE WAIVERS AND CONSENTS SET FORTH HEREIN, ARE MADE WITH FULL KNOWLEDGE OF THEIR SIGNIFICANCE AND CONSEQUENCES, AND THAT ALL SUCH WAIVERS AND CONSENTS HEREIN ARE EXPLICIT AND KNOWING WHICH EACH GUARANTOR EXPECTS TO BE FULLY ENFORCEABLE.

If, while any Subordinated Debt is outstanding, any Insolvency Proceeding is commenced by or against any Company or its property, the Agent, when so instructed by the Issuing Bank and the Majority Banks, is hereby irrevocably authorized and empowered (in the name of the Issuing Bank and the Banks or in the name of the Guarantor or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution in respect of the Subordinated Debt and give acquittance therefor and to file claims and proofs of claim and take such other action (including voting the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Agent the Issuing Bank and the Banks; and each Guarantor shall promptly take such action as the Agent (on instruction from the Issuing Bank and the Majority Banks) may reasonably request (A) to collect the Subordinated Debt for the account of the Issuing Bank and the Banks and to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to the Agent, such powers of attorney, assignments and other instruments as it may request to enable it to enforce any and all claims with respect to the Subordinated Debt, and (C) to collect and receive any and all Subordinated Debt Payments.

11.19  Entire Agreement.

    This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Companies, the Banks and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.

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    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco, California by their proper and duly authorized officers as of the day and year first written above.

THE COMPANIES/THE GUARANTORS:
ESTERLINE TECHNOLOGIES CORPORATION		ADVANCED INPUT DEVICES CO.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Treasurer
ARMTEC DEFENSE PRODUCTS CO.		AUXITROL TECHNOLOGIES S.A.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Attorney-in-fact
EQUIPMENT SALES CO.		EXCELLON AUTOMATION CO.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Treasurer
HYTEK FINISHES CO.		KIRKHILL RUBBER CO.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Treasurer
KORRY ELECTRONICS CO.		MASON ELECTRIC CO.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Treasurer
MIDCON CABLES CO.		TA MFG. CO.
By:	/s/ ROBERT D. GEORGE	By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George	Name:	Robert D. George
Title:	Treasurer	Title:	Treasurer

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W.A. WHITNEY CO.
By:	/s/ ROBERT D. GEORGE
Name:	Robert D. George
Title:	Treasurer
THE AGENT, THE BANKS AND THE ISSUING BANK:
BANK OF AMERICA, NATIONAL ASSOCIATION, as Agent, as Issuing Bank and as a Bank
By:	/s/ KEVIN LEADER
Name:	Kevin Leader
Title:	Managing Director
U.S. BANK NATIONAL ASSOCIATION, as a Bank
By:	/s/ JAMES R. FARMER
Name:	James R. Farmer
Title:	Vice President
THE BANK OF NEW YORK, as a Bank
By:	/s/ ELIZABETH T. YING
Name:	Elizabeth T. Ying
Title:	Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Bank
By:	/s/ DONALD H. RALSTON
Name:	Donald H. Ralston
Title:	Vice President

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Schedule A to Credit Agreement

Pricing Matrix

Level	Consolidated Funded Debt/EBITDA	Commitment Fee Percentage	Applicable Margin (Offshore Rate)	Applicable Margin (Base Rate)	Utilization Premium Percentage
1	Less than 1.50 to 1.00	30.0	100.0	00.0	12.5
2	Less than 2.00 to 1.00 but greater than or equal to 1.50 to 1.00	35.0	112.5	00.0	12.5
3	Less than 2.50 to 1.00 but greater than or equal to 2.00 to 1.00	40.0	125.0	00.0	12.5
4	Less than 3.00 to 1.00 but greater than or equal to 2.50 to 1.00	45.0	150.0	00.0	25.0
5	Greater than or equal to 3.00 to 1.00	50.0	200.0	00.0	25.0

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TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I DEFINITIONS
ARTICLE II THE CREDITS
ARTICLE III THE LETTERS OF CREDIT
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY
ARTICLE V CONDITIONS PRECEDENT
ARTICLE VI REPRESENTATIONS AND WARRANTIES
ARTICLE VII AFFIRMATIVE COVENANTS
ARTICLE VIII NEGATIVE COVENANTS
ARTICLE IX EVENTS OF DEFAULT
ARTICLE X THE AGENT
ARTICLE XI MISCELLANEOUS
Schedule A to Credit Agreement Pricing Matrix

EX-11

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Exhibit 11

ESTERLINE TECHNOLOGIES CORPORATION
(in thousands, except per share amounts)

Computation of Net Earnings Per Share—Basic

	For Fiscal Years
	2000		1999		1998		1997		1996
Net Earnings	$	32,587	$	29,862	$	30,084	$	25,321	$	21,354
Weighted-Average Number of Shares Outstanding		17,375		17,337		17,290		17,124		15,842
Net Earnings Per Share—Basic	$	1.88	$	1.72	$	1.74	$	1.48	$	1.35

Computation of Net Earnings Per Share—Diluted	For Fiscal Years
	2000		1999		1998		1997		1996
Net Earnings	$	32,587	$	29,862	$	30,084	$	25,321	$	21,354
Weighted-Average Number of Shares Outstanding		17,375		17,337		17,290		17,124		15,842
Net Shares Assumed to be Issued for Stock Options		279		321		428		484		492
Total Shares—Diluted		17,654		17,658		17,718		17,608		16,334
Net Earnings Per Share—Diluted	$	1.85	$	1.69	$	1.70	$	1.44	$	1.31
Net Earnings Per Share—Basic	$	1.88	$	1.72	$	1.74	$	1.48	$	1.35
Dilutive Effect Per Share	$	.03	$	.03	$	.04	$	.04	$	.04

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Computation of Net Earnings Per Share—Basic

EX-13

Exhibit 13

Management's discussion and analysis of financial condition and results of operations

OVERVIEW

Our strategic growth plan revolves around the development of three key technologies—sensors and controls, specialized high-performance materials and illuminated displays. We are concentrating our efforts to selectively expand our capabilities in these markets. Our goal is to meet the evolving needs of our customers by providing a broad array of products and services through a single point of contact. We plan to accomplish this through internal development and strategic acquisitions. Internally, we are increasing our market presence by uniting sales forces, combining marketing opportunities and blending manufacturing knowledge and technological expertise.

Over the past several years we have focused on a selective acquisition and divestiture program supporting our long-term strategy to be a leading supplier to aerospace and defense customers throughout the world. Late in fiscal 1999, as a strategic addition to our European aerospace operation, we purchased the aerospace group of Muirhead Vactric and Norcroft Dynamics, Muirhead, a manufacturer of micro motors and motion control components located in the United Kingdom. Also, late in fiscal 1999, we divested Federal Products, an operation not aligned with our long-term direction. In December 1999, we acquired a manufacturer of custom keyboards and other multifunction data input subsystems, Advanced Input Devices Co., A.I.D. This acquisition expanded our high-end illuminated displays and custom panels operations.

We view and operate our business in three different segments: Aerospace, Advanced Materials and Automation. We primarily serve aerospace and defense customers with manufactured products such as high-end components for avionics, propulsion and guidance systems, high-performance elastomers and other complex materials in the Aerospace and Advanced Materials segments. The Automation segment serves electronic equipment customers with PCB drilling equipment and heavy equipment customers with automated machine tools for cutting and punching plate metal for heavy equipment applications.

RESULTS OF OPERATIONS

Fiscal 2000 compared with fiscal 1999

Sales for fiscal 2000 grew 6.5% when compared with the prior year. Sales by segment, were as follows:

	1999		2000		Increase (decrease) from prior year
	(dollars in thousands)
Aerospace	$	183,783	$	236,269	28.6%
Advanced Materials		127,920		129,386	1.1%
Automation		149,266		125,311	(16.0%	)
Total	$	460,969	$	490,966

Aerospace provided our key area of growth in fiscal 2000. Substantially all of this growth was attributable to the acquisitions of Muirhead and A.I.D. Muirhead was included for a full year in fiscal 2000 and only three months in the prior year. In addition, the timing of the A.I.D. acquisition resulted in the inclusion of approximately three quarters of its sales in fiscal 2000. Sales growth in Advanced Materials was affected by customer programs designed to rebalance inventory levels. We believe those inventory levels have been normalized. Order placement activity improved over the last two quarters of fiscal 2000.

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The decrease in Automation sales was primarily a result of our October 1999 divestiture of Federal Products. Excluding Federal Products on a comparative basis, Automation sales increased 15.6% due to improved PCB manufacturing equipment business, driven largely by strong performance in the second half of the year. Performance in this area has been difficult to predict and current trends indicate that the improvement may not continue through fiscal 2001. In addition, equipment sales to the heavy equipment markets remained weak throughout fiscal 2000 and are not expected to improve during fiscal 2001.

Sales to foreign customers, including export sales by domestic operations, totaled $156.2 million and $137.3 million, and accounted for 31.8% and 29.8% of our sales for fiscal 2000 and 1999, respectively.

Overall, gross margin as a percentage of sales was 36.6% and 37.9% for fiscal 2000 and 1999, respectively. Gross margin by segment ranged from 35.0% to 37.6% in fiscal 2000, compared with 33.7% to 40.4% in the prior year. Gross margin ranges for fiscal 2000 were lower when compared to fiscal 1999 due to a combination of factors, including lower margins on some recent acquisitions in the Aerospace segment; customer-related inventory rebalancing during the first part of fiscal 2000 in Advanced Materials; and a non-recurring inventory charge in Advanced Materials.

Automation gross margin improved when compared with the prior year primarily due to the PCB equipment revenue increases and cost cutting measures that have been implemented in the operations serving the heavy equipment markets.

Selling, general and administrative expenses (which include corporate expenses) decreased to $105.5 million in fiscal 2000 compared with $106.2 million in the prior year. As a percentage of sales, selling, general and administrative expenses were 21.5% and 23.0% in fiscal 2000 and 1999, respectively. Overall sales volume was weak throughout fiscal 1999 into the first quarter of fiscal 2000 and we focused on tightening selling, general and administrative expenses. In the second quarter of fiscal 2000, sales nearly matched the highest quarter in the prior year and continued to improve throughout the rest of the year. We believe our efficiency improvements have facilitated the absorption of business without significant increases in expenses. However, as an upward trend in sales continues, selling, general and administrative expenses will gradually increase. Long-term selling, general and administrative expense as a percentage of sales is unlikely to remain as low as the 21.5% in fiscal 2000.

Research, development and related engineering spending was $20.8 million, or 4.2% of sales, in fiscal 2000 compared with $24.0 million, or 5.2% of sales, in the prior year. During the year, several projects transitioned from prototype to production and accounted for the lower level of spending in the current fiscal year.

Segment earnings (excluding corporate expenses) increased 14.8% during fiscal year 2000 to $65.4 million compared with $56.9 million in the prior year. By segment, Aerospace earnings increased 31.6% to $32.7 million for fiscal 2000 compared with $24.8 million in the prior year, primarily due to acquisitions. Advanced Materials earnings were $24.8 million for fiscal 2000 compared with $29.2 million for the prior year. The decrease in earnings for Advanced Materials was attributable to the customer-related inventory rebalancing and the write-down of inventory. Automation earnings improved to $7.9 million for fiscal 2000 compared with $2.9 million for the prior year. For fiscal 1999, Automation earnings were attributable to Federal Products—sold at the end of that fiscal year. Excluding Federal Products in a year-over-year comparison, the increase in Automation earnings was primarily related to improvements in business related to PCB markets.

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The $2.6 million gain on sale of business relates to the curtailment of retirement benefits for certain Federal Products employees resulting from the October 28, 1999 sale of that operation. This gain was reported during the third quarter when it was first estimable. For purposes of the benefit calculations, credited service under the plan was frozen as of the date of sale. We do not anticipate any further adjustments related to the curtailment.

Interest income decreased to $2.2 million during fiscal 2000 compared with $2.9 million in the prior year. Interest expense decreased to $8.1 million during fiscal 2000 compared with $9.0 million in the prior year.

The effective income tax rate for fiscal 2000 was 34.9% compared with fiscal 1999 at 35.2%. Both years benefited from certain tax credits.

Net earnings in fiscal 2000 were $32.6 million, or $1.85 per share on a diluted basis, compared with $29.9 million, or $1.69 per share, in the prior year.

Orders received in fiscal 2000 increased 12.7% to $536.1 million from $475.7 million in the prior year. The increase is primarily attributable to Aerospace and Advanced Materials. Backlog at the end of fiscal 2000 was $228.3 million compared with $183.2 million at the end of the prior year. Approximately $46.1 million of backlog is scheduled to be delivered after fiscal 2001. Backlog is subject to cancellation until delivery.

Fiscal 1999 compared with fiscal 1998

Sales for fiscal 1999 grew 1.6% when compared with the prior year. Sales by segment were as follows:

	1998		1999		Increase (decrease) from prior year
	(dollars in thousands)
Aerospace	$	171,028	$	183,783	7.5%
Advanced Materials		91,498		127,920	39.8%
Automation		191,376		149,266	(22.0%	)
Total	$	453,902	$	460,969

Sales in Advanced Materials grew substantially in fiscal 1999. This growth was primarily attributable to Kirkhill Rubber Co., Kirkhill, acquired in August 1998. Kirkhill was included in Advanced Materials for a full year during fiscal 1999 and three months in fiscal 1998. Aerospace continued to see improvements although at a slower rate than in the previous year. Sales in Aerospace were positively impacted by the acquisition of Muirhead. Revenues for this entity were included for the last quarter of the year.

Sales in Automation declined due to a variety of unfavorable market conditions during the year. These included continuing poor worldwide demand for PCB manufacturing equipment as well as soft agriculture and automotive markets. The sale of Tulon Co., Tulon, in late fiscal 1998 also impacted Automation in the year-over-year comparison.

Sales to foreign customers, including export sales by domestic operations, totaled $137.3 million and $120.2 million, and accounted for 29.8% and 26.5% of our sales for fiscal 1999 and 1998, respectively.

Gross margin as a percentage of sales was 37.9% and 38.0% for fiscal 1999 and 1998, respectively. Gross margins by segment ranged from 33.7% to 40.4% in fiscal 1999, compared with 33.2% to 42.4% in the prior year. Gross margin in Aerospace decreased slightly due to volumes that were lower

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than expected. Gross margin for Advanced Materials decreased during the year due to volume decreases and new business included for a full year, primarily Kirkhill. An increase in Automation margin was related primarily to improvements at Federal Products relative to the prior year, and the divestiture of Tulon late in fiscal 1998.

Selling, general and administrative expenses (which include corporate expenses) increased to $106.2 million in fiscal 1999 compared with $102.4 million in the prior year. As a percentage of sales, selling, general and administrative expenses were 23.0% and 22.6% in fiscal 1999 and 1998, respectively.

Research, development and related engineering spending increased to $24.0 million in fiscal 1999 from $20.8 million in fiscal 1998, and as a percentage of sales was 5.2% compared with 4.6% in the prior year. Developments continued in laser technology for Automation; sensors and controls for Aerospace; and fireproofing elastomer for Advanced Materials during fiscal 1999.

Segment earnings (excluding corporate expenses) decreased 5.3% during fiscal 1999 to $56.9 million compared with $60.1 million in the prior year. Aerospace earnings were essentially flat with the prior year. Advanced Materials posted earnings of $29.2 million in fiscal 1999 compared with $24.7 million in fiscal 1998. The improvement was primarily due to Kirkhill's full year of earnings. Automation earnings decreased to $2.9 million in fiscal 1999 compared with $10.7 million in the prior year. This reduction was primarily due to the continued effects of a depressed worldwide PCB equipment market and was compounded in the second half of the year by a significant decline in the agriculture and heavy equipment sector.

Prior to the close of fiscal 1999, we completed the sale of Federal Products to Mahr GmbH. Federal Products was our only measurement business and accounted for less than 10.0% of our sales during fiscal 1999. We recognized an $8.0 million gain on the sale for fiscal 1999.

Interest income increased to $2.9 million during fiscal 1999 compared with $1.6 million in the prior year. Interest expense increased to $9.0 million during fiscal 1999 compared with $3.8 million in the prior year. In November 1998, we completed a $100.0 million private placement of senior notes (1999 Senior Notes). The proceeds of this placement were used to retire an outstanding bridge facility arising from the Kirkhill acquisition. The remainder was invested and utilized to fund other internal expansion and acquisition activities.

The effective income tax rate decreased to 35.2% in fiscal 1999 from 35.9% in fiscal 1998, primarily due to a one-time benefit related to state tax refunds.

Net earnings in fiscal 1999 were $29.9 million, or $1.69 per share on a diluted basis, compared with $30.1 million, or $1.70 per share, in the prior year.

Orders received in fiscal 1999 increased 6.1% to $475.7 million from $448.5 million in the prior year. Backlog at October 31, 1999 was $183.2 million compared with $168.4 million at the end of the prior year.

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LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents at the end of fiscal 2000 totaled $50.9 million, a decrease of $4.2 million from the prior year. No short-term investments were held at the end of fiscal 2000 compared with $25.9 million at the end of fiscal 1999. Net working capital decreased to $121.6 million at the end of fiscal 2000 from $140.9 million at the end of the prior year. These decreases were primarily attributable to the acquisitions completed during late 1999.

Net accounts receivable were $83.3 million at the end of fiscal 2000 compared with $69.6 million at the end of the prior year. Sales increased $15.1 million when compared with the prior year fourth quarter, resulting in a significant increase in net accounts receivable. Accounts payable were $25.0 million at the end of fiscal 2000 compared with $16.9 million at the end of the prior year. The increase was primarily due to the timing of payments in Automation. Net accounts receivable and accounts payable were also higher due to the inclusion of A.I.D. for the current year. Federal and foreign income taxes payable were $5.5 million at the end of fiscal 2000 compared with $6.3 million at the end of fiscal 1999.

Net property, plant and equipment was $87.4 million at the end of fiscal 2000 compared with $89.3 million at the end of the prior year. Goodwill increased to $138.0 million at the end of fiscal 2000 compared with $105.4 million at the end of the prior year, due to acquisitions completed during the year.

Capital expenditures for fiscal 2000 were $15.5 million (excluding acquisitions) and included machinery and equipment and enhancements to information technology systems. Capital expenditures are anticipated to approximate $21.0 million for fiscal 2001. We will continue to support expansion through investments in infrastructure including machinery, equipment, buildings and information systems.

Total debt decreased $12.0 million from the prior year to $117.4 million at the end of fiscal 2000, principally due to a reduction in outstanding short-term credit facilities and repayment of debt. Total debt outstanding at the end of fiscal 2000 consisted of $100.0 million under our 1999 Senior Notes, $11.4 million under our 8.75% Senior Notes, and $6.0 million under various foreign currency debt agreements, including capital lease obligations. The 8.75% Senior Notes have a scheduled annual payment of $5.7 million, which will continue until maturity on July 30, 2002. The 1999 Senior Notes have maturities ranging from 5 to 10 years and interest rates from 6.00% to 6.77%. Management believes cash on hand, funds generated from operations and other available debt facilities are sufficient to fund operating cash requirements and capital expenditures through fiscal 2001.

SEASONALITY

The timing of our revenues is impacted by the purchasing patterns of our customers and as a result we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday and vacation periods in both Europe and North America. This leads to decreased order and shipment activity, consequently first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

5

MARKET RISK EXPOSURE

We have financial instruments that are subject to interest rate risk, principally debt obligations issued at a fixed rate. To the extent that sales are transacted in a foreign currency, we are also subject to foreign currency fluctuation risk. Furthermore, we have assets denominated in foreign currencies that are not offset by liabilities in such foreign currencies. Historically, we have not experienced material gains or losses due to interest rate or foreign exchange fluctuations. We own a significant operation in France. During the year, the foreign exchange rate for this country decreased significantly relative to the US dollar, which resulted in an increase in accumulated other comprehensive loss, as a result of the foreign currency translation adjustment.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board, FASB, issued Statement of Financial Accounting Standards, FAS, No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No. 133 establishes standards for derivative instruments and requires an entity to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. In June 1999, the FASB issued FAS No. 137 which deferred the effective date of FAS No. 133. This standard will be effective for us beginning in fiscal 2001. We utilize foreign currency forward contracts primarily to reduce our exposure to fluctuations between the US dollar and the French Franc. At the end of fiscal 2000, we held foreign currency contracts totaling a notional amount of $8.5 million. If FAS No 133 was in effect at the end of fiscal 2000, this would have resulted in a gain of approximately $600,000. We anticipate that future similar foreign currency transactions will qualify for hedge accounting treatment under FAS No. 133.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, SAB No. 101, "Revenue Recognition in Financial Statements." In SAB No. 101, the Commission's staff expressed its views regarding the appropriate recognition of revenue with regard to a variety of circumstances. We will be required to adopt SAB No. 101 for the fourth quarter of fiscal 2001. We are currently evaluating SAB No. 101, however, we believe it will not have a material impact on our consolidated financial statements.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of Accounting Principles Board Opinion 25, "Stock Issued to Employees." We adopted the Interpretation effective July 1, 2000, and it did not have a material impact on the consolidated financial statements.

6

SELECTED FINANCIAL DATA

in thousands, except per share amounts

for fiscal years	2000			1999			1998			1997			1996
Operating Results
Sales	$	490,966		$	460,969		$	453,902		$	390,958		$	352,843
Cost of sales		311,242			286,410			281,539			243,197			215,015
Selling, general and administrative		105,532			106,239			102,361			90,918			88,042
Research, development and engineering		20,839			24,022			20,846			17,556			15,373
Gain on sale of business		(2,591	)		(7,956	)		—			—			—
Interest income		(2,205	)		(2,859	)		(1,594	)		(2,397	)		(1,989	)
Interest expense		8,124			9,011			3,803			3,603			4,328
Income tax expense		17,438			16,240			16,863			12,760			10,720
Net earnings		32,587			29,862			30,084			25,321			21,354
Net earnings per share—diluted	$	1.85		$	1.69		$	1.70		$	1.44		$	1.31
Financial Structure
Total assets	$	474,339		$	453,082		$	387,179		$	289,847		$	276,646
Long-term debt, net		108,172			116,966			74,043			27,218			29,007
Shareholders' equity		249,695			224,620			196,376			165,718			142,304
Weighted average shares outstanding—diluted		17,654			17,658			17,718			17,608			16,334

7

MARKET PRICE OF ESTERLINE COMMON STOCK

in dollars

	2000				1999
for fiscal years	High		Low		High		Low
Quarter
First	$	14.00	$	10.25	$	24.13	$	18.25
Second		13.19		9.25		19.63		12.13
Third		16.13		12.06		16.75		12.38
Fourth		22.50		14.75		16.63		13.25

Principal Market—New York Stock Exchange

At the end of fiscal 2000, there were approximately 797 holders of record of the Company's common stock.

8

Esterline Technologies Corporation

CONSOLIDATED STATEMENT OF OPERATIONS

in thousands, except per share amounts

for each of the three fiscal years in the period ended October 27, 2000	2000			1999			1998
Sales	$	490,966		$	460,969		$	453,902
Cost of Sales		311,242			286,410			281,539
		179,724			174,559			172,363
Expenses
Selling, general and administrative		105,532			106,239			102,361
Research, development and engineering		20,839			24,022			20,846
Total Expenses		126,371			130,261			123,207
Operating Earnings		53,353			44,298			49,156
Gain on sale of business		(2,591	)		(7,956	)		—
Interest income		(2,205	)		(2,859	)		(1,594	)
Interest expense		8,124			9,011			3,803
Net Other (Income) Expense		3,328			(1,804	)		2,209
Earnings Before Income Taxes		50,025			46,102			46,947
Income Tax Expense		17,438			16,240			16,863
Net Earnings	$	32,587		$	29,862		$	30,084
Net Earnings Per Share—Basic	$	1.88		$	1.72		$	1.74
Net Earnings Per Share—Diluted	$	1.85		$	1.69		$	1.70

See notes to consolidated financial statements.

9

Esterline Technologies Corporation

CONSOLIDATED BALANCE SHEET

in thousands, except share and per share amounts

as of October 27, 2000 and October 31, 1999	2000			1999
Assets
Current Assets
Cash and cash equivalents	$	50,888		$	55,047
Short-term investments		—			25,933
Accounts receivable, net of allowances of $2,423 and $2,233		83,336			69,613
Inventories		73,984			71,430
Deferred income tax benefits		16,053			16,212
Prepaid expenses		4,282			4,251
Total Current Assets		228,543			242,486
Property, Plant and Equipment
Land		12,950			13,159
Buildings		64,007			62,561
Machinery and equipment		123,611			117,555
		200,568			193,275
Accumulated depreciation		113,158			103,936
		87,410			89,339
Other Non-Current Assets
Goodwill, net		137,952			105,383
Intangibles, net and other assets		20,434			15,874
Total Assets	$	474,339		$	453,082
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$	25,014		$	16,918
Accrued liabilities		67,211			65,974
Credit facilities		2,654			5,138
Current maturities of long-term debt		6,525			7,249
Federal and foreign income taxes		5,518			6,299
Total current liabilities		106,922			101,578
Long-Term Liabilities
Long-term debt, net of current maturities		108,172			116,966
Deferred income taxes		9,550			9,918
Commitments and contingencies		—			—
Shareholders' Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued and outstanding 17,424,853 and 17,342,374 shares		3,485			3,468
Additional paid in capital		46,952			46,824
Retained earnings		211,540			178,953
Accumulated other comprehensive loss		(12,282	)		(4,625	)
Total Shareholders' Equity		249,695			224,620
Total Liabilities and Shareholders' Equity	$	474,339		$	453,082

See notes to consolidated financial statements.

10

Esterline Technologies Corporation

CONSOLIDATED STATEMENT OF CASH FLOWS

in thousands

for each of the three fiscal years in the period ended October 27, 2000	2000			1999			1998
Cash Flows Provided (Used) by Operating Activities
Net earnings	$	32,587		$	29,862		$	30,084
Gain on sale of business		(2,591	)		(7,956	)		—
Depreciation and amortization		21,709			20,796			18,316
Deferred income taxes		112			497			(447	)
Working capital changes, net of effect of acquisitions
Accounts receivable		(12,377	)		4,778			(2,344	)
Inventories		(1,394	)		(2,640	)		(4,920	)
Prepaid expenses		(472	)		98			(222	)
Accounts payable		6,773			(7,805	)		167
Accrued liabilities		275			(5,795	)		(1,557	)
Federal and foreign income taxes		(701	)		5,643			(1,542	)
Other, net		(3,114	)		1,684			(2,420	)
		40,807			39,162			35,115
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(15,489	)		(15,641	)		(29,773	)
Capital dispositions		1,618			28,995			9,421
Sales (Purchases) of short-term investments		25,933			(25,933	)		—
Acquisitions of businesses, net of cash acquired		(45,998	)		(20,860	)		(113,304	)
		(33,936	)		(33,439	)		(133,656	)
Cash Flows Provided (Used) by Financing Activities
Net change in credit facilities		(1,922	)		(3,649	)		6,579
Repayment of long-term obligations		(8,655	)		(6,287	)		(5,079	)
Proceeds from sale of senior notes		—			100,000			—
Proceeds (Repayment) of bridge facility		—			(50,000	)		50,000
		(10,577	)		40,064			51,500
Effect of foreign exchange rates on cash		(453	)		363			(107	)
Net increase (decrease) in cash and cash equivalents		(4,159	)		46,150			(47,148	)
Cash and cash equivalents—beginning of year		55,047			8,897			56,045
Cash and cash equivalents—end of year	$	50,888		$	55,047		$	8,897
Supplemental Cash Flow Information
Cash paid during the fiscal year for
Interest	$	8,366		$	6,805		$	3,244
Income taxes		17,521			8,779			17,517

See notes to consolidated financial statements.

11

Esterline Technologies Corporation

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

in thousands, except per share amounts

for each of the three fiscal years in the period ended October 27, 2000	2000			1999			1998
Common Stock, Par Value $.20 Per Share
Beginning of year	$	3,468		$	3,463		$	3,457
Shares issued under stock option plans		17			5			6
End of year		3,485			3,468			3,463
Additional Paid-in Capital
Beginning of year		46,824			46,793			46,831
Shares issued under stock option plans		128			31			(38	)
End of year		46,952			46,824			46,793
Retained Earnings
Beginning of year		178,953			149,091			119,007
Net earnings		32,587			29,862			30,084
End of year		211,540			178,953			149,091
Accumulated Other Comprehensive Loss
Beginning of year		(4,625	)		(2,971	)		(3,577	)
Foreign currency translation adjustment		(7,657	)		(1,654	)		606
End of year		(12,282	)		(4,625	)		(2,971	)
Total shareholders' equity	$	249,695		$	224,620		$	196,376
Comprehensive Income
Net earnings	$	32,587		$	29,862		$	30,084
Foreign currency translation adjustment		(7,657	)		(1,654	)		606
Comprehensive Income	$	24,930		$	28,208		$	30,690

See notes to consolidated financial statements.

12

Esterline Technologies Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Accounting Policies

Nature of Operations

Esterline Technologies (the "Company") designs, manufactures and markets highly engineered products. The Company principally serves the aerospace and defense industry and electronic equipment manufacturers throughout the world, primarily in the United States and Europe.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated. Classifications have been changed for certain amounts in prior periods to conform with the current year's presentation.

The Company closes its books for reporting purposes on the last Friday of October and has changed its fiscal year in 2000 to coincide with that date.

Management Estimates

To prepare financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

Foreign currency assets and liabilities are translated into their U.S. dollar equivalents based on year-end exchange rates. Revenue and expense accounts are generally translated at average exchange rates. Aggregate exchange gains and losses arising from the translation of foreign assets and liabilities are included in shareholders' equity as a component of comprehensive loss. Foreign currency transaction gains and losses are included in income and have not been significant in amount.

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase. Fair value of cash equivalents approximates carrying value.

Short-Term Investments

Short-term investments, consisting principally of local government obligations, are classified as available-for-sale. These investments are carried at amortized cost which approximates the fair market value.

Inventories

Inventories are stated at the lower of cost or market. One subsidiary determines the cost of its inventories under the last-in, first-out (LIFO) method while the remainder use the first-in, first-out (FIFO) method. Inventory cost includes material, labor and factory overhead.

Property, Plant and Equipment, and Depreciation

Property, plant and equipment is carried at cost and includes expenditures for major improvements. Depreciation is generally provided on the straight-line method based upon estimated useful lives ranging from 3 to 30 years. Depreciation expense was $15,763,000, $16,297,000, and $15,126,000 for fiscal 2000, 1999, and 1998, respectively.

13

Asset Valuation

The carrying amount of long-lived assets, including goodwill attributable to those assets, is reviewed periodically for impairment. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not deemed recoverable, the asset is adjusted to its estimated fair value. Fair value is generally determined based upon discounted future cash flow.

Goodwill and Intangibles

Intangible assets and the excess purchase price paid over the fair value of net assets of businesses acquired are amortized on a straight-line basis over the period of expected benefit which ranges from 5 to 40 years. Accumulated amortization of goodwill and intangibles was $38,173,000 and $33,355,000, respectively, at the end of fiscal years 2000 and 1999.

Environmental

Environmental exposures are provided for at the time they are known to exist or are considered reasonably probable and estimable. No provision has been recorded for environmental remediation costs which could result from changes in laws or other circumstances currently not contemplated by the Company. Costs provided for future expenditures on environmental remediation are not discounted to present value.

Revenue Recognition

Sales are generally recorded at the time of shipment of products or performance of services and are presented net of sales returns and allowances.

Earnings Per Share

Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding during the year. Diluted earnings per share also includes the dilutive effect of stock options. The weighted average number of shares outstanding used to compute basic earnings per share were 17,375,000, 17,337,000, and 17,290,000 for the fiscal years ending 2000, 1999, and 1998, respectively. The weighted average number of shares outstanding used to compute diluted earnings per share were 17,654,000, 17,658,000, and 17,718,000 for the fiscal years ending 2000, 1999, and 1998, respectively.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No. 133 establishes standards for derivative instruments and requires an entity to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. In June 1999, the FASB issued FAS No. 137 which deferred the effective date of FAS No. 133. This standard will be effective for the Company beginning in fiscal 2001. The Company utilizes foreign currency forward contracts primarily to reduce its exposure to fluctuations between the U.S. dollar and the French Franc. At the end of fiscal 2000, the Company held foreign currency forward contracts totaling a notional amount of $8.5 million. If FAS No. 133 was in effect at the end of fiscal 2000, this would have resulted in a gain of approximately $600,000. The Company anticipates that future similar foreign currency transactions will qualify for hedge accounting treatment under FAS No. 133.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." In SAB No. 101, the SEC staff expressed its views regarding the appropriate recognition of revenue with regard to a variety of

14

circumstances. The Company will be required to adopt SAB No. 101 for the fourth quarter of fiscal 2001. The Company is currently evaluating SAB No. 101, however, the Company believes that it will not have a material impact on the consolidated financial statements.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of Accounting Principles Board ("APB") Opinion No. 25, "Stock Issued to Employees." The Interpretation was adopted by the Company effective July 1, 2000 and did not have a material impact on the consolidated financial statements.

(2) Inventory

Inventories at the end of the fiscal year consisted of the following:

in thousands	2000		1999
Raw materials and purchased parts	$	31,693	$	30,014
Work in process		27,264		27,803
Finished goods		15,027		13,613
	$	73,984	$	71,430

Inventories stated under the last-in, first-out method totaled $6,666,000 and $6,118,000 at the end of fiscal 2000 and 1999, respectively. Had the first-in, first-out method been used, these inventories would have been $421,000 and $524,000 higher than reported at the end of fiscal 2000 and 1999, respectively.

(3) Accrued Liabilities

Accrued liabilities at the end of the fiscal year consisted of the following:

in thousands	2000		1999
Payroll and other compensation	$	24,614	$	21,135
Casualty and medical		6,988		5,642
Interest		3,204		3,446
Warranties		7,946		7,440
State and other tax accruals		9,785		9,396
Other		14,674		18,915
	$	67,211	$	65,974

15

(4) Retirement Benefits

Pension benefits are provided for substantially all U.S. employees under a noncontributory pension plan and are based on years of service and five-year average compensation. The Company makes actuarially computed contributions as necessary to adequately fund benefits. The actuarial computations assumed discount rates for benefit obligations on plan assets of 7.5%, 7.25%, and 6.5% for fiscal 2000, 1999, and 1998, respectively, and annual compensation increases of 5%. The expected long-term rate of return on plan assets was assumed at 8.5% for fiscal 2000, 1999, and 1998. Plan assets primarily consist of publicly traded common stocks, bonds and government securities. The Company also has an unfunded supplemental retirement plan for key executives providing for periodic payments upon retirement.

Total pension expense (benefit) for all benefit plans, including defined benefit plans, was ($3,334,000), $902,000, and ($971,000) for the fiscal years ending 2000, 1999, and 1998, respectively. The Company recorded a curtailment gain resulting from the October 1999 sale of Federal Products Co. This amount is reported as a gain on sale of business in fiscal 2000. Net periodic pension benefit for the Company's defined benefit plans at the end of the fiscal year consisted of the following:

in thousands	2000			1999			1998
Components of Net Periodic Benefit Cost
Service cost	$	2,268		$	3,351		$	2,639
Interest cost		6,463			5,726			5,645
Expected return on plan assets		(10,069	)		(9,122	)		(8,895	)
Amortization of transition asset		(401	)		(400	)		(405	)
Amortization of prior service cost		92			105			105
Amortization of actuarial loss (gain)		(116	)		4			(1,157	)
Recognition of gain due to curtailment		(2,591	)		—			—
Net periodic benefit	$	(4,354	)	$	(336	)	$	(2,068	)

16

The funded status of the defined benefit pension plan at the end of each fiscal year was as follows:

in thousands	2000		1999
Benefit Obligation
Beginning balance	$ 84,161		$ 92,509
Service cost	2,268		3,351
Interest cost	6,463		5,726
Curtailment gain	(2,692	)	—
Actuarial loss (gain)	7,713		(8,717	)
Benefits paid	(5,552	)	(8,708	)
Ending balance	$ 92,361		$ 84,161
Plan Assets—Fair Value
Beginning balance	$121,012		$109,663
Actual return on plan assets	10,704		16,299
Company contributions	981		3,758
Benefits paid	(5,552	)	(8,708	)
Ending balance	$127,145		$121,012
Reconciliation of Funded Status to Net Amount Recognized
Funded status—plan assets in excess of benefit obligation	$ 34,784		$ 36,851
Unrecognized net actuarial gain	(16,635	)	(23,830	)
Unrecognized prior service costs	680		874
Unrecognized net transition obligations (assets)	239		(162	)
Net amount recognized	$ 19,068		$ 13,733
Amount Recognized in the Consolidated Balance Sheet
Prepaid benefit cost	19,231		14,279
Accrued benefit liability	(163	)	(546	)
Net amount recognized	$ 19,068		$ 13,733

(5) Income Taxes

Income tax expense for each of the fiscal years consisted of:

in thousands	2000			1999			1998
Current
U.S. federal	$	14,011		$	13,530		$	14,799
State		650			160			1,295
Foreign		2,665			2,053			1,216
		17,326			15,743			17,310
Deferred
U.S. federal		(564	)		684			(429	)
State		(48	)		20			(18	)
Foreign		724			(207	)		—
		112			497			(447	)
Income tax expense	$	17,438		$	16,240		$	16,863

17

U.S. and foreign components of earnings before income taxes for each of the fiscal years were:

in thousands	2000		1999		1998
U.S.	$	42,794	$	42,518	$	45,608
Foreign		7,231		3,584		1,339
Earnings before income taxes	$	50,025	$	46,102	$	46,947

Primary components of the Company's deferred tax assets (liabilities) at the end of the fiscal year resulted from temporary tax differences associated with the following:

in thousands	2000		1999
Reserves and liabilities	$ 17,054		$ 17,339
Employee benefits	5,494		4,425
Total deferred tax assets	22,548		21,764
Depreciation and amortization	(8,378	)	(9,720	)
Retirement benefits	(6,960	)	(5,013	)
Other	(706	)	(737	)
Total deferred tax liabilities	(16,044	)	(15,470	)
	$ 6,504		$ 6,294

No valuation allowance was considered necessary on deferred tax assets.

A reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate for each of the fiscal years was as follows:

	2000		1999		1998
U.S. statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes	0.8		0.2		1.8
Foreign taxes	1.2		1.2		1.3
Foreign sales corporation	(1.0	)	(1.1	)	(1.5	)
Tax exempt interest	(0.6	)	(0.8	)	(0.3	)
Non-deductible goodwill	2.5		1.7		0.9
Research & development credits	(3.9	)	—		—
Other, net	0.9		(1.0	)	(1.3	)
Effective income tax rate	34.9	%	35.2	%	35.9	%

No provision for federal income taxes has been made on accumulated earnings of foreign subsidiaries, since such earnings were considered permanently reinvested or would be substantially offset by foreign tax credits, if repatriated.

18

(6) Debt

Long-term debt at the end of the fiscal year consisted of the following:

in thousands	2000	1999
6.77% Senior notes, due 2008	$ 40,000	$ 40,000
6.40% Senior notes, due 2005	30,000	30,000
6.00% Senior notes, due 2003	30,000	30,000
8.75% Senior notes, due 2002	11,428	17,143
Other	3,269	7,072
	114,697	124,215
Less current maturities	6,525	7,249
	$108,172	$116,966

The 1999 Senior Notes are payable in full in 2003, 2005 and 2008 and require semi-annual interest payments in November and May of each year. The 8.75% Senior Notes are due in 2002, are payable in equal annual installments and interest is payable semi-annually in January and July. All Senior Notes are unsecured.

Maturities of long-term debt at the end of the fiscal year were as follows:

in thousands
2001	$	6,525
2002		6,236
2003		30,302
2004		285
2005		30,274
2006 and thereafter		41,075
		$114,697

Short-term credit facilities at the end of the fiscal year consisted of the following:

in thousands	2000			1999
	Outstanding Borrowings	Interest Rate		Outstanding Borrowings	Interest Rate
U.S. dollar	$   —	—		$   —	—
Foreign	2,654	5.70	%	5,138	5.60	%
	$2,654			$5,138

During the fourth quarter of fiscal 2000, the Company's primary U.S. dollar credit facility was renewed and increased from $35,000,000 to $50,000,000. This credit facility is offered through a group of banks, is unsecured with interest based on standard inter-bank offering rates and will be up for renewal during fiscal 2005. An additional $8,600,000 of unsecured foreign currency credit facilities has been extended by foreign banks for a total of $58,600,000 available companywide.

A number of underlying agreements contain various covenant restrictions which include maintenance of net worth, payment of dividends, interest coverage and limitations on additional borrowings. The Company was in compliance with these covenants at the end of the fiscal year. Available credit under the above credit facilities was $53,577,000 at fiscal 2000 year-end, when reduced by outstanding borrowings of $2,654,000 and letters of credit of $2,369,000.

19

The fair market value of the Company's long-term debt and short-term borrowings was estimated at $110,000,000 and $121,000,000 at fiscal year-end 2000 and 1999, respectively. These estimates were derived using discounted cash flow with interest rates currently available to the Company for issuance of debt with similar terms and remaining maturities.

(7) Commitments and Contingencies

Rental expense for operating leases totaled $5,871,000, $4,647,000, and $4,628,000 in fiscal 2000, 1999, and 1998, respectively.

At the end of the fiscal year, the Company's rental commitments for noncancelable operating leases with a duration in excess of one year were as follows:

in thousands
2001	$	5,696
2002		5,414
2003		5,337
2004		4,535
2005		3,873
2006 and thereafter		14,486
	$	39,341

The Company is a party to various lawsuits and claims, both as plaintiff and defendant, and has contingent liabilities arising from the conduct of business, none of which, in the opinion of management, is expected to have a material effect on the Company's financial position or results of operations. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.

(8) Stock Option Plans

The Company provides a nonqualified stock option plan for officers and key employees. At the end of fiscal 2000, the Company had 1,574,750 shares reserved for issuance to officers and key employees, of which 93,500 shares were available to be granted in the future. The Board of Directors has approved a proposal to solicit shareholder approval to amend the Stock Option Plan at the March 7, 2001 shareholders' meeting. The proposed amendment will authorize an additional 500,000 shares to be available for grant.

The Board of Directors authorized the Compensation and Stock Option Committee to administer option grants and their terms. Awards under the plan may be granted to eligible employees of the Company over the 10-year period ending March 4, 2007. Options granted become exercisable over a period of four years following the date of grant and expire on the tenth anniversary of the grant. Option exercise prices are equal to the fair market value of the Company's common stock on the date of grant.

20

The following table summarizes the changes in outstanding options granted under the Company's stock option plans:

	2000				1999				1998
	Shares Subject to Option		Weighted Average Exercise Price		Shares Subject to Option		Weighted Average Exercise Price		Shares Subject to Option		Weighted Average Exercise Price
Outstanding, beginning of year	1,355,250		$	11.046	1,313,250		$	10.125	1,190,000		$	8.472
Granted	316,500			13.216	202,000			18.973	187,000			18.644
Exercised	(185,500	)		6.286	(47,500	)		5.016	(63,750	)		4.261
Cancelled	(5,000	)		19.625	(112,500	)		17.070	—			—
Outstanding, end of year	1,481,250		$	12.077	1,355,250		$	11.046	1,313,250		$	10.125
Exercisable, end of year	921,500		$	10.199	925,500		$	8.413	741,500		$	6.893

The Company accounts for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25. Additional disclosures as required under FAS No. 123, "Accounting for Stock-Based Compensation," are included below. The Black-Scholes option-pricing model was used to calculate the estimated compensation expense that would have been recognized under these guidelines.

If only options granted after fiscal 1995 were included, as prescribed by FAS No. 123, pro forma net income would have been $31,573,000, $28,920,000, and $28,971,000 for fiscal 2000, 1999, and 1998, respectively. Basic earnings per share for fiscal 2000, 1999, and 1998 would have been $1.82, $1.67, and $1.68, respectively. Diluted earnings per share for fiscal 2000, 1999, and 1998 would have been $1.79, $1.64, and $1.64, respectively.

The pro forma disclosures presented below include the fair value compensation expense for all options that would have been amortized during fiscal 2000, 1999, and 1998:

in thousands, except per share amounts	2000		1999		1998
Net earnings as reported	$	32,587	$	29,862	$	30,084
Pro forma net earnings	$	31,573	$	28,915	$	28,928
Basic earnings per share as reported	$	1.88	$	1.72	$	1.74
Pro forma basic earnings per share	$	1.82	$	1.67	$	1.67
Diluted earnings per share as reported	$	1.85	$	1.69	$	1.70
Pro forma diluted earnings per share	$	1.79	$	1.63	$	1.63

The weighted average Black-Scholes value of options granted during fiscal 2000, 1999, and 1998 was $8.516, $12.109, and $10.870, respectively. The assumptions used in the Black-Scholes option-pricing model for fiscal 2000, 1999, and 1998 were as follows:

	2000		1999		1998
Volatility	62.3	%	60.5	%	55.3	%
Risk-free interest rate	5.75 - 5.83	%	5.99 - 6.23	%	4.10 - 4.57	%
Expected life (years)	5 - 8		5 - 8		5 - 8
Dividends	—		—		—

21

The following table summarizes information for stock options outstanding at the end of the fiscal year:

Range of Exercise Prices	Shares	Average Remaining Life (years)	Weighted Average Price		Shares	Weighted Average Price
$ 3.6875 - 4.1875	218,000	2.89	$	4.0453	218,000	$	4.0453
4.3750 - 11.1250	293,000	4.37		8.1113	283,000		8.0446
11.3750 - 11.6875	285,750	7.49		11.5021	116,250		11.6875
13.2500 - 14.7500	330,250	7.51		13.7920	159,000		13.3502
16.7500 - 20.6875	354,250	7.79		19.1647	145,250		18.9883

(9) Capital Stock

The authorized capital stock of the Company consists of 500,000 shares of preferred stock, including 25,000 shares ($100 par value) and 475,000 shares ($1.00 par value) issuable in series, and 60,000,000 shares of common stock ($.20 par value). At the end of fiscal 2000, there were no shares of preferred stock outstanding.

The Company has a Shareholder Rights Plan providing for the distribution of one Preferred Stock Purchase Right ("Right") for each share of common stock held. Each Right entitles the holder to purchase one one-hundredth of a share of Series A Serial Preferred Stock at an exercise price of $56. The Rights expire December 23, 2002.

The Rights will be exercisable and transferable apart from the common stock only if a person or group acquires beneficial ownership of 10% or more of the Company's common stock or commences a tender offer or exchange offer which would result in a person or group beneficially owning 10% or more of the Company's common stock. The Rights will be redeemable by the Company for $.01 each at any time prior to the tenth day after an announcement that a person or group beneficially owns 10% or more of the common stock. Upon the occurrence of certain events, the holder of a Right can purchase, for the then current exercise price of the Right, shares of common stock of the Company (or under certain circumstances, as determined by the Board of Directors, cash, other securities or property) having a value of twice the Right's exercise price. Upon the occurrence of certain other events, the holder of each Right would be entitled to purchase, at the exercise price of the Right, shares of common stock of a corporation or other entity acquiring the Company or engaging in certain transactions involving the Company, that has a market value of twice the Right's exercise price.

22

(10) Acquisitions

In December 1999, the Company purchased Advanced Input Devices Co. ("A.I.D."). A.I.D. is a strategic purchase for the Company's growth platform around high-end illuminated displays and custom panels. The total purchase price, including closing and other direct costs of the acquisition, was approximately $43,100,000. The acquisition resulted in an excess of cost over identifiable tangible assets of approximately $37,100,000. This goodwill is being amortized over a 30-year period.

The Company also purchased Surftech Finishes Co., a small metal-finishing operation, in April 2000. This acquisition resulted in an excess of cost over identifiable tangible assets of approximately $2,100,000.

Both transactions were accounted for under the purchase method of accounting and funded with available cash. The results of operations were included from the effective date of each acquisition.

(11) Business Segment Information

The Company's businesses are organized and managed in three operating segments: Aerospace, Advanced Materials and Automation. Aerospace operations produce high-precision components for avionics, propulsion and guidance systems. Advanced Materials operations formulate specialized materials such as high-temperature elastomers, molded-fiber compounds and certain finishings and coatings. Both segments principally serve aerospace and defense markets. Automation operations manufacture products that enhance the fabrication efficiency of manufactured goods. Sales in all segments are worldwide, and include military, defense and commercial customers.

Geographic sales information is based on product origin. The Company evaluates these segments based on segment profits prior to net interest, other income/expense, corporate expenses and federal/foreign income taxes.

23

Details of the Company's operations by business segment for the last three fiscal years were as follows:

in thousands	2000			1999			1998
Sales
Aerospace	$	236,269		$	183,783		$	171,028
Advanced materials		129,386			127,920			91,498
Automation		125,311			149,266			191,376
	$	490,966		$	460,969		$	453,902
Earnings Before Income Taxes
Aerospace	$	32,661		$	24,822		$	24,766
Advanced materials		24,819			29,186			24,683
Automation		7,894			2,924			10,694
Segment earnings		65,374			56,932			60,143
Corporate expense		(12,021	)		(12,634	)		(10,987	)
Gain on sale of business		2,591			7,956			—
Interest of income		2,205			2,859			1,594
Interest expense		(8,124	)		(9,011	)		(3,803	)
	$	50,025		$	46,102		$	46,947
Identifiable Assets
Aerospace	$	192,496		$	144,836		$	123,346
Advanced materials		140,028			135,907			142,902
Automation		62,611			62,868			87,227
Corporate(1)		79,204			109,471			33,704
	$	474,339		$	453,082		$	387,179
Capital Expenditures
Aerospace	$	8,368		$	6,029		$	9,103
Advanced materials		3,822			3,866			11,997
Automation		2,758			5,518			7,748
Corporate		541			228			925
	$	15,489		$	15,641		$	29,773
Depreciation and Amortization
Aerospace	$	10,305		$	6,961		$	6,065
Advanced materials		6,938			6,814			4,579
Automation		3,686			6,270			7,084
Corporate		780			751			588
	$	21,709		$	20,796		$	18,316

(1)

Primarily cash, prepaid pension expense (see Note 4) and deferred tax assets (see Note 5).

24

The Company's operations by geographic area for the last three fiscal years were as follows:

in thousands	2000			1999			1998
Sales
Domestic:
Unaffiliated customers—U.S.	$	334,768		$	323,702		$	333,678
Unaffiliated customers—export		66,205			57,776			58,926
Intercompany		5,591			8,670			11,042
		406,564			390,148			403,646
France:
Unaffiliated customers		44,368			58,871			47,056
Intercompany		6,494			10,694			9,552
		50,862			69,565			56,608
All other foreign:
Unaffiliated customers		45,625			20,620			14,242
Intercompany		194			843			1,761
		45,819			21,463			16,003
Eliminations		(12,279	)		(20,207	)		(22,355	)
	$	490,966		$	460,969		$	453,902
Segment Earnings(1)
Domestic	$	57,119		$	52,585		$	58,579
France		6,701			5,233			2,485
All other foreign		1,263			(625	)		(1,025	)
Eliminations		291			(261	)		104
	$	65,374		$	56,932		$	60,143
Identifiable Assets(2)
Domestic	$	328,006		$	269,860		$	302,977
France		32,165			35,758			39,343
All other foreign		34,964			37,993			11,155
	$	395,135		$	343,611		$	353,475

(1)

Before corporate expense, shown on page F-18.

(2)

Excludes corporate, shown on page F-18.

The Company's principal foreign operations consist of manufacturing facilities located in France, the United Kingdom and Spain, and include sales and service operations located in Germany, Italy, Hong Kong and France. Intercompany sales are at prices comparable with sales to unaffiliated customers. Sales to any single customer or government entity did not exceed 10% of consolidated sales.

Product lines contributing sales of 10% or more of total sales in any of the last three fiscal years were as follows:

	2000		1999		1998
Elastomeric products	13	%	14	%	5	%
Printed circuit board drilling equipment	16	%	12	%	16	%
Aerospace switches and indicators	9	%	10	%	13	%
Gauge products	—		9	%	10	%

25

(12) Quarterly Financial Data (Unaudited)

The following is a summary of unaudited quarterly financial information:

in thousands, except per share amounts	Fourth			Third			Second		First
Fiscal year 2000
Sales	$	138,539		$	126,033		$	122,146	$	104,248
Gross margin		50,963			45,791			44,962		38,008
Net earnings		11,130			9,694	(1)		6,937		4,826
Net earnings per share—basic	$	.64		$	.56		$	.40	$	.28
Net earnings per share—diluted	$	.63		$	.55		$	.40	$	.27
Fiscal year 1999
Sales	$	123,402		$	112,748		$	116,121	$	108,698
Gross margin		46,053			43,425			44,957		40,124
Net earnings		11,711	(2)		5,952			7,142		5,057
Net earnings per share—basic	$	.68		$	.34		$	.41	$	.29
Net earnings per share—diluted	$	.66		$	.34		$	.40	$	.29

(1)

Included a $2.6 million gain on sale of business related to the curtailment of retirement benefits for certain Federal Products employees resulting from the October 28, 1999 sale of that operation.

(2)

Included an $8.0 million gain on sale of Federal Products.

26

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and the Board of Directors
Esterline Technologies Corporation
Bellevue, Washington

We have audited the accompanying consolidated balance sheet of Esterline Technologies Corporation and subsidiaries as of October 27, 2000, and the related consolidated statements of operations, shareholders' equity and comprehensive income, and cash flows for the fiscal year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Company for the two fiscal years ended October 31, 1999, were audited by other auditors whose report dated December 9, 1999, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the fiscal 2000 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Esterline Technologies Corporation and subsidiaries at October 27, 2000 and the consolidated results of their operations and their cash flows for the fiscal year then ended in conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP
Seattle, Washington
December 6, 2000

27

EX-21

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Exhibit 21

SUBSIDIARIES

    The subsidiaries of the Company as of October 27, 2000 are as follows:

Name of Subsidiary		Jurisdiction of Incorporation
Advanced Input Devices Co.		Delaware
Armtec Defense Products Co.		Delaware
Auxitrol Technologies S.A.		France
	Auxitrol S.A.	France
	Auxitrol International S.A.	France
	Auxitrol Co.	Delaware
	Fluid Regulators Corporation	Ohio
	Muirhead Aerospace Limited	England
Equipment Sales Co.		Connecticut
Esterline Technologies (Hong Kong) Limited		Hong Kong
Excellon Automation Co.		California
	Excellon Europa GmbH	Germany
	Excellon U.K.	California
	Amtech Automated Manufacturing Technology, Inc.	Utah
	Excellon Japan Co.	Japan
Hytek Finishes Co.		Delaware
Kirkhill Rubber Co.		California
	TA Mfg. Co.	California
Korry Electronics Co.		Delaware
	Mason Electric Co.	Delaware
	Memtron Technologies Co.	Delaware
Midcon Cables Co.		Delaware
W.A. Whitney Co.		Illinois

    The above list excludes certain subsidiaries that, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of October 27, 2000.

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SUBSIDIARIES

EX-23.1

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Exhibit 23.1

Consent of Ernst & Young, LLP, Independent Auditors

    We consent to the incorporation by reference in this Annual Report (Form 10-K) of Esterline Technologies Corporation of our report dated December 6, 2000, with respect to the consolidated financial statements of Esterline Technologies Corporation as of and for the fiscal year ended October 27, 2000 included in the 2000 Annual Report to Shareholders of Esterline Technologies Corporation.

    We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-43843 and No. 33-58375) pertaining to the 1997 Stock Option Plan and the Non-Employee Directors' Stock Compensation Plan of Esterline Technologies Corporation of our report dated December 6, 2000, with respect to the consolidated financial statements and schedule of Esterline Technologies Corporation as of and for the fiscal year ended October 27, 2000 included in and/or incorporated by reference in the Annual Report (Form 10-K) for the fiscal year ended October 27, 2000.

    Our audit also included the financial statement schedule of Esterline Technologies Corporation for the fiscal year ended October 27, 2000 listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP
Seattle, Washington
January 19, 2001

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Consent of Ernst & Young, LLP, Independent Auditors

EX-23.2

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Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

    We consent to the incorporation by reference in Registration Statement No. 33-58375 and No. 333-43843 of Esterline Technologies Corporation and subsidiaries on Form S-8 of our report dated December 9, 1999, included in this Annual Report on Form 10-K of Esterline Technologies Corporation for the year ended October 27, 2000.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Seattle, Washington
January 15, 2001

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INDEPENDENT AUDITORS' CONSENT

EX-23.3

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Exhibit 23.3

INDEPENDENT AUDITORS' REPORT

Shareholders and Board of Directors
Esterline Technologies Corporation
Bellevue, Washington

    We have audited the consolidated balance sheet of Esterline Technologies Corporation and subsidiaries (the Company) as of October 31, 1999, and the related consolidated statements of operations, shareholder's equity and comprehensive income, and cash flows for each of the two years in the period ended October 31, 1999. Our audits also included the consolidated financial statement schedules of the Company for each of the two years in the period ended October 31, 1999, listed in Item 14(a). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on these financial statements and financial statement schedules based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the 1999 and 1998 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Esterline Technologies Corporation and subsidiaries at October 31, 1999, and the consolidated results of their operations and their cash flows for each of the two years in the period ended October 31, 1999, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

Seattle, Washington
December 9, 1999

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INDEPENDENT AUDITORS' REPORT